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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): March 31, 1995
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Horizon Healthcare Corporation
(Exact name of registrant as specified in its charter)
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DELAWARE 1-9369 91-1346899
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
- --------------------------------------------------------------------------------
6001 INDIAN SCHOOL ROAD, N.E., SUITE 530, ALBUQUERQUE, NM 87110
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (505) 881-4961
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ITEM 5. OTHER EVENTS.
On March 31, 1995, Horizon Healthcare Corporation
("Horizon") entered into (i) the Agreement and Plan of Merger,
dated as of March 31, 1995, (the "Merger Agreement") by and
among Horizon, CMS Merger Corporation, a wholly owned subsidiary
of Horizon ("Merger Sub"), and Continental Medical Systems, Inc.
("CMS"); (ii) the Stock Option Agreement, dated as of March 31,
1995, by and among Horizon and CMS (the "Stock Option Agreement");
and (iii) the Voting Agreement, dated as of March 31, 1995, between
Horizon and certain stockholders of CMS named therein (the
"Voting Agreement"). The Merger Agreement, the Stock Option
Agreement, the Voting Agreement and the joint press release of
Horizon and CMS, dated March 31, 1995 (the "Joint Press
Release"), are filed as Exhibits 2.1, 2.2, 2.3 and 99 hereto,
respectively, and are specifically incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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2.1 Agreement and Plan of Merger, dated as of March 31,
1995, by and among Horizon, Merger Sub and CMS.
2.2 Stock Option Agreement, dated as of March 31, 1995, by
and among Horizon and CMS.
2.3 Voting Agreement, dated as of March 31, 1995, between
Horizon and the stockholders of CMS named therein.
99 Joint Press Release.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report
to be signed on its behalf to the undersigned, thereunto duly
authorized.
Date: April 10, 1995
HORIZON HEALTHCARE CORPORATION
By: /s/ ERNEST A. SCHOFIELD
---------------------------
Name: Ernest A. Schofield
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
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2.1 Agreement and Plan of Merger, dated as
of March 31, 1995, by and among Horizon
Healthcare Corporation, CMS Merger
Corporation and Continental Medical
Systems, Inc.
2.2 Stock Option Agreement, dated as of
March 31, 1995, by and among Horizon
Healthcare Corporation and Continental
Medical Systems, Inc.
2.3 Voting Agreement, dated as of March 31,
1995, between Horizon Healthcare
Corporation and the stockholders of
Continental Medical Systems, Inc. named
therein.
99 Joint Press Release of Horizon
Healthcare Corporation and Continental
Medical Systems, Inc., dated March 31,
1995.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HORIZON HEALTHCARE CORPORATION,
CMS MERGER CORPORATION
AND
CONTINENTAL MEDICAL SYSTEMS, INC.
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER.................................................................................. 1
SECTION 1.02. EFFECTIVE TIME.............................................................................. 1
SECTION 1.03. EFFECT OF THE MERGER........................................................................ 1
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS........................................................ 2
SECTION 1.05. DIRECTORS AND OFFICERS...................................................................... 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF SECURITIES............................. 2
SECTION 2.02. PAYMENT FOR COMPANY COMMON STOCK; SURRENDER OF CERTIFICATES................................. 3
SECTION 2.03. STOCK TRANSFER BOOKS........................................................................ 5
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................................................ 5
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS..................................................... 5
SECTION 3.03. CAPITALIZATION.............................................................................. 5
SECTION 3.04. AUTHORITY................................................................................... 7
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.................................................. 7
SECTION 3.06. PERMITS; COMPLIANCE......................................................................... 8
SECTION 3.07. REPORTS; FINANCIAL STATEMENTS............................................................... 9
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS........................................................ 10
SECTION 3.09. ABSENCE OF LITIGATION....................................................................... 10
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS....................................................... 11
SECTION 3.11. TAXES....................................................................................... 12
SECTION 3.12. TAX MATTERS; POOLING........................................................................ 12
SECTION 3.13. AFFILIATES.................................................................................. 13
SECTION 3.14. CERTAIN BUSINESS PRACTICES.................................................................. 13
SECTION 3.15. OPINION OF FINANCIAL ADVISOR................................................................ 13
SECTION 3.16. VOTE REQUIRED............................................................................... 13
SECTION 3.17. BROKERS..................................................................................... 13
SECTION 3.18. ACQUIRING PERSON............................................................................ 14
SECTION 3.19. INFORMATION SUPPLIED........................................................................ 14
SECTION 3.20. INSURANCE................................................................................... 14
SECTION 3.21. PROPERTIES.................................................................................. 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................................................ 15
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS..................................................... 15
SECTION 4.03. CAPITALIZATION.............................................................................. 15
SECTION 4.04. AUTHORITY................................................................................... 16
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.................................................. 17
SECTION 4.06. PERMITS; COMPLIANCE......................................................................... 17
SECTION 4.07. REPORTS; FINANCIAL STATEMENTS............................................................... 18
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS........................................................ 19
SECTION 4.09. ABSENCE OF LITIGATION....................................................................... 19
SECTION 4.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS....................................................... 20
SECTION 4.11. TAXES....................................................................................... 21
SECTION 4.12. TAX MATTERS; POOLING........................................................................ 22
SECTION 4.13. AFFILIATES.................................................................................. 22
SECTION 4.14. CERTAIN BUSINESS PRACTICES.................................................................. 22
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SECTION 4.15. OPINION OF FINANCIAL ADVISOR................................................................ 22
SECTION 4.16. VOTE REQUIRED............................................................................... 22
SECTION 4.17. BROKERS..................................................................................... 22
SECTION 4.18. INFORMATION SUPPLIED........................................................................ 22
SECTION 4.19. INSURANCE................................................................................... 23
SECTION 4.20. PROPERTIES.................................................................................. 23
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY........................................................ 23
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY........................................................... 23
SECTION 5.03. NEGATIVE COVENANTS OF ACQUIROR.............................................................. 26
SECTION 5.04. ACCESS AND INFORMATION...................................................................... 28
SECTION 5.05. AFFIRMATIVE COVENANTS OF ACQUIROR........................................................... 28
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. MEETINGS OF STOCKHOLDERS.................................................................... 29
SECTION 6.02. REGISTRATION STATEMENT; PROXY STATEMENTS.................................................... 29
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS....................................................... 31
SECTION 6.04. AFFILIATES; POOLING; TAX TREATMENT.......................................................... 32
SECTION 6.05. PUBLIC ANNOUNCEMENTS........................................................................ 32
SECTION 6.06. NYSE LISTING................................................................................ 32
SECTION 6.07. RIGHTS AGREEMENT; STATE TAKEOVER STATUTES................................................... 32
SECTION 6.08. COMFORT LETTERS............................................................................. 32
SECTION 6.09. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK.................................................... 33
SECTION 6.10. MERGER SUB.................................................................................. 34
SECTION 6.11. BOARD OF DIRECTORS.......................................................................... 34
SECTION 6.12. INDEMNIFICATION AND INSURANCE............................................................... 34
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT................................ 35
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE ACQUIROR COMPANIES.............................. 36
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY......................................... 36
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION................................................................................. 37
SECTION 8.02. EFFECT OF TERMINATION....................................................................... 38
SECTION 8.03. AMENDMENT................................................................................... 38
SECTION 8.04. WAIVER...................................................................................... 38
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS........................................................... 39
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................................. 40
SECTION 9.02. NOTICES..................................................................................... 40
SECTION 9.03. CERTAIN DEFINITIONS......................................................................... 41
SECTION 9.04. HEADINGS.................................................................................... 42
SECTION 9.05. SEVERABILITY................................................................................ 42
SECTION 9.06. ENTIRE AGREEMENT............................................................................ 42
SECTION 9.07. ASSIGNMENT.................................................................................. 42
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SECTION 9.08. PARTIES IN INTEREST......................................................................... 42
SECTION 9.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....................................... 42
SECTION 9.10. GOVERNING LAW............................................................................... 42
SECTION 9.11. COUNTERPARTS................................................................................ 43
SECTION 9.12. SPECIFIC PERFORMANCE........................................................................ 43
EXHIBITS
Exhibit A Form of Company Affiliate Letter
Exhibit B Form of Acquiror Affiliate Letter
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1995 (this
"Agreement"), is by and among HORIZON HEALTHCARE CORPORATION, a Delaware
corporation ("Acquiror"), CMS MERGER CORPORATION, a Delaware corporation and
wholly owned subsidiary of Acquiror ("Merger Sub"), and CONTINENTAL MEDICAL
SYSTEMS, INC., a Delaware corporation (the "Company"). Acquiror and Merger Sub
are sometimes collectively referred to herein as the "Acquiror Companies."
WHEREAS, Merger Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), will merge with and into the Company (the "Merger");
WHEREAS, Acquiror and the Company, in connection with this Agreement and
prior to or contemporaneous with the execution of this Agreement, have entered
into a Stock Option Agreement (the "Stock Option Agreement");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and is fair to, and in the best interests of, the Company and its
stockholders and has approved and adopted this Agreement and the transactions
contemplated hereby, and recommended approval and adoption of this Agreement by
the stockholders of the Company;
WHEREAS, the Board of Directors of Acquiror (the Acquiror Board ) has
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Acquiror and is fair to, and in the best
interests of, Acquiror and its stockholders and has approved and adopted this
Agreement and the transactions contemplated hereby, and recommended approval and
adoption of this Agreement by the stockholders of Acquiror;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Delaware Law, at the Effective
Time (as defined in Section 1.02 of this Agreement), Merger Sub shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation"). The name of
the Surviving Corporation shall be "Continental Medical Systems, Inc."
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing a Certificate of Merger with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Delaware Law (the date and time of the completion of
such filing being the "Effective Time").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Merger Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Merger Sub
and the Company shall become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time,
the Certificate of Incorporation and the Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of the Acquiror Companies, the Company or the holders of any
of the Company's securities:
(a) Subject to the other provisions of this Article II, each share of
common stock, par value $.01 per share, of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective Time
(excluding any Company Common Stock described in Section 2.01(c) of this
Agreement) shall be converted into a number of shares of common stock, par
value $.001 per share ("Acquiror Common Stock") of Acquiror equal to $13.00
divided by the "Acquiror Transaction Value" as hereinafter defined, rounded
to four decimal places (the "Common Stock Exchange Ratio"); provided,
however, that notwithstanding the foregoing, the Common Stock Exchange Ratio
shall not be less than .4415 nor more than .5397. The term "Acquiror
Transaction Value" shall mean the average closing price on the New York
Stock Exchange Composite Tape of Acquiror Common Stock for the 20 New York
Stock Exchange trading days ending with the third New York Stock Exchange
trading day immediately preceding the date of mailing of the Company Proxy
Statement (as defined below). Notwithstanding the foregoing, if between the
date of this Agreement and the Effective Time the outstanding shares of
Acquiror Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Common Stock Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares.
(b) As a result of their conversion pursuant to subsection 2.01(a), all
shares of Company Common Stock shall cease to be outstanding and shall
automatically be canceled and retired, and each certificate ("Certificate")
previously evidencing Company Common Stock outstanding immediately prior to
the Effective Time (other than Company Common Stock described in Section
2.01(c) of this Agreement) ("Converted Shares") shall thereafter represent,
subject to Section 2.02(e) of this Agreement, that number of shares of
Acquiror Common Stock determined pursuant to the Common Stock Exchange Ratio
and, if applicable, the right to receive cash pursuant to Section 2.02(e) of
this Agreement (the "Merger Consideration"). The holders of Certificates
previously evidencing Converted Shares shall cease to have any rights with
respect to such Converted Shares except as otherwise provided herein or by
law. Such Certificates previously evidencing Converted Shares shall be
exchanged for certificates evidencing whole shares of Acquiror Common Stock
upon the surrender of such Certificates in accordance with the provisions of
Section 2.02 of this Agreement. No fractional shares of Acquiror Common
Stock shall be issued and, in lieu thereof, a cash payment shall be made
pursuant to Section 2.02(e) of this Agreement. From and after the Effective
Time, former stockholders of record of the Company shall be entitled to vote
at any meeting of holders of Acquiror Common Stock the number of whole
shares of Acquiror Common Stock into which their Converted Shares are
converted, regardless of whether such holders have exchanged their
certificates representing the Converted Shares for certificates representing
Acquiror Common Stock in accordance with the provisions of this Agreement.
Until surrendered for exchange in accordance with the provisions of Section
2.02 of this Agreement, each Certificate theretofore representing Converted
Shares (other than shares of
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Company Common Stock to be canceled pursuant to Section 2.01(c) of this
Agreement) shall from and after the Effective Time represent for all
purposes only shares of Acquiror Common Stock and/or the right to receive
cash, as set forth in this Agreement.
(c) Notwithstanding any provision of this Agreement to the contrary,
each share of Company Common Stock held in the treasury of the Company and
each share of Company Common Stock owned by Acquiror or any direct or
indirect wholly owned subsidiary of Acquiror or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(d) Each share of common stock, par value $.001 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $.001 per share, of the
Surviving Corporation.
SECTION 2.02. PAYMENT FOR COMPANY COMMON STOCK; SURRENDER OF
CERTIFICATES.
(a) EXCHANGE FUND. Promptly after the Effective Time, Acquiror shall
deposit, or cause to be deposited, with a bank or trust company mutually
agreeable to the parties to this Agreement (the "Exchange Agent"), for the
benefit of the former holders of Converted Shares, for exchange in
accordance with this Article II, through the Exchange Agent, (i)
certificates evidencing a number of shares of Acquiror Common Stock equal to
the product of the Common Stock Exchange Ratio multiplied by the number of
Converted Shares and (ii) cash in an amount equal to the aggregate amount
required to be paid in lieu of fractional interests of Acquiror Common Stock
pursuant to Section 2.02(e). Subject to the provisions of subsection (f) of
this Section 2.02, Acquiror shall, if and when a payment date has occurred
with respect to a dividend or distribution that has been declared subsequent
to the Effective Time, deposit with the Exchange Agent an amount in cash (or
property of like kind to that which is the subject to such dividend or
distribution) equal to the dividend or distribution per share of Acquiror
Common Stock times the number of shares of Acquiror Common Stock evidenced
by Certificates that have not theretofore been surrendered for exchange in
accordance with this Section 2.02. The certificates and cash (and property,
if any) deposited with the Exchange Agent in accordance with this subsection
2.02(a) are hereinafter referred to as the "Exchange Fund". The Exchange
Agent shall, pursuant to irrevocable instructions, deliver Acquiror Common
Stock (and any dividends or distribution related thereto) and/or cash, as
described above, in exchange for surrendered Certificates pursuant to the
terms of this Agreement out of the Exchange Fund. Except as contemplated by
Section 2.02(e) of this Agreement, the Exchange Fund shall not be used for
any other purpose.
(b) LETTER OF TRANSMITTAL. As soon as practicable after the Effective
Time, Acquiror will send to each record holder of Company Stock at the
Effective Time a letter of transmittal and other appropriate materials for
use in surrendering Certificates to the Exchange Agent.
(c) PAYMENT PROCEDURES. Promptly after the Effective Time, the Exchange
Agent shall distribute to each former holder of Converted Shares, upon
surrender to the Exchange Agent of one or more Certificates for
cancellation, together with a duly executed and properly completed letter of
transmittal, the Merger Consideration for each Converted Share formerly
represented thereby, in accordance with the provisions of Section 2.01 of
this Agreement. If payment is to be made to a person other than the person
in whose name the Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed, with signatures guaranteed, or otherwise in proper form for
transfer and that the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered, or such person shall
establish to the satisfaction of Acquiror that such tax has been paid or is
not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to any former holder of Converted
Shares for any cash, Acquiror Common Stock or dividends thereon delivered to
a public official pursuant to applicable escheat law. No interest shall be
paid on any Merger Consideration payable to former holders of Converted
Shares.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF ACQUIROR COMMON
STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to Acquiror Common Stock with a record date
after the Effective Time shall be paid to the holder of
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any unsurrendered Certificate with respect to the shares of Acquiror Common
Stock evidenced thereby and no Merger Consideration shall be paid to any
such holder, until the holder of such Certificate shall surrender such
Certificate. If any holder of Converted Shares shall be unable to surrender
such holder's Certificates because such Certificates have been lost or
destroyed, such holder may deliver in lieu thereof an affidavit and
indemnity bond in form and substance and with surety reasonably satisfactory
to Acquiror. Subject to applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates
evidencing whole shares of Acquiror Common Stock issued in exchange
therefor, without interest, (i) promptly, the amount of any cash payable
with respect to a fractional share of Acquiror Common Stock to which such
holder is entitled pursuant to Section 2.02(e) of this Agreement and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of
Acquiror Common Stock, and (ii) at the appropriate payment date, the amount
of dividends or other distributions, with a record date after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such whole shares of Acquiror Common Stock.
(e) NO FRACTIONAL SHARES.
(i) Notwithstanding anything herein to the contrary, no certificates
or scrip evidencing fractional shares of Acquiror Common Stock shall be
issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or
to any rights as a stockholder of Acquiror. In lieu of any such
fractional shares, each holder of Company Stock upon surrender of a
Certificate for exchange pursuant to this Article II shall be paid an
amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (a) the per share closing price on the New York
Stock Exchange ("NYSE") of Acquiror Common Stock on the date of the
Effective Time (or, if shares of Acquiror Common Stock do not trade on
the NYSE on such date, the first date of trading of Acquiror Common Stock
on the NYSE after the Effective Time) by (b) the fractional interest of
Acquiror Common Stock to which such holder would otherwise be entitled
(after taking into account all Converted Shares held of record by such
holder at the Effective Time), subject to the provisions of Section
2.02(c) of this Agreement.
(ii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to former holders of Converted Shares with
respect to any fractional share interests of Acquiror Common Stock, the
Exchange Agent shall promptly pay such amounts to such former holders of
Converted Shares subject to and in accordance with the terms of this
Section 2.02. Acquiror will make available to the Exchange Agent the cash
necessary for this purpose.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains unclaimed by the former holders of Converted Shares for six months
after the Effective Time shall be delivered to Acquiror, upon demand, and
any former holders of Converted Shares who have not theretofore complied
with this Article II shall thereafter look only to Acquiror for the Merger
Consideration and dividends or distributions to which they are entitled,
without any interest thereon.
(g) WITHHOLDING. Acquiror (or any affiliate thereof) shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any former holder of Converted Shares such amounts as
Acquiror (or any affiliate thereof) is required to deduct and withhold with
respect to the making of such payment under the Code, or any other provision
of federal, state, local or foreign tax law. To the extent that amounts are
so withheld by Acquiror, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of the
Converted Shares in respect of which such deduction and withholding was made
by Acquiror.
(h) EFFECT OF ESCHEAT LAWS. None Acquiror nor the Company shall be
liable to any holder of shares of Company Stock for any Merger Consideration
(or dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any applicable abandoned property escheat or
similar law.
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SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Stock thereafter on the records
of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Acquiror Companies that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is
a corporation, and each of the Company's subsidiaries is a corporation or
partnership, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary, other than where the failure to be so duly qualified
and in good standing could not reasonably be expected to have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as used in this
Agreement shall mean any change or effect that, individually or when taken
together with all other such changes or effects, would be materially adverse to
the financial condition, results of operations, business or prospects of the
Company and its subsidiaries, taken as a whole, at the time of such change or
effect. Section 3.01 of the Disclosure Schedule delivered by the Company to the
Acquiror Companies concurrently with the execution of this Agreement (the
"Company Disclosure Schedule") sets forth, as of the date of this Agreement, a
true and complete list of all the Company's directly or indirectly owned
subsidiaries, together with (A) the jurisdiction of incorporation or
organization of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company and (B) an indication of whether each such
subsidiary is a "Significant Subsidiary" as defined in Section 9.03(f) of this
Agreement. Except as set forth in Section 3.01 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries owns an equity
interest in any partnership or joint venture arrangement or other business
entity that is material to the financial condition, results of operations,
business or prospects of the Company and its subsidiaries, taken as a whole.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished or made available to Acquiror complete and correct copies
of the Certificate of Incorporation and the Bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Company and each of its subsidiaries. Neither the Company nor any
of its corporate subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws (or equivalent organizational documents).
