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Exhibit 7.1
AGREEMENT AND PLAN OF MERGER
By and Among
VICAR RECAP, INC.,
a Delaware corporation,
VETERINARY CENTERS OF AMERICA, INC.,
a Delaware corporation
and
VICAR OPERATING, INC.,
a Delaware corporation
Dated as of March 30, 2000
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
March 30, 2000 by and among Vicar Recap, Inc., a Delaware corporation
("Recap") wholly owned by Green Equity Investors III, L.P. ("Parent"),
Veterinary Centers of America, Inc., a Delaware corporation (together with its
Subsidiaries from time to time (except as the context may otherwise require),
the "Company"), and Vicar Operating, Inc., a Delaware corporation and wholly
owned subsidiary of the Company ("Operating Company"), with respect to the
facts and circumstances set forth below. Capitalized terms used herein without
definition have the meanings set forth elsewhere in this Agreement.:
A. The Company Board (acting upon a recommendation of the Special
Committee) and the Board of Directors of Operating Company have each
determined that it is advisable and in the best interests of their respective
stockholders to effect a transfer of all of the assets, properties, business
operations and liabilities of the Company to Operating Company prior to the
Merger (the "Asset Drop Down"), to create a holding company and operating
company structure, in order to facilitate the consummation of the Merger in
accordance with this Agreement. Upon consummation of the Asset Drop Down,
Operating Company will remain and continue to be a wholly owned subsidiary of
the Company.
B. The Company Board (acting upon a recommendation of the Special
Committee) and the Board of Directors of Recap have each determined that it is
advisable and in the best interests of their respective stockholders to effect
a merger, following the consummation of the Asset Drop Down, of Recap with and
into the Company, with the Company as the surviving corporation, pursuant to
the Certificate of Merger and upon the terms and subject to the conditions set
forth herein.
C. Pursuant to the Merger, all shares of capital stock of the Company
(other than Dissenting Shares, shares held by Parent or Recap, and shares held
in the Company's treasury) shall be cancelled and converted automatically into
the right to receive an amount in cash per share, without interest, as set
forth in Section 2.2 of this Agreement.
D. As a result of the Merger, all of the outstanding equity interests of
the Company will be owned by Parent and certain members of management of the
Company.
E. Concurrently with the execution and delivery of this Agreement and in
order to induce Recap to enter into this Agreement, Recap and certain Rollover
Holders are entering into Voting Agreements in the form attached hereto as
EXHIBIT A, pursuant to which, among other things, the Rollover Holders will
agree to vote their shares of the Company in favor of the Merger.
F. In connection with the transactions contemplated by the Merger, certain
members of management of the Company (the "Rollover Holders") have entered
into Exchange and Subscription Agreements in the form attached hereto as
EXHIBIT B with Recap, pursuant to which the Rollover Holders will exchange a
portion of their Existing Shares (the "Rollover Shares") of the Company for
shares of Recap prior to the closing of the Merger (the "Recapitalization").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Certain Terms. For all purposes of this Agreement, except as otherwise
expressly provided:
1.1.1. the terms defined in this Article 1 have the meanings assigned to
them in this Article 1 and include the plural as well as the singular;
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1.1.2. all accounting terms not otherwise defined herein have the
meanings assigned under GAAP;
1.1.3. all references in this Agreement to "Articles," "Sections,"
"Exhibits," "Annexes" and "Schedules" shall be deemed to be references to
Articles and Sections of, and Exhibits, Annexes and Schedules to, this
Agreement, unless the context shall otherwise require;
1.1.4. pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
1.1.5. the words "include," "includes" and "including" shall be deemed
in each case to be followed by the words "without limitation";
1.1.6. the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
1.1.7. the term "party" or "parties" when used herein refer to Recap,
the Company and Operating Company; and
1.1.8. unless otherwise expressly provided herein, any agreement, plan,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
1.2. Definitions. As used in this Agreement and the Exhibits, Annexes and
Schedules delivered pursuant to this Agreement, the following terms have the
meanings set forth below:
1.2.1. "Acquisition Proposal" has the meaning set forth in Section 7.5.2
hereof.
1.2.2. "Action" means any action, complaint, petition, investigation,
suit, litigation or other proceeding, whether civil or criminal, in law or
in equity, before any court, tribunal, arbitrator or Governmental Entity.
1.2.3. "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, such Person. The term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
1.2.4. "Agreement" means this Agreement, as amended or supplemented,
together with all Annexes and Schedules attached or incorporated by
reference, in each case as amended or supplemented.
1.2.5. "Asset Drop Down" has the meaning set forth in the recitals
hereof.
1.2.6. "Business Day" means any day that is not a Saturday, Sunday or
legal holiday in the State of California.
1.2.7. "Certificate" has the meaning set forth in Section 4.1 hereof.
1.2.8. "Certificate of Merger" has the meaning set forth in Section
2.1.2 hereof.
1.2.9. "Closing" has the meaning set forth in Section 3.1 hereof.
1.2.10. "Closing Date" means the date and time of the Closing.
1.2.11. "Code" means the Internal Revenue Code of 1986, as amended.
1.2.12. "Common Stock" means the Company's common stock, $.001 par
value.
1.2.13. "Company" has the meaning set forth in the preamble hereof.
1.2.14. "Company Board" means the Board of Directors of the Company.
1.2.15. "Company Computer System" has the meaning set forth in Section
5.15 hereof.
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1.2.16. "Company Plans" has the meaning set forth in Section 5.13
hereof.
1.2.17. "Company Proxy Statement" has the meaning set forth in Section
7.9 hereof.
1.2.18. "Convertible Debentures" means the Company's 5.25% convertible
subordinated debentures issued April 17, 1996.
1.2.19. "DGCL" means the Delaware General Corporation Law.
1.2.20. "Disclosure Schedule" has the meaning set forth in Article 5
hereof.
1.2.21. "Dissenting Shares" has the meaning set forth in Section 2.4
hereof.
1.2.22. "Effective Time" has the meaning set forth in Section 2.1.2
hereof.
1.2.23. "Encumbrance" means any charge, encumbrance, security interest,
lien, option, equity, adverse claim or restriction, except for any
restrictions on transfer generally arising under any applicable Law.
1.2.24. "Environmental Law" has the meaning set forth in Section 5.16.2
hereof.
1.2.25. "ERISA" means the Employee Retirement Income Security Act of
1934, as amended.
1.2.26. "ERISA Affiliate" has the meaning set forth in Section 5.13
hereof.
1.2.27. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.2.28. "Exchange Agreement" means the exchange and subscription
agreement in the form attached hereto as EXHIBIT B.
1.2.29. "Exchange Ratio" has the meaning set forth in Section 2.2.3
hereof.
1.2.30. "Executive Officer" means each of Robert Antin, Arthur Antin,
Tomas Fuller and Neil Tauber.
1.2.31. "Existing Shares" means all of the Company's issued and
outstanding Common Stock.
1.2.32. "Expenses" has the meaning set forth in Section 9.3.2 hereof.
1.2.33. "Financial Statements" means the Company's audited consolidated
balance sheet as of December 31, 1999, and the related consolidated income
statements, statement of stockholders' equity and comprehensive income and
statement of cash flows for the year ended December 31, 1999, in each case
as contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 filed with the SEC on March 24, 2000.
1.2.34. "Financing" has the meaning set forth in Section 6.6 hereof.
1.2.35. "Financing Entities" has the meaning set forth in Section 6.6
hereof.
1.2.36. "Financing Letters" has the meaning set forth in Section 6.6
hereof.
1.2.37. "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, consistently applied.
1.2.38. "Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
1.2.39. "Hazardous Substance" has the meaning set forth in Section
5.16.2 hereof.
1.2.40. "HSR Act" has the meaning set forth in Section 7.6.1 hereof.
1.2.41. "Indebtedness" means all obligations for borrowed money, however
evidenced, including principal and interest.
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1.2.42. "Indemnified Party" has the meaning set forth in Section 7.13
hereof.
1.2.43. "Insurance Policies" has the meaning set forth in Section 5.18
hereof.
1.2.44. "Knowledge" means, with respect to any Person other than the
Company, the actual knowledge of such Person and its Representatives, and
with respect to the Company, the actual knowledge of the Company's Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer and
Senior Vice President of Development.
1.2.45. "Law" means any applicable statute, rule, regulation,
administrative requirement, code or ordinance of any Governmental Entity.
1.2.46. "Leased Real Estate" has the meaning set forth in Section 5.22.2
hereof.
1.2.47. "Liabilities" means all liabilities, obligations or Indebtedness
of any kind, whether matured or unmatured, liquidated or unliquidated,
fixed or contingent.
1.2.48. "Material Adverse Effect" means a material adverse effect on (i)
the ability of the subject Person to perform its obligations under, and
consummate the transactions contemplated by, this Agreement on a timely
basis or (ii) the financial condition, business, results of operations, or
prospects of such Person and its Subsidiaries, taken as a whole; provided,
however, the parties hereto acknowledge and agree that the adverse effect
(if any) on (a) the Company's ability to perform its obligations under, and
consummate the transactions contemplated by, this Agreement on a timely
basis or (b) the Company's financial condition, business, results of
operations, or prospects directly or indirectly resulting from, or which is
reasonably likely to result from, (A) this Agreement or the transactions
contemplated hereby or the public announcement of this Agreement and the
Merger, (B) the economy or securities markets in general, or (C) the
Company's industry in general, and not specifically related to the Company,
shall not constitute a Material Adverse Effect with respect to the Company
hereunder.
1.2.49. "Merger" has the meaning set forth in Section 2.1.1 hereof.
1.2.50. "Merger Consideration" means the cash paid to the holders of the
Existing Shares pursuant to Article 2 hereof.
1.2.51. "NASD" has the meaning set forth in Section 5.5.1 hereof.
1.2.52. "New Financing Letters" has the meaning set forth in Section 6.6
hereof.
1.2.53. "NLRB" has the meaning set forth in Section 5.14.3 hereof.
1.2.54. "Notice of Superior Proposal" has the meaning set forth in
Section 7.5.2 hereof.
1.2.55. "Operating Company" has the meaning set forth in the preamble
hereof.
1.2.56. "Options" means the options to purchase shares of capital stock
of the Company.
1.2.57. "Order" means any decree, injunction, judgment, order, ruling,
arbitration award, assessment or writ issued by any Governmental Entity.
1.2.58. "Owned Real Estate" has the meaning set forth in Section 5.22.1
hereof.
1.2.59. "Parent" has the meaning set forth in the preamble.
1.2.60. "Paying Agent" has the meaning set forth in Section 2.3.1
hereof.
1.2.61. "Per Share Amount" has the meaning set forth in Section 2.2.1
hereof.
1.2.62. "Permit" means any license, permit, franchise or authorization.
1.2.63. "Permitted Acquisitions" has the meaning set forth in Section
7.1.3 hereof.
1.2.64. "Permitted Encumbrances" means (i) Encumbrances disclosed on the
Disclosure Schedule, (ii) liens for Taxes, assessments, governmental
charges or levies or mechanics' and other statutory liens
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which are not material in amount relative to the property affected, or
which are not yet delinquent or can be paid without penalty or are being
contested in good faith and by appropriate proceedings in respect thereof,
and (iii) imperfections of title which are not substantial in amount
relative to the property affected and which do not materially interfere
with the present use of the property subject thereto or affected thereby.
1.2.65. "Person" means an association, a corporation, an individual, a
partnership, a limited liability company or limited liability partnership,
a trust or any other entity or organization, including a Governmental
Entity.
1.2.66. "Preferred Stock" means the Company's preferred stock, $.001 par
value.
1.2.67. "Recap" has the meaning set forth in the preamble hereof.
1.2.68. "Recapitalization" has the meaning set forth in the recitals
hereof.
1.2.69. "Rights Agreement" has the meaning set forth in Section 5.28
hereof.
1.2.70. "Representatives" means Persons acting on behalf of another
Person, including such Person's officers, directors, employees,
representatives, agents, independent accountants, investment bankers and
counsel.
1.2.71. "Rollover Holders" has the meaning set forth in the recitals
hereof.
1.2.72. "Rollover Options" means the Options issued under the Stock
Options Plans that will continue in the Surviving Corporation.
1.2.73. "Rollover Shares" has the meaning set forth in the recitals
hereof.
1.2.74. "SEC" means the United States Securities and Exchange Commission
or any successor entity.