Except as disclosed in the Company Disclosure Schedule, none of the Company s
noncorporate subsidiaries is in violation of any provisions of its
organizational documents (the "Constituent Documents") other than any such
violations that could not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 80,000,000
shares of Company Common Stock and 10,000,000 shares of preferred stock, par
value $.01 per share ("Company Preferred Stock"), of which 50,000 shares
have been designated as Series A Junior Participating Preferred Stock and
the balance of which are undesignated. At the close of business on March 28,
1995, 38,623,786 shares of Company Common Stock were issued and outstanding,
no shares of Company Common Stock were held by the Company in its treasury
or by the Company's subsidiaries and 10,227,050 shares of Company Common
Stock were reserved for issuance as follows: (i) 8,923,406 shares were
reserved for future issuance pursuant to stock options granted or that may
be granted pursuant to the 1986 Stock Option Plan, the 1992 CEO Stock Option
Plan, the 1993 Non-Qualified Stock Option Plan, the 1994 Stock Option Plan
and the 1989 Non-Employee
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Directors Stock Option Plan (collectively, the "Option Plans"), (ii) 300,000
shares were reserved for issuance upon the exercise of nonqualified stock
options granted pursuant to the Chief Executive Officer of the Company in
May 1989 (such stock option, together with outstanding stock options granted
pursuant to the Option Plans, being referred to herein as the "Stock
Options"), (iii) 233,644 shares were reserved for issuance upon conversion
of the Company's $2,000,000 7 3/4% Subordinated Convertible Debenture due
May 1, 2012 (the "Company Debenture"), (iv) 420,000 shares were reserved for
issuance pursuant to the Company's Restricted Stock Plan, (v) an
indeterminate number of shares (not reasonably expected to exceed 300,000
shares) were reserved for issuance, subject to the satisfaction of certain
conditions, under the earnout agreements described in Section 3.03(a) of the
Company Disclosure Schedule (the "Company Acquisition Agreements") and (vi)
350,000 shares were reserved for issuance upon the exercise of warrants
expiring October 22, 1996 (the "Warrants"). No shares of the Company
Preferred Stock are issued or outstanding. Except as described in this
Section 3.03 or in Section 3.03(a) of the Company Disclosure Schedule, as of
the date of this Agreement, no shares of capital stock of the Company are
reserved for issuance for any other purpose. Since March 28,1995, no shares
of capital stock have been issued by the Company except pursuant to
agreements for which shares were adequately reserved at such date as
described in this subsection (a). Since March 28, 1995, the Company has not
granted any options for, or other rights to purchase, any shares of capital
stock of the Company. Each of the issued shares of capital stock of, or
other equity interests in, each of the Company and its subsidiaries is duly
authorized, validly issued and, in the case of shares of capital stock,
fully paid and nonassessable, and has not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity
interests in, the Company or any of its wholly owned subsidiaries subject
to) any preemptive or similar rights created by statute, the Certificate of
Incorporation or Bylaws (or the equivalent organizational documents) of the
Company or any of its subsidiaries, or any agreement to which the Company or
any of its subsidiaries is a party or is bound, and, except as set forth in
Section 3.21 of the Company Disclosure Schedule and in the Constituent
Documents, all such issued shares or other equity interests owned by the
Company or a subsidiary of the Company are owned free and clear of all
security interests, liens, claims, pledges, agreements, limitations on the
Company's or such subsidiaries' voting rights, charges or other encumbrances
of any nature whatsoever.
(b) Except as set forth in Section 3.03(a) above, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into or exercisable for securities having the right to vote) on
any matters on which stockholders may vote ("Voting Debt") is issued or
outstanding. All shares of Company Common Stock which may be issued pursuant
to the Option Plans will, when issued in accordance with the terms of the
related Option Plan and Stock Option, be validly issued, fully paid and
nonassessable and not subject to preemptive rights.
(c) Except (i) as set forth in Section 3.03(a) above, (ii) as set forth
in Section 3.03(c) of the Company Disclosure Schedule, (iii) pursuant to the
terms of that certain Rights Agreement dated as of March 11, 1991 by and
between the Company and Mellon Bank, N.A.(as substitute Rights Agent) (as
amended, the "Company Rights Agreement") and (iv) as set forth in the
Constituent Documents, there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of
any character to which the Company or any of its subsidiaries is a party
relating to the issued or unissued capital stock or other equity interests
of the Company or any of its subsidiaries or obligating the Company or any
of its subsidiaries to grant, issue or sell any shares of capital stock,
Voting Debt or other equity interests of the Company or any of its
subsidiaries. Except as set forth in Section 3.03(c) of the Company
Disclosure Schedule or in the Constituent Documents, there are no
obligations, contingent or otherwise, of the Company or any of its
subsidiaries 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
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any material investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the material
obligations of, any subsidiary of the Company or any other person. Except
(i) as set forth in Section 3.03(c) of the Company Disclosure Schedule, (ii)
for subsidiaries of the Company set forth in Section 3.01 of the Company
Disclosure Schedule or (iii) as permitted pursuant to Section 5.02(e),
neither the Company nor any of its subsidiaries (x) directly or indirectly
owns, (y) has agreed to purchase or otherwise acquire for a purchase price
in excess of $1 million or (z) holds any interest convertible into or
exchangeable or exercisable for, 5% or more of the capital stock or other
equity interest of any corporation, partnership, joint venture or other
business association or entity with an aggregate fair market value of in
excess of $20 million. Except (q) as set forth in Section 3.03(c) of the
Company Disclosure Schedule, (r) for any agreements, arrangements or
commitments between the Company and its subsidiaries or between such
subsidiaries or (s) payments made pursuant to real property leases, there
are no agreements, arrangements or commitments of any character (contingent
or otherwise) pursuant to which any person is or may be entitled to receive
any payment based on the revenues or earnings, or calculated in accordance
therewith, of the Company or any of its subsidiaries. Except as set forth in
the Constituent Documents, there are no voting trusts, proxies or other
agreements or understandings to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound with
respect to the voting of any shares of capital stock or other equity
interests of the Company or any of its subsidiaries.
(d) The Company has delivered to Acquiror complete and correct copies of
the Option Plans and all forms of Stock Options issued pursuant to the
Option Plans or otherwise, including all amendments thereto. The Company has
previously delivered to Acquiror a complete and correct list setting forth
as of March 28, 1995, (i) the number of Stock Options outstanding, (ii) the
exercise price of each outstanding Stock Option and (iii) the number of
Stock Options exercisable.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Stock Option Agreement
(the "Transaction Documents"), to perform its obligations under the Transaction
Documents and to consummate the transactions contemplated by the Transaction
Documents (subject to, with respect to the Merger, the approval and adoption of
this Agreement by the stockholders of the Company as set forth in Section 3.16
of this Agreement). The execution and delivery of the Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
by the Transaction Documents have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize the Transaction Documents or to consummate the
transactions contemplated by the Transaction Documents (subject to, with respect
to the Merger, the approval and adoption of this Agreement by the stockholders
of the Company as set forth in Section 3.16 of this Agreement). The Transaction
Documents have been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Acquiror Companies (to
the extent a party thereto), constitute the legal, valid and binding obligation
of the Company.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers, approvals,
authorizations, orders, filings and notifications contemplated by the
exceptions to Section 3.05(b) are obtained or made, and except as disclosed
in Section 3.05(a) of the Company Disclosure Schedule, the execution and
delivery of the Transaction Documents by the Company does not, and the
consummation of the transactions contemplated by the Transaction Documents,
will not (i) conflict with or violate the Certificate of Incorporation or
Bylaws, or the equivalent organizational documents, in each case as amended
or restated, of the Company or any of its subsidiaries, (ii) conflict with
or violate any federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to the Company or any of its subsidiaries or by or to which any
of their respective properties is bound or subject or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default)
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under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or require payment under, or result in the creation of a
lien or encumbrance on any of the properties or assets of the Company or any
of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company or any of its subsidiaries is a party or
by or to which the Company or any of its subsidiaries or any of their
respective properties is bound or subject, except for any such conflicts,
violations, breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or encumbrances
that could not reasonably be expected to have a Company Material Adverse
Effect. The Board of Directors of the Company has taken all actions
necessary under Delaware Law, including approving the transactions
contemplated by the Transaction Documents, to ensure that the prohibitions
on business combinations set forth in Section 203 of Delaware Law do not,
and will not, apply to the transactions contemplated by the Transaction
Documents or that certain Voting Agreement (the Voting Agreement ) dated as
of March 31, 1995 by and between Acquiror and the stockholders of the
Company named therein.
(b) The execution and delivery of the Transaction Documents by the
Company do not, and the performance of the Transaction Documents by the
Company will not, require the Company to obtain any consent, license,
permit, waiver, approval, authorization or order of, or to make any filing
with or notification to, any governmental or regulatory authority, federal,
state, local or foreign (collectively, "Governmental Entities"), except (i)
for applicable requirements, if any, of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), state securities or blue sky laws ("Blue Sky
Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the filing and recordation of appropriate merger
documents as required by Delaware Law, (ii) where the failure to obtain such
consents, licenses, permits, waivers, approvals, authorizations or orders,
or to make such filings or notifications could not reasonably be expected to
prevent the Company from performing its obligations under the Transaction
Documents and could not reasonably be expected to have a Company Material
Adverse Effect and (iii) as disclosed in Section 3.05(b) of the Company
Disclosure Schedule.
SECTION 3.06. PERMITS; COMPLIANCE.
(a) Except as disclosed in Section 3.06(a) of the Company Disclosure
Schedule, each of the Company and its subsidiaries is in possession of (i)
all franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted and (ii) agreements from all federal, state and local governmental
agencies and accrediting and certifying organizations having jurisdiction
over such facility or facilities that are required to operate the facility
or facilities in the manner in which it or they are currently operated and
receive reimbursement for care provided to patients covered under the
federal Medicare program or any applicable state Medicaid program
(collectively, the "Company Permits"), except where the failure to possess
such Company Permits could not reasonably be expected to have a Company
Material Adverse Effect. Without limiting the generality of the foregoing,
all of the Company's hospitals are certified for participation or enrollment
in the Medicare program, have a current and valid provider contract with the
Medicare program and are in substantial compliance with the conditions of
participation of such programs. Neither the Company nor any of its
subsidiaries has received notice from the regulatory authorities that
enforce the statutory or regulatory provisions in respect of either the
Medicare or the Medicaid program of any pending or threatened investigations
or surveys, and no such investigations or surveys are pending or, to the
knowledge of the Company, threatened or imminent that could reasonably be
expected to have a Company Material Adverse Effect. Section 3.06(a) of the
Company Disclosure Schedule sets forth, as of the date of this Agreement,
all actions, proceedings, investigations or surveys pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to result in (i) the loss or
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revocation of a Company Permit necessary to operate one or more facilities
or for a facility to receive reimbursement under the Medicare or Medicaid
programs, (ii) the suspension or cancellation of any other Company Permit
except any such Company Permit where such suspension or cancellation could
not reasonably be expected to have a Company Material Adverse Effect. Except
as set forth in Section 3.06(a) of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries is in conflict with, or in default
or violation of (a) any Law applicable to the Company or any of its
subsidiaries or by or to which any of their respective properties is bound
or subject or (b) any of the Company Permits, except for any such conflicts,
defaults or violations that could not reasonably be expected to have a
Company Material Adverse Effect. Except as set forth in Section 3.06(a) of
the Company Disclosure Schedule, since June 30, 1993, neither the Company
nor any of its subsidiaries has received from any Governmental Entity any
written notification with respect to possible conflicts, defaults or
violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that could not reasonably be expected to
have a Company Material Adverse Effect.
(b) The Company and its subsidiaries, as appropriate, are approved
participating providers in and under all third party payment programs from
which they receive revenues. No action or investigation is pending, or to
the best of its knowledge, threatened to suspend, limit, terminate,
condition, or revoke the status of the Company or any of its subsidiaries as
a provider in any such program, and neither the Company nor any of its
subsidiaries has been provided notice by any third party payor of its
intention to suspend, limit, terminate, revoke, condition or fail to renew
in whole or in part or decrease the amounts payable under any arrangement
with the Company or such subsidiary as a provider, which action,
investigation or proceeding would have a Company Material Adverse Effect.
(c) The Company and its subsidiaries have filed on a timely basis all
claims, cost reports or annual filings required to be filed to secure
payments for services rendered by them under any third-party payment program
from which they receive or expect to receive revenues except where the
failure to file such claim, report or other filing would not have a Company
Material Adverse Effect. Except as indicated in its financial statements
included in the Company SEC Reports (as hereinafter defined), the Company or
its subsidiaries, as applicable, have paid, or caused to be paid, all
refunds, discounts, adjustments, or amounts owing that have become due to
such third party payors pursuant to such claims, reports or filings, and
neither the Company nor any of its subsidiaries has any knowledge or notice
of any material changes required to be made to any cost reports, claims or
filings made by them for any period or of any deficiency in any such claim,
report, or filing, except for changes and deficiencies that in the aggregate
would not have a Company Material Adverse Effect.
SECTION 3.07. REPORTS; FINANCIAL STATEMENTS.
(a) Since June 30, 1991, 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
Governmental Entities, including, without limitation, state insurance and
health regulatory authorities, except where the failure to file any such
forms, reports, statements or other documents could not reasonably be
expected 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(a) being referred to herein, collectively, as the "Company Reports").
The Company Reports 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 the rules and regulations
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of the SEC thereunder applicable to such Company SEC Reports) and the
Company SEC Reports 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.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (i)
have been prepared in accordance with the published rules and regulations of
the SEC and generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except (A) to the extent disclosed
therein or required by changes in generally accepted accounting principles,
(B), with respect to Company SEC Reports filed prior to the date of this
Agreement, as may be indicated in the notes thereto and (c) in the case of
the unaudited financial statements, as permitted by the rules and
regulations of the SEC) and (ii) fairly present the consolidated financial
position of the Company and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated (subject, in the case of unaudited consolidated financial
statements for interim periods, to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of operations
and cash flows), except that any pro forma financial statements contained in
such consolidated financial statements are not necessarily indicative of the
consolidated financial position of the Company and its subsidiaries as of
the respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement or as
contemplated in this Agreement or as set forth in Section 3.08 of the Company
Disclosure Schedule, since June 30, 1994 the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course and in a
manner consistent with past practice and there has not been: (i) any damage,
destruction or loss with respect to any assets of the Company or any of its
subsidiaries that, if not covered by insurance, would constitute a Company
Material Adverse Effect; (ii) any change by the Company or its subsidiaries in
their significant accounting policies; (iii) except (x) for dividends by a
subsidiary of the Company to the Company or another wholly-owned subsidiary of
the Company, (y) as required by the Constituent Documents or (z) pursuant to the
Constituent Documents in accordance with past practice, any declaration, setting
aside or payment of any dividends or distributions in respect of shares of
Company Common Stock or the shares of stock of, or other equity interests in,
any subsidiary of the Company or any redemption, purchase or other acquisition
of any of the Company's securities or any of the securities of any subsidiary of
the Company; (iv) any material increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, performance awards
(including, without limitation, the granting of stock appreciation rights or
restricted stock awards), stock purchase or other employee benefit plan, or any
increase in the compensation payable or to become payable to any of the
directors or officers of the Company or the employees of the Company or its
subsidiaries as a group, except for (A) increase in salaries or wages payable or
to become payable in the ordinary course of business and consistent with past
practice or (B) the granting of stock options in the ordinary course of business
to employees of the Company or its subsidiaries who are not directors or
executive officers of the Company; or (v) any other Company Material Adverse
Effect.
SECTION 3.09. ABSENCE OF LITIGATION. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or as set forth in Section
3.09 of the Company Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of the Company,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any properties or
rights of the Company or any of its subsidiaries (except for claims, actions,
suits, litigation, proceedings, arbitrations, or investigations that could not
reasonably be expected to have a Company Material Adverse Effect), and neither
the Company nor any of its subsidiaries is subject to any continuing order of,
consent decree, settlement agreement or other
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similar written agreement with, or, to the knowledge of the Company, continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Government Entity or arbitrator, including,
without limitation, cease-and-desist or other orders, except for matters that
could not reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained or contributed to by the Company or
any of its subsidiaries, or with respect to which the Company or any of its
subsidiaries could incur liability under Section 4069, 4212(c) or 4204 of
ERISA (the "Benefit Plans"), the Company has delivered or made available to
Acquiror a true and correct copy of (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS") for each Benefit
Plan for which a Form 5500 is required to be filed, (ii) such Benefit Plan,
(iii) each trust agreement, if any, relating to such Benefit Plan, (iv) the
most recent summary plan description for each Benefit Plan for which a
summary plan description is required, (v) the most recent actuarial report
or valuation relating to a Benefit Plan subject to Title IV of ERISA and
(vi) the most recent determination letter, if any, issued by the IRS with
respect to any Benefit Plan qualified under Section 401 of the Code.
(b) With respect to the Benefit Plans, no event has occurred and, to the
knowledge of the Company, there exists no condition or set of circumstances,
in connection with which the Company or any of its subsidiaries could be
subject to any liability under the terms of such Benefit Plans, ERISA, the
Code or any other applicable Law that could reasonably be expected to have a
Company Material Adverse Effect.
(c) The Company has delivered to Acquiror all collective bargaining or
other labor union contracts to which the Company or its subsidiaries is a
party applicable to persons employed by the Company or its subsidiaries and
no collective bargaining agreement is being negotiated by the Company or any
of its subsidiaries. There is no pending or, to the knowledge of the
Company, threatened labor dispute, strike or work stoppage against the
Company or any of its subsidiaries that may interfere with the respective
business activities of the Company or any of its subsidiaries and could
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, none of the Company, any of its subsidiaries or
any of their respective representatives or employees has committed any
unfair labor practices in connection with the operation of the respective
businesses of the Company or its subsidiaries that could reasonably be
expected to have a Company Material Adverse Effect, and there is no pending
or, to the knowledge of the Company, threatened charge or complaint against
the Company or any of its subsidiaries by the National Labor Relations Board
or any comparable state agency that, if not covered by insurance, would
constitute a Company Material Adverse Effect.
(d) The Company has delivered or made available to Acquiror (i) copies
of all employment agreements with officers of the Company; (ii) a schedule
listing all officers of the Company who have executed a non-competition
agreement with the Company; (iii) copies of all severance agreements,
programs and policies of the Company with or relating to its employees; and
(iv) copies of all plans, programs, agreements and other arrangements of the
Company with or relating to its employees. Except as set forth in Section
3.10(d) of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries will owe a severance payment or similar obligation to any
of their respective employees, officers or directors as a result of the
Merger or the transactions contemplated by this Agreement, and none of such
persons will be entitled to an increase in severance payments or other
benefits as a result of the Merger or the transactions contemplated by this
Agreement in the event of the subsequent termination of their employment.
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(e) Except as provided in Section 3.10(e) of the Company Disclosure
Schedule, no Benefit Plan provides retiree medical or retiree life insurance
benefits that could reasonably be expected to have a Company Material
Adverse Effect and (y) neither the Company nor any of its subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide
life insurance and medical benefits upon retirement or termination of
employment of employees that could reasonably be expected to have a Company
Material Adverse Effect.
(f) Except as provided in Section 3.10(f) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries contributes to or
has an obligation to contribute to, and has not within six years prior to
the date of this Agreement contributed to or had an obligation to contribute
to, a multiemployer plan within the meaning of Section 3(37) of ERISA.
(g) The Company has not taken any of the following or other similar
actions since January 1, 1994: the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a change in control of the Company or a filing under Sections
13(d) or 14(d) of the Exchange Act with respect to the Company) with respect
to any of the Benefit Plans or any of the plans, programs, agreements,
policies or other arrangements described in Section 3.10(d) of this
Agreement.
SECTION 3.11. TAXES. Except as set forth in Section 3.11 of the Company
Disclosure Statement,
(a) And except for matters that could not be expected to have a Company
Material Adverse Effect, (i) all returns and reports ("Tax Returns") of or
with respect to any Tax which is required to be filed on or before the
Closing Date by or with respect to Company or any its subsidiaries have been
or will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such Tax
Return have been or will be so included and all information provided in each
such Tax Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each such
Tax Return have been or will be timely paid in full, (iv) all withholding
Tax requirements imposed on or with respect to Company or any of its
subsidiaries have been or will be satisfied in full in all respects, and (v)
no penalty, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax.
(b) There is no claim against Company or any of its subsidiaries for any
material amount of Taxes, and no material assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of
or with respect to Company or any of its subsidiaries other than those
disclosed (and to which are attached true and complete copies of all audit
or similar reports) in Section 3.11 of the Company Disclosure Schedule.
(c) The total amounts set up as liabilities for current and deferred
Taxes in the financial statements referred to in Section 3.07 of this
Agreement are sufficient to cover the payment of all Taxes, whether or not
assessed or disputed, which are, or are hereafter found to be, or to have
been, due by or with respect to Company and any of its subsidiaries up to
and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due, no
material liens for Taxes exist upon the assets of any of Company or its
subsidiaries.
(e) None of the transactions contemplated by this Agreement will result
in any Tax liability or the recognition of any item of income or gain to
Company or any of its subsidiaries.
(f) Neither Company nor any of its subsidiaries has made an election
under section 341(f) of the Code.
SECTION 3.12. TAX MATTERS; POOLING.
(a) Neither Company nor, to the knowledge of Company, any of its
affiliates has taken or agreed to take any action that would prevent the
Merger from (a) constituting a reorganization
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qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a "pooling of interests" in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC (a "Pooling Transaction").
(b) There is no plan or intention by any stockholder of the Company
(other than institutional investors not affiliated with the Company) who
owns five percent or more of Company Common Stock, and to the best knowledge
of Company there is no plan or intention on the part of any of any other
stockholder of Company Common Stock, to sell, exchange or otherwise dispose
of a number of shares of Acquiror Common Stock to be received in the Merger
that would reduce the Company stockholders' ownership of Acquiror Common
Stock to a number of shares having a value, as of the Effective Time, of
less than 50 percent of the value of all of the Company Common Stock
(including shares of Company Common Stock exchanged for cash in lieu of
fractional shares of Acquiror Common Stock) outstanding immediately prior to
the Effective Time.
(c) Following the Merger, Company will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets held immediately prior to the Merger. For
purposes of this representation, amounts used by Company to pay Merger
expenses and all redemptions and distributions (except for regular, normal
dividends) made by Company will be included as assets of Company immediately
prior to the Merger.
(d) There is no intercorporate indebtedness existing between the Company
and Acquiror or between the Company and Merger Sub that was issued, acquired
or will be settled at a discount.
(e) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) The Company is not under the jurisdiction of a court in a title 11
or similar case within the meaning of section 368(a)(3)(A) of the Code.
(g) The total amount of cash to be received by stockholders of Company
Common Stock in lieu of fractional shares of Acquiror Common Stock will not
exceed one percent of the total fair market value of the Acquiror Common
Stock (as of the Effective Time) to be issued in the Merger.
SECTION 3.13. AFFILIATES. Section 3.13 of the Company Disclosure Schedule
identifies all persons who, to the knowledge of the Company, may be deemed to be
affiliates of the Company under Rule 145 of the Securities Act, including,
without limitation, all directors and executive officers of the Company.
SECTION 3.14. CERTAIN BUSINESS PRACTICES. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment.
SECTION 3.15. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Merrill Lynch & Co. to the effect that, as of the date of this
Agreement, the Common Stock Exchange Ratio is fair, from a financial point of
view, to the holders of Company Common Stock.
SECTION 3.16. 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 of the holders of a majority of the outstanding shares of the
Company Common Stock.
SECTION 3.17. BROKERS. Except as set forth in Section 3.17 of the Company
Disclosure Schedule, no broker, finder or investment banker (other than Merrill
Lynch & Co. is entitled to any
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brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Prior to the date of this Agreement, the Company has
made available to Acquiror a complete and correct copy of all agreements between
the Company and Merrill Lynch & Co. pursuant to which such firm will be entitled
to any payment relating to the transactions contemplated by this Agreement.
SECTION 3.18. ACQUIRING PERSON. None of the Acquiror Companies 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 execution of the Transaction Documents does not, and the
consummation of the Merger and the other transactions contemplated by the
Transaction Documents 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 3.19. INFORMATION SUPPLIED. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed by Acquiror with the SEC in
connection with the issuance of shares of Acquiror Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Company
Proxy Statement (as hereinafter defined) will, at the date of mailing to
stockholders and at the time of the stockholders' meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein, in light of the circumstances in which they were made, not
misleading. All documents that the Company is responsible for filing with any
Governmental Entity in connection with the transactions contemplated hereby will
comply as to form in all material respects with the provisions of applicable
law, including applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations thereunder. Without limiting any of the
representations and warranties contained herein, no representation or warranty
to the Acquiror Companies by the Company and no information contained in the
Company Disclosure Schedule or any document incorporated therein by reference
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances in which such statements are or will be made, not misleading.
SECTION 3.20. INSURANCE. Except as set forth in the Company Disclosure
Schedule, the Company and each of its subsidiaries are presently insured, and
during each of the past five calendar years have been insured against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. Except as set forth in the Company
Disclosure Schedule, the policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of the Company and its
subsidiaries provide adequate coverage against loss.
SECTION 3.21. PROPERTIES. Except as set forth in Section 3.21 of the
Company Disclosure Schedule or specifically described in the Company SEC
Reports, the Company and its subsidiaries have good and marketable title, free
and clear of all liens, the existence of which could reasonably be expected to
have a Company Material Adverse Effect, to all their material properties and
assets whether tangible or intangible, real, personal or mixed, reflected in the
Company's consolidated financial statements contained in the Company's most
recent SEC Report on Form 10-K as being owned by the Company and its
subsidiaries as of the date thereof, other than (i) any properties or assets
that have been sold or otherwise disposed of in the ordinary course of business
since the date of such financial statements, (ii) liens disclosed in the notes
to such financial statements and (iii) liens arising in the ordinary course of
business after the date of such financial statements. All buildings, and all
fixtures, equipment and other property and assets that are material to its
business on a consolidated basis, held under leases or sub-leases by the Company
or any of its subsidiaries are held under valid instruments enforceable in
accordance with their respective terms, subject to applicable laws of
bankruptcy, insolvency or similar laws relating to creditors' rights generally
and to general
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principles of equity (whether applied in a proceeding in law or equity).
Substantially all of the Company's and its subsidiaries' equipment in regular
use has been reasonably maintained and is in serviceable condition, reasonable
wear and tear excepted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
The Acquiror Companies hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Acquiror Companies is a corporation, and each of Acquiror's other subsidiaries
is a corporation or partnership, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted and is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so duly
qualified and in good standing could not reasonably be expected to have an
Acquiror Material Adverse Effect. The term "Acquiror Material Adverse Effect" as
used in this Agreement shall mean any change or effect that, individually or
when taken together with all such other changes or effects, would be materially
adverse to the financial condition, results of operations, business or prospects
of Acquiror and its subsidiaries, taken as a whole, at the time of such change
or effect. Section 4.01of the Disclosure Schedule delivered by the Acquiror
Companies to the Company concurrently with the execution of this Agreement (the
"Acquiror Disclosure Schedule") sets forth, as of the date of this Agreement, a
true and complete list of all the Acquiror's directly or indirectly owned
subsidiaries, together with (A) the jurisdiction of incorporation or
organization of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by Acquiror or another
subsidiary of Acquiror and (B) an indication of whether each such subsidiary is
a "Significant Subsidiary" as defined in Section 9.03(f) of this Agreement.
Except as set forth in Section 4.01 of the Acquiror Disclosure Schedule, neither
Acquiror nor any of its subsidiaries owns an equity interest in any partnership
or joint venture arrangement or other business entity that is material to the
financial condition, results of operations, business or prospects of Acquiror
and its subsidiaries, taken as a whole.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS. Acquiror has
heretofore furnished or made available to the Company complete and correct
copies of the Certificate of Incorporation and the Bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of Acquiror and each of its subsidiaries. Neither Acquiror nor any of
its corporate subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws (or equivalent organizational Documents).
None of Acquiror s noncorporate subsidiaries is in violation of any provisions
of its organizational documents (the Acquiror Constituent Documents ) other than
any such violations that could not reasonably be expected to have an Acquiror
Material Adverse Effect.
SECTION 4.03. CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of (i) 150,000,000
shares of Acquiror Common Stock, of which, as of March 28, 1995: (A)
29,455,220 were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights created by statute, Acquiror's
Certificate of Incorporation or Bylaws or any agreement to which Acquiror is
a party or is bound; (B) 504,976 were held in the treasury of Acquiror; and
(C) 2,998,714 were reserved for future issuance and (ii) 500,000 shares of
preferred stock, par value $.001 per share ("Acquiror Preferred Stock"), of
which, as of March 28, 1995, 150,000 shares had been designated as Series A
Junior Participating Preferred Stock. No shares of Acquiror Preferred Stock
are issued and outstanding. Except (1) as disclosed in the Acquiror SEC
Reports (as hereinafter defined) or otherwise as set forth in this Section
4.03
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or in Section 4.03(a) of the Acquiror Disclosure Schedule and (2) pursuant
to the terms of that certain Rights Agreement dated as of September 15, 1994
by and between Acquiror and Chemical Trust Company of California (the
"Acquiror Rights Agreement"), there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of
any character to which Acquiror or any of its subsidiaries is a party
relating to the issued or unissued capital stock of, or other equity
interests in, Acquiror or any of its subsidiaries or obligating Acquiror or
any of its subsidiaries to grant, issue or sell any shares of the capital
stock of, or other equity interests in, Acquiror or any of its subsidiaries.
Except pursuant to the terms of the Acquiror Rights Agreement or as set
forth in Section 4.03(a) of the Acquiror Disclosure Schedule, there are no
obligations, contingent or otherwise, of Acquiror or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of Acquiror Common
Stock or the capital stock of, or other equity interests in, any subsidiary
of Acquiror. Each of the issued shares of capital stock of, or other equity
interests in, each of Acquiror s subsidiaries is duly authorized, validly
issued and, in the case of shares of capital stock, fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock of, or other equity interests in, such
entities subject to) any preemptive or similar rights created by statute,
the Certificate of Incorporation of Bylaws (or the equivalent organizational
documents) of any of Acquiror s subsidiaries, or any agreement to which the
Company or any of its subsidiaries is a party or is bound.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $.001 per share ("Merger Sub Common Stock"). An
aggregate of 100 shares of Merger Sub Common Stock are issued and
outstanding and held by Acquiror, all of which are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, Merger Sub's Certificate of Incorporation or Bylaws or
any agreement to which Merger Sub is a party or is bound.
(c) The shares of Acquiror Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, Acquiror s
Certificate of Incorporation or Bylaws or any agreement to which Acquiror is
a party or is bound. The offering, sale and delivery of such shares of
Acquiror Common Stock will, prior to the date of the Company Stockholders'
Meeting, have been registered under the Securities Act and will have been
qualified or registered or exempt therefrom under applicable Blue Sky Laws.
In addition, the Acquiror Common Stock will, prior to the Effective Time,
have been registered under the Exchange Act and listed on the New York Stock
Exchange, subject to official notice of issuance.
SECTION 4.04. AUTHORITY. Each of the Acquiror Companies has all requisite
corporate power and authority to execute and deliver the Transaction Documents
(to the extent a party thereto), to perform its obligations under the
Transaction Documents and to consummate the transactions contemplated by the
Transaction Documents (subject to the approval and adoption of this Agreement by
the holders of a majority of the outstanding shares of Acquiror Common Stock in
accordance with Delaware Law and Acquiror's Certificate of Incorporation). The
execution and delivery of the Transaction Documents by each of the Acquiror
Companies and the consummation by each of the Acquiror Companies (to the extent
a party thereto) of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of any of the Acquiror Companies are necessary to authorize the
Transaction Documents or to consummate the transactions contemplated by the
Transaction Documents (subject to the approval and adoption of this Agreement by
the holders of a majority of the outstanding shares of Acquiror Common Stock in
accordance with Delaware Law and Acquiror's Certificate of Incorporation). The
Transaction Documents have been duly executed and delivered by each of the
Acquiror Companies (to the extent a party thereto) and, assuming the due
authorization, execution and delivery thereof by the Company, constitute the
legal, valid and binding obligation of each of the Acquiror Companies (to the
extent a party thereto).
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SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers, approvals,
authorizations, orders, filings and notifications contemplated by the
exceptions to Section 4.05(b) are obtained or made and except as otherwise
disclosed in Section 4.05(a) of the Acquiror Disclosure Schedule, the
execution and delivery of the Transaction Documents by each of the Acquiror
Companies does not, and the consummation of the transactions contemplated
hereby will not (i) conflict with or violate the Certificate of
Incorporation or Bylaws, or the equivalent organizational documents, in each
case as amended or restated, of Acquiror or any of Acquiror's subsidiaries,
(ii) conflict with or violate any Laws in effect as of the date of this
Agreement applicable to Acquiror or any of Acquiror's subsidiaries or by or
to which any of their properties is bound or subject or (iii) result in any
breach of or constitute a default (or an event that with or without notice
or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of a lien or encumbrance on
any of the properties or assets of Acquiror or any of Acquiror's
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Acquiror or any of Acquiror's subsidiaries is a party or
by or to which Acquiror or any of Acquiror's subsidiaries or any of their
respective properties is bound or subject, except for any such conflicts,
violations, breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or encumbrances
that could not reasonably be expected to have an Acquiror Material Adverse
Effect.
(b) Except as disclosed in Section 4.05(b) of the Acquiror Disclosure
Schedule, the execution and delivery of the Transaction Documents by each of
the Acquiror Companies does not, and the performance of the Transaction
Documents by each of the Acquiror Companies will not, require any of the
Acquiror Companies to obtain any consent, license, permit, waiver approval,
authorization or order of, or to make any filing with or notification to,
any Governmental Entities, except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws and the HSR Act and
the filing and recordation of appropriate merger documents as required by
Delaware Law and (ii) where the failure to obtain such consents, licenses,
permits, waivers, approvals, authorizations or orders, or to make such
filings or notifications could not reasonably be expected to prevent any of
the Acquiror Companies from performing its obligations under the Transaction
Documents and could not reasonably be expected to have an Acquiror Material
Adverse Effect.
SECTION 4.06. PERMITS; COMPLIANCE.
(a) Each of Acquiror and its subsidiaries is in possession of all (i)
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, identification and registration numbers,
approvals and orders necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted and (ii) agreements
from all federal, state and local governmental agencies and accrediting and
certifying organizations having jurisdiction over such facility or
facilities that are required to operate the facility or facilities in the
manner in which it or they are currently operated and receive reimbursement
for care provided to patients covered under the federal Medicare program or
any applicable state Medicaid program (collectively, the "Acquiror
Permits"), except where the failure to possess such Acquiror Permits could
not reasonably be expected to have an Acquiror Material Adverse Effect.
Without limiting the generality of the foregoing, all of Acquiror's
hospitals are certified for participation or enrollment in the Medicare
program, have a current and valid provider contract with the Medicare
program and are in substantial compliance with the conditions of
participation of such programs. Neither Acquiror nor any of its subsidiaries
has received notice from the regulatory authorities that enforce the
statutory or regulatory provisions in respect of either the Medicare or the
Medicaid program of any pending or threatened investigations or surveys, and
no such investigations or
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surveys are pending or, to the knowledge of Acquiror, threatened or imminent
that could reasonably be expected to have an Acquiror Material Adverse
Effect. Section 4.06 of Acquiror Disclosure Schedule sets forth, as of the
date of this Agreement, all actions, proceedings, investigations or surveys
pending or, to the knowledge of Acquiror, threatened against Acquiror or any
of its subsidiaries that could reasonably be expected to result in (i) the
loss or revocation of an Acquiror Permit necessary to operate one or more
facilities or for a facility to receive reimbursement under the Medicare or
Medicaid programs, (ii) the suspension or cancellation of any other Acquiror
Permit except any such Acquiror Permit where such suspension or cancellation
could not reasonably be expected to have an Acquiror Material Adverse
Effect. Neither Acquiror nor any of its subsidiaries is in conflict with, or
in default or violation of (1) any Law applicable to Acquiror or any of its
subsidiaries or by or to which any of their respective properties is bound
or subject or (2) any of Acquiror Permits, except for any such conflicts,
defaults or violations that could not reasonably be expected to have an
Acquiror Material Adverse Effect. Since June 30, 1993, neither Acquiror nor
any of its subsidiaries has received from any Governmental Entity any
written notification with respect to possible conflicts, defaults or
violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that could not reasonably be expected to
have an Acquiror Material Adverse Effect.
(b) Acquiror and its subsidiaries, as appropriate, are approved
participating providers in and under all third party payment programs from
which they receive revenues. No action or investigation is pending, or to
the best of its knowledge, threatened to suspend, limit, terminate,
condition, or revoke the status of Acquiror or any of its subsidiaries as a
provider in any such program, and neither Acquiror nor any of its
subsidiaries has been provided notice by any third party payor of its
intention to suspend, limit, terminate, revoke, condition or fail to renew
in whole or in part or decrease the amounts payable under any arrangement
with Acquiror or such subsidiary as a provider, which action, investigation
or proceeding would have an Acquiror Material Adverse Effect.
(c) Acquiror and its subsidiaries have filed on a timely basis all
claims, cost reports or annual filings required to be filed to secure
payments for services rendered by them under any third-party payment program
from which they receive or expect to receive revenues except where the
failure to file such claim, report or other filing would not have an
Acquiror Material Adverse Effect. Except as indicated in its financial
statements included in the Acquiror SEC Reports (as hereinafter defined),
Acquiror or its subsidiaries, as applicable, have paid, or caused to be
paid, all refunds, discounts, adjustments, or amounts owing that have become
due to such third party payors pursuant to such claims, reports or filings,
and neither Acquiror nor any of its subsidiaries has any knowledge or notice
of any material changes required to be made to any cost reports, claims or
filings made by them for any period or of any deficiency in any such claim,
report, or filing, except for changes and deficiencies that in the aggregate
would not have an Acquiror Material Adverse Effect.
SECTION 4.07. REPORTS; FINANCIAL STATEMENTS.
(a) Since June 30, 1991, Acquiror 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 "Acquiror 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
Governmental Entities, including, without limitation, state insurance and
health regulatory authorities, except where the failure to file any such
forms, reports, statements or other documents could not reasonably be
expected to have an Acquiror Material Adverse Effect (all such forms,
reports, statements and other documents in clauses (i) and (ii) of this
Section 4.07(a) being referred to herein, collectively,
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as the "Acquiror Reports"). Acquiror Reports were prepared in all material
respects in accordance with the requirements of applicable Law (including,
with respect to Acquiror SEC Reports, the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Acquiror SEC Reports) and Acquiror SEC Reports 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.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Acquiror SEC Reports (i)
have been prepared in accordance with the published rules and regulations of
the SEC and generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except (A) to the extent disclosed
therein or required by changes in generally accepted accounting principles,
(B), with respect to Acquiror SEC Reports filed prior to the date of this
Agreement, as may be indicated in the notes thereto and (C) in the case of
the unaudited financial statements, as permitted by the rules and
regulations of the SEC) and (ii) fairly present the consolidated financial
position of Acquiror and its subsidiaries as of the respective dates thereof
and the consolidated results of operations and cash flows for the periods
indicated (subject, in the case of unaudited consolidated financial
statements for interim periods, to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of operations
and cash flows), except that any pro forma financial statements contained in
such consolidated financial statements are not necessarily indicative of the
consolidated financial position of Acquiror and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Acquiror SEC Reports filed prior to the date of this Agreement or as
contemplated in this Agreement or as set forth in Section 4.08 of the Acquiror
Disclosure Schedule, since May 31, 1994, Acquiror and its subsidiaries have
conducted their respective businesses only in the ordinary course and in a
manner consistent with past practice and there has not been: (i) any damage,
destruction or loss with respect to any assets of Acquiror or any of its
subsidiaries that, if not covered by insurance, would constitute an Acquiror
Material Adverse Effect; (ii) any change by Acquiror or its subsidiaries in
their significant accounting policies; (iii) except (x) for dividends by a
subsidiary of Acquiror to Acquiror or another wholly-owned subsidiary of
Acquiror, (y) as required by the Acquiror Constituent Documents, (z) pursuant to
the Acquiror Constituent Documents in accordance with pasts practice, any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of Acquiror Common Stock or the shares of stock of, or other
equity interests in, any subsidiary of Acquiror or any redemption, purchase or
other acquisition of any of Acquiror's securities or any of the securities of
any subsidiary of Acquiror; (iv) any material increase in the benefits under, or
the establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any increase in the compensation payable or to become
payable to any of the directors or officers of Acquiror or its subsidiaries as a
group, except for (A) increase in salaries or wages payable or to become payable
in the ordinary course of business and consistent with past practice or (B) the
granting of stock options in the ordinary course of business to employees of
Acquiror or its subsidiaries who are not directors or executive officers of
Acquiror; or (v) any other Acquiror Material Adverse Effect.