1.2.75. "SEC Reports" has the meaning set forth in Section 5.6.1 hereof.
1.2.76. "Securities Act" means the Securities Act of 1933, as amended.
1.2.77. "Service" means the Internal Revenue Service or any successor
entity.
1.2.78. "Share Certificates" has the meaning set forth in Section 2.3.1
hereof.
1.2.79. "Special Committee" means the special committee of the Company
Board consisting entirely of non-management independent directors
established to make recommendations to the Company Board with respect to,
among other matters, the advisability of the consummation of the
transactions contemplated by this Agreement.
1.2.80. "Special Meeting" has the meaning set forth in Section 7.10
hereof.
1.2.81. "Stockholder Agreement" means the stockholders agreement to be
entered into by the Company, Parent and the Rollover Holders on or prior to
the Closing Date.
1.2.82 "Stock Option Plans" means, collectively, the Veterinary Centers
of America, Inc. 1996 Employee Stock Purchase Plan, the 1996 Stock
Incentive Plan, and the 1993 Stock Incentive Plan.
1.2.83 "Subsidiary" of a company means any Person in which such company
has a direct or indirect equity or ownership interest by vote or value of
in excess of 50%.
1.2.84 "Surviving Corporation" has the meaning set forth in Section
2.1.1 hereof.
1.2.85 "Superior Proposal" has the meaning set forth in Section 7.5.2
hereof.
1.2.86 "Takeover Statute" has the meaning set forth in Section 7.15
hereof.
1.2.87 "Tax" or "Taxes", as the context may require, include: (i) any
income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license,
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withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance,
windfall profit or license tax, governmental fee, including estimated taxes
relating to any of the foregoing, or other similar tax or other like
assessment or charge of similar kind whatsoever together with any interest
and any penalty, addition to tax or additional amount imposed by any
Governmental Entity responsible for the imposition of any such Tax; or (ii)
any liability of a Person for the payment of any taxes, interest, penalty,
addition to tax or like additional amount resulting from the application of
Treas. Reg. Section 1.1502-6 or comparable provisions of any Governmental
Entity in respect of a consolidated or combined return.
1.2.88 "Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to,
any Governmental Entity in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Law relating to
any Tax.
1.2.89 "Termination Fee" shall have the meaning set forth in Section
9.3.1 hereof.
1.2.90 "Third Party" has the meaning set forth in Section 7.5.2 hereof.
1.2.91 "Updated Financial Statements" has the meaning set forth in
Section 7.7 hereof.
1.2.92 "Voting Agreement" means the Voting Agreement in the form
attached hereto as Exhibit A.
ARTICLE 2.
THE MERGER
2.1. The Merger.
2.1.1. Upon the terms and subject to the conditions hereof, and in
accordance with the DGCL, Recap shall be merged with and into the Company
at the Effective Time (the "Merger"). Upon consummation of the Merger, the
separate existence of Recap shall cease and the Company shall be the
surviving corporation (the "Surviving Corporation").
2.1.2. As soon as practicable after satisfaction of (or, to the extent
permitted hereunder, waiver of) all conditions to the Merger, the Company
and Recap will file a certificate of merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware in accordance with the
DGCL and make all other filings or recordings required by Law in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware or at such later time as is specified in the Certificate of Merger
(the "Effective Time").
2.1.3. The Merger shall have the effects set forth in Sections 251, 259
and 261 of DGCL.
2.2. Merger Consideration and Cancellation of Existing Shares. At the
Effective Time, pursuant to this Agreement and by virtue of the Merger and
without any action on the part of Recap, the Company, or the holders of any of
the following securities:
2.2.1. Each Existing Share issued and outstanding immediately prior to
the Effective Time (including shares of Common Stock issued upon exercise
of Options and other convertible securities of the Company, but excluding
any Dissenting Shares, and shares to be cancelled pursuant to Section
2.2.2), shall be cancelled and shall be converted automatically into the
right to receive an amount equal to $15.00 in cash (the "Per Share
Amount"), without interest, payable to the holder thereof upon surrender of
the certificate formerly representing such share of Common Stock in the
manner provided in Section 2.3.
2.2.2. Each Existing Share held in the treasury of the Company or held
by Recap or Parent, if any, immediately prior to the Effective Time, shall
be cancelled without any conversion thereof and no payment or distribution
shall be made with respect thereto.
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2.2.3. Each share of common stock of Recap that is issued and
outstanding immediately prior to the Effective Time shall remain
outstanding as an issued, fully paid and nonassessable share of common
stock of the Surviving Corporation (the "Exchange Ratio").
2.2.4. If between the date of this Agreement and the Effective Time the
number of outstanding shares of capital stock of the Company shall have
been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, exchange of shares or the like
other than pursuant to the Merger, the Per Share Amount payable to each
holder of Existing Shares shall be correspondingly adjusted.
2.3. Payment of Cash for Existing Shares and Options.
2.3.1. At the Effective Time, the Surviving Corporation shall
irrevocably deposit or cause to be deposited with a paying agent appointed
by Recap with the Company's prior approval (the "Paying Agent"), as agent
for the holders of Existing Shares to be cancelled in accordance with
Section 2.2, cash in the aggregate amount required to pay the Merger
Consideration in respect of such securities outstanding immediately prior
to the Effective Time. Pending distribution pursuant to Section 2.3.2
hereof of the cash deposited with the Paying Agent, such cash shall be held
in trust for the benefit of the holders of Existing Shares cancelled in the
Merger and such cash shall not be used for any other purposes, and shall be
held in obligations of, or guaranteed by, the United States of America, or
any agency thereof, and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investor Services, Inc. or Standard & Poors Corporation,
respectively, or in deposit accounts, certificates of deposit or bankers'
acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from commercial banks with capital,
surplus and undivided profits aggregating in excess of $1,000,000,000
(based on the most recent financial statements of such bank which are then
publicly available at the SEC or otherwise). Promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each Person who
was, at the Effective Time, a holder of record of Existing Shares entitled
to receive the Per Share Amount pursuant to Section 2.2 hereof, a form of
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the certificates evidencing the Existing
Shares (the "Share Certificates") shall pass, only upon proper delivery of
the Share Certificate to the Paying Agent) and instructions for use in
effecting the surrender of the Share Certificate pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Share Certificate,
together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of
such Share Certificate shall be entitled to receive in exchange therefor
the Per Share Amount for each Existing Share formerly evidenced by such
Share Certificate, and such Share Certificate shall thereupon be cancelled.
No interest shall accrue or be paid on the Per Share Amount payable upon
the surrender of any Share Certificate for the benefit of the holder of
such Share Certificate.
2.3.2. After surrender to the Paying Agent of any Share Certificate or
other instrument which prior to the Effective Time shall have represented
any Existing Shares, the Paying Agent shall promptly distribute to the
Person in whose name such Share Certificate or other instrument shall have
been registered, a check in the amount into which such Existing Shares
shall have been converted at the Effective Time pursuant to Section 2.2
hereof. Until so surrendered and cancelled, each such Share Certificate or
other instrument shall, after the Effective Time, be deemed to represent
only the right to receive the Per Share Amount, and until such surrender
and cancellation, no cash shall be paid to the holder of such outstanding
Share Certificate or other instrument in respect thereof. From and after
the Effective Time, the holders of Existing Shares outstanding immediately
prior to the Effective Time shall cease, except for Dissenting Shares and
otherwise as required by law, to have any rights with respect to such
Existing Shares, other than the right to receive the Per Share Amount as
provided in this Agreement.
2.3.3. If payment is to be made to a Person other than the registered
holder of the Existing Shares represented by the Share Certificate or other
instrument so surrendered in exchange therefor, it shall be a condition to
such payment that the Share Certificate or other instrument so surrendered
shall be properly
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endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Paying Agent any transfer or other
taxes required as a result of such payment to a Person other than the
registered holder of such Existing Shares or establish to the satisfaction
of the Paying Agent that such tax has been paid or is not payable.
2.3.4. After the Effective Time, there shall be no further transfers on
the stock transfer books of the Surviving Corporation of the Existing
Shares that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Share Certificates representing Existing Shares
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for the cash amount provided for, and in accordance with the
procedures set forth in this Article 2.
2.3.5. If any cash deposited with the Paying Agent for purposes of
payment in exchange for Existing Shares remains unclaimed six months after
the Effective Time, such cash shall be returned to the Surviving
Corporation, upon demand, and any such holder who has not converted his
Existing Shares into the Per Share Amount or otherwise received the Per
Share Amount pursuant to this Agreement prior to that time shall thereafter
look only to the Surviving Corporation for payment of the Per Share Amount.
Notwithstanding the foregoing, the Surviving Corporation shall not be
liable to any holder of Existing Shares for any amount paid to a public
official pursuant to applicable unclaimed property laws. Any amounts
remaining unclaimed by holders of Existing Shares seven (7) years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of any claims or
interest of any Person previously entitled thereto.
2.3.6. Any portion of the Merger Consideration made available to the
Paying Agent pursuant to Section 2.4 to pay for Existing Shares for which
dissenters' rights have been perfected as provided in Section 2.4 hereof
shall be returned to the Surviving Corporation upon demand.
2.3.7. No dividends or other distributions with respect to capital stock
of the Surviving Corporation with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate for Existing
Shares.
2.3.8. In the event that any Share Certificate or other instrument
representing Existing Shares shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
certificate or other instrument to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such holder of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Share Certificate or other instrument, the Paying Agent will issue in
exchange for and in lieu of such lost, stolen or destroyed certificate or
other instrument representing the Existing Shares, the Per Share Amount,
and unpaid dividends and distributions on Existing Shares deliverable in
respect thereof, pursuant to this Agreement and the Merger.
2.4. Dissenting Shares. Notwithstanding any other provisions of this
Agreement, Existing Shares which are issued and outstanding immediately prior
to the Effective Time and which are held by a holder who has not voted such
shares of capital stock of the Company in favor of the Merger and who has
delivered a written demand for relief as a dissenting stockholder in the
manner provided by DGCL and who, as of the Effective Time, shall not have
effectively withdrawn or lost such right to relief as a dissenting stockholder
("Dissenting Shares") shall not be converted into a right to receive the Per
Share Amount. The holders thereof shall be entitled only to such rights as are
granted by Section 262 of DGCL. Each holder of Dissenting Shares who becomes
entitled to payment for such Dissenting Shares pursuant to Section 262 of DGCL
shall receive payment therefor from the Surviving Corporation in accordance
with DGCL; provided, however, that if any such holder of Dissenting Shares (i)
shall have failed to establish his entitlement to relief as a dissenting
stockholder as provided in Section 262 of DGCL, (ii) shall have effectively
withdrawn his demand for relief as a dissenting stockholder with respect to
such Dissenting Shares or lost his right to relief as a dissenting stockholder
and payment for his Dissenting Shares under Section 262 of DGCL or (iii) shall
have failed to file a complaint with
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the appropriate court seeking relief as to determination of the value of all
Dissenting Shares within the time provided in Section 262 of DGCL, such holder
shall forfeit the right to relief as a dissenting stockholder with respect to
such Dissenting Shares and each such Dissenting Share shall be converted into
the right to receive the Per Share Amount from the Surviving Corporation as
provided in Section 2.2. The Company shall give Recap prompt notice of any
demands received by the Company prior to the Effective Time for relief as a
dissenting stockholder, and Recap shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Recap, make any payment with
respect to, or settle or offer to settle, any such demands.
2.5. Stock Options.
2.5.1. Except as may be otherwise agreed to in writing between Recap and
the holder of any Rollover Options, each Option that has an exercise price
of equal to or greater than the Per Share Amount shall be cancelled at the
Effective Time, without any payment or other consideration therefor.
2.5.2. At the Effective Time, all other Options (other than the Rollover
Options), whether or not vested, shall be cancelled and, in lieu thereof,
as soon as reasonably practicable after the Effective Time, each holder of
such Options shall receive a cash payment from the Surviving Corporation
equal to the excess of the aggregate cash amount that would be paid in the
Merger with respect to the shares of Common Stock subject to such Options,
if the Options were exercised, over the aggregate exercise price with
respect to such Options, as reduced by any required withholding of taxes.
The Rollover Options at the Effective Time shall survive the Closing and
the Surviving Corporation shall assume all the rights, liabilities and
obligations of such Rollover Options in accordance with the respective
Stock Option Plan or any successor or replacement stock option plan of the
Surviving Corporation.