SECTION 4.09. ABSENCE OF LITIGATION. Except as disclosed in Acquiror SEC
Reports filed prior to the date of this Agreement or as set forth in Section
4.09 of the Acquiror Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of Acquiror,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of Acquiror, threatened
against Acquiror or any of its subsidiaries or any properties or rights of
Acquiror or any of its subsidiaries (except for claims, actions, suits,
litigation,
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proceedings, arbitrations, or investigations that could not reasonably be
expected to have an Acquiror Material Adverse Effect), and neither Acquiror nor
any of its subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of Acquiror, continuing investigation by, any Governmental Entity, or
any judgment, order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-desist or other
orders, except for matters that could not reasonably be expected to have an
Acquiror Material Adverse Effect.
SECTION 4.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained or contributed to by Acquiror or any
of its subsidiaries, or with respect to which Acquiror or any of its
subsidiaries could incur liability under Section 4069, 4212(c) or 4204 of
ERISA (the "Benefit Plans"), Acquiror has delivered or made available to the
Company a true and correct copy of (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS") for each Benefit
Plan for which a Form 5500 is required to be filed, (ii) such Benefit Plan,
(iii) each trust agreement, if any, relating to such Benefit Plan, (iv) the
most recent summary plan description for each Benefit Plan for which a
summary plan description is required, (v) the most recent actuarial report
or valuation relating to a Benefit Plan subject to Title IV of ERISA and
(vi) the most recent determination letter, if any, issued by the IRS with
respect to any Benefit Plan qualified under Section 401 of the Code.
(b) With respect to the Benefit Plans, no event has occurred and, to the
knowledge of Acquiror, there exists no condition or set of circumstances, in
connection with which Acquiror or any of its subsidiaries could be subject
to any liability under the terms of such Benefit Plans, ERISA, the Code or
any other applicable Law that could reasonably be expected to have an
Acquiror Material Adverse Effect.
(c) Acquiror has delivered or made available to the Company all
collective bargaining or other labor union contracts to which Acquiror or
its subsidiaries is a party applicable to persons employed by Acquiror or
its subsidiaries and, except as set forth in Section 4.10(c) of the Acquiror
Disclosure Schedule, no collective bargaining agreement is being negotiated
by Acquiror or any of its subsidiaries. There is no pending or, to the
knowledge of Acquiror, threatened labor dispute, strike or work stoppage
against Acquiror or any of its subsidiaries that may interfere with the
respective business activities of Acquiror or any of its subsidiaries and
could reasonably be expected to have an Acquiror Material Adverse Effect. To
the knowledge of Acquiror, none of Acquiror, any of its subsidiaries or any
of their respective representatives or employees has committed any unfair
labor practices in connection with the operation of the respective
businesses of Acquiror or its subsidiaries that could reasonably be expected
to have an Acquiror Material Adverse Effect, and there is no pending or, to
the knowledge of Acquiror, threatened charge or complaint against Acquiror
or any of its subsidiaries by the National Labor Relations Board or any
comparable state agency that, if not covered by insurance, would constitute
an Acquiror Material Adverse Effect.
(d) Acquiror has delivered or made available to the Company (i) copies
of all employment agreements with officers of Acquiror; (ii) a schedule
listing all officers of Acquiror who have executed a non-competition
agreement with Acquiror; (iii) copies of all severance agreements, programs
and policies of Acquiror with or relating to its employees; and (iv) copies
of all plans, programs, agreements and other arrangements of Acquiror with
or relating to its employees. Except as set forth in Section 4.10(d) of the
Acquiror Disclosure Schedule, neither Acquiror nor any of its subsidiaries
will owe a severance payment or similar obligation to any of their
respective employees, officers or directors as a result of the Merger or the
transactions contemplated by this
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Agreement, and none of such persons will be entitled to an increase in
severance payments or other benefits as a result of the Merger or the
transactions contemplated by this Agreement in the event of the subsequent
termination of their employment.
(e) Except as provided in Section 4.10(e) of the Acquiror Disclosure
Schedule, no Benefit Plan provides retiree medical or retiree life insurance
benefits that could reasonably be expected to have an Acquiror Material
Adverse Effect and (y) neither Acquiror nor any of its subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide
life insurance and medical benefits upon retirement or termination of
employment of employees that could reasonably be expected to have an
Acquiror Material Adverse Effect.
(f) Except as provided in Section 4.10(f) of the Acquiror Disclosure
Schedule, neither Acquiror nor any of its subsidiaries contributes to or has
an obligation to contribute to, and has not within six years prior to the
date of this Agreement contributed to or had an obligation to contribute to,
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(g) Acquiror has not taken any of the following or other similar actions
since January 1, 1994: the acceleration of vesting, waiving of performance
criteria or the adjustment of awards or any other actions permitted upon a
change in control of Acquiror or a filing under Sections 13(d) or 14(d) of
the Exchange Act with respect to Acquiror) with respect to any of the
Benefit Plans or any of the plans, programs, agreements, policies or other
arrangements described in Section 4.10(d) of this Agreement.
SECTION 4.11. TAXES.
(a) Except for matters that could not be expected to have an Acquiror
Material Adverse Effect and except as set forth in Section 4.11(a) to the
Acquiror Disclosure Schedule, (i) all returns and reports ("Tax Returns") of
or with respect to any Tax which is required to be filed on or before the
Closing Date by or with respect to Acquiror or any its subsidiaries have
been or will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such Tax
Return have been or will be so included and all information provided in each
such Tax Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each such
Tax Return have been or will be timely paid in full, (iv) all withholding
Tax requirements imposed on or with respect to Acquiror or any of its
subsidiaries have been or will be satisfied in full in all respects, and (v)
no penalty, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax.
(b) There is no claim against Acquiror or any of its subsidiaries for
any material amount of Taxes, and no material assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of
or with respect to Acquiror or any of its subsidiaries other than those
disclosed (and to which are attached true and complete copies of all audit
or similar reports) on Schedule 4.11(b) to the Acquiror Disclosure Schedule.
(c) The total amounts set up as liabilities for current and deferred
Taxes in the financial statements referred to in Section 4.07 of this
Agreement are sufficient to cover the payment of all Taxes, whether or not
assessed or disputed, which are, or are hereafter found to be, or to have
been, due by or with respect to Acquiror and any of its subsidiaries up to
and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due, no
material liens for Taxes exist upon the assets of any of Acquiror or its
subsidiaries.
(e) Except as set forth on Section 4.11(e) to the Acquiror Disclosure
Schedule, none of the transactions contemplated by this Agreement will
result in any Tax liability or the recognition of any item of income or gain
to Acquiror or any of its subsidiaries.
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(f) Neither Acquiror nor any of its subsidiaries has made an election
under section 341(f) of the Code.
SECTION 4.12. TAX MATTERS; POOLING. Neither Acquiror nor, to the knowledge
of Acquiror, any of its affiliates has taken or agreed to take any action that
would prevent the Merger from (a) constituting a reorganization qualifying under
the provisions of Section 368(a) of the Code or (b) being treated for financial
accounting purposes as a Pooling Transaction. Acquiror does not own, nor has it
owned during the past five years, any shares of Company Common Stock. There is
no intercorporate indebtedness existing between the Company and Acquiror, or
between the Company and Merger Sub, that was issued, acquired or will be settled
at a discount.
SECTION 4.13. AFFILIATES. Section 4.13 of the Acquiror Disclosure Schedule
identifies all persons who, to the knowledge of Acquiror, may be deemed to be
affiliates of Acquiror under Rule 145 of the Securities Act, including, without
limitation, all directors and executive officers of Acquiror.
SECTION 4.14. CERTAIN BUSINESS PRACTICES. None of Acquiror, any of its
subsidiaries or any directors, officers, agents or employees of Acquiror or any
of its subsidiaries (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment.
SECTION 4.15. OPINION OF FINANCIAL ADVISOR. Acquiror has received the
opinion of Salomon Brothers Inc to the effect that, as of the date of this
Agreement, the Merger Consideration to be paid by Acquiror in the Merger is
fair, from a financial point of view, to the stockholders of Acquiror.
SECTION 4.16. VOTE REQUIRED. The only votes of the holders of any class or
series of Acquiror capital stock necessary to approve the Merger are the
affirmative votes of the holders of a majority of the shares of Acquiror Common
Stock present or represented by proxy at a meeting at which a quorum is present.
SECTION 4.17. BROKERS. Except as set forth in Section 4.17 of the Acquiror
Disclosure Schedule, no broker, finder or investment banker (other than Salomon
Brothers Inc) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror. Prior to the date of this
Agreement, Acquiror has made available to the Company a complete and correct
copy of all agreements between Acquiror and Salomon Brothers Inc pursuant to
which such firm will be entitled to any payment relating to the transactions
contemplated by this Agreement.
SECTION 4.18. INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Acquiror for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed by the Company with the SEC in
connection with the issuance of shares of the Company Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the
Acquiror Proxy Statement (as hereinafter defined) will, at the date of mailing
to stockholders and at the time of the stockholders' meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein, in light of the circumstances in which they were made, not
misleading. All documents that Acquiror is responsible for filing with any
Governmental Entity in connection with the transactions contemplated hereby will
comply as to form in all material respects with the provisions of applicable
law, including applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations thereunder. Without limiting any of the
representations and warranties contained herein, no representation or warranty
to the
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Company by Acquiror and no information contained in the Acquiror Disclosure
Schedule or any document incorporated therein by reference contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained therein, in light of the circumstances in which
such statements are or will be made, not misleading.
SECTION 4.19. INSURANCE. Except as set forth in the Acquiror Disclosure
Schedule, Acquiror and each of its subsidiaries are presently insured, and
during each of the past five calendar years have been insured against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. Except as set forth in the Acquiror
Disclosure Schedule, the policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of Acquiror and its
subsidiaries provide adequate coverage against loss.
SECTION 4.20. PROPERTIES. Except as set forth in Section 4.20 of the
Acquiror Disclosure Schedule or specifically described in Acquiror SEC Reports,
Acquiror and its subsidiaries have good and marketable title, free and clear of
all liens, the existence of which could reasonably be expected to have an
Acquiror Material Adverse Effect, to all their material properties and assets
whether tangible or intangible, real, personal or mixed, reflected in Acquiror's
consolidated financial statements contained in Acquiror's most recent SEC Report
on Form 10-K as being owned by Acquiror and its subsidiaries as of the date
thereof, other than (i) any properties or assets that have been sold or
otherwise disposed of in the ordinary course of business since the date of such
financial statements, (ii) liens disclosed in the notes to such financial
statements and (iii) liens arising in the ordinary course of business after the
date of such financial statements. All buildings, and all fixtures, equipment
and other property and assets that are material to its business on a
consolidated basis, held under leases or sub-leases by Acquiror or any of its
subsidiaries are held under valid instruments enforceable in accordance with
their respective terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity). Substantially all
of Acquiror's and its subsidiaries' equipment in regular use has been reasonably
maintained and is in serviceable condition, reasonable wear and tear excepted.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Acquiror,
the Company will and will cause its subsidiaries to:
(a) operate its business in the usual and ordinary course consistent
with past practices;
(b) use all reasonable efforts to preserve substantially intact its
business organization, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice; and
(d) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Acquiror,
from the date of this Agreement until the Effective Time, the Company will not
do, and will not permit any of its subsidiaries to do, any of the following:
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(a) (i) increase the compensation payable to or to become payable to any
director or executive officer, other than in the ordinary course of
business; (ii) pay bonuses to employees of the Company after the date of
this Agreement in excess of $2.5 million in the aggregate (excluding
payments made pursuant to agreements disclosed on the Company Disclosure
Schedule), (iii) grant any severance or termination pay (other than pursuant
to the normal severance practices of the Company or its subsidiaries as in
effect on the date of this Agreement) to, or enter into any employment or
severance agreement with, any director, officer or employee; (iv) establish,
adopt or enter into any employee benefit plan or arrangement or (v) except
as may be required by applicable law and actions that are not inconsistent
with the provisions of Section 6.09 of this Agreement, amend, or take any
other actions (including, without limitation, the acceleration of vesting,
waiving of performance criteria or the adjustment of awards or any other
actions permitted upon a "change in control" (as defined in the respective
plans) of the Company or a filing under Section 13(d) or 14(d) of the
Exchange Act with respect to the Company) with respect to any of the Benefit
Plans or any of the plans, programs, agreements, policies or other
arrangements described in Section 3.10(d) of this Agreement;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock or other equity interests,
except for (i) dividends by a wholly owned subsidiary of the Company to the
Company or another wholly owned subsidiary of the Company, (ii)
distributions by subsidiaries of the Company required by the terms of the
Constituent Documents and (iii) distributions by subsidiaries of the Company
pursuant to the terms of the Constituent Documents and in accordance with
past practice;
(c) (i) except as described in Section 3.03(c) of the Company Disclosure
Schedule, redeem, purchase or otherwise acquire any shares of its or any of
its subsidiaries' capital stock or any securities or obligations convertible
into or exchangeable for any shares of its or its subsidiaries' capital
stock (other than any such acquisition directly from any wholly owned
subsidiary of the Company in exchange for capital contributions or loans to
such subsidiary), or any options, warrants or conversion or other rights to
acquire any shares of its or its subsidiaries' capital stock or any such
securities or obligations (except as permitted pursuant to Section 6.09 of
this Agreement, in connection with the exercise of outstanding Stock Options
in accordance with their terms and redemptions or repurchases of capital
stock or other equity interests of subsidiaries of the Company in an
aggregate amount not to exceed $10 million); (ii) effect any reorganization
or recapitalization of the Company or any of its Significant Subsidiaries,
(iii) split, combine or reclassify any of its or its Significant
Subsidiaries' capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,
shares of its or its Significant Subsidiaries' capital stock or (iv) take
any action described in clause (ii) or (iii) above with respect to any other
subsidiary of the Company other than actions that, individually or in the
aggregate, could not reasonable be expected to (x) have a material adverse
effect on the financial condition, results of operations, business or
prospects affected subsidiary or subsidiaries, (y) a Company Material
Adverse Effect or (z) adversely affect in any material respect the Company s
ability to control any of its subsidiaries;
(d) (i) except as set forth in Section 3.03(a) herein or as described in
Section 3.03(c) of the Company Disclosure Schedule, issue (whether upon
original issue or out of treasury), sell, grant, award, deliver or limit the
voting rights of any class of its or its subsidiaries' capital stock, any
securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire, any such shares
(except as permitted pursuant to Section 6.09 of this Agreement or for the
issuance of shares upon the exercise of outstanding Stock Options in
accordance with their terms); (ii) amend or otherwise modify the terms of
any such rights, warrants or options the effect of which shall be to make
such terms materially more favorable to the holders thereof; or (iii) take
any action to accelerate the vesting of any of the Stock Options;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation,
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partnership, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets of any other person
(other than the purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice) with an aggregate
purchase price in excess of $25,000,000;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets or any material assets of
any of its subsidiaries, except for (i) dispositions of inventories and of
assets in the ordinary course of business and consistent with past practice
and (ii) dispositions of assets having an aggregate fair market value of
less than $10 million;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, any Competing Transaction, or enter into discussions
or negotiate with any person or entity in furtherance of such inquiries or
to obtain a Competing Transaction, or agree to, or endorse, any Competing
Transaction, or authorize or permit any of the officers, directors,
employees or agents of the Company or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of the Company's subsidiaries
to take any such action and the Company shall promptly notify Acquiror of
all relevant terms of any such inquiries or proposals received by the
Company or any of its subsidiaries or by any such officer, director,
employee, agent, investment banker, financial advisor, attorney, accountant
or other representative relating to any of such matters and if such inquiry
or proposal is in writing, the Company shall promptly deliver or cause to be
delivered to Acquiror a copy of such inquiry or proposal; PROVIDED, HOWEVER,
that nothing contained in this subsection (g) shall prohibit the Board of
Directors of the Company from (i) furnishing information to, or entering
into discussions or negotiations with, any persons or entity in connection
with an unsolicited bona fide proposal in writing by such person or entity
relating to a Competing Transaction if, and only to the extent that (A) such
unsolicited bona fide proposal is a bona fide written proposal made by a
third party relating to a Competing Transaction on terms that the Board of
Directors of the Company determines it cannot then reject in favor of the
Merger, based on applicable fiduciary duties and the advice of counsel and
(except with respect to furnishing information) for which financing, to the
extent required, is then committed, (B) the Board of Directors of the
Company, after duly considering the written advice of outside legal counsel
to the Company, determines in good faith that such action is required for
the Board of Directors of the Company to comply with its fiduciary duties to
stockholders imposed by Delaware Law and (C) prior to furnishing such
information to, or entering into discussions or negotiations with, such
person or entity the Company provides written notice to Acquiror to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity; or (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction.
For purposes of this Agreement, "Competing Transaction" shall mean any
merger, consolidation, share exchange, business combination or similar
transaction involving the Company or any of its Significant Subsidiaries or
the acquisition in any manner, directly or indirectly, of a material
interest in any voting securities of, or a material equity interest in a
substantial portion of the assets of, the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by this Agreement;
(h) release any third party from its obligations under any existing
standstill agreement or arrangement relating to a Competing Transaction or
otherwise under any confidentiality or other similar agreement relating to
information material to the Company or any of its subsidiaries;
(i) propose to adopt any amendments to its Certificate of Incorporation
or its Bylaws that would have an adverse effect on the consummation of the
transactions contemplated by this Agreement;
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(j) (A) change any of its significant accounting policies or (B) make
or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the
amount of such settlements or controversies, individually or in the
aggregate, does not exceed $5 million), or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the
taxable year ending June 30, 1994, except, in the case of clause (A) or
clause (B), as may be required by Law or generally accepted accounting
principles;
(k) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument or under any financing lease, whether pursuant to a
sale-and-leaseback transaction or otherwise, except in the ordinary course
of business consistent with past practice, purchase money indebtedness
incurred in connection with acquisitions permitted pursuant to Section
5.02(e) or pursuant to the terms in effect on the date of this Agreement of
any revolving credit agreements disclosed on the Company Disclosure
Schedule;
(l) enter into any material arrangement, agreement or contract with any
third party (other than customers in the ordinary course of business) that
provides for an exclusive arrangement with that third party or is
substantially more restrictive on the Company or substantially less
advantageous to the Company than arrangements, agreements or contracts
existing on the date hereof; or
(m) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. NEGATIVE COVENANTS OF ACQUIROR. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Acquiror will
not do, and will not permit any of its subsidiaries to do, any of the following:
(a) amend any of the material terms or provisions of the Acquiror Common
Stock;
(b) knowingly take any action that would result in a failure to maintain
the trading of the Acquiror Common Stock on the NYSE (other than as a result
of consummation of the transactions contemplated hereby);
(c) (i) increase the compensation payable to or to become payable to any
director or executive officer, other than in the ordinary course of
business; (ii) grant any severance or termination pay (other than pursuant
to the normal severance policy of Acquiror or its subsidiaries as in effect
on the date of this Agreement) to, or enter into any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt or
enter into any employee benefit plan or arrangement or (iv) except as may be
required by applicable law, amend, or take any other actions (including,
without limitation, the acceleration of vesting, waiving of performance
criteria or the adjustment of awards or any other actions permitted upon a
"change in control" (as defined in the respective plans) of Acquiror or a
filing under Section 13(d) or 14(d) of the Exchange Act with respect to
Acquiror) with respect to any of the Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in Section
4.10(d) of this Agreement;
(d) except with respect to the 6.5% convertible subordinated notes due
June 2011 and the 8.75% convertible senior subordinated notes due 2015
assumed by Acquiror in connection with the merger of Greenery Rehabilitation
Group, Inc.into Acquiror (collectively, the "Greenery Notes"), declare or
pay any dividend on, or make any other distribution in respect of,
outstanding shares of capital stock or other equity interests, except for
(i) dividends by a wholly owned subsidiary of Acquiror to Acquiror or
another wholly owned subsidiary of Acquiror, (ii) distributions by
subsidiaries of Acquiror required by the terms of the Acquiror Constituent
Documents and (iii) distributions by subsidiaries of Acquiror pursuant to
the terms of the Acquiror Constituent Documents and in accordance with past
practice.;
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(e) (i) except as described in Section 4.03(c) of the Acquiror
Disclosure Schedule and with respect to the Greenery Notes, redeem, purchase
or otherwise acquire any shares of its or any of its subsidiaries' capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its or its subsidiaries' capital stock (other than any such
acquisition directly from any wholly owned subsidiary of the Acquiror in
exchange for capital contributions or loans to such subsidiary), or any
options, warrants or conversion or other rights to acquire any shares of its
or its subsidiaries' capital stock or any such securities or obligations
(except as permitted pursuant to Section 6.09 of this Agreement or in
connection with the exercise of outstanding Stock Options in accordance with
their terms); (ii) effect any reorganization or recapitalization of the
Acquiror or any of its Significant Subsidiaries, (iii) split, combine or
reclassify any of its or its Significant Subsidiaries' capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its or its
Significant Subsidiaries' capital stock or (iv) take any action described in
clause (ii) or (iii) above with respect to any other subsidiary of the
Acquiror other than actions that, individually or in the aggregate, could
not reasonable be expected to (x) have a material adverse effect on the
financial condition, results of operations, business or prospects affected
subsidiary or subsidiaries, (y) a Acquiror Material Adverse Effect or (z)
adversely affect in any material respect the Acquiror s ability to control
any of its subsidiaries;
(f) (i) except as set forth in Section 4.03(a) herein or as described in
Section 4.03(c) of the Acquiror Disclosure Schedule, issue (whether upon
original issue or out of treasury), sell, grant, award, deliver or limit the
voting rights of, or agree or propose to do any of the foregoing, of any
class of its or its subsidiaries' capital stock, any securities convertible
into or exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire, any such shares (except or for the issuance
of shares upon the exercise of outstanding stock options in accordance with
their terms); (ii) amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof; or (iii) take any action to accelerate the
vesting of any of the stock options;
(g) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with past practice) with an aggregate purchase price in excess of
$25,000,000;
(h) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets or any material assets of
any of its subsidiaries, except for (i) dispositions of inventories and of
assets in the ordinary course of business and consistent with past practice
and (ii) dispositions of assets having an aggregate fair market value of
less than $10 million;
(i) propose to adopt any amendments to its Certificate of Incorporation
or its Bylaws that would have an adverse effect on the consummation of the
transactions contemplated by this Agreement;
(j) (A) change any of its significant accounting policies or (B) make
or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the
amount of such settlements or controversies, individually or in the
aggregate, does not exceed $5 million), or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the
taxable year ending May 31, 1994, except, in the case of clause (A) or
clause (B), as may be required by Law or generally accepted accounting
principles;
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(k) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument or under any financing lease, whether pursuant to a
sale-and-leaseback transaction or otherwise, except in the ordinary course
of business consistent with past practice, purchase money indebtedness
incurred in connection with acquisitions permitted pursuant to Section
5.03(g) or pursuant to the terms in effect on the date of this Agreement of
any revolving credit agreements.
(l) enter into any material arrangement, agreement or contract with any
third party (other than customers in the ordinary course of business) that
provides for an exclusive arrangement with that third party or is
substantially more restrictive on the Acquiror or substantially less
advantageous to the Acquiror than arrangements, agreements or contracts
existing on the date hereof; or
(m) agree in writing or otherwise to do any of the foregoing.
SECTION 5.04. ACCESS AND INFORMATION.
(a) The Company shall, and shall cause its subsidiaries to (i) afford to
Acquiror and its officers, directors, employees, accountants, consultants,
legal counsel, agents and other representatives (collectively, the "Acquiror
Representatives") reasonable access at reasonable times, upon reasonable
prior notice, to the officers, employees, accountants, agents, properties,
offices and other facilities of the Company and its subsidiaries and to the
books and records thereof and (ii) furnish promptly to Acquiror and the
Acquiror Representatives such information concerning the business,
properties, contracts, records and personnel of the Company and its
subsidiaries (including, without limitation, financial, operating and other
data and information) as may be reasonably requested, from time to time, by
Acquiror.
(b) Acquiror shall, and shall cause its subsidiaries to, (i) afford to
the Company and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
the "Company Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, employees, accountants, agents,
properties, offices and other facilities of Acquiror and its subsidiaries
and to the books and records thereof and (ii) furnish promptly to the
Company and the Company Representatives such information concerning the
business, properties, contracts, records and personnel of Acquiror and its
subsidiaries (including, without limitation, financial, operating and other
data and information) as may be reasonably requested, from time to time, by
the Company.
(c) Notwithstanding the foregoing provisions of this Section 5.04,
neither party shall be required to grant access or furnish information to
the other party to the extent that such access or the furnishing of such
information is prohibited by law. No investigation by the parties hereto
made heretofore or hereafter shall affect the representations and warranties
of the parties that are contained herein and each such representation and
warranty shall survive such investigation.
SECTION 5.05. AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby covenants
and agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by the Company,
Acquiror will and will cause its subsidiaries to:
(a) operate its business in the usual and ordinary course consistent
with past practices;
(b) use all reasonable efforts to preserve substantially intact its
business organization, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice; and
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(d) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. MEETINGS OF STOCKHOLDERS.
(a) The Company shall, promptly after the date of this Agreement, take
all actions necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene a special meeting of the Company's
stockholders to act on this Agreement (the "Company Stockholders Meeting"),
and the Company shall consult with Acquiror in connection therewith. Unless
its Board of Directors in the good faith exercise of its fiduciary duties,
after consultation with legal counsel and its financial advisors, determines
not to recommend, or to withdraw its recommendation, that such matters be
approved by the Company's stockholders, the Company shall use all reasonable
efforts to solicit from stockholders of the Company proxies in favor of the
approval and adoption of this Agreement and to secure the vote or consent of
stockholders required by Delaware Law and its Certificate of Incorporation
and Bylaws to approve and adopt this Agreement.
(b) Acquiror shall, promptly after the date of this Agreement, take all
actions necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene a special meeting of Acquiror's
stockholders to act on this Agreement (the "Acquiror Stockholders Meeting"),
and Acquiror shall consult with the Company in connection therewith.
Acquiror shall use all reasonable efforts to solicit from stockholders of
Acquiror proxies in favor of the approval and adoption of this Agreement and
to secure the vote or consent of stockholders required by Delaware Law and
its Certificate of Incorporation and Bylaws to approve and adopt this
Agreement.
SECTION 6.02. REGISTRATION STATEMENT; PROXY STATEMENTS.
(a) As promptly as practicable after the execution of this Agreement,
the Acquiror Companies shall prepare and file with the SEC a registration
statement on Form S-4 (such registration statement, together with any
amendments thereof or supplements thereto, being the "Registration
Statement"), containing a proxy statement/prospectus for stockholders of the
Company (the "Company Proxy Statement/Prospectus") and a proxy
statement/prospectus for stockholders of Acquiror (the "Acquiror Proxy
Statement/Prospectus"), in connection with the registration under the
Securities Act of the offer, sale and delivery of Acquiror Common Stock to
be issued in the Merger and the other transactions contemplated by this
Agreement. As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC a proxy statement that will
be the same as the Company Proxy Statement/Prospectus, and a form of proxy,
in connection with the vote of the Company's stockholders with respect to
this Agreement (such Company Proxy Statement/Prospectus, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Company's stockholders, being the "Company Proxy Statement").
As promptly as practicable after the execution of this Agreement, the
Acquiror shall prepare and file with the SEC a proxy statement that will be
the same as the Acquiror Proxy Statement/Prospectus, and a form of proxy, in
connection with the vote of the Acquiror's stockholders with respect to this
Agreement (such Acquiror Proxy Statement/Prospectus, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Acquiror's stockholders, being the "Acquiror Proxy
Statement"). Each of the Acquiror Companies and the Company will use all
reasonable efforts to have or cause the Registration Statement to become
effective as promptly as practicable, and shall take any action required to
be taken under any applicable federal or state securities laws in connection
with the issuance of shares of Acquiror Common Stock in the Merger. Each of
the Acquiror Companies and the Company shall furnish all information
concerning it and the holders of its capital stock as the other may
reasonably request in connection with such actions. As promptly as
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practicable after the Registration Statement shall have become effective,
the Company shall mail the Company Proxy Statement to its stockholders
entitled to notice of and to vote at the Company Stockholder Meeting and
Acquiror shall mail the Acquiror Proxy Statement to its stockholders
entitled to notice of and to vote at the Acquiror Stockholder Meeting. The
Company Proxy Statement shall, to the extent consistent with their fiduciary
duties, include the recommendation of the Company's Board of Directors in
favor of the Merger. The Acquiror Proxy Statement shall include the
recommendation of the Acquiror's Board of Directors in favor of the Merger.
(b) The information supplied by the Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The information
supplied by the Company for inclusion in (i) the Company Proxy Statement to
be sent to the stockholders of the Company in connection with the Company
Stockholders Meeting shall not, at the date the Company Proxy Statement (or
any supplement thereto) is first mailed to stockholders, at the time of the
Company Stockholders Meeting or at the Effective Time and (ii) the Acquiror
Proxy Statement to be sent to the stockholders of Acquiror in connection
with the Acquiror Stockholders Meeting shall not, at the date the Acquiror
Proxy Statement (or any supplement thereto) is first mailed to stockholders,
at the time of the Acquiror Stockholders Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
are made, not misleading. If at any time prior to the Company Stockholders
Meeting any event or circumstance relating to the Company or any of its
affiliates, or its or their respective officers or directors, should be
discovered by the Company that should be set forth in an amendment to the
Registration Statement or a supplement to the Company Proxy Statement or
Acquiror Proxy Statement, the Company shall promptly inform Acquiror. All
documents that the Company is responsible for filing with the SEC in
connection with the transactions contemplated herein shall comply as to form
in all material respects with the applicable requirements of the Securities
Act and the rules and regulations thereunder and the Exchange Act and the
rules and regulations thereunder.
(c) The information supplied by the Acquiror Companies for inclusion in
the Registration Statement shall not, at the time the Registration Statement
is declared effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading. The information
supplied by the Acquiror Companies for inclusion in (i) the Company Proxy
Statement to be sent to the stockholders of the Company in connection with
the Company Stockholders Meeting shall not, at the date the Company Proxy
Statement (or any supplement thereto) is first mailed to stockholders, at
the time of the Company Stockholders Meeting or at the Effective Time and
(ii) the Acquiror Proxy Statement to be sent to the stockholders of Acquiror
in connection with the Acquiror Stockholders Meeting shall not, at the date
the Acquiror Proxy Statement (or any supplement thereto) is first mailed to
stockholders, at the time of the Acquiror Stockholders Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they are made, not misleading. If at any time prior to the Acquiror
Stockholders Meeting any event or circumstance relating to Acquiror or any
of its respective affiliates, or to their respective officers or directors,
should be discovered by Acquiror that should be set forth in an amendment to
the Registration Statement or a supplement to the Company Proxy Statement or
Acquiror Proxy Statement, Acquiror shall promptly inform the Company. All
documents that the Acquiror Companies are responsible for filing with the
SEC in connection with the transactions contemplated hereby shall comply as
to form in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder.
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SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror shall each use, and shall cause each of
their respective subsidiaries to use, all reasonable efforts promptly to
(i)take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by
the Transaction Documents, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained by Acquiror or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
the Transaction Documents and the consummation of the transactions
contemplated hereby, including, without limitation, the Merger, (iii) make
all necessary filings, and thereafter make any other required submissions,
with respect to the Transaction Documents and the Merger required under (A)
the Securities Act (in the case of Acquiror) and the Exchange Act and the
rules and regulations thereunder, and any other applicable federal or state
securities laws, (B) the HSR Act and (C) any other applicable Law; provided
that Acquiror and the Company shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the nonfiling party and its advisors prior to filing and, if
requested, shall accept all reasonable additions, deletions or changes
suggested in connection therewith. The Company and Acquiror shall furnish
all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Company Proxy Statement, the
Acquiror Proxy Statement or the Registration Statement) in connection with
the transactions contemplated by the Transaction Documents.
(b) The Acquiror Companies and the Company agree to, and shall cause
each of their respective subsidiaries to, cooperate and use all reasonable
efforts vigorously to contest and resist any action, including legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that is in effect and that
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by the Transaction Documents, including, without
limitation, by vigorously pursuing all available avenues of administrative
and judicial appeal and all available legislative action. Each of the
Acquiror Companies and the Company also agree to take any and all actions,
including, without limitation, the disposition of assets or the withdrawal
from doing business in particular jurisdictions, required by regulatory
authorities as a condition to the granting of any approvals required in
order to permit the consummation of the Merger or as may be required to
avoid, lift, vacate or reverse any legislative or judicial action that would
otherwise cause any condition to Closing not to be satisfied; PROVIDED,
HOWEVER, that in no event shall either party take, or be required to take,
any action that could reasonably be expected to have a Company Material
Adverse Effect or an Acquiror Material Adverse Effect.
(c) (i) Each of the Company and Acquiror shall promptly give (or shall
cause their respective subsidiaries to give) any notices to third parties,
and use, and cause their respective subsidiaries to use, all reasonable
efforts to obtain any third party consents (A) necessary, proper or
advisable to consummate the transactions contemplated by this Agreement, (B)
otherwise required under any contracts, licenses, leases or other agreements
in connection with the consummation of the transactions contemplated by the
Transaction Documents or (C) required to prevent a Company Material Adverse
Effect from occurring prior to or after the Effective Time or an Acquiror
Material Adverse Effect from occurring after the Effective Time.
(ii) If any party shall fail to obtain any third party consent described
in subsection (c)(i) above, such party shall use all reasonable efforts, and
shall take any such actions reasonably requested by the other parties, to
limit the adverse effect upon the Company and Acquiror, their respective
subsidiaries, and their respective businesses resulting, or which could
reasonably be expected to result after the Effective Time, from the failure
to obtain such consent.
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SECTION 6.04. AFFILIATES; POOLING; TAX TREATMENT.
(a) The Company shall use all reasonable efforts to obtain and deliver
to Acquiror an executed letter agreement, substantially in the form of
EXHIBIT A hereto, from (i) each person identified as an affiliate of the
Company in Section 3.13 of the Company Disclosure Schedule by April 14,
1995, (ii) any person who may be deemed to have become an affiliate of the
Company after the date of this Agreement and on or prior to the Effective
Time as soon as practicable after such person attains such status and (iii)
any person whose agreement thereto may be deemed reasonably necessary by
Acquiror to sustain the Merger's status as a Pooling Transaction on or prior
to the Effective Time.
(b) Acquiror shall use all reasonable efforts to obtain an executed
letter agreement, substantially in the form of EXHIBIT B hereto, from (i)
each person identified as an affiliate of Acquiror in Section 4.13 of
Acquiror Disclosure Schedule by April 14, 1995, (ii) any person who may be
deemed to have become an affiliate of Acquiror after the date of this
Agreement and on or prior to the Effective Time as soon as practicable after
such person attains such status and (iii) any person whose agreement thereto
may be deemed reasonably necessary by Acquiror to sustain the Merger's
status as a Pooling Transaction on or prior to the Effective Time.
(c) The Acquiror Companies shall not be required to maintain the
effectiveness of the Registration Statement for the purpose of resale by
stockholders of Acquiror who may be affiliates of the Company or Acquiror
pursuant to Rule 145 under the Securities Act.
(d) Each party hereto shall use all reasonable efforts to cause the
Merger to qualify, and shall not take, and shall use all reasonable efforts
to prevent any affiliate of such party from taking, any actions which could
prevent the Merger from qualifying, as a reorganization under the provisions
of Section 368(a) of the Code.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. The initial press release relating to
this Agreement shall be a joint press release and thereafter, to the extent
practicable, Acquiror and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Transaction Documents or the Merger and shall not issue any such press
release or make any such public statement prior to such consultation.
SECTION 6.06. NYSE LISTING. Acquiror shall use all reasonable efforts to
cause the shares of Acquiror Common Stock to be issued in the Merger to be
approved for listing (subject to official notice of issuance) on the NYSE prior
to the Effective Time.
SECTION 6.07. RIGHTS AGREEMENT; STATE TAKEOVER STATUTES. The Company shall
take all action (including, if necessary, redeeming all of the outstanding
rights issued pursuant to the Company Rights Agreement or amending or
terminating the Company Rights Agreement) so that the execution of the
Transaction Documents and the consummation of the Merger and the other
transactions contemplated by the Transaction Documents 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. The Company will take all steps necessary to exempt
the transactions contemplated by the Transaction Documents and the Voting
Agreement from, and if necessary challenge the validity of, any applicable state
takeover law, including, without limitation, Section 203 of Delaware Law. The
Company shall take all actions necessary under Delaware Law, including approving
the transactions contemplated by the Transaction Documents and the Voting
Agreement, to ensure that the prohibitions on business combinations set forth in
Section 203 of Delaware Law do not, or will not, apply to the transactions
contemplated by the Transaction Documents and the Voting Agreement.
SECTION 6.08. COMFORT LETTERS.
(a) The Company shall use all reasonable efforts to cause Ernst & Young
to deliver a letter dated as of the date of the Company Proxy
Statement/Prospectus, and addressed to the Company and its Board of
Directors and Acquiror and its Board of Directors, in form and substance
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reasonably satisfactory to Acquiror and customary in scope and substance for
agreed upon procedures letters delivered by independent public accountants
in connection with registration statements and proxy statements similar to
the Registration Statement and the Company Proxy Statement.
(b) Acquiror shall use all reasonable efforts to cause Arthur Andersen
LLP to deliver a letter dated as of the date of the Acquiror Proxy
Statement, and addressed to Acquiror and its Board of Directors and the
Company and its Board of Directors, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for agreed
upon procedures letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Registration Statement and the Acquiror Proxy Statement.
SECTION 6.09. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK.
(a) At the Effective Time, automatically and without any action on the
part of the holder thereof, each outstanding Company Stock Option shall be
assumed by Acquiror and become an option to purchase that number of shares
of Acquiror Common Stock obtained by multiplying the number of shares of
Company Common Stock issuable upon the exercise of such option by the Common
Stock Exchange Ratio at an exercise price per share equal to the per share
exercise price of such option divided by the Common Stock Exchange Ratio and
otherwise upon the same terms and conditions as such outstanding options to
purchase Company Common Stock; provided, however, that in the case of any
option to which Section 421of the Internal Revenue Code applies by reason of
the qualifications under Section 422 or 423 of such Code, the exercise
price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order
to comply with Section 424(a) of the Code.
(b) At the Effective Time, subject to the any requirements or
restrictions necessary in order for the Merger to constitute a Pooling
Transaction, automatically and without any action by any person, each
outstanding Company Stock Option then held by an employee of the Company or
any of its subsidiaries and granted prior to January 1, 1995 shall become
immediately exercisable.
(c) The Acquiror shall take all corporate actions necessary to reserve
for issuance a sufficient number of shares of Acquiror Common Stock for
delivery upon exercise of the Company Stock Options assumed by Acquiror
pursuant to Section 6.09(a) above.
(d) As promptly as practicable after the Effective Time, Acquiror shall
file a Registration Statement on Form S-8, as the case may be (or any
successor or other appropriate forms) with respect to the shares of Acquiror
Common Stock subject to the Company Stock Options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as such options remain
outstanding.
(e) Except as provided herein or as otherwise agreed to by the parties,
each of the Company Stock Option Plans providing for the issuance or grant
of options in respect to the stock of Company shall be assumed as of the
Effective Time by the Acquiror with such amendments thereto as may be
required to reflect the Merger.
(f) In connection with the submission of the Acquiror Proxy Statement to
its stockholders, the Acquiror shall seek such stockholder approval as may
be necessary so that grants of options and issuances of securities pursuant
to the exercise of such options under the Company Stock Option Plans assumed
by it hereunder, as amended, and all other Company Stock Option Plans as in
effect on the date hereof shall qualify for the exemption for such issuances
provided by Rule 16b-3 under the Exchange Act.
(g) At or prior the Effective Time the Acquiror shall (i) assume and
agree to perform the Company s obligations under its existing
change-in-control agreements identified on the Company Disclosure Schedule
and (ii) shall agree the to issue shares of Acquiror Common Stock
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pursuant to the Company Acquisition Agreements described in Section 3.03(a)
of the Company Disclosure Schedule, upon exercise of the Warrant and upon
conversion of the Company Debenture, in each case in lieu of shares of
Company Common Stock, the number of shares to be so issued to be obtained by
multiplying the number of shares of Company Common Stock otherwise issuable
thereunder by the Common Stock Exchange Ratio and the purchase of such
shares of Acquiror Common Stock, if applicable, to be obtained by dividing
the per share purchase price of a share of Acquiror Common Stock thereunder
by the Common Stock Exchange Ratio.