2.5.3. Prior to the Effective Time, the Company shall (i) take all
reasonable steps necessary to make any amendments to the terms of such
Stock Option Plans, individual Option agreement or Options that are
necessary to give effect to the transactions contemplated by this
Agreement, and (ii) use all reasonable and necessary efforts to obtain at
the earliest practicable date all written consents (if necessary) from
holders of Options to effect the cancellation of such holder's Options to
take effect at the Effective Time.
2.5.4. At or prior to the Effective Time, the Company shall take all
reasonable and necessary action to fully advise the holders of Options of
their respective rights under this Agreement, the Options and the
respective Stock Option Plan, to facilitate the timely exercise of such
rights and obligations to effectuate the provisions of this Section 2.5.
From and after the Effective Time, other than as expressly set forth in
this Section 2.5 or any written agreement between Recap and the holder of
the Rollover Options, no holder of Options shall have any rights in respect
of such Options, other than to receive the cash payment in the manner
described in this Section 2.5. The surrender of any Option or the receipt
of cash in cancellation of such Options by the holder thereof shall be
deemed a release of any and all rights the holder of such Option had or may
have had in respect of such Option.
ARTICLE 3.
CLOSING
3.1. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Troop Steuber Pasich Reddick & Tobey LLP, 2029 Century
Park East, Los Angeles, California 90067 at 9:00 A.M. (Los Angeles time) on
the Business Day on which the parties hereto designate as the closing date
following the fulfillment or waiver of the conditions set forth in Article 8
hereof in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Recap may agree.
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ARTICLE 4.
CERTIFICATE OF INCORPORATION AND BYLAWS; OFFICERS AND
DIRECTORS OF THE SURVIVING CORPORATION
4.1. The Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of Recap (the "Certificate") in effect at the
Effective Time shall be amended and restated as of the Effective Time and
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
4.2. The Bylaws of Surviving Corporation. The Bylaws of Recap in effect at
the Effective Time shall be the Bylaws of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
4.3 Officers and Directors of Surviving Corporation. From and after the
Effective Time, the directors of the Surviving Corporation shall be as set
forth in the Disclosure Schedule, and the officers of the Company at the
Effective Time shall be the officers of the Surviving Corporation, until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered at or prior to the
execution of this Agreement by the Company which shall refer to the relevant
sections of this Agreement (the "Disclosure Schedule"), the Company hereby
represents and warrants to Recap as follows:
5.1. Organization, Standing and Authority. Each of the Company and its
Subsidiaries is a corporation, limited liability company or partnership duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation or organization. Each of the Company and its
Subsidiaries is duly qualified to do business and is in good standing in the
states of the United States and any foreign jurisdictions where its respective
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company has made available to Recap a complete and correct
copy of the certificate of incorporation, bylaws, operating agreements,
partnership agreements or other organizational documents, each as amended to
date, of each of the Company and its Subsidiaries. Each of the certificates of
incorporation, bylaws, operating agreements, partnership agreements or other
organizational documents so made available is in full force and effect. The
corporate records and minute books or other applicable records of the Company
and its Subsidiaries reflect all material action taken and authorizations made
at meetings of such companies' partners, members, boards of directors or any
committees thereof and at any stockholders' meetings thereof.
5.2. Subsidiaries.
5.2.1. The Company has previously provided a list of the true, accurate
and complete legal names, jurisdiction of incorporation or organization and
foreign qualification of each of the Company and its Subsidiaries, which
list is included as part of the Disclosure Schedule, (ii) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly owned Subsidiaries) by reason of any
options, warrants, or otherwise, (iii) there are no contracts, commitments,
understandings or arrangements by which any of such Subsidiaries is or may
be bound to sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to it or its wholly owned Subsidiaries), and (iv)
there are no contracts, commitments, understandings, or arrangements
relating to the Subsidiary's rights to vote or to dispose of such
securities.
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5.2.2. The Company does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Person, or any interest
in a partnership, limited liability company, joint venture or other entity
or organization, other than its Subsidiaries.
5.3 Company Capital Stock. As of March 30, 2000, the authorized capital
stock of the Company consists solely of 60,000,000 shares of Common Stock, of
which 21,913,336 are issued and outstanding (of which 620,511 are held in the
Company treasury) and 2,000,000 shares of Preferred Stock of which 583,333
shares of Series A Preferred Stock are authorized and no shares of Preferred
Stock are outstanding. As of the date hereof, no shares of Common Stock or
Preferred Stock were held in treasury by the Company or otherwise beneficially
owned by the Company or its Subsidiaries. The outstanding shares of Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, subject to no preemptive rights, and were not issued in
violation of any preemptive rights. Each of the outstanding shares of capital
stock of each of the Company's Subsidiaries have been duly authorized, and
validly issued and are fully paid and nonassessable and not subject to any
preemptive right and owned, either directly or indirectly, by the Company free
and clear of all Encumbrances. Except as set forth on the Disclosure Schedule,
other than Options to purchase 3,779,244 shares of Common Stock of the
Company, with an average weighted exercise price of $10.43 and the issuance of
rights pursuant to the terms and conditions of the Rights Agreement, there are
no preemptive rights or outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of the
Company or any of its Subsidiaries.
5.4 Corporate Power. The Company and its Subsidiaries each has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets. Subject to receipt of the
requisite approval of the Merger by the holders of its capital stock entitled
to vote thereon, this Agreement and the transactions contemplated hereby and
thereby have been authorized by all necessary corporate action of the Company
and the Company Board and Operating Company on or prior to the date hereof.
This Agreement has been duly executed and delivered by each of the Company,
and Operating Company and is a valid and legally binding obligation of each of
the Company, and Operating Company enforceable against each of the Company,
and Operating Company in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity principles).
5.5 Consents and Approvals; No Defaults.
5.5.1. No consents or approvals of, or filings or registrations with,
any Governmental Entity or with any third party are required to be made or
obtained by the Company or any of its Subsidiaries in connection with the
execution, delivery or performance by the Company, or Operating Company of
this Agreement or to consummate the Asset Drop Down, or the Merger except
for (i) filings of applications, registrations, statements, reports or
notices (and expiration of any applicable notice periods) with the United
States Department of Justice, the Federal Trade Commission, the National
Association of Securities Dealers, Inc. ("NASD"), the NASDAQ National
Market, the SEC and state securities authorities, (ii) the requisite
approval of this Agreement by the holders of the capital stock of the
Company, or Operating Company entitled to vote thereon, (iii) the filing of
the Certificate of Merger with the Delaware Secretary pursuant to the DGCL
and (iv) consents, approvals, filings, or registrations which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
5.5.2. Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, the execution,
delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and compliance with the provisions hereof
do not and will not (i) violate, or conflict with, or result in any breach
of the terms, conditions, or provisions of, the respective charters, bylaws
or other organizational documents of the Company and each of its
Subsidiaries; (ii) violate, or conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination,
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cancellation, modification or acceleration of the performance required by
or a loss of a material benefit under, or result in the creation or
imposition of (or the obligation to create or impose) any Encumbrance
(other than Permitted Encumbrances) upon any of the properties or assets of
the Company under, any of the terms, conditions or provisions of any
material agreement, indenture, note, bond, mortgage, deed of trust,
undertaking, permit, lease, franchise, license or other instrument to which
the Company is a party or by which it or any of its properties or assets
may be bound or affected; or (iii) to the knowledge of the Company, violate
any Law or Order applicable to the Company; except, in the case of the
preceding clauses (i), (ii) or (iii), for any such violation, conflict,
breach, default, event, right or Encumbrance which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Company.
5.6 SEC Reports.
5.6.1. The Company has made available to Recap a true and complete copy
of each form, report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since January 1, 1997 (as such
documents have since the time of their filing been amended or supplemented,
the "SEC Reports"), which are all of the documents that the Company was
required to file with the SEC since January 1, 1997. As of their respective
dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports (including all financial statements included
therein and all exhibits and schedules thereto and documents incorporated
by reference therein) contained (as of their respective filing dates) any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading,
except for such statements, if any, as have been modified or superseded by
any subsequent filings. The Financial Statements included in such SEC
Reports delivered by the Company to Recap comply in all material respects
with the rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited Financial Statements, as permitted by Exchange
Act Form 10-Q) and fairly present (subject, in the case of the unaudited
Financial Statements, to normal, recurring audit adjustments that,
individually and in the aggregate, were not material) the financial
position of the Company and its Subsidiaries as at the dates thereof and
the results of each of their operations and cash flows for the periods then
ended.
5.6.2. As of the date hereof, none of the Subsidiaries of the Company is
a reporting company under the Exchange Act, and none is required to file
any regular and periodic filings, notices, forms, reports, or statements
with the United States Department of Justice, the Federal Trade Commission,
the NASD or the SEC.
5.6.3. Except as disclosed in the SEC Reports or the Disclosure
Schedule, or as contemplated by this Agreement, since January 1, 2000 to
the date hereof, the Company's business has been conducted in the ordinary
course, and there has not been any:
(a) event, situation or occurrence that individually or in the
aggregate has had a Material Adverse Effect on the Company;
(b) amendment to the Company's or any of the Company's Subsidiaries'
charter, bylaws or other organizational documents;
(c) sale, assignment, disposition, transfer, pledge, mortgage or
lease of any material portion of the assets primarily used in the
Company's business taken as a whole;
(d) incurrence of any additional Indebtedness in excess of
$1,000,000, other than accounts payable arising in the ordinary course
of business, consistent with past practice, and in connection with
Permitted Acquisitions;
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(e) any increase in the compensation or fringe benefits payable or to
become payable to any Executive Officer of the Company, other than
routine increases made in the ordinary course of business and consistent
with past practice or as required by law or under any existing
agreements heretofore disclosed to Recap;
(f) any amendment, alteration or modification in the terms of any
currently outstanding options, warrants or other rights to purchase any
capital stock or equity interest in the Company or any securities
convertible into or exchangeable for such capital stock or equity
interest, including without limitation any reduction in the exercise or
conversion price of any such rights or securities, any change to the
vesting or acceleration terms of any such rights or securities, or any
change to terms relating to the grant of any such rights or securities;
(g) declaration or payment of any dividend or other distribution, or
the transfer of any assets, by the Company to any stockholders of the
Company with respect to the Common Stock, or any redemption, repurchase
or other acquisition by the Company of its capital stock, except in the
ordinary course of business;
(h) change by the Company in any of its significant accounting
principles, methods or practices;
(i) any material closure, shut down or other elimination of any of
the Company's offices, franchises or any other change in the character
of its business, properties or assets, except for closures, shut downs,
or other eliminations that have not had a Material Adverse Effect on the
Company;
(j) loan or advance to or other such agreement with any of its
stockholders, officers, directors, employees, agents, consultants or
other Representatives, except in the ordinary course of business,
consistent with past practice;
(k) damage, destruction or loss with respect to any of the properties
or assets of the Company that would reasonably be expected to have a
Material Adverse Effect on the Company; or
(l) agreement to do, cause or suffer any of the foregoing.
5.7. Disclosure Documents. The proxy statement on Schedule 14A in respect
of the Special Meeting of the Company's stockholders to vote upon the Asset
Drop Down and the Merger to be filed with the SEC in connection with the
Merger as the same may be amended or supplemented, will not, at the date it is
first mailed to stockholders of the Company or at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Company Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act. No representation
is made by the Company with respect to statements made in the Company Proxy
Statement based on information supplied by Recap for inclusion therein.
5.8. Litigation. There are no Actions pending or, to the Knowledge of the
Company, claims threatened against the Company, at law or in equity, and there
is no investigation or proceeding pending or, to the Knowledge of the Company,
threatened before or by any Governmental Entity nor is there any currently
effective Order against the Company or to the Knowledge of the Company, any
Order expected to be issued, except for any such Actions, claims,
investigations, proceedings or Orders that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. The Disclosure Schedule identifies those pending or, to the Knowledge
of the Company, threatened proceedings before a Governmental Entity and
threatened claims listed therein which (i) may not be covered by third party
insurance or (ii) with respect to which the insurance carrier has denied
coverage or has advised the Company that it is defending such claim under
reservation of rights or (iii) for which the Company is self-insured.
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5.9. Compliance with Laws.