SECTION 6.10. MERGER SUB. Prior to the Effective Time, Merger Sub 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
MINIMIS amount of cash paid to Merger Sub for the issuance of their stock to
Acquiror) or liabilities.
SECTION 6.11. BOARD OF DIRECTORS. Acquiror shall take action to cause the
number of directors on the Acquiror Board at the Effective Time to be thirteen
and to ensure that five of such directorships be filled with individuals
designated by the Company prior to the Effective Time (the "Company Designees").
The Company shall designate (i) one Company Designee who, immediately after
being elected to the Acquiror Board, shall be elected to the Audit Committee
thereof, (ii) a second Company Designee who, immediately after being elected to
the Acquiror Board, shall be elected to the Compensation Committee thereof
(provided that such designee shall not be an employee of Acquiror or any
subsidiary following the Effective Time), and (iii) a third Company Designee
who, immediately after being elected to the Acquiror Board, shall be elected to
the Executive Committee thereof. The Company Designees shall be nominated for
election as directors of Acquiror at the first annual meeting of stockholders of
the Acquiror subsequent to the Effective Time and shall be nominated for
election in the class of directors whose term expires at the 1996 annual meeting
of stockholders. Acquiror shall make any amendments to its Certificate of
Incorporation or by-laws necessary to effect the foregoing.
SECTION 6.12. INDEMNIFICATION AND INSURANCE.
(a) The Company hereby indemnifies and holds harmless Acquiror and its
directors and officers who sign the Registration Statement, from and against
any loss, claim, damage, cost, liability, obligation or expense (including
reasonable attorney's fees and costs of investigation) to which any
indemnified party may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such loss, claim, damage, cost, liability,
obligation or expense or actions in respect thereof arises out or is based
upon any untrue statement or alleged untrue statement of a material fact
relating to such indemnifying party and contained in the Registration
Statement or arises out of or is based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein with respect to such indemnifying party not
misleading.
(b) (i) The Company and Acquiror agree that, until six years from the
Effective Time, the Certificates of Incorporation and Bylaws of the
Company and Acquiror as in effect immediately after the amendments to the
Certificate of Incorporation of the Company contemplated by Section 1.04
have become effective shall not be amended to reduce or limit the rights
of indemnity afforded to the present and former directors and officers of
the Company and Acquiror thereunder or as to the ability of Acquiror and
the Company to indemnify such persons, or to hinder, delay or make more
difficult the exercise of such rights of indemnity or the ability to
indemnify. The Company and Acquiror agree that the Company, as the
surviving corporation of the Merger will at all times exercise the powers
granted to it by its Certificate of Incorporation, its Bylaws and by
applicable law to indemnify to the fullest extent possible present or
former directors, officers, employees and agents of the Company against
claims made against them arising from their service in such capacities.
(ii) Should any claim or claims be made against any present or former
director, officer, employee or agent of the Company or Acquiror, arising
from his services as such, within six
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years of the Effective Time, the provisions of this Section 6.12(b)
respecting the Certificates of Incorporation and Bylaws of Acquiror and
the Company shall continue in effect until the final disposition of all
such claims. Notwithstanding anything to the contrary in this Section
6.12, neither Acquiror nor the Company shall be liable for any settlement
effected without its written consent, which shall not be unreasonably
withheld.
(iii) The provisions of this Section 6.12(b) are intended to be for
the benefit of, and shall be enforceable by, each party entitled to
indemnification hereunder, his heirs and his representatives.
(c) Acquiror shall cause to be maintained in effect the current policies
of directors' and officers' liability insurance maintained by the Company
(or substitute policies providing at least the same coverage and limits and
containing terms and conditions that are not materially less advantageous)
with respect to claims arising from facts or events which occurred before
the Effective Time; provided, however that in no event shall Acquiror or the
Company be required to expend more than 200% of the current annual premiums
paid by the Company for such insurance.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions (any or all of
which may be waived by the parties hereto in writing, in whole or in part, to
the extent permitted by applicable Law):
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose shall have been initiated by the SEC.
(b) STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the requisite vote of the stockholders of the Company. This
Agreement shall have been approved and adopted by the requisite vote of the
stockholders of Acquiror.
(c) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) HSR ACT. The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
(e) ACQUIROR TAX OPINION. Acquiror shall have received from Vinson &
Elkins L.L.P. a written opinion dated as of the date (the "Mailing Date")
the Company Proxy Statement or the Acquiror Proxy Statement is mailed,
whichever is first mailed, to the stockholders of the Company or Acquiror to
the effect that the Merger, when effected in accordance with this Agreement,
will qualify as a reorganization under Section 368(a) of the Code and
Acquiror, Merger Sub and the Company will constitute parties to such
reorganization, and a copy of such opinion shall have been delivered to the
Company.
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(f) COMPANY TAX OPINION. The Company shall have received from Drinker
Biddle & Reath a written opinion dated as of the Mailing Date to the effect
that the receipt of the Merger Consideration by the stockholders of the
Company will be nontaxable to such stockholders, and a copy of such opinion
shall have been delivered to Acquiror.
(g) POOLING OPINION. Acquiror shall have received from Arthur Andersen
LLP a written opinion dated the Effective Date to the effect that the
transactions contemplated by this Agreement, including the Merger, when
effected in accordance with the terms thereof, shall be accounted for in the
consolidated financial statements of Acquiror and its subsidiaries as a
Pooling Transaction, and a copy of such opinion shall have been delivered to
the Company.
(h) ABSENCE OF REGULATORY CONDITIONS. There shall not be any action
taken, or any Law enacted, entered, enforced or deemed applicable to the
Merger by any Governmental Entity that, in connection with the grant of a
regulatory approval necessary to the continuing operation of the business or
future prospects of the Company, which action, statute, rule, regulation or
order imposes any condition or restriction upon the Acquiror Companies or
the business or operations of the Company that would constitute a Company
Material Adverse Effect or an Acquiror Material Adverse Effect.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE ACQUIROR
COMPANIES. The obligations of the Acquiror Companies to effect the Merger and
the other transactions contemplated by the Transaction Documents are also
subject to the following conditions (any or all of which may be waived by
Acquiror in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in the Transaction Documents shall be
true and correct in all material respects as of the Effective Time as though
made on and as of the Effective Time. The Acquiror Companies shall have
received a certificate of the President and the Chief Financial Officer of
the Company, dated the date of the Effective Time, to such effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by the Transaction Documents to be performed or complied with by it on or
prior to the Effective Time. The Acquiror Companies shall have received a
certificate of the President and the Chief Financial Officer of the Company,
dated the date of the Effective Time, to that effect.
(c) BLUE SKY. The Acquiror Companies shall have received all "blue sky"
permits and other authorizations necessary to consummate the transactions
contemplated by the Transaction Documents.
(d) RIGHTS AGREEMENT. None of the events described in sections 11(a)(ii)
or 13 of the Company Rights Agreement shall have occurred, and the rights
thereunder shall not have become nonredeemable and such rights shall not
become exercisable for capital stock of Acquiror upon consummation of the
Merger.
(e) FAIRNESS OPINION. Acquiror shall have received from Salomon Brothers
Inc written confirmation dated the Mailing Date of its opinion rendered
pursuant to Section 4.15 herein.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the following conditions (any or all of
which may be waived by the Company in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Acquiror Companies contained in the Transaction Documents
shall be true and correct in all material respects as of the Effective Time
as though made on and as of the Effective Time. The Company shall have
received a certificate of the President and the Chief Financial Officer of
each of the Acquiror Companies, dated the date of the Effective Time, to
such effect.
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(b) AGREEMENTS AND COVENANTS. The Acquiror Companies shall have
performed or complied in all material respects with all agreements and
covenants required by the Transaction Documents to be performed or complied
with by them on or prior to the Effective Time. The Company shall have
received a certificate of the President and the Chief Financial Officer of
each of the Acquiror Companies, dated the date of the Effective Time, to
that effect.
(c) FAIRNESS OPINION. The Company shall have received from Merrill Lynch
& Co. written confirmation dated the Mailing Date of its opinion rendered
pursuant to Section 3.15 hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of the Company:
(a) by mutual consent of Acquiror and the Company;
(b) by Acquiror, upon a breach of any material representation, warranty,
covenant or agreement on the part of the Company set forth in the
Transaction Documents, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set forth
in Section 7.02(a) or Section 7.02(b) of this Agreement would not be
satisfied (a "Terminating Company Breach"); PROVIDED THAT, if such
Terminating Company Breach is curable by the Company through the exercise of
reasonable efforts and for so long as the Company continues to exercise such
reasonable efforts (or, if shorter, for 30 days), Acquiror may not terminate
this Agreement under this Section 8.01(b);
(c) by the Company, upon breach of any material representation,
warranty, covenant or agreement on the part of the Acquiror Companies set
forth in the Transaction Documents, or if any representation or warranty of
the Acquiror Companies shall have become untrue, in either case such that
the conditions set forth in Section 7.03(a) or Section 7.03(b) of this
Agreement would not be satisfied (a "Terminating Acquiror Breach"); PROVIDED
THAT, if such Terminating Acquiror Breach is curable by the Acquiror
Companies through the exercise of their reasonable efforts and for so long
as the Acquiror Companies continue to exercise such reasonable efforts (or,
if shorter, for 30 days), the Company may not terminate this Agreement under
this Section 8.01(c);
(d) by either Acquiror or the Company, if there shall be any Order which
is final and nonappealable preventing the consummation of the Merger, except
if the party seeking to terminate this Agreement has not complied with its
obligations under Section 6.03(b) of this Agreement;
(e) by either Acquiror or the Company, if the Merger shall not have been
consummated before December 31, 1995; PROVIDED, HOWEVER, that this Agreement
may be extended by written notice of either Acquiror or the Company to a
date not later than March 31, 1996, if the Merger shall not have been
consummated as a result of the Company or the Acquiror Companies having
failed by December 31, 1995 to receive all required regulatory approvals or
consents with respect to the Merger or as a result of the entering of an
Order;
(f) by either Acquiror or the Company, if this Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company Stockholders Meeting;
(g) by either Acquiror or the Company, if this Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
Acquiror at the Acquiror Stockholders Meeting;
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(h) by Acquiror, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to the Acquiror Companies or shall have resolved to do any of
the foregoing or the Board of Directors of the Company shall have
recommended to the stockholders of the Company any Competing Transaction or
resolved to do so; (ii) a tender offer or exchange offer for outstanding
shares of capital stock of the Company then representing 20% or more of the
combined power to vote generally for the election of directors is commenced,
and the Board of Directors of the Company does not recommend that
stockholders not tender their shares into such tender or exchange offer or;
(iii) any person shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated hereunder), shall have been formed which beneficially owns, or
has the right to acquire beneficial ownership of, outstanding shares of
capital stock of the Company then representing 20% or more of the combined
power to vote generally for the election of directors;
(i) by the Company or the Acquiror, if the Company accepts a Superior
Proposal and makes payment as required pursuant to Section 8.05(c)(i) of
this Agreement and of the Expenses for which the Company is responsible
under Section 8.05(a) of this Agreement. For purposes of this Agreement,
"Superior Proposal" means a bona fide written proposal made by a third party
relating to a Competing Transaction on terms that the Board of Directors of
the Company determines it cannot reject in favor of the Merger, based on
applicable fiduciary duties and the advice of counsel and for which
financing, to the extent required, is then committed; or
(j) by the Company, if (i) a tender offer or exchange offer for
outstanding shares of capital stock of Acquiror then representing 20% or
more of the combined power to vote generally for the election of directors
is commenced, and the Board of Directors of Acquiror does not recommend that
stockholders not tender their shares into such tender or exchange offer or
(ii) any person shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations promulgated
hereunder), shall have been formed which beneficially owns, or has the right
to acquire beneficial ownership of, outstanding shares of capital stock of
Acquiror then representing 20% or more of the combined power to vote
generally for the election of directors.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents or other
representatives whether prior to or after the execution of this Agreement.
SECTION 8.02. EFFECT OF TERMINATION. Except as provided in Section 8.05 or
Section 9.01 of this Agreement, in the event of the termination of this
Agreement pursuant to Section 8.01, this Agreement shall forthwith become void,
there shall be no liability on the part of the Acquiror Companies or the Company
or any of their respective officers or directors to the other and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party from its obligations with respect to any breach of this
Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made that
would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained
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herein or in any document delivered pursuant hereto and (c) waive compliance by
the other party with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. For purposes of this
Section 8.04, the Acquiror Companies as a group shall be deemed to be one party.
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS.
(a) Except as provided in Sections 8.05(c) and 8.05(d) of this
Agreement, all Expenses (as defined in paragraph (b) of this Section 8.05)
incurred by the parties hereto shall be borne solely and entirely by the
party which has incurred such Expenses; PROVIDED, HOWEVER, that the
allocable share of the Acquiror Companies as a group and the Company for all
Expenses related to printing, filing and mailing the Registration Statement,
the Company Proxy Statement and the Acquiror Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Registration
Statement, the Company Proxy Statement and the Acquiror Proxy Statement
shall be one-half each; AND PROVIDED FURTHER that Acquiror may, at its
option, pay any Expenses of the Company.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all reasonable fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement, the Company
Proxy Statement and the Acquiror Proxy Statement, the solicitation of
stockholder approvals and all other matters related to the consummation of
the transactions contemplated hereby.
(c) The Company agrees that, if (i) this Agreement is terminated
pursuant to Section 8.01(f) and, prior to the Company Stockholders Meeting,
the Company shall have furnished information to, or entered into discussions
or negotiations with, any person or entity with respect to a Competing
Transaction involving the Company or any of its subsidiaries and the Board
of Directors of the Company shall not have reaffirmed its recommendation to
the stockholders of the Company with respect to the transactions
contemplated by this Agreement by the time of the Company Stockholders
Meeting; (ii) Acquiror terminates this Agreement pursuant to Section
8.01(h); (iii) (A) the Company or the Acquiror terminates this Agreement
pursuant to Section 8.01(i) or (iv) the Company or Acquiror terminates this
Agreement pursuant to Section 8.01(b) or 8.01(e) at a time that a
Terminating Company Breach exists (except solely for purposes of this
paragraph (c) a breach of a representation shall not be deemed to be a
Terminating Company Breach if the representation was true and correct as of
the date hereof), and (B) within nine months after such termination (1) a
Competing Transaction is consummated or (2) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder), shall have been formed
which beneficially owns, or has the right to acquire beneficial ownership
of, outstanding shares of capital stock of the Company then representing 20%
or more of the combined power to vote generally for the election of
directors, then in any such case the Company shall pay to Acquiror the
Termination Fee (as defined below),
plus the Expenses of the Acquiror Companies up to $5 million. The
Termination Fee shall be equal to $20 million, less the aggregate amount of
any cash payments to Acquiror in excess of $10 million pursuant to Section
7(a) of the Stock Option Agreement.
(d) Acquiror agrees that, if (i) the Company terminates this Agreement
pursuant to Section 8.01(j) or (ii)(A) the Company or Acquiror terminates
this Agreement pursuant to Section 8.01(c) or 8.01(e) at a time that a
Terminating Acquiror Breach exists (except solely for purposes of this
paragraph (d) a breach of a representation shall not be deemed to be a
Terminating Acquiror Breach if the representation was true and correct as of
the date hereof), and (B) within nine months after such termination (1) an
Acquiror Competing Transaction is consummated or
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(2) any person shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder), shall have been formed which beneficially owns, or
has the right to acquire beneficial ownership of, outstanding shares of
capital stock of Acquiror then representing 20% or more of the combined
power to vote generally for the election of directors, then Acquiror shall
pay to the Company $10 million. For purposes of this Agreement, "Acquiror
Competing Transaction" shall mean any merger, consolidation, share exchange,
business combination or similar transaction involving Acquiror or any of its
Significant Subsidiaries or the acquisition in any manner, directly or
indirectly, of a material interest in any voting securities of, or a
material equity interest in a substantial portion of the assets of, Acquiror
or any of its Significant Subsidiaries.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
(a) Except as set forth in Section 9.01(b) of this Agreement, the
representations, warranties, covenants and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers, directors,
representatives or agents whether prior to or after the execution of this
Agreement.
(b) The representations, warranties, covenants and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Article VIII, except that the agreements set
forth in Articles I and II and Sections 6.07, 6.09, 6.11 and 6.12 shall
survive the Effective Time and those set forth in Sections 5.04(c), 8.02,
8.05 and Article IX hereof shall survive termination.
SECTION 9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses ( or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to any of the Acquiror Companies, to:
Horizon Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, N.M. 87110
Attention: Chairman of the Board
Telecopier No.: (505) 881-5097
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with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Barry A. Bryer
Telecopier No: (212) 403-2000
(b) If to the Company, to:
Continental Medical Systems, Inc.
P. O. Box 715
600 Wilson Lane
Mechanicsburg, PA 17055
Attention: General Counsel
Telecopier No.: (717) 790-9974
with a copy to:
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: F. Douglas Raymond III
Telecopier No.: (215) 988-2757
SECTION 9.03. CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in the
State of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock
or as trustee or executor, by contract or credit arrangement or otherwise;
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Acquiror, as the case
may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act);
(f) "Significant Subsidiary" means any subsidiary of the Company or
Acquiror, as the case may be, that would constitute a Significant Subsidiary
of such party within the meaning of Rule 1-02 of Regulation S-X of the SEC;
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(g) "subsidiary" or "subsidiaries" of the Company, Acquiror, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
Acquiror, the Surviving Corporation or an such other person, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity; and
(h) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
levies, assessments, duties or other amounts payable to any federal, state,
local or foreign taxing authority or agency, including, without limitation,
(i) income, franchise, profits, gross receipts, minimum, alternative
minimum, estimated, ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall profits, transfer
and gains taxes, (ii) customs, duties, imposts, charges, levies or other
similar assessments of any kind, and (iii) interest, penalties and additions
to tax imposed with respect thereto.
SECTION 9.04. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless 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. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06. ENTIRE AGREEMENT. The Transaction Documents (together with
the Exhibits, the Company Disclosure Schedule and the Acquiror Disclosure
Schedule), constitute the entire agreement of the parties, and supersede all
prior agreements and undertakings, both written and oral, among the parties,
with respect to the subject matter of the Transaction Documents, other than that
certain Confidentiality Agreement dated February 9, 1995 between Acquiror and
the Company, as supplemented by letters dated March 4, 1995 and March 23, 1995,
which agreement shall remain in full force and effect.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
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SECTION 9.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.12. SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to this Agreement to perform its agreement
and covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Merger, will cause irreparable
injury to the other parties to this Agreement for which damages, even if
available, will not be an adequate remedy. Accordingly, each of the parties
hereto hereby consents to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of any party's obligations and to
the granting by any such court of the remedy of specific performance of such
party's obligations hereunder.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
HORIZON HEALTHCARE CORPORATION
By: /s/ NEAL ELLIOTT
- --------------------------------------------------------------------------------
Neal Elliott
Chairman of the Board and President
CMS MERGER CORPORATION
By: /s/ NEAL ELLIOTT
- --------------------------------------------------------------------------------
Neal Elliott
President
CONTINENTAL MEDICAL SYSTEMS, INC.
By: /s/ ROCCO A. ORTENZIO
- --------------------------------------------------------------------------------
Rocco A. Ortenzio
Chairman of the Board and
Chief Executive
Officer
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EXHIBIT A
CONTINENTAL MEDICAL SYSTEMS, INC.
AFFILIATE'S AGREEMENT
Horizon Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, N.M. 87110
Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
"affiliate" of Continental Medical Systems, Inc., a Delaware corporation (the
"Company"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").
I understand that pursuant to the terms and subject to the conditions of
that certain Agreement and Plan of Merger by and among Horizon Healthcare
Corporation, a Delaware corporation ("Acquiror"), CMS Merger Corporation, a
Delaware corporation and wholly owned subsidiary of Acquiror ("Merger Sub"), and
the Company dated as of March 31, 1995 (the "Merger Agreement"), providing for,
among other things, the merger of Merger Sub with and into the Company (the
"Merger"), I will be entitled to receive shares of common stock, par value $.001
per share ("Acquiror Common Stock"), of Acquiror in exchange for shares of
common stock, par value $.01 per share ("Company Common Stock"), of the Company
owned by me at the effective time of the Merger (the "Effective Time") as
determined pursuant to the Merger Agreement.
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
I hereby represent and warrant that, since 30 days before closing to and
including the date hereof, I have not sold, transferred or otherwise disposed of
any shares of Company Common Stock.
In consideration of the agreements contained herein, Acquiror's reliance on
this letter in connection with the consummation of the Merger and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of Company Common Stock prior to the earlier
of the Effective Time and the termination of the Merger Agreement, (ii) I will
not make any sale, transfer or other disposition of Acquiror Common Stock
received by me pursuant to the Merger or otherwise owned by me until such time
as financial results that include at least 30 days of combined operations of the
Company and Acquiror after the Merger shall have been published, unless I shall
have delivered to Acquiror prior to any such sale, transfer or other
disposition, a written opinion from Arthur Andersen LLP, independent public
accountants for Acquiror, or a written no-action letter from the accounting
staff of the SEC, in either case in form and substance reasonably satisfactory
to Acquiror, to the effect that such sale, transfer or other disposition will
not cause the Merger not to be treated as a "pooling of interests" for financial
accounting purposes in accordance with generally accepted accounting principles,
the Rules and Regulations and interpretations of the SEC and (iii) I will not
make any sale, transfer or other disposition of any shares of Acquiror Common
Stock received by me pursuant to the Merger in violation of the Securities Act
or the Rules and Regulations. I have been advised that the issuance of the
shares of Acquiror Common Stock pursuant to the Merger will have been registered
with the SEC under the Securities Act on a Registration Statement on Form S-4. I
have also been advised, however, that since I may be deemed to be an affiliate
of the Company at the time the Merger is submitted for a vote of the
stockholders of the Company, the Acquiror Common Stock received by me pursuant
to the Merger can be sold by me only (i) pursuant to an effective registration
statement
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under the Securities Act, (ii) in conformity with the volume and other
limitations of Rule 145 promulgated by the SEC under the Securities Act, or
(iii) in reliance upon an exemption from registration that is available under
the Securities Act.
I also understand that instructions will be given to Acquiror's transfer
agent with respect to the Acquiror Common Stock to be received by me pursuant to
the Merger and that there will be placed on the certificates representing such
shares of Acquiror Common Stock, or any substitutions therefor, a legend stating
in substance as follows:
"These shares were issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. These shares may only be
transferred in accordance with the terms of such Rule and an Affiliate's
Agreement between the original holder of such shares and Horizon
Healthcare Corporation, a copy of which agreement is on file at the
principal offices of Horizon Healthcare Corporation."
It is understood and agreed that the legend set forth above shall be removed
upon surrender of certificates bearing such legend by delivery of substitute
certificates without such legend if I shall have delivered to Acquiror an
opinion of counsel, in form and substance reasonably satisfactory to Acquiror,
to the effect that (i) the sale or disposition of the shares represented by the
surrendered certificates may be effected without registration of the offering,
sale and delivery of such shares under the Securities Act, and (ii) the shares
to be so transferred may be publicly offered, sold and delivered by the
transferee thereof without compliance with the registration provisions of the
Securities Act.
By its execution hereof, Acquiror agrees that it will, as long as I own any
Acquiror Common Stock to be received by me pursuant to the Merger, take all
reasonable efforts to make timely filings with the SEC of all reports required
to be filed by it pursuant to the Securities Exchange Act of 1934, as amended,
and will promptly furnish upon written request of the undersigned a written
statement confirming that such reports have been so timely filed.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
- --------------------------------------------------------------------------------
Name:
Title:
Date:
Address:
ACCEPTED this _______ day
of ___________________ , 1995
HORIZON HEALTHCARE CORPORATION
By
- --------------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
HORIZON HEALTHCARE CORPORATION
AFFILIATE'S AGREEMENT
Horizon Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, N.M. 87110
Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
"affiliate" of Horizon Healthcare Corporation, a Delaware corporation
("Acquiror"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").
I understand that pursuant to the terms and subject to the conditions of
that certain Agreement and Plan of Merger by and among Horizon Healthcare
Corporation, a Delaware corporation ("Acquiror"), CMS Merger Corporation, a
Delaware corporation and wholly owned subsidiary of Acquiror ("Merger Sub"), and
the Company dated as of March 31, 1995 (the "Merger Agreement"), providing for,
among other things, the merger of Merger Sub with and into the Company (the
"Merger"), and the conversion of shares of common stock, par value $.01 per
share ("Company Common Stock"), of the Company into shares of common stock, par
value $.001 per share ("Acquiror Common Stock"), of Acquiror at the effective
time of the Merger (the "Effective Time") as determined pursuant to the Merger
Agreement.
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
I hereby represent and warrant that, since 30 days before closing to and
including the date hereof, I have not sold, transferred or otherwise disposed of
any shares of Acquiror Common Stock.
In consideration of the agreements contained herein, Acquiror's reliance on
this letter in connection with the consummation of the Merger and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of Acquiror Common Stock prior to the
earlier of the Effective Time and the termination of the Merger Agreement and
(ii) I will not make any sale, transfer or other disposition of Acquiror Common
Stock owned by me until such time as financial results that include at least 30
days of combined operations of the Company and Acquiror after the Merger shall
have been published, unless I shall have delivered to Acquiror prior to any such
sale, transfer or other disposition, a written opinion from Arthur Andersen LLP,
independent public accountants for Acquiror, or a written no-action letter from
the accounting staff of the SEC, in either case in form and substance reasonably
satisfactory to Acquiror, to the effect that such sale, transfer or other
disposition will not cause the Merger not to be treated as a "pooling of
interests" for financial accounting purposes in accordance with generally
accepted accounting principles, the Rules and Regulations and interpretations of
the SEC. I have been advised that since I may be deemed to be an affiliate of
Acquiror at the time the Merger is submitted for a vote of the stockholders of
the Company, the Acquiror Common Stock owned by me at the Effective Time can be
sold by me only (i) pursuant to an effective registration statement under the
Securities Act, (ii) in conformity with the volume and other limitations of Rule
145 promulgated by the SEC under the Securities Act, or (iii) in reliance upon
an exemption from registration that is available under the Securities Act.
By its execution hereof, Acquiror agrees that it will, as long as I own any
Acquiror Common Stock owned by me at the Effective Time, take all reasonable
efforts to make timely filings with the SEC of
B-1
<PAGE>
all reports required to be filed by it pursuant to the Securities Exchange Act
of 1934, as amended, and will promptly furnish upon written request of the
undersigned a written statement confirming that such reports have been so timely
filed.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
- --------------------------------------------------------------------------------
Name:
Title:
Date:
Address:
ACCEPTED this _______ day
of ___________________ , 1995
HORIZON HEALTHCARE CORPORATION
By
- --------------------------------------
Name:
Title:
B-2
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 31, 1995 by and among Horizon
Healthcare Corporation, a Delaware corporation ("Acquiror"), and Continental
Medical Systems, Inc., a Delaware corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Acquiror, the Company, CMS Merger Corporation ("Merger Sub") are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, upon the terms and
subject to the conditions thereof, for the merger of Merger Sub into the
Company (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the
Merger Agreement, Acquiror has requested that the Company agree, and the
Company has so agreed, to grant to Acquiror an option with respect to certain
shares of the Company's common stock, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, to induce Acquiror to enter into the Merger Agreement,
and in consideration of the mutual covenants and agreements set forth herein
and in the Merger Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants Acquiror an irrevocable
option (the "Company Option") to purchase from the Company upon original issue
up to a number of shares of common stock, par value $.01 per share ("Company
Common Stock"), of the Company equal to 15% of the number of shares of Common
Stock outstanding on date of this Agreement, subject to adjustment as
provided in Section 11 (such shares being referred to herein as the "Company
Shares") in the manner set forth below at an exercise price of $13.00 per
Company Share (the "Exercise Price"), payable in cash in accordance with
Section 4 hereof. Notwithstanding the foregoing, in no event shall the
number of shares for which the Company Option is exercisable exceed 15% of
the number of issued and outstanding Company Shares. Capitalized terms used
herein but not defined herein shall have the meanings set forth in the Merger
Agreement.
2. EXERCISE OF OPTION. The Company Option may be exercised by Acquiror,
in whole or in part, at any time or from time to time after the Merger
Agreement becomes terminable by Acquiror under circumstances that would, if
the Merger Agreement were terminated as a result thereof, entitle Acquiror to
Expenses (as defined in the Merger Agreement) under Section 8.05(c) of the
Merger Agreement, any event by which the Merger Agreement becomes so
terminable by Acquiror being referred to herein as a "Trigger Event." The
Company shall notify Acquiror promptly in writing of the occurrence of any
Trigger Event, it being understood that the giving of such notice by the
Company shall not be a condition to the right of Acquiror to exercise the
Company Option. If Acquiror wishes to exercise the Company Option, Acquiror
shall deliver to the Company a written notice (an "Exercise Notice")
specifying the total number of Company Shares
<PAGE>
it wishes to purchase. Each closing of a purchase of Company Shares (a
"Closing") shall occur at a place, on a date and at a time designated by
Acquiror in an Exercise Notice delivered at least two business days prior to
the date of the Closing. The Company Option shall terminate upon the earlier
of: (i) the Effective Time; (ii) the termination of the Merger Agreement
pursuant to Section 8.01 thereof (other than upon or during the continuance
of a Trigger Event); or (iii) 180 days following any termination of the
Merger Agreement upon or during the continuance of a Trigger Event (or if, at
the expiration of such 180 day period the Company Option cannot be exercised
by reason of any applicable judgment, decree, order, law or regulation, ten
business days after such impediment to exercise shall have been removed or
shall have become final and not subject to appeal, but in no event under this
clause (iii) later than December 31, 1996). Notwithstanding the foregoing,
the Company Option may not be exercised if Acquiror is in material breach of
any of its material representations or warranties, or in material breach of
any of its covenants or agreements, contained in this Agreement or in the
Merger Agreement. Upon the giving by Acquiror to the Company of the Exercise
Notice and the tender of the applicable aggregate Exercise Price, Acquiror
shall be deemed to be the holder of record of the Company Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such Company
Shares shall not then be actually delivered to Acquiror.
3. CONDITIONS TO CLOSING. The obligation of the Company to issue the
Company Shares to Acquiror hereunder is subject to the conditions, which
(other than the conditions described in clauses (i), (iii) and (iv) below)
may be waived by the Company in its sole discretion, that (i) all waiting
periods, if any, under the HSR Act, applicable to the issuance of the Company
Shares hereunder shall have expired or have been terminated; (ii) the Company
Shares shall have been approved for listing on the NYSE upon official notice
of issuance; (iii) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Governmental Entity, if any,
required in connection with the issuance of the Company Shares hereunder
shall have been obtained or made, as the case may be; and (iv) no preliminary
or permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
4. CLOSING. At any Closing, (a) the Company will deliver to Acquiror or
its designee a single certificate in definitive form representing the number
of the Company Shares designated by Acquiror in its Exercise Notice, such
certificate to be registered in the name of Acquiror and to bear the legend
set forth in Section 12, and (b) Acquiror will deliver to the Company the
aggregate price for the Company Shares so designated and being purchased by
wire transfer of immediately available funds or certified check or bank
check. The Company shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 4 in the name of Acquiror or its designee.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Acquiror that (a) the Company has taken all
necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Company Option, and at all times
from the date hereof through the expiration of the Company Option will have
reserved, a number
2
<PAGE>
of authorized and unissued Company Shares equal to 15% of the number of
Company Shares issued and outstanding on the date hereof, such amount being
subject to adjustment as provided in Section 11, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, (b) upon delivery of the
Company Shares to Acquiror upon the exercise of the Company Option, Acquiror
will acquire the Company Shares free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever, and (c) none of
the Company, any of its affiliates or anyone acting on its or their behalf
has issued, sold or offered any security of the Company to any person under
circumstances, or taken any other action, that would cause the issuance and
sale of the Option Shares, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act as in effect on the
date hereof and, assuming the representations of Acquiror contained in
Section 6(c) are true and correct, the issuance, sale and delivery of the
Option Shares hereunder upon exercise of the Company Option will be exempt
from the registration and prospectus delivery requirements of the Securities
Act, as in effect on the date hereof.
6. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror represents and
warrants to the Company that any Company Shares acquired upon exercise of the
Company Option will be acquired for Acquiror's own account, and will not be,
and the Company Option is not being, acquired by Acquiror with a view to the
distribution thereof in violation of any applicable provision of the
Securities Act.
7. CERTAIN REPURCHASES.
(a) ACQUIROR PUT. At the request of Acquiror by written notice at
any time during which the Company Option is exercisable pursuant to Section 2
(the "Repurchase Period"), the Company (or any successor entity thereof)
shall repurchase from Acquiror all or any portion of the Company Option, at
the price set forth in subparagraph (i) below, or, at the request of Acquiror
by written notice at any time prior to December 31, 1995 (provided that such
date shall be extended to March 31, 1996 under the circumstances where the
date after which either party may terminate the Merger Agreement pursuant to
Section 8.01(e) of the Merger Agreement has been extended to March 31, 1996),
the Company (or any successor thereto) shall repurchase from Acquiror all or
any portion of the Company Shares purchased by Acquiror pursuant to the
Company Option, at the price set forth in subparagraph (ii) below:
(i) (A) the difference between
(x) the "Market/Offer Price" for shares of Company
Common Stock as of the date Acquiror gives notice of its
intent to exercise its rights under this Section 7 (defined
as the higher of (1) the highest price per share offered as
of such date pursuant to any tender or exchange offer or
other Competing Transaction (as defined in the Merger
Agreement) that was made prior to such date and not
terminated or withdrawn as of such date (the "Offer Price")
and (2)
3
<PAGE>
the Fair Market Value of the Company Stock as of such date
(the "Market Price")); and
(y) the Exercise Price,
multiplied by
(B) the number of Company Shares purchasable pursuant to the
Company Option (or portion thereof with respect to which
Acquiror is exercising its rights under this Section 7), but
only if the Market/Offer Price is greater than the Exercise
Price;
(ii) the product of (x) the sum of (A) the Exercise Price paid
by Acquiror for the Company Shares acquired pursuant to the Company
Option and (B) the difference between the Market/Offer Price and the
Exercise Price, but only if the Market/Offer Price is greater than
the Exercise Price, and (y) the number of Company Shares so purchased.
As used herein, the "Fair Market Value" of any share shall be the average
of the daily closing sales price for such share on the New York Stock
Exchange (the "NYSE") during the ten NYSE trading days prior to the fifth
NYSE trading day preceding the date such is to be determined.
Notwithstanding any provision to the contrary in this Agreement, Acquiror
may not exercise its rights pursuant to Section 7(a) in a manner that would
result in the cash payment to Acquiror of an aggregate amount under this
Section 7(a) of more than $30 million, less the amount, if any, of the
Termination Fee paid to Acquiror pursuant to Section 8.05(c) of the Merger
Agreement; PROVIDED, HOWEVER, that nothing in this sentence shall limit
Acquiror's ability to exercise the Company Option in accordance with its
terms.
(b) PAYMENT AND REDELIVERY OF COMPANY OPTION OR SHARES. If
Acquiror exercises its rights under this Section 7, the Company shall, within
five business days thereafter, pay the required amount to Acquiror in
immediately available funds and Acquiror shall surrender to the Company the
Company Option or the certificates evidencing the Company Shares purchased by
Acquiror pursuant thereto, and Acquiror shall warrant that it owns the
Company Option or such shares and that the Company Option or such shares are
then free and clear of all liens, claims, damages, charges and encumbrances
of any kind or nature whatsoever.
(c) PROHIBITION OF REPURCHASE. After delivery by Acquiror of a
notice of repurchase by the Company, the Company shall, to the extent that
the Company is prohibited under any applicable law or regulation from
repurchasing the Company Option and/or the Company Shares in full in
accordance with this Section 7, the Company shall immediately so notify
Acquiror and, thereafter, shall deliver to Acquiror from time to time,
promptly and in any event within five business days following the lapse of
any such prohibition, the repurchase price for that portion of the Company
Option or the Company Shares, as the case may be, determined pursuant to
4
<PAGE>
Section 7(a), with respect to which Acquiror has delivered such notice of
repurchase (the "Repurchase Price") that it is no longer prohibited from
delivering; PROVIDED, HOWEVER, that, if the Company at any time after
delivery by Acquiror of a notice of repurchase pursuant to Section 7(a) is
prohibited under applicable law or regulation from delivering to Acquiror the
Repurchase Price in full (and the Company hereby undertakes to use all
reasonable efforts to obtain all required regulatory and legal approvals and
to file any required notices as promptly as practicable in order to
accomplish such repurchase), then Acquiror may to that extent revoke its
notice of repurchase of the Company Option or the Company Shares, as the case
may be, whereupon the Company, in addition to paying such portion of the
Repurchase Price as it is permitted to pay, promptly upon Acquiror's
surrender pursuant to Section 7(b) shall promptly deliver to Acquiror, to the
extent theretofore surrendered by Acquiror pursuant to Section 7(b), (a) a
certificate for the Company Shares that Company is then so prohibited from
repurchasing or (b) a new Company Option evidencing the right of Acquiror to
purchase that number of shares of Company Common Stock obtained by
multiplying the number of shares of Company Common Stock for which the
surrendered Company Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Repurchase
Price less the portion thereof theretofore delivered to Acquiror and the
denominator of which is the Repurchase Price.
8. VOTING OF SHARES. Following the date hereof and prior to the fifth
anniversary of the date hereof (the "Expiration Date"), Acquiror shall vote
any shares of capital stock of the Company acquired by Acquiror pursuant to
this Agreement ("Restricted Shares") or otherwise beneficially owned (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act") by Acquiror on each matter submitted to
a vote of stockholders of the Company for and against such matter in the same
proportion as the vote of all other stockholders of the Company are voted
(whether by proxy or otherwise) for and against such matter.
9. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date, Acquiror
shall not, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by Acquiror, other than (i) pursuant to Section 7 or (ii)
in accordance with Section 9(b) or Section 10.
(b) PERMITTED SALES. Following the termination of the Merger
Agreement, Acquiror shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended, or otherwise determined
to be fair to and in the best interests of the stockholders of the the
Company, by a majority of the members of the Board of Directors of the
Company, which majority shall include a majority of directors who were
directors prior to the announcement of such tender or exchange offer.
10. REGISTRATION RIGHTS. Following the termination of the Merger
Agreement, Acquiror may by written notice (the "Registration Notice") to the
the Company request the Company to register under the Securities Act all or
any part of the Restricted Shares beneficially owned by
5
<PAGE>
Acquiror (the "Registrable Securities") pursuant to a bona fide firm
commitment underwritten public offering in which Acquiror and the
underwriters shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use all reasonable efforts
to prevent any Person (including any Group) and its affiliates from
purchasing through such offering Restricted Shares representing more than 1%
of the outstanding shares of common stock of the Company on a fully diluted
basis (a "Permitted Offering"). The Registration Notice shall include a
certificate executed by Acquiror and its proposed managing underwriter, which
underwriter shall be an investment banking firm of nationally recognized
standing (the "Manager"), stating that (i) they have a good faith intention
to commence promptly a Permitted Offering and (ii) the Manager in good faith
believes that, based on the then prevailing market conditions, it will be
able to sell the registrable Securities at a per share price equal to at
least 80% of the then Fair Market Value of such shares. The Company (and/or
any Person designated by the Company) shall thereupon have the option
exercisable by written notice delivered to Acquiror within ten business days
after the receipt of the Registration Notice, irrevocably to agree to
purchase all or any part of the Registrable Securities for cash at a price
(the "Option Price") equal to the product of (i) the number of Registrable
Securities and (ii) the then Fair Market Value of such shares. Any such
purchase of Registrable Securities by the Company (or its designee) hereunder
shall take place at a closing to be held at the principal executive offices
of the Company or at the offices of its counsel at any reasonable date and
time designated by the Company and/or such designee in such notice within 20
business days after delivery of such notice. Any payment for the shares to
be purchased shall be made by delivery at the time of such closing of the
Option Price in immediately available funds.
If the Company does not elect to exercise its option pursuant to this
Section 10 with respect to all Registrable Securities, it shall use all
reasonable efforts to effect, as promptly as practicable, the registration
under the Securities Act of the unpurchased Registrable Securities; PROVIDED,
HOWEVER, that (i) Acquiror shall be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) the Company will not be
required to file any such registration statement during any period of time
(not to exceed 40 days after such request in the case of clause (A) below or
90 days in the case of clauses (B) and (C) below) when (A) the Company is in
possession of material non-public information which it reasonably believes
would be detrimental to be disclosed at such time, and in the opinion of
counsel to the Company, such information would have to be disclosed if a
registration statement were filed at that time; (B) the Company is required
under the Securities Act to include audited financial statements for any
period in which registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) the
Company determines, in its reasonable judgment, that such registration would
interfere with any financing, acquisition or other material transaction
involving the Company or any of its affiliates. The Company shall use
reasonable efforts to cause any Registrable Securities registered pursuant to
this Section 10 to be qualified for sale under the securities or Blue Sky
laws of such jurisdictions as Acquiror may reasonably request and shall
continue such registration or qualification in effect in such jurisdiction;
PROVIDED, HOWEVER, that the Company shall not be required to qualify to do
business in, or consent to general service of process in, any jurisdiction by
reason of this provision.