5.9.1. Except as set forth on the Disclosure Schedule, the Company and
each of its Subsidiaries: (i) is in compliance with all Laws and Orders
applicable thereto or to the business of the Company and its Subsidiaries
or to the employees conducting such businesses, except where the failure to
so comply would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect; (ii) has all Permits, Orders
and Approvals of, and has made all filings, applications and registrations
with, all Governmental Entities that are required in order to permit them
to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the Company's
Knowledge, no suspension or cancellation of any of them is threatened,
other than such failure to obtain or maintain the same would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on the Company; and (iii) has not received any notification
or communication from any Governmental Entity (a) asserting that the
Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Entity enforces
or (b) threatening to revoke any license, franchise, permit or governmental
authorization (nor, to the Company's Knowledge, do any grounds for any of
the foregoing exist), except such notifications or communications which
would not, individually or in the aggregate, be reasonably expected to have
a Material Adverse Effect on the Company.
5.10. Material Contracts; Defaults.
5.10.1. The Disclosure Schedules lists all management contracts and
administrative services contracts with the hospitals and/or professional
corporations and all contracts or commitments that provide for an aggregate
payment from the Company in excess of $500,000 in any contract year other
than (i) contracts or commitments that can or in reasonable probability
will be completed within 90 days of the Closing Date or can be terminated
within such 90 day period without payment of a penalty in excess of
$100,000, (ii) contracts or commitments for goods and services purchased in
the ordinary course of the Company's business in amounts consistent with
past practice, (iii) contracts or commitments in connection with capital
expenditures that provide for expenditures consistent with the capital
expenditure budget previously supplied by the Company to Recap, and (iv)
contracts or commitments reflected on the Financial Statements included as
part of the SEC Reports or disclosed in the SEC Reports.
5.10.2. The Company is not in breach or violation of any contract, or in
default with respect thereto, except for such violations, breaches or
defaults that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company. None of the
contracts of the Company contain any provisions that upon a change in
control of the Company would have a Material Adverse Effect on the Company.
5.11. No Brokers. Except for financial advisory fees payable to Jefferies &
Company, Inc. and Houlihan Lokey Howard & Zukin Capital, no action has been
taken by the Company that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or other like payment with
respect to the transactions contemplated by this Agreement.
5.12. Absence of Undisclosed Liabilities. Except as set forth on the
Disclosure Schedule, there are no Liabilities of any kind that would be
required to be reflected on, or reserved against in the consolidated Financial
Statements of the Company or in the notes thereto, prepared in accordance with
GAAP that are not disclosed, reflected or reserved against in the consolidated
Financial Statements of the Company and its Subsidiaries, except for such
Liabilities incurred (i) since December 31, 1999, in the ordinary course of
business, consistent with past practice, (ii) which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company, (iii) related to the transactions contemplated by this Agreement,
and (iv) payments required as a result of the consummation of the Merger under
the terms of the existing employment agreements with the Executive Officers of
the Company.
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5.13. Employee Benefit Plans. The Company has previously supplied Recap a
list which is attached to the Disclosure Schedules of all plans and other
arrangements which provide compensation or benefits to officers, directors or
consultants or employee benefits to employees of the Company or its
Subsidiaries, including, without limitation, all "employee benefit plans" as
defined in Section 3(3) of ERISA, and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans, and all employment or executive
compensation agreements (collectively, the "Company Plans"). All Company Plans
comply with and are and have been operated in material compliance with each
applicable provision of ERISA, the Code, other federal statutes, state law
(including, without limitation, state insurance law) and the regulations and
rules promulgated pursuant thereto or in connection therewith. Neither the
Company nor any member of the same controlled group of businesses as the
Company within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") is or ever was a sponsor or obligated to contribute to any plan
covered by Title IV of ERISA or Section 412 of the Code, or any "multi-
employer plan," within the meaning of Section 3(37) of ERISA. Each Company
Plan which is required to comply with the provisions of Sections 4980B and
4980C of the Code, or with the requirements referred to in Section 4980D(a) of
the Code, has complied in all material respects, and, except as required by
such sections of the Code, no Company Plan which is a "welfare benefit plan,"
as defined in Section 3(1) of ERISA, provides for post-employment benefits.
Notwithstanding any statement or indication in this Agreement to the contrary,
there are no Company Plans which the Company or Recap will not be able to
terminate (or in which the Company or Recap will not be able to terminate the
participation of their Employees) immediately after the Closing in accordance
with their terms and ERISA, and without incurring any expenses (including, but
not limited to, loads or termination charges imposed with respect to insurance
policies or mutual funds used to fund such Company Plans), other than
administrative expenses in connection with such termination. Neither the
Company, any of its Subsidiaries, nor any ERISA Affiliate has failed to make
any material contributions or to pay any material amounts due and owing as
required by the terms of any Company Plan. Each of the Company Plans which is
intended to be a qualified plan under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service, and has
been operated substantially in accordance with its terms and with the
provisions of the Code. No amounts payable under the Company Plans will fail
to be deductible for federal income tax purposes by virtue of Sections 162(m)
or 280G of the Code. Other than routine claims for benefits under the Company
Plans, there are no pending, or, to the best knowledge of the Company,
threatened, investigations, proceedings, claims, lawsuits, disputes, actions,
audits or controversies involving the Company Plans, or the fiduciaries,
administrators, or trustees of any of the Company Plans or the Company or any
ERISA Affiliate of either as the employer or sponsor under any Company Plan,
with any of the Internal Revenue Service, the Department of Labor, the Pension
Benefit Guaranty Corporation, any participant in or beneficiary of any Company
Plan or any other Person whomsoever. The Company knows of no reasonable basis
for any such claim, lawsuit, dispute, action or controversy. The Company has
delivered to Recap true and complete copies of: (i) each of the Company Plans
and any related funding agreements thereto (including insurance contracts)
including all amendments, all of which are legally valid and binding and in
full force and effect and there are no defaults thereunder, (ii) the currently
effective Summary Plan Description pertaining to each of the Company Plans,
(iii) the three most recent annual reports for each of the Company Plans
(including all relevant schedules), (iv) the most recent Internal Revenue
Service determination letter for each Company Plan which is intended to
constitute a qualified plan under Section 401 of the Code and each amendment
to each of the foregoing documents, and (v) financial statements for each
funded Company Plan. Neither the Company nor any Subsidiary is a party or
subject to any agreement, contract or other obligation which would require the
making of any payment, other than payments as contemplated by this Agreement,
to any employee of the Company or to any other Person as a result of the
consummation of the transactions contemplated herein.
5.14. Labor and Employment Matters.
5.14.1. Neither the Company nor any of its Subsidiaries is a party to or
is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
the Company or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or
seeking to compel the Company or any such Subsidiary to bargain with any
labor
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organization as to wages or conditions of employment, nor is there any
strike involving it or any of its Subsidiaries pending or, to the Company's
Knowledge, threatened, nor is the Company aware of any activity during the
past three years involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
5.14.2. The Disclosure Schedule contains an accurate list of all
employment contracts between the Company and each of the Executive
Officers. Except in accordance with the contracts, agreements, plans or
programs identified in the Disclosure Schedule, no individual will accrue
or receive material additional benefits, service or accelerated rights to
payment of benefits as a result of the transactions contemplated by this
Agreement (either alone or combined with any other event or transaction).
5.14.3. As of the date hereof, and except as set forth in the Disclosure
Schedule, there is no (i) unfair labor practice complaint against the
Company pending before the National Labor Relations Board (the "NLRB") or
any other federal, state, local or foreign agency; (ii) pending labor
strike or lockout affecting the Company; (iii) pending material grievance
or unfair dismissal proceeding before the NLRB relating to the Company;
(iv) pending representation question or union organizing activities
respecting a significant number of the employees of the Company; or (v) to
the Knowledge of the Company, threat, investigation, charge or complaint
with regard to any of the foregoing relating to the Company.
5.15. Year 2000 Compliance. Except as set forth on the Disclosure Schedule
the computer software and related hardware of the Company and its Subsidiaries
(the "Company Computer System") used for the storage and processing of data
have not suffered any adverse effects from the changing of the year from 1999
to 2000 that has had or would reasonably be expected to have a Material
Adverse Effect.
5.16. Environmental Matters.
5.16.1. The Company and each of its Subsidiaries is in compliance with
applicable Environmental Laws, except where the failure to so comply would
not have or be reasonably expected to have a Material Adverse Effect; (i)
to the Knowledge of the Company, no real property (including buildings or
other structures) currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries has been contaminated with, or has had
any release of, any Hazardous Substance that the Company would reasonably
be expected to be liable for any potential material investigation, clean
up, claim or liability from such real property that would have or be
reasonably expected to have a Material Adverse Effect on the Company; (ii)
neither the Company nor any of its Subsidiaries is subject to liability for
any Hazardous Substance disposal or contamination by their agents or
employees on any third party property, except where the failure to so
comply would not have or be reasonably expected to have a Material Adverse
Effect; (iii) neither the Company nor any of its Subsidiaries has received
any notice, demand letter, claim or request for information alleging any
current material violation of, or material liability under, any
Environmental Law; (iv) neither the Company nor any of its Subsidiaries is
subject to any Order or other agreement with any Governmental Entity or any
third party relating to any Environmental Law; and (v) the Company has
delivered to Recap copies of all environmental reports, studies, sampling
data, correspondence, filings and other environmental information in its
possession or reasonably available to it relating to the Company, any
Subsidiary of the Company and any currently owned, leased or operated
property.
5.16.2. As used herein, the term "Environmental Law" means any federal,
state or local law, regulation, order, decree, permit, authorization,
opinion, common law or agency requirement relating to: (i) the protection
or restoration of the environment, health, safety, or natural resources but
specifically excluding worker safety laws such as OSHA and Cal-OSHA, (ii)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) wetlands, indoor air, pollution, contamination
or any injury or threat of injury to persons or property in connection with
any Hazardous Substance and the term "Hazardous Substance" means any
substance in any concentration that is: (i) listed, classified or regulated
as hazardous, toxic, infectious or carcinogenic pursuant to any
Environmental Law; or (ii) any petroleum product or by-product, asbestos-
containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon.
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5.17. Tax Matters.
5.17.1. (i) All Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect to
the Company and its Subsidiaries have been duly filed, (ii) all Taxes due
have been paid in full or reserved on the Balance Sheet, (iii) all
deficiencies asserted or assessments made as a result of such examinations
have been paid in full or reserved on the Balance Sheet, (iv) no issues
that have been raised by the relevant taxing authority in connection with
the examination of any of the Tax Returns referred to in clause (i) are
currently pending, and (v) no waivers of statutes of limitation have been
given by or requested with respect to any Taxes of the Company or its
Subsidiaries. The Company has made available to Recap true and correct
copies of the United States federal income Tax Returns filed by the Company
and its Subsidiaries for each of the three most recent fiscal years ended
on or before December 31, 1998 and has provided the Tax Return for December
31, 1999, if available. Neither the Company nor any of its Subsidiaries has
any liability with respect to income, franchise or similar Taxes that
accrued on or before the end of the most recent period covered by the SEC
Reports filed prior to the date hereof in excess of the amounts accrued
with respect thereto that are reflected in the Financial Statements.
Neither the Company nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement, is or has been a member of an affiliated
group filing consolidated or combined Tax Returns (other than a group the
common parent of which is or was the Company) or otherwise has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries).
5.18. Insurance. The Company has provided a list which is attached to the
Disclosure Schedules of the insurance policies, binders, or bonds maintained
by the Company or its Subsidiaries ("Insurance Policies"). All the Insurance
Policies are in full force and effect; the Company and its Subsidiaries are
not in material default thereunder; and all claims thereunder have been filed
in due and timely fashion. No material claim by the Company on or in respect
of an insurance policy or bond has ever been declined or refused by the
relevant insurer or insurers.
5.19. Assets. The Company holds title to or a leasehold, consignment or
license in each item of material tangible personal property owned or used by
or in the possession of the Company.
5.20. Statements True and Correct. None of the information (including this
Agreement) supplied or to be supplied by the Company or any of its
Subsidiaries to any Governmental Entity in connection with the transactions
contemplated hereby will, at the respective time such documents are supplied,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
to any Governmental Entity.
5.21. Regulatory Approvals. Neither the Company nor any of its Subsidiaries
has taken any action or has any knowledge of any fact or circumstance that is
reasonably likely to materially impede or delay receipt of any consents of a
Governmental Entity necessary in connection with the consummation of the
Merger, which if not obtained, individually or in the aggregate, would be
reasonably expected to have a Material Adverse Effect on the Company.
5.22. Real Property and Leaseholds.
5.22.1. The Company owns all material parcels of real property currently
indicated as owned in fee by the Company on the Financial Statements (the
"Owned Real Estate"). The Company holds marketable and legal title to each
of the real properties constituting Owned Real Estate, free and clear of
all Encumbrances, except for Permitted Encumbrances, and except for
Encumbrances the existence of which would not have a Material Adverse
Effect.
5.22.2. To the Knowledge of the Company, the Company holds valid and
subsisting leasehold interests in all material parcels of real property
leased or subleased to the Company (collectively, the
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"Leased Real Estate"), free and clear of all Encumbrances, except for
Permitted Encumbrances, and except for Encumbrances the existence of which
would not have a Material Adverse Effect.
5.23. Company Action. The Company Board has adopted resolutions
recommending that this Agreement, the Asset Drop Down and the Merger be
approved by its stockholders and directing that this Agreement, the Asset Drop
Down and the Merger be submitted for consideration by its stockholders at the
Special Meeting.
5.24. Takeover Statutes. Except for Section 203 of the DGCL, no Takeover
Statute applicable to the Company is applicable to the Asset Drop Down or the
Merger, the Recapitalization or the other transactions contemplated hereby.
5.25. Earn Out Payments. The Disclosure Schedule lists and identifies all
earn out cash payments that exceed the payout of $600,000 in the aggregate or
earn out equity issuances required by the Company or any of its Subsidiaries.
5.26. Opinion. The Special Committee has received written opinions from
Jefferies & Company, Inc. and Houlihan Lokey Howard & Zukin Capital, to the
effect that, as of the date of this Agreement, the Per Share Amount to be
received in the Merger by the holders of the shares of Common Stock (other
than the Rollover Holders) is fair to such holders from a financial point of
view.
5.27. Operating Company. As of the date hereof, the authorized capital
stock of Operating Company consists solely of 1,000 shares of common stock, of
which 1,000 are issued and outstanding. The Company is the sole stockholder of
Operating Company. Since its incorporation, Operating Company was not engaged
in any activities other than in connection with or as contemplated by this
Agreement, the Asset Drop Down, the Merger and the Recapitalization or in
connection with arranging any financing required to consummate the transaction
contemplated hereby.
5.28. Rights Agreement. The Company and Continental Stock Transfer & Trust
Corporation, as Rights Agent, have executed and delivered, or within two (2)
days of the signing of this Agreement, will execute and deliver, the Rights
Agreement Amendment, pursuant to which, the execution and delivery of and the
performance of the transactions contemplated by this Agreement would not
result in the creation of an "Acquiring Person" or the occurrence of a
"Distribution Date" as defined in the Rights Agreement, dated as of December
30, 1997 between the Company and the Rights Agent (the "Rights Agreement"). As
of the date hereof, the Rights Agreement Amendment has not been withdrawn,
modified, amended or supplemented and the Company is not aware of facts or
circumstances that may reasonably be expected to result in the occurrence of a
"Distribution Date" as defined in the Rights Agreement.
5.29. Asset Drop Down. The consummation of the Asset Drop Down as
contemplated in this Agreement will not result in a Material Adverse Effect on
the Company.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF RECAP
Recap hereby represents and warrants to the Company as follows:
6.1. Organization, Standing And Authority. Recap is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Recap is duly qualified to do business and is in good standing in
the states of the United States and any foreign jurisdictions where its
respective ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified, except where the failure to be so
qualified would not individually or in the aggregate have a Material Adverse
Effect on Recap. Recap has the corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this
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Agreement and consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Recap and is a valid and legally
binding obligation of it, enforceable against Recap in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors' rights or by
general equity principles). Since the date of its incorporation, Recap has not
engaged in any activities other than in connection with or as contemplated by
this Agreement, the Merger, and the Recapitalization or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
6.2. Consents And Approvals; No Defaults.
6.2.1. No consents or approvals of, or filings or registrations with,
any Governmental Entity or with any third party are required to be made or
obtained by Recap in connection with the execution, delivery or performance
by Recap of this Agreement or to consummate the Merger except for (i)
filings of applications, registrations, statements, reports or notices (and
expiration of any applicable notice periods) with the United States
Department of Justice, the Federal Trade Commission, NASD, the SEC and
state securities authorities, (ii) the requisite approval of this Agreement
by the holders of the capital stock of Recap (which approval has been
secured), (iii) the filing of the Certificate of Merger with the Delaware
Secretary pursuant to the DGCL and (iv) consents, approvals, filings, or
registrations listed on SCHEDULE 6.2.1 or which would not, individually or
in the aggregate, have a Material Adverse Effect on Recap.
6.2.2. Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, the execution,
delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and compliance with the provisions hereof
do not and will not (i) violate, or conflict with, or result in any breach
of the terms, conditions, or provisions of the charter, bylaws or other
organizational documents of Recap; (ii) violate, or conflict with, or
result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or give rise to a right of termination, cancellation,
modification or acceleration of the performance required by or a loss of a
material benefit under, or result in the creation or imposition of (or the
obligation to create or impose) any Encumbrance (other than Permitted
Encumbrances) upon any of the properties or assets of Recap under, any of
the terms, conditions or provisions of any material agreement, indenture,
note, bond, mortgage, deed of trust, undertaking, permit, lease, franchise,
license or other instrument to which Recap is a party or by which it or any
of its properties or assets may be bound or affected; or (iii) to the
Knowledge of Recap, violate any Law or Order applicable to Recap, except
for any such violation, conflict, breach, default, event, right or
Encumbrance which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Recap.
6.2.3. Other than the Approvals of Governmental Entities set forth in
Section 6.2.1 hereof, that, to the Knowledge of Recap, there are no other
Approvals required to be given or obtained by Recap from any and all
Governmental Entities in connection with the consummation of the
transactions contemplated by this Agreement, except where the failure to be
given or to obtain such Approvals, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Recap.
6.2.4. To the Knowledge of Recap, there are no-governmental Approvals
required to be given or obtained by Recap from any and all third parties in
connection with the consummation of the transactions contemplated by this
Agreement, except where the failure to give or obtain such Approvals,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Recap.
6.3. Capitalization. As of the date hereof, the authorized capital stock of
Recap consists of 5,000 shares of common stock, $.01 par value per share, of
which as of the date hereof 1,000 shares were issued and outstanding and 5,000
shares of preferred stock, $.01 par value per share of which as of the date
hereof no shares were outstanding. All outstanding shares of capital stock of
Recap have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in the Exchange Agreement and the
Stockholder Agreement, there are no preemptive rights or outstanding
subscriptions, options, warrants, rights, convertible
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securities or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of Recap.
6.4. Regulatory Approvals. Recap has not taken any action and does not have
any Knowledge of any fact or circumstance that is reasonably likely to
materially impede or delay receipt of any consents of a Governmental Entity or
result in the imposition of a condition or restriction with respect to any
such consents.
6.5. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been conducted by Recap and its
Affiliates in such manner as not to give rise to, and the consummation of the
transactions contemplated hereby will not give rise to, any valid claim
against any party hereto or any of their directors, officers, stockholders or
other Representatives or Affiliates for a brokerage commission, finder's fee
or other like payment to any Person.
6.6. Financing. Recap has received, and has delivered to the Company Board
copies of (a) a letter dated March 30, 2000 from Leonard Green & Partners,
L.P. pursuant to which such Person has committed, subject to the terms and
conditions set forth therein, to purchase equity securities of Recap
immediately prior to the Merger for an aggregate amount of at least
$152,000,000, (b) (i) a letter dated March 30, 2000 from GS Mezzanine Partners
II, L.P. pursuant to which such Person has committed, on its own behalf and on
behalf of affiliated investment funds, subject to the terms and conditions set
forth therein, to purchase notes from Company and Operating Company in an
aggregate amount of $120,000,000, and (ii) a letter dated March 30, 2000 from
Goldman Sachs Credit Partners L.P., pursuant to which such Person has
committed, subject to the terms and conditions set forth therein, to enter
into a credit agreement providing for loans to Operating Company of up to
$325,000,000. As used in this Agreement, the aforementioned entities shall
hereinafter be referred to as the "Financing Entities." The aforementioned
commitments shall be referred to as the "Financing Letters" and the financing
to be provided thereunder shall be referred to as the "Financing." The
aggregate proceeds of the Financing are in an amount sufficient to pay when
due, pursuant to the terms and conditions herein, the full Merger
Consideration as provided herein, to make all other necessary payments by
Recap and the Surviving Corporation in connection with the Merger (including
the repayment of Indebtedness of the Surviving Corporation as contemplated by
the Financing Letters and any amounts payable in respect of Dissenting
Shares), to provide a reasonable amount of working capital financing and to
pay related fees and expenses. As of the date hereof, none of the Financing
Letters has been withdrawn and Recap does not know of any facts or
circumstances that may reasonably be expected to result in any of the
conditions set forth in any of the Financing Letters not being satisfied.
The foregoing notwithstanding, the Financing Letters may be superseded at
the option of Recap after the date hereof but prior to the Effective Time by
letters (the "New Financing Letters") delivered to the Company Board which
contemplate a co-investment by a third party, which New Financing Letters
shall be otherwise identical in all material respects to the Financing Letters
except for changes necessary to reflect that co-investment, provided that the
terms of the New Financing Letters shall not have any adverse effect upon the
amount of or ability to consummate, or expand upon the conditions precedent
to, the Financing as set forth in the Financing Letters. In such event, the
term "Financing Letters" as used herein shall be deemed to refer to the New
Financing Letters.
6.7. Litigation. There are no Actions pending, or to the knowledge of
Recap, claims threatened against Recap, at law or in equity, and there is no
investigation or proceeding pending or, to the Knowledge of Recap, threatened
before or by any Governmental Entity nor is there any currently effective
Order against Recap, except for any such Actions, claims, investigations,
proceedings or Orders that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Recap.
6.8. Statements True and Correct. None of the information (including this
Agreement) supplied or to be supplied by or on behalf of Recap to any
Governmental Entity in connection with the transactions contemplated hereby
will, at the respective time such documents are supplied, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
to any Governmental Entity.
6.9. No Prior Activities. Recap has not incurred, directly or indirectly,
any material liabilities or obligations except those incurred in connection
with its organization or with the negotiation and execution of this Agreement
and the performance of the transactions contemplated hereby. Except as
contemplated by this Agreement or in connection with the Merger, or the
Recapitalization, Recap has not engaged, directly or indirectly, in any
business or activity of any type or kind, or entered into any agreement or
arrangement with any person or entity, and is not subject to or bound by any
material obligation or undertaking.
6.10. Fraudulent Transfer Laws. Assuming the Company is not insolvent
immediately prior to the Effective Time, and further assuming the
representations and warranties of the Company contained in this Agreement are
true and accurate, the Surviving Corporation will not be insolvent immediately
after the Effective Time, taking into account changes in assets and
Liabilities (including the Financing) of the Surviving Corporation as a result
of the Merger and the other transactions contemplated hereby.
ARTICLE 7.