6
<PAGE>
The registration rights set forth in this Section 10 are subject to the
condition that Acquiror shall provide the Company with such information with
respect to such holder's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to such holder
as, in the reasonable judgment of counsel for the Company, is necessary to
enable the Company to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall be effected at the
Company's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to Acquiror, and the Company shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings as such underwriters may reasonably
require. In connection with any such registration, the parties agree (i) to
indemnify each other and the underwriters in the customary manner, (ii) to
enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering and (iii) to take all further actions which
shall be reasonably necessary to effect such registration and sale
(including, if the Manager deems it necessary, participating in road-show
presentations).
The Company shall be entitled to include (at its expense) additional
shares of its common stock in a registration effected pursuant to this
Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such
offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without limiting any
restriction on the Company contained in this Agreement or in the Merger
Agreement, in the event of any change in Company Common Stock by reason of
stock dividends, splitups, mergers (other than the Merger),
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Company Option, and the
purchase price per share provided in Section 1, shall be adjusted
appropriately to restore to Acquiror its rights hereunder, including the
right to purchase from the Company (or its successors) shares of Company
Common Stock representing 15% of the outstanding Company Common Stock for the
aggregate Exercise Price calculated as of the date of this Agreement as
provided in Section 1.
12. RESTRICTIVE LEGENDS. Each certificate representing shares of
Company Common Stock issued to Acquiror hereunder shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED
7
<PAGE>
AS OF MARCH 31, 1995, A COPY OF WHICH MAY BE OBTAINED FROM
THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Acquiror
shall have delivered to the Company a copy of a letter from the staff of the
Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to the Company, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions to this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
Certificates representing shares sold in a registered public offering
pursuant to Section 10 shall not be required to bear the legend set forth in
this Section 12.
13. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the
rights or the obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon
any person other than the parties hereto and their respective permitted
assigns any rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free of
the restrictions imposed with respect to such shares by this Agreement,
unless and until such party shall repurchase or otherwise become the
beneficial owner of such shares, and any transferee of such shares shall not
be entitled to the registration rights of such party.
14. SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree that
the failure of the Company to perform its agreement and covenants hereunder
will cause irreparable injury to Acquiror for which damages, even if
available, will not be an adequate remedy. Accordingly, the Company hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of the Company's obligations and to the
granting by any such court of the remedy of specific performance of its
obligations hereunder.
15. ENTIRE AGREEMENT. This Agreement and the Merger Agreement
(including the exhibits and schedules thereto) constitute the entire
agreement of the parties, and supersedes all prior agreements and
undertakings, both written and oral, among the parties, with respect to the
subject matter hereof.
16. FURTHER ASSURANCES. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
8
<PAGE>
17. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
If any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision and the economic effects thereof. If for any reason any such court
or regulatory determines that Acquiror is not permitted to acquire, or the
Company is not permitted to repurchase pursuant to Section 7, the full number
of shares of Company Common Stock provided in Section 1 hereof (as the same
may be adjusted), it is the express intention of the Company to allow
Acquiror to acquire or to require the Company to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null,
void or unenforceable, or order any party to take any action inconsistent
herewith, or not take any action required herein, the other party shall not
be entitled to specific performance of such provision or part hereof or to
any other remedy, including without limitation money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
18. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given in the manner provided in the Merger
Agreement.
19. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
20. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
22. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
23. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an
instrument in writing signed on behalf of each of the parties hereto or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
24. EXTENSION OF TIME PERIODS. The time periods for exercise of certain
rights under Sections 2, 6 and 7 shall be extended (i) to the extent
necessary to obtain all regulatory approvals
9
<PAGE>
for the exercise of such rights, and for the expiration of all statutory
waiting periods and (ii) to the extent necessary to avoid any liability under
Section 16(b) of the Exchange Act by reason of such exercise.
25. REPLACEMENT OF COMPANY OPTION. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
HORIZON HEALTHCARE CORPORATION
By /s/ NEAL ELLIOTT
_____________________________________
Neal Elliott
Chairman of the Board and President
CONTINENTAL MEDICAL SYSTEMS, INC.
By /s/ ROCCO A. ORTENZIO
_____________________________________
Rocco A. Ortenzio
Chairman of the Board and
Chief Executive Officer
10
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT ("Agreement") dated as of March 31, 1995, between
Horizon Healthcare Corporation, a Delaware corporation ("Acquiror"), and the
undersigned stockholders (collectively, the "Stockholders") of Continental
Medical Systems, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Stockholders beneficially own an aggregate of 3,440,239
shares (together with any additional shares as to which beneficial ownership
is acquired by any member of the Stockholder Group described below, the
"Company Shares") of Common Stock, par value $.01 per share ("Company Common
Stock"), of the Company.
WHEREAS, Acquiror is prepared to enter into an Agreement and Plan of
Merger with the Company (the "Merger Agreement") providing for the merger of
a wholly owned subsidiary of Acquiror into the Company and the conversion in
such merger of each share of Company Common Stock into the number of shares
of the Common Stock, par value $.001 per share, of Acquiror set forth in the
Merger Agreement (the "Merger");
WHEREAS, the Stockholders fully support the Merger and, in order to
encourage Acquiror to enter into the Merger Agreement with the Company, the
Stockholders are willing to enter into certain arrangements with respect to
the Company Shares;
NOW THEREFORE, in consideration of the premises set forth above, the
mutual promises set forth below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. STOCKHOLDERS' SUPPORT OF THE MERGER. From the date hereof until March
31, 1996, or, if earlier, termination of the Merger Agreement:
(a) No Stockholder or any corporation or other person controlled
by any Stockholder or any affiliate or associate thereof, other than the
Company and its subsidiaries (collectively, the "Stockholder Group"),
will, directly or indirectly, sell, transfer, pledge or otherwise
dispose of, or grant a proxy with respect to, any Company Shares to any
person other than Acquiror or its designee, or grant an option with
respect to any of the foregoing, or enter into any other agreement or
arrangement with respect to any of the foregoing.
(b) No Stockholder or any other member of the Stockholder Group will
initiate, solicit or encourage (including by way of furnishing information
or assistance), or take any other action to facilitate, any inquiries or
the making of any proposal relating to, or that may
<PAGE>
reasonably be expected to lead to, any merger, consolidation, share
exchange, business combination or similar transaction involving the
Company or any of its subsidiaries or the acquisition in any manner,
directly or indirectly, of a material equity interest in any voting
securities of, or a substantial portion of the assets of, the Company
or any of its Significant Subsidiaries, other than the transactions
contemplated by this Agreement (a "Competing Transaction"), or enter
into discussions or negotiate with any person or entity in furtherance
of such inquiries or to obtain a Competing Transaction, or agree to, or
endorse, any Competing Transaction, or authorize or permit any of the
officers, directors or employees of any Stockholder or any member of
the Stockholder Group or any investment banker, financial advisor,
attorney, accountant or other representative retained by any Stockholder
or any other member of the Stockholder Group to take any such action.
Each Stockholder shall promptly notify Acquiror of all relevant terms of
any such inquiries or proposals received by such Stockholder or any other
member of the Stockholder Group or by any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or
other representative relating to any of such matters and if such inquiry
or proposal is in writing, such Stockholder shall deliver or cause to be
delivered to Acquiror a copy of such inquiry or proposal.
(c) The Stockholders agree that the Stockholders will vote, and will
cause each member of the Stockholder Group to vote, all Company Shares
beneficially owned by such persons (i) in favor of the Merger and (ii)
subject to the provisions of paragraph (d) below, against any combination
proposal or other matter that may interfere or be inconsistent with the
Merger (including without limitation a Competing Transaction).
(d) The Stockholders agree that, if requested by Acquiror, it will
not, and it will cause each member of the Stockholder Group not to, attend
or vote any Company Shares beneficially owned by any such person at any
annual or special meeting of stockholders, or execute any written consent
of stockholders, during such period.
(e) The Stockholders shall take all affirmative steps reasonably
requested by Acquiror to indicate their full support for the Merger, and
hereby consent to Acquiror's announcement in any press release, public
filing, advertisement or other document, that the Stockholders fully
support the Merger.
(f) Acquiror and the Stockholders agree that they shall use all
reasonable efforts to seek the successful completion of the Merger in an
expeditious manner.
(g) To the extent inconsistent with the provisions of this
Section 2, each member of the Stockholder Group hereby revokes any and
all proxies with respect to such member's Company Shares or any other
voting securities of the Company.
Nothing in this Agreement shall be deemed to prohibit any Stockholder
from acting in accordance with such Stockholder s fiduciary duties solely to
the extent that such Stockholder is acting in the capacity of officer or
director of the Company.
2
<PAGE>
2. MISCELLANEOUS
(a) The Stockholders, on the one hand, and Acquiror, on the other,
acknowledge and agree that irreparable damage would occur if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof
having jurisdiction, in addition to any other stockholder to which they may
be entitled at law or equity.
(b) Descriptive headings are for convenience only and shall not control
or affect the meaning or construction of any provision of this Agreement.
(c) All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be validly given, made or served, if
in writing and delivered personally, by telecopier or sent by registered
mail, postage prepaid:
If to Acquiror:
Horizon Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, N.M. 87110
Attention: Chairman of the Board
Telecopier No.: (505) 881-5097
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Barry A. Bryer
Telecopier No: (212) 403-2000
If to the Stockholders:
3
<PAGE>
c/o Rocco A. Ortenzio
Continental Medical Systems, Inc.
P. O. Box 715
600 Wilson Lane
Mechanicsburg, PA 17055
Attention: General Counsel
Telecopier No.: (717) 790-9974
with a copy to:
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: F. Douglas Raymond III
Telecopier No.: (215) 988-2757
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives
telecopier confirmation that such notice was received at the telecopier
number of the addressee. Notice given by mail as set out above shall be
deemed delivered three days after the date the same is postmarked.
(d) From and after the termination of this Agreement, the covenants of
the parties set forth herein shall be of no further force or effect and the
parties shall be under no further obligation with respect thereto.
(e) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) AFFILIATE. "Affiliate" shall have the meaning ascribed to it
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
(ii) BENEFICIAL OWNER. A person shall be deemed a "beneficial owner"
of or to have "beneficial ownership" Company Shares in accordance with the
interpretation of the term "beneficial ownership" as defined in Rule
13-d(3) under the Exchange Act, as in effect on the date hereof, provided
that a person shall be deemed to be the beneficial owner of, and to have
beneficial ownership of, Company Shares that such person or any Affiliate
of such person has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrant or options, or otherwise.
4
<PAGE>
(iii) MERGER. "Merger" shall mean the transaction referred to in the
second whereas clause of this Agreement, or any amendment to or
modification does not reduce the value of the financial consideration to
be received by Stockholders pursuant to the transaction set forth in the
Merger Agreement.
(iv) PERSON. A "person" shall mean any individual, firm,
corporation, partnership, trust, limited liability company or other
entity.
(v) SIGNIFICANT SUBSIDIARY. "Significant Subsidiary" shall have
the meaning ascribed to it in Rule 1-02 of SEC Regulation S-X as in
effect on the date hereof.
(g) DUE AUTHORIZATION; NO CONFLICTS. The Stockholders hereby represent
and warrant to Acquiror as follows: the Stockholders have full power and
authority to enter into this Agreement. Neither the execution or delivery of
this Agreement nor the consummation of the transactions contemplated herein
will (a) conflict with or result in a breach, default or violation of (i) any
of the terms, provisions or conditions of the Certificate of Incorporation or
Bylaws of any member of the Stockholder Group or (ii) any agreement, proxy,
document, instrument, judgment, decree, order, governmental permit,
certificate, license, law, statute, rule or regulation to which any member of
the Stockholder Group is a party or to which it is subject, (b) result in the
creation of any lien, charge or other encumbrance on any shares of Company
Common Stock or (c) require any member of the Stockholder Group to obtain the
consent of any private nongovernmental third party. No consent, action,
approval or authorization of, or registration, declaration or filing with,
any governmental department, commission, agency or other instrumentality or
any other person or entity is required to authorize, or is otherwise required
in connection with, the execution and delivery of this Agreement or any
Stockholder's performance of the terms of this Agreement or the validity or
enforceability of this Agreement.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors, assigns and Affiliates, but shall not
be assignable by any party hereto without the prior written consent of the
other parties hereto.
(i) WAIVER. No party may waive any of the terms or conditions of this
Agreement except by a duly signed writing referring to the specific provision
to be waived.
(j) GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
(k) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement,
and supersedes all other and prior agreements and understandings, both
written and oral, among the parties hereto and their Affiliates.
5
<PAGE>
(l) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the Stockholders and Acquiror have each caused this
Agreement to be duly executed by their respective officers, each of whom is
duly authorized, all as of the day and year first above written.
HORIZON HEALTHCARE CORPORATION
By: /s/ NEAL ELLIOTT
-------------------------------------
Neal Elliott
Chairman of the Board and President
STOCKHOLDERS:
/s/ ROCCO A. ORTENZIO
----------------------------------------
Rocco A. Ortenzio
/s/ ROBERT A. ORTENZIO
----------------------------------------
Robert A. Ortenzio
LIBERTY INVESTORS, INC.
By /s/ GEORGE P. WARREN, JR.
--------------------------------------
Name: George P. Warren, Jr.
Title: Vice President
HEALTHCARE INVESTORS, INC.
By /s/ GEORGE P. WARREN, JR.
--------------------------------------
Name: George P. Warren, Jr.
Title: Vice President
7
<PAGE>
FOR IMMEDIATE RELEASE
HORIZON/CMS HEALTHCARE CORPORATION
CONTACT:
HORIZON HEALTHCARE CORPORATION CONTINENTAL MEDICAL SYSTEMS,
INC.
CONTACT: CONTACT:
Michael H. Seeliger Dennis L. Lehman
Vice President, Investor Senior Vice President
and Corporate Relations Finance and Chief
(505) 881-4961 Financial Officer
(717) 790-8300
HORIZON HEALTHCARE CORPORATION TO ACQUIRE
CONTINENTAL MEDICAL SYSTEMS, INC.,
IN STOCK FOR STOCK MERGER
ALBUQUERQUE, NM and MECHANICSBURG, PA, March 31, 1995 -- Horizon Healthcare
Corporation ("Horizon") (NYSE:HHC) and Continental Medical Systems, Inc.
("CMS") (NYSE:CNM) jointly announced today that they have agreed to a
strategic merger and that the merger was unanimously approved by each
company's Board of Directors. The combined company will be called Horizon/CMS
Healthcare Corporation.
Under the terms of the merger agreement, CMS stockholders will receive for
each of their CMS common shares a number of shares of Horizon common stock
equal to $13.00, divided by the average daily closing price of Horizon common
stock for a twenty trading-day period preceding the mailing of the proxy
materials relating to the special meetings of stockholders for approval of
the transaction. The transaction is intended to be tax free to CMS
stockholders and to be accounted for as a pooling of interests. CMS has
approximately
<PAGE>
38,623,786 shares of common stock outstanding. At yesterday's closing price
for Horizon common stock, the aggregate value of the transaction to CMS
stockholders would be $502.1 million.
As of March 31, 1995, CMS operated thirty seven "State of the Art"
rehabilitation hospitals which provide a full continuum of acute medical
rehabilitation services. The Company also provides out-patient services at
more than 140 locations. In addition, CMS provides contract therapy services
to approximately 1,000 facilities and operates a respiratory therapy company.
CMS's annualized revenues based on the quarter ended December 31, 1995, were
approximately $974.5 million.
Horizon, headquartered in Albuquerque, New Mexico, is a leading provider
of specialty health care services, and long-term nursing care, including
licensed specialty hospitals and subacute units, institutional pharmacy
services, rehabilitation therapies, clinical laboratory services, medical and
sleep diagnostics, home respiratory care services and Alzheimer's care in 149
inpatient units. Horizon's annualized operating revenues based on the quarter
ended February 28, 1995 were approximately $675.3 million.
Commenting on the merger, Horizon's Chairman and CEO Neal Elliott noted
"We are very excited about the merger with Continental Medical Systems, Inc.
The merger will create the largest specialty health care company in the
United States providing a full continuum of lower cost health care from acute
rehabilitation services through subacute care, long-term care,
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<PAGE>
out-patient and home care services. The combination of these two companies
represents a market place response to the rapidly changing health care
environment. This consolidation will enhance our efforts with managed care
organizations as we together seek cost-efficient, quality results."
Mr. Elliott continued, "Significant savings and economies of scale, as
well as the synergies we have identified convince us that the merger will be
accretive to earnings and immediately have a positive impact on the combined
earnings. In addition, tremendous opportunities are created for the expansion
of Horizon's institutional pharmacy, laboratory and other specialty programs
in each of CMS's hospitals."
"The unique combination will bring together the expertise necessary to
respond to the growing post-acute market which is being asked to care for
more higher acuity patients. As a result, we will be the nation's premier
post-acute provider."
Commenting on the proposed merger, Rocco Ortenzio, Chairman and CEO of
Continental Medical Systems, Inc., made the following statement: "The
combination of these two quality health care companies represents a
tremendous opportunity. The merger will establish a much stronger system for
the consistent delivery of acute rehabilitation and economical therapy
services to the long-term care and subacute industry, and will establish a
foundation to immediately expand contract therapies from both related and
non-related facilities. When CMS is
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<PAGE>
combined with Horizon, I believe the full potential from our contract
rehabilitation division and the full potential of our first class facilities
and excellent professional staff will be realized. CMS is a leading developer
of clinically responsive programs nationwide and this expertise combined
with the long-term industry will be timely and responsive to this growing
market."
The companies expect to complete the merger by June 30, 1995. Completion
of the transaction is subject, among other conditions, to a normal review of
appropriate regulatory authorities. Horizon and CMS said that they expect
their respective stockholders to vote on the proposed merger at special
stockholders meetings, the dates of which will be announced later. Proxy
materials fully describing the transaction will be mailed to stockholders as
soon as possible. CMS's Chairman, Rocco Ortenzio, and Robert Ortenzio,
President of CMS, have entered into an agreement with Horizon pursuant to
which the Ortenzios have agreed to vote the CMS shares owned or controlled by
them in favor of the merger. Their shares constitute approximately 9.0
percent of the outstanding shares of CMS.
When the merger is consummated, Neal M. Elliott will continue as Chairman
of the Board, President & CEO, Rocco Ortenzio will be Vice Chairman and Klem
Belt and Robert Ortenzio will be Executive Vice Presidents of Horizon. The
combined entity's board of directors will be increased to 13
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<PAGE>
members and will consist of the eight current Horizon directors and five of
the current CMS directors.
Salomon Brothers Inc., has rendered a fairness opinion to the Horizon
board of directors, and Merrill Lynch & Co. acted as financial advisor to
CMS and has rendered a fairness opinion to CMS's board of directors with
respect to the financial terms of the proposed combination.
Horizon Healthcare Corporation, headquartered in Albuquerque, New Mexico
is a leading provider of quality specialty health care services and long-term
nursing care. The Company's specialty health care services include subacute
care, pharmacy services, rehabilitation therapies, laboratory services,
medical and sleep diagnostic services, home respiratory care services and
Alzheimer's care. Horizon currently operates 16 specialty hospitals and
specialty centers, fifteen specialty subacute units and 133 long-term care
centers totalling 17,760 beds in 18 states. In addition, the Company provides
institutional pharmacy services to more than 36,400 beds from 19 pharmacies
in 16 states. The Company also provides contract rehabilitation therapy
services through 442 contracts in 20 states serving approximately 41,200 beds.
CMS is a diversified provider of medical rehabilitation and physician
services. CMS operates 37 freestanding rehabilitation hospitals, provides
outpatient rehabilitation services at more than 125 locations and manages
13 inpatient rehabilitation units for general acute care hospitals. These
- 5 -
<PAGE>
services are provided in 20 states. CMS provides contract therapy in more
than 30 states with physical, occupational, and speech therapy services.
Physician staffing services provide hospitals and physician groups with
temporary physician and allied health professional staffing services in all
50 states.
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