COVENANTS
7.1. Conduct of Business Pending Closing. Except for actions contemplated
by subparagraphs below, the Company agrees that on and after the date hereof
and prior to the Closing Date, except as otherwise consented to by Recap in
writing (which consent shall not be unreasonably withheld, delayed or
conditioned), as set forth in the Disclosure Schedule, or as otherwise
contemplated by this Agreement (including specifically Section 7.19 hereof):
7.1.1. The Company shall conduct its business in the ordinary course and
consistent with past practice in all material respects;
7.1.2. The Company shall use reasonable best efforts to preserve the
business organization of the Company intact, to preserve the goodwill of
suppliers, customers, employees and others with whom business relationships
exist and maintain all Permits and Approvals;
7.1.3. Other than in connection with acquisitions in the ordinary course
of business, not to exceed $10,000,000 individually or $17,500,000 in the
aggregate in total consideration (including but not limited to cash paid,
seller notes, Indebtedness assumed or other such consideration, including
earn out obligations) (the "Permitted Acquisitions"), the Company shall not
borrow any money, incur any Indebtedness or guarantee any Indebtedness or
financial obligation of any Person other than Subsidiaries, other than to
finance working capital requirements in the ordinary course of business and
consistent with past practice;
7.1.4. Other than in connection with Permitted Acquisitions, the Company
shall not issue, sell or dispose of any capital stock or other equity
interest in the Company or options, warrants or other rights to purchase
any such capital stock or equity interest or any securities convertible
into or exchangeable for such capital stock or equity interests or
otherwise make or effect any change in the issued and outstanding
capitalization of the Company other than pursuant to agreements existing as
of the date hereof;
7.1.5. The Company shall not cause or permit any amendment, alteration
or modification in the terms of any currently outstanding options, warrants
or other rights to purchase any capital stock or equity interest in the
Company or any securities convertible into or exchangeable for such capital
stock or equity interest, including without limitation any reduction in the
exercise or conversion price of any such rights or securities, any change
to the vesting or acceleration terms of any such rights or securities, or
any change to terms relating to the grant of any such rights or securities
other than pursuant to agreements existing as of the date hereof;
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7.1.6. The Company shall not declare or pay any dividend or make any
other distribution, or transfer any assets, to any stockholders of the
Company with respect to the Common Stock, or redeem, repurchase or
otherwise reacquire any of its capital stock, except in the ordinary course
of business;
7.1.7. Other than Permitted Acquisitions, capital expenditures permitted
under this Agreement or agreements to manage practices pursuant to the
management agreements and administrative services agreements of the Company
with hospitals and professional corporations in accordance with past
practice, the Company shall not enter into any contracts or agreements
(written or oral) that provide for minimum mandatory payments in the
aggregate by any party in excess of $2,000,000 per contract per annum, and
to the extent the Company is a party to any such contract or agreement as
of the date hereof, the Company shall not amend or waive any material
rights under any such contract;
7.1.8. Subject to the provisions of Section 7.5 hereof, other than
Permitted Acquisitions, the Company shall not purchase all or any
substantial part of the properties or assets of, or otherwise acquire,
merge or consolidate with, any Person (or division thereof);
7.1.9. The Company shall not sell, lease, transfer, assign or otherwise
dispose of any material portion of its properties or assets, except for
sales in connection with any transaction to which the Company is
contractually obligated prior to the date hereof or as consistent with past
business practice, or as would not reasonably be expected to have a
Material Adverse Effect on the Company;
7.1.10. Except pursuant to any agreement in existence on the date
hereof, the Company shall not sell, lease, transfer, assign or otherwise
dispose of any material Owned Real Estate or Leased Real Estate, and the
Company shall not permit any lease or sublease of Leased Real Estate to
terminate or expire (except in accordance with its terms), in each case
except as otherwise provided in this Agreement or as consistent with past
business practices or would not reasonably be expected to have a Material
Adverse Effect on the Company;
7.1.11. Except as may be required by law or under any existing
agreements heretofore disclosed to Recap, the Company shall not increase
the compensation or fringe benefits payable or to become payable by the
Company to any of the Executive Officers of the Company, other than routine
or customary increases made in the ordinary course of business and
consistent with past practice;
7.1.12. Except as set forth in the Disclosure Schedule, the Company
shall not make any material change in the character of its business or
operations that would, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company;
7.1.13. The Company shall not change its significant accounting
principles, methods or practices, other than in the ordinary course of
business and/or would have a detrimental impact on the financial condition
of the Company, except as required by law or by GAAP;
7.1.14. The Company shall (i) use reasonable best efforts to maintain
its existing Permits and Approvals, and (ii) carry on its business in
compliance with applicable Law, except for failures to comply that would
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company;
7.1.15. The Company shall not enter into any agreement or take or commit
to take any action with the intent that would, if taken on or before the
Closing, result in a breach of any of the foregoing covenants contained in
this Section 7.1 or of any representation or warranty of the Company
contained in this Agreement;
7.1.16. Subject to the provisions of Section 7.5 hereof, the Company
shall not take any action, enter into any agreement, alter any policy or
commit to any of the foregoing if such action, agreement or policy would
restrict the ability of the Company to consummate the Recapitalization or
the Merger, and the transactions contemplated herein;
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7.1.17. The Company shall not settle or resolve any litigation,
arbitration or other adjudication matter not covered by insurance, if such
settlement or resolution would result in a payment in excess of $2,500,000
in the aggregate; and
7.1.18. The Company may not make any aggregate cash payment for or incur
any new obligations for capital expenditures other than capital
expenditures in the ordinary course of business consistent with past
practice in amounts not exceeding $15,000,000.
7.2. Access. The Company shall permit Recap and its Representatives to have
reasonable access during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of the
Company's business, to all of the directors, officers, employees, agents and
Representatives of the Company and all properties, books, records, operating
instructions, procedures and Tax Returns of the Company and all other
information with respect to the Company, its business and operations and its
assets and properties as Recap or its Representatives may from time to time
reasonably request, and to make copies of such books, records and other
documents.
7.3. Permits and Approvals. The Company and Recap shall use reasonable best
efforts to obtain all Permits and Approvals reasonably necessary for the
consummation of the transactions contemplated hereby and to permit the
Company, following the Closing, to continue to conduct its business in
substantially the manner it is being conducted as of the date hereof, except
as would not otherwise, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company. The Company shall
use reasonable best efforts to obtain all authorizations from any Person as
may be required for it to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement, and if the Company, despite such
efforts, is unable to obtain any such authorizations, the Company shall take,
or cause to be taken, all other reasonable actions necessary, proper or
advisable in order for it to fulfill its obligations hereunder and to carry
out the intentions of the parties expressed herein.
7.4. Litigation. Until the Closing, each of the Company and Recap shall
promptly notify the other of any Action which is threatened or commenced that
materially relates to or materially affects the Company, its business, its
properties or assets, this Agreement or the transactions contemplated hereby.
7.5. Acquisition Proposals.
7.5.1. The Company agrees that neither it nor any of its officers and
directors shall, and the Company shall direct and use its reasonable best
efforts to cause its Representatives (including, without limitation, any
investment bankers, attorneys or accountants) not to, directly or
indirectly, initiate, solicit, encourage, enter into or conduct discussions
or negotiations with or provide any non-public information to any Person or
group (other than Recap and its designees) concerning any Acquisition
Proposal; provided, however, that (a) nothing herein shall prevent the
Company Board from taking and disclosing to the Company's stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to any tender offer and otherwise complying with
such rules, provided that the Company Board shall not recommend that the
stockholders of the Company tender their Shares in connection with any such
tender offer unless the Company Board, acting upon a recommendation of the
Special Committee, and after consultation with legal counsel, determines
that there is a substantial likelihood that it is required to do so in
order to comply with its fiduciary duties; and (b) if the Company Board,
acting upon a recommendation of the Special Committee, and after
consultation with legal counsel, determines that there is a substantial
likelihood that it is required to do so in order to comply with its
fiduciary duties, the Company Board may, and may authorize or permit any of
its officers, directors, employees, Representatives or agents to, respond
to inquiries from, discuss with, negotiate with, and provide non-public
information to, any other Person concerning an Acquisition Proposal. The
Company will notify Recap immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with
the Company, including setting forth the material terms of the proposal and
the identity of the party making such proposal, and Company shall promptly
notify Recap of the status and any material developments concerning the
same, including furnishing copies of any such
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written inquiries or proposals. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing
and shall make all reasonable efforts to enforce any confidentiality
agreements to which it is a party; provided, that the Company may waive the
enforcement of any such confidentiality agreement if the Company Board,
acting upon recommendations of the Special Committee, and after
consultation with legal counsel, determines that there is a substantial
likelihood that it is required to do so in order to comply with its
fiduciary duties. The Company will take the necessary steps to inform the
appropriate individuals or entities referred to in the prior sentence of
the obligations undertaken in this Section 7.5.
7.5.2. Except as set forth in this Section 7.5.2, the Company Board
shall not withdraw its recommendation of the transactions contemplated
hereby or approve or recommend, or cause the Company to enter into any
agreement with respect to, any Acquisition Proposal. Notwithstanding the
foregoing, if the Company Board, acting upon a recommendation of the
Special Committee, and after consultation with legal counsel, determines
that there is a substantial likelihood that it is required to do so in
order to comply with its fiduciary duties, the Company Board may withdraw
its recommendation of the transactions contemplated hereby or approve or
recommend a Superior Proposal; provided, however, that the Company shall
not be entitled to enter into any agreement with respect to a Superior
Proposal unless and until the Company Board provides written notice to
Recap (a "Notice of Superior Proposal") advising Recap that the Company
Board has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the Person making such
Superior Proposal; provided, further, however, that the Company shall not
be entitled to enter into any agreement with respect to a Superior Proposal
unless and until this Agreement is terminated by its terms pursuant to
Section 9.1.3 and the Company has paid all amounts due to Recap pursuant to
Section 9.3. For the purposes of this Agreement, "Acquisition Proposal"
means the following: (i) the acquisition of the Company by merger or
otherwise by any Person (which includes a "person" as such term is defined
in Section 13(d)(3) of the Exchange Act) other than Recap or any Affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more
than 20% of the total assets of the Company; (iii) the acquisition by a
Third Party of more than 20% or more of the outstanding shares of Common
Stock (either directly from the Company or from stockholders of the
Company); (iv) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend; (v) the repurchase by
the Company of more than 20% of the outstanding shares of Common Stock; or
(vi) the acquisition by the Company by merger, purchase of stock or assets,
joint venture or otherwise of a direct or indirect ownership interest or
investment in any business the annual revenues, net income or assets of
which is equal or greater than 20% of the annual revenues, net income or
assets of the Company. For purposes of this Agreement a "Superior Proposal"
means any bona fide Acquisition Proposal with terms which the Company
Board, acting upon a recommendation of the Special Committee, after taking
into consideration advice of a financial adviser of nationally recognized
reputation, determines to be more favorable to the Company's stockholders
(other than the Rollover Holders) than the Merger.
7.6. HSR Notification.
7.6.1. Filings. As soon as reasonably practicable after the execution of
this Agreement, each of the Company and Recap shall file, or cause to be
filed, with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
notification and documentary material required in connection with the
transactions contemplated hereby.
7.6.2. Cooperation. Recap and the Company shall promptly file any
additional information requested as soon as reasonably practicable after
receipt of a request for additional information. Recap and the Company
shall use their reasonable best efforts to obtain early termination of the
applicable waiting period under the HSR Act. The parties hereto will
coordinate and cooperate with one another in exchanging such information
and providing such reasonable assistance as may be requested in connection
with such filings.
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7.6.3. Other Actions. The Company agrees that, in order to comply with
the HSR Act in connection with the transactions contemplated hereby, Recap
shall be entitled, in its sole discretion, to acquiesce to any
divestitures, operating restrictions or other constraints imposed or
required by any Governmental Entity; provided that such divestitures,
operating restrictions or other constraints shall not have any material
effect on the terms of the Merger; and provided, further, that such
divestitures, operating restrictions or other constraints shall only be
consummated or take effect (as the case may be) concurrently with or
following the consummation of the Merger.
7.7. Financial Statement Deliveries. As soon as is reasonably practicable
and in no event later than thirty-five (35) days from the last day of each
fiscal month between the date of this Agreement and the Closing Date, the
Company shall prepare and provide to Recap the monthly financial reports
routinely prepared for management of the Company, including the profit and
loss column reports, same store revenue reports, detail hospital profit and
loss and regional consolidated reports, comparative profit and loss reports by
region and any other financial reports prepared for management (the "Updated
Financial Statements"), utilizing the same format and methodology used in
preparing such reports as are provided internally to management. As soon as
reasonably practicable between the date of this Agreement and the Closing
Date, the Company shall deliver drafts of any Form 10-Q or Form 10-K,
including any revisions or amendments thereto, prepared or filed by the
Company.
7.8. Covenant to Satisfy Conditions. Each of the Company and Recap will use
reasonable best efforts to ensure, and to cause their respective Affiliates to
ensure, that the conditions set forth in Article 8 hereof are satisfied,
insofar as such matters are within the control of such party. Each such party
shall promptly consult with the other with respect to, and provide to the
other any legally permitted information and copies of all filings made by such
party with any Governmental Entity or any other information supplied by such
party to a Governmental Entity (other than confidential personnel information)
in connection with this Agreement and the transactions contemplated hereby.
Recap and the Company further covenant and agree, with respect to any pending
or threatened Action, preliminary or permanent injunction or other Order,
decree or ruling or statute, rule, regulation or executive order that would
adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to use reasonable best efforts to prevent or
lift the entry, enactment or promulgation thereof, as the case may be. Upon
the request of Recap, the Company agrees that it shall use reasonable best
efforts to secure waivers and/or consents from such third parties as may be
necessary or desirable in Recap's reasonable judgment in order to consummate
the transactions contemplated hereby.
7.9. Proxy Statement. As soon as reasonably practicable after the date
hereof, the Company shall prepare and file the draft proxy statement relating
to the Special Meeting and such other reports, schedules or other information
(including Schedule 13E-3 under the Exchange Act) as may be required with the
SEC, respond to comments of the staff of the SEC, if any, file the definitive
proxy statement (the "Company Proxy Statement") as soon as practicable, and
promptly thereafter mail such Company Proxy Statement to all holders of record
(as of the applicable record date) of Existing Shares. The Company and Recap
shall cooperate reasonably with each other in the preparation of the proxy
statement and such other materials. Recap shall provide, and shall cause its
Affiliates to provide, the Company and any of its Affiliates with any
information for inclusion in the Company Proxy Statement or any other filings
required to be made by the Company or any of its Affiliates with any
Governmental Entity in connection with the transactions contemplated by this
Agreement which may be required under applicable law and which is reasonably
requested by the Company or any of its Affiliates. The Company agrees that
Recap shall be given reasonable opportunity to review and comment on the draft
proxy statement relating to the Special Meeting and such other materials and
to approve such draft proxy statement and such other materials prior to their
filing (which approval will not be unreasonably withheld) and thereafter to
participate in discussions concerning the comments of the SEC staff and to
approve all responses thereto (which approval will not be unreasonably
withheld, delayed or conditioned). The Company shall promptly notify Recap of
the receipt of the comments of the SEC and of any request from the SEC for
amendments or supplements to the Company Proxy Statement or for additional
information, and will promptly supply Recap with copies of all correspondence
between the Company or its Representatives, on the one hand, and the SEC or
members of its staff, on the other hand, with respect to the Company Proxy
Statement, the Asset Drop Down, or the Merger. If
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at any time prior to the Special Meeting any event should occur which is
required by applicable law to be set forth in an amendment of, or a supplement
to, the Company Proxy Statement, the Company will promptly inform Recap. In
such case, the Company, with the cooperation of Recap, will, upon learning of
such event, promptly prepare and mail such amendment or supplement; provided,
that prior to such mailing, the Company shall consult with Recap with respect
to such amendment or supplement and shall afford Recap reasonable opportunity
to comment thereon. The Company will notify Recap at least 24 hours prior to
the mailing of the Company Proxy Statement, or any amendment or supplement
thereto, to the stockholders of the Company.
7.10. Stockholders' Meeting. The Company shall take all action necessary,
in accordance with applicable law and its certificate of incorporation and
bylaws, to convene a Special Meeting of the holders of the Existing Shares
(the "Special Meeting") as promptly as practicable for the purpose of
approving the Asset Drop Down and the Merger. The Company shall through the
Company Board recommend at such Special Meeting that the Asset Drop Down and
the Merger be approved by its stockholders; provided, however, that the
Company Board may withdraw its recommendation in accordance with the
provisions of Section 7.5 hereof.
7.11. Financing. Recap agrees to use its reasonable best efforts to obtain,
on terms reasonably satisfactory to Recap, all of the financing necessary in
connection with the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company
acknowledges receipt of the "Financing Letters" referred to in Section 6.6
hereof and undertakes to use its reasonable best efforts to fulfill, or cause
to be fulfilled, its obligations thereunder and to cooperate in the obtaining
of the Financing.
7.12. Disclosure Prior To Closing. In the event that, at any time prior to
the Closing, the Company or Recap becomes aware of any matter that, if
existing or known as of the date of this Agreement, would have been required
to be set forth or described in the Schedules hereto or would otherwise have
rendered any representation or warranty false, such party shall promptly
provide written notice of such matters to the other party. However, no such
notice provided under this Section 7.12 shall be deemed to cure any breach of
any representation or warranty made in this Agreement whether for purposes of
determining whether or not the conditions set forth in Article 8 hereof have
been satisfied or otherwise. In addition, the Company shall promptly provide
written notice of any events occurring after the date hereof and prior to the
Closing that individually or in the aggregate have had or are reasonably
expected to have a Material Adverse Effect on the Company.
7.13. Directors' and Officers' Insurance and Indemnification. The Surviving
Corporation will indemnify each person who is now, or has been at any time
prior to the date hereof, a director, officer, employee or agent of the
Company (including its Subsidiaries) or their successors and assigns
(individually an "Indemnified Party" and collectively the "Indemnified
Parties"), to the fullest extent permitted (i) by applicable law, (ii) under
the certificate of incorporation or bylaws of the Company, or (iii) under any
agreement with the Company as in effect immediately prior to the execution of
this Agreement, with respect to any claim, Liability, loss, damage, judgment,
fine, penalty, amount paid in settlement or compromise, cost or expense,
including reasonable fees and expenses of legal counsel (whenever asserted or
claimed), based in whole or in part on, or arising in whole or in part out of,
any matter, state of affairs or occurrence existing or occurring at or prior
to the Effective Time whether commenced, asserted or claimed before or after
the Effective Time, including, Liability arising under the Securities Act, the
Exchange Act, state law or liability based in whole or in part on or arising
in whole or in part out of or pertaining to the Agreement or the transactions
contemplated hereby. The Surviving Corporation shall faithfully assume and
honor in all respects the obligations of the Company pursuant to the Company's
certificate of incorporation, bylaws and any indemnification agreements
between the Company and any of the Persons mentioned in the first sentence of
this Section 7.13 existing and in force as of the date of this Agreement to
the extent permitted under applicable law. The Surviving Corporation will also
maintain in effect for not less than six years after the Effective Time the
current policies of directors' and officers' liability insurance maintained by
the Company on the date hereof (provided that the Surviving Corporation may
substitute therefor policies having at least the same coverage, with a
comparably rated insurer and containing terms and conditions which are no less
advantageous to the persons currently covered by such policies) with respect
to matters existing or occurring at or prior to the Effective Time; provided,
however, that if the aggregate annual premiums for such
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insurance during such period exceed 200% of the per annum rate of the
aggregate premium currently paid by the Company for such insurance on the date
of this Agreement, then the Surviving Corporation will provide the maximum
coverage that will then be available at an annual premium equal to 200% of
such rate. The rights under this Section 7.13 are in addition to rights that
an Indemnified Party may have under the certificate of incorporation, bylaws
or other similar organizational documents of the Company or any Subsidiary or
under the DGCL. The rights under this Section 7.13 are contingent upon the
occurrence of, and will survive consummation of, the Merger and are expressly
intended to benefit each Indemnified Party. Notwithstanding the provisions of
the preceding sentence, in the event of any claim (whether arising before or
after the Effective Time) that may be subject to indemnification hereunder,
upon receipt from the Indemnified Party to whom expenses are advanced of an
undertaking to repay such advances to the extent required by law, the Company
shall advance expenses to each such Indemnified Party, including the payment
of the fees and expenses of counsel selected by such Indemnified Party, which
counsel shall be reasonably satisfactory to the Company, promptly after
statements therefore are received. Each Indemnified Party (and their
respective heirs and estates) is intended to be a third party beneficiary of
this Section 7.13 and may specifically enforce its terms.
7.14. Options and Convertible Debentures. The Company shall use its
reasonable best efforts to obtain the rollover, the exercise or the
cancellation of the Options and Rollover Options as set forth in Section 2.5.
The Surviving Corporation shall assume the Rollover Options pursuant to
Section 2.2 and in accordance with the respective Stock Option Plan, and the
exercise price and number of shares underlying each such option shall be
adjusted equitably to reflect the effect of the Merger. The Company shall use
its reasonable best efforts to obtain the receipt of any approvals or consents
from the holders of the Convertible Debentures, if any, to this Agreement and
the transactions contemplated hereby; provided, however, that Recap
acknowledges that the consummation of the transactions contemplated hereby
will constitute a change of control under the terms of in the Convertible
Debentures.
7.15. Antitakeover Statutes. If any Takeover Statute (as defined below) is
or may become applicable to the transactions contemplated hereby, the Company
Board will grant such approvals and take such actions as are necessary so that
the transactions contemplated hereby and thereby may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate the effects of any Takeover Statute on any of the
transactions contemplated hereby or thereby. For purposes of this Agreement, a
"Takeover Statute" means a "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, including Section 203 of the DGCL.
7.16. Regulatory Applications.
7.16.1. Each of the Company and Recap and their respective Subsidiaries
shall cooperate and use their respective reasonable best efforts to prepare
all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and
Governmental Entities necessary to consummate the transactions contemplated
by this Agreement. Each of the Company and Recap shall have the right to
review in advance, and to the extent practicable each will consult with the
other, in each case subject to applicable laws relating to the exchange of
information, with respect to all material written information submitted to
any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto agrees to act reasonably and as promptly
as practicable. Each party hereto agrees that it will consult with the
other parties hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other parties
appraised of the status of material matters relating to completion of the
transactions contemplated hereby.
7.16.2. Each party agrees, upon request, to furnish the other parties
with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
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necessary or advisable in connection with any filing, notice or application
made by or on behalf of such other parties or any of their respective
Subsidiaries to any third party or Governmental Entity.
7.17. Notices of Certain Events. Each of the parties hereto shall promptly
notify the other parties of:
7.17.1. the receipt by such party of any notice or other communication
from any Person alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement;
7.17.2. the receipt by such party of any notice or other communication
from any Governmental Authority in connection with the transactions
contemplated by this Agreement; and
7.17.3. any Actions commenced or, to the best of such party's Knowledge,
threatened against, or affecting, such party which, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant
to this Agreement or which relate to the consummation of the transactions
contemplated by this Agreement.
7.18. Delivery of Opinion of Financial Advisor. The Company agrees to
deliver to Recap a true and complete copy of the written opinions of Jefferies
& Company, Inc. and Houlihan Lokey Howard & Zukin Capital, promptly following
the execution and delivery of this Agreement.
7.19. Asset Drop Down. The Company and Operating Company shall use
reasonable best efforts to effect and consummate the Asset Drop Down,
necessary for the consummation of the Merger and the transactions contemplated
hereby and to permit Recap, to participate in the timing and structuring of
the Asset Drop Down.
ARTICLE 8.
CONDITIONS OF MERGER
8.1. General Conditions. The obligations of the parties to effect the
Closing shall be subject to the following conditions unless waived in writing
by Recap and the Company:
8.1.1. No Law or Orders. No Law or Order shall have been enacted,
entered, issued or promulgated by any Governmental Entity (and be in
effect) which prohibits the consummation of the Asset Drop Down, the Merger
or the Recapitalization.
8.1.2. HSR. Any applicable waiting period under the HSR Act shall have
expired or have been terminated with respect to the transactions
contemplated hereby.
8.1.3. Legal Proceedings. No Governmental Entity shall have initiated
proceedings to restrain or prohibit the Merger or the Recapitalization or
force rescission, unless such Governmental Entity shall have withdrawn and
abandoned any such proceedings prior to the time which otherwise would have
been the Closing Date and there shall not have been any Law or Order which
would require the divestiture by the Company or its Subsidiaries of a
material portion of their respective businesses, assets or properties,
taken as a whole, or impose any material limitation on the ability of the
Company and its Subsidiaries, taken as a whole, to conduct their respective
businesses and own their assets and properties, taken as a whole, following
the Closing.
8.1.4. Stockholder Approval. The Asset Drop Down and the Merger shall
have been approved by the requisite vote of the holders of the outstanding
capital stock of the Company entitled to vote thereon at the Special
Meeting.
8.1.5. Regulatory Approval. All regulatory approvals or waivers required
to consummate the Asset Drop Down, the Merger or the Recapitalization shall
have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired, other than
those the failure of
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which to be obtained or maintained would not have or reasonably be expected
to have a Material Adverse Effect on the Company or Recap, and no such
approvals or waivers shall contain any conditions, restrictions or
requirements which would (i) following the Effective Time, have a Material
Adverse Effect on the Surviving Corporation and its Subsidiaries, taken as
a whole or (ii) reduce the benefits of the transactions contemplated hereby
to such a degree that Recap would not have entered into this Agreement had
such conditions, restrictions or requirements been known at the date
hereof.
8.1.6. Third Party Consents. The Company shall have received all
requisite consents from third parties (other than Governmental Entities)
required by any contract between the Company or any of its Subsidiaries to
be obtained prior to the consummation of the Asset Drop Down, the Merger or
the Recapitalization, which if not obtained, individually or in the
aggregate, would have a Material Adverse Effect.
8.1.7. Permits and Approvals. The Company shall have made or obtained
all Permits and Approvals which are legally required to be obtained by the
Company or any Subsidiary from any Governmental Entity prior to
consummation of the Merger or the Recapitalization, which if not obtained,
individually or in the aggregate, would have a Material Adverse Effect.
8.2. Conditions Precedent to the Obligations of the Company. The
obligations of the Company to close the transactions contemplated by this
Agreement shall be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions precedent, any of which may be waived by
the Company:
8.2.1. Accuracy of Recap's Representations and Performance of
Obligations.
(a) All representations and warranties made by Recap in this
Agreement, any Schedule or any agreement, certificate or instrument to
be executed by Recap pursuant hereto shall be true and correct in all
material respects on the date when made and on and as of the Closing
Date (unless the representations and warranties address matters as of a
particular date, in which case they shall remain true and correct in
all respects as of such date) with the same effect as if made on and as
of the Closing Date (without regard to any amendment or supplement of
any such Schedule, agreement or instrument after the date hereof),
except where such failures, in each case or in the aggregate, have not
had and are not reasonably expected to have a Material Adverse Effect
on Recap.
(b) Recap shall have performed or complied in all material respects
with all covenants contained in this Agreement, or any agreement,
certificate or instrument to be executed by Recap pursuant hereto
required to be performed or complied with by Recap either at or prior
to the Closing.
8.2.2. Recap Deliveries. Recap shall have delivered, or shall have
caused to be delivered, to the Company at or prior to the Closing the
following:
(a) a certified copy of the resolutions duly adopted by the board of
directors of Recap authorizing this Agreement and the transactions
contemplated hereby and thereby;
(b) such other documents, instruments or certificates as shall be
reasonably requested by the Company or its counsel; and
(c) a certificate of the president or any vice president and
secretary or any assistant secretary of Recap certifying to the matters
set forth in Sections 8.2.1(a) and (b) above.
8.2.3. Financing. Recap shall have made or obtained all financing
necessary in connection with the consummation of the transactions
contemplated by this Agreement and the "Financing Letters" referred to in
Section 6.6.
8.2.4. Recapitalization. All parties (other than the Company, Operating
Company and their respective Affiliates) to the Recapitalization have
entered into and delivered to the other parties thereto the agreements
contemplated by, and performed all actions required by them, to consummate
the Recapitalization.
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8.3. Conditions Precedent to Obligations of Recap. The obligations of Recap
to close the transactions contemplated by this Agreement shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions precedent, any of which may be waived by Recap:
8.3.1. Accuracy of the Company's Representations and Performance of
Obligations.
(a) All representations and warranties made by the Company in this
Agreement, any Schedule or any agreement, certificate or instrument to
be executed by the Company pursuant hereto shall be true and correct in
all material respects on the date when made and on and as of the
Closing Date (unless the representations and warranties address matters
as of a particular date, in which case they shall remain true and
correct in all respects as of such date) with the same effect as if
made on and as of the Closing Date (without regard to any amendment or
supplement of any such Schedule, agreement or instrument after the date
hereof), except where such failures, in each case or in the aggregate,
have not had and are not reasonably expected to have a Material Adverse
Effect on the Company.
(b) The Company shall have performed or complied with all covenants
contained in this Agreement, or any agreement, certificate or
instrument to be executed by the Company pursuant hereto required to be
performed or complied with by the Company either at or prior to the
Closing, except where such failure to perform or comply with,
individually or in the aggregate, has not had, and are not reasonably
expected to have a Material Adverse Effect on the Company.
8.3.2. Company Adverse Changes. There shall not have occurred after the
date hereof any events which individually or in the aggregate have had or
are reasonably expected to have a Material Adverse Effect on the Company.
8.3.3. Deliveries. The Company shall have delivered, or shall have
caused to be delivered, to Recap at or prior to the Closing the following:
(a) certified copies of the resolutions duly adopted by the Company
Board and by the holders of the Existing Shares, authorizing this
Agreement and the transactions contemplated hereby; and
(b) a certificate of the chief executive officer, president or any
vice president and secretary or any assistant secretary of the Company
certifying to the matters set forth in Section 8.3.1(a) and (b) above.
8.3.4. Financing. Recap shall have obtained all financing set forth in
the "Financing Letters" referred to in Section 6.6, it being acknowledged
that if the parties to the Financing Letters or New Financing Letters
(other than Parent and Leonard Green & Partners, L.P.) are prepared to
perform thereon (or would have been prepared to perform had Parent and
Leonard Green & Partners, L.P. performed as contemplated thereby), this
condition contained in this Section 8.3.4 shall be deemed to have been
satisfied.
8.3.5. Recapitalization. All parties (other than Recap and its
Affiliates) to the Recapitalization have entered into and delivered to the
other parties thereto the agreements contemplated by, and performed all
actions required by them to consummate the Recapitalization.
8.3.6. Accounting Principles. Except as set forth on the Disclosure
Schedule, from the fiscal year ended December 31, 1999 and prior to the
Effective Time, the Company shall not have altered, modified or amended, or
be required in the future to make any alteration, modification or amendment
of, any of its material accounting principles, methods or practices, other
than (a) such alterations, modifications or amendments that are applicable
generally and are not directed specifically to the Company, and (b) such
alterations, modifications or amendments that do not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
8.3.7. Push-Down Accounting. There shall not have occurred any material
change in accounting rules (including but not limited to GAAP), or in the
applicable federal and state securities Laws, or any action by the Company
or its Subsidiaries, which results in or triggers push-down accounting
treatment for the Merger.
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8.3.8. Dissenting Shares. The aggregate number of Dissenting Shares
shall not equal 15% or more of the Existing Shares outstanding as of the
record date for the Special Meeting.
8.3.9. Share Exchange and Subscription. Subject to the terms and
conditions of the Exchange Agreement, Robert Antin or assigns shall have
transferred and exchanged $2,000,000 worth of Common Stock (133,333 shares)
held by him on the date hereof and certain members of management of the
Company shall have transferred and exchanged up to a maximum of $2,000,000
worth of value of Common Stock or Rollover Options valued at the Per Share
Amount held by them in the aggregate on the date hereof.
8.3.10. Management Services Agreement. The Company (and/or the
Subsidiaries) shall have executed and delivered the management services
agreement prior to the Closing.
8.3.11. Stockholders Agreement. Each of the respective parties to the
Stockholders Agreement (other than Parent, Leonard Green & Partners, L.P.,
or any Affiliate) shall have executed and delivered such agreement prior to
the Closing.
8.3.12. Employment Agreements. Each of Robert Antin and Arthur Antin
shall have executed and delivered an employment agreement substantially in
the forms attached hereto as EXHIBIT C and EXHIBIT D prior to the Closing.
8.3.13. Cancellation of Options. The Company shall have obtained the
rollover, the exercise or the cancellation of the Options and Rollover
Options as set forth in Section 2.5 and received any necessary agreements,
approvals or consents from the holders thereof.
8.3.14. Resignation of Directors. All of the directors of the Company,
other than those persons set forth on the Disclosure Schedule, shall have
resigned from the Board of Directors effective as of the Closing Date.
8.4. Asset Drop Down. The Company and Operating Company shall have
consummated the Asset Drop Down.
ARTICLE 9.
TERMINATION
9.1. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Effective Time, whether
before or after stockholder approval of the Merger:
9.1.1. Mutual Consent. By mutual written consent of the parties hereto;
9.1.2. By Recap. By Recap, if (i) any of the conditions set forth in
Section 8.1 or 8.3 shall have become incapable of fulfillment (other than
as a result of a breach of this Agreement by Recap); or (ii) the Company
Board or any committee thereof fails to recommend or withdraws or modifies
or resolves to withdraw or modify its recommendation of the Merger, whether
or not in compliance with Section 7.5 hereof;
9.1.3. By The Company. By the Company, if (i) any of the conditions set
forth in Section 8.1 or 8.2 shall have become incapable of fulfillment
(other than as a result of a breach of this Agreement by the Company); (ii)
the Company Board has approved a Superior Proposal in accordance with the
terms of Section 7.5 or (iii) the Company Board withdraws it recommendation
of the transactions contemplated hereby in accordance with the terms of
Section 7.5;
9.1.4. Failure of Conditions. By Recap or the Company, if the
transactions contemplated hereby are not consummated on or before September
30, 2000, but only if the failure to consummate such transactions on or
before such date did not result from the breach of any representation,
warranty or agreement herein of the party seeking such termination;
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9.1.5. Breach of Covenant. By Recap or the Company, if the other party
shall be in material breach of any of its covenants contained in this
Agreement and such breach either is incapable of cure or is not cured
within 20 Business Days after notice from the party wishing to terminate;
provided that the party seeking such termination shall not also then be in
material breach of this Agreement; provided, further, that any material
breach of the provisions of Section 7.5 hereof shall entitle Recap to an
immediate right to termination without any notice or cure requirement;
9.1.6. Breach of Representations and Warranties. By Recap or the
Company, if the other party shall be in breach of any of its
representations or warranties contained in this Agreement, which breach,
individually or together with all other breaches, is reasonably expected to
have a Material Adverse Effect on the Company or Recap, as applicable, and
such breach either is incapable of cure or is not cured within 20 Business
Days after notice from the party wishing to terminate; provided, that the
party seeking such termination shall not also then be in material breach of
this Agreement; or
9.1.7. By the Company or Recap: By either Recap or the Company, if a
Governmental Entity shall have issued a non-appealable final order, decree
or ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger or the
Recapitalization (provided that (i) if the party seeking to terminate this
Agreement pursuant to Section is subject to such order, decree or ruling,
it shall have used all reasonable efforts to have such order, decree or
ruling removed and (ii) the right to terminate this Agreement under this
Section shall not be available to any party who has not complied with its
obligations under Sections 7.8 and 7.16 and such noncompliance materially
contributed to the issuance of any such order, decree or ruling or the
taking of such action).
9.2. Manner and Effect of Termination. Termination shall be effected by the
giving of written notice to that effect by the party seeking termination. If
this Agreement is validly terminated and the transactions contemplated hereby
are not consummated, this Agreement shall become null and void and of no
further force and effect and no party shall be obligated to the others
hereunder; provided, however, that termination shall not affect (i) the rights
and remedies available to a party as a result of the breach by the other party
or parties hereunder (provided that, the provisions of Section 9.3 shall
constitute the exclusive legal remedy of Recap with respect to a breach by the
Company described therein, and the payment by the Company of the Termination
Fee and any expenses shall constitute the exclusive legal remedy of Recap for
breaches of this Agreement in the event of the Company's acceptance of a
Superior Proposal or the withdrawal by the Company Board of its recommendation
of the transactions contemplated hereby, each as contemplated by Section 7.5),
(ii) the provisions of Sections 5.11, 6.5, 10.1, 10.2, 10.4 and 10.9 hereof,
or (iii) the obligations of the Company pursuant to Section 9.3 below.
9.3. Certain Payments Upon Termination.
9.3.1. In the event that: (A) the Company terminates this Agreement
under Section 9.1.3(ii) or Section 9.1.3(iii), or (B) Recap terminates this
Agreement under Section 9.1.2(ii), the Company shall pay to Recap a
termination fee in the amount of $10,000,000 (the "Termination Fee").
9.3.2. In the event that (A) a Termination Fee is not otherwise payable
to Recap pursuant to Section 9.3.1 and (B) (i) Recap terminates this
Agreement under Section 9.1.5 or 9.1.6, or (ii) this Agreement is
terminated due to a failure of the condition set forth in Section 8.1.4,
the Company shall pay to Recap all fees and expenses (including those of
counsel, accountants and other advisors and in connection with the
Financings) incurred by any of Recap and its Affiliates in connection with
the transactions contemplated by this Agreement ("Expenses"); provided,
however, such Expenses shall not exceed $1,000,000. All payments required
to be made hereunder shall be made by wire transfer of immediately
available funds within two (2) Business Days of the event giving rise to
the payment of such Expenses. The Company acknowledges that the agreements
contained in this Section 9.3 are an integral part of the transactions
contemplated by this Agreement and that, without said agreements, Recap
would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the Termination Fee and Expenses due pursuant to this
Section 9.3, and, in order to obtain such payment, Recap commences a suit
which results in
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a judgment against the Company for the fees and expenses set forth herein,
the Company will pay to Recap, its reasonable expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts due hereunder at the legal rate determined by the
court rendering such judgment.
ARTICLE 10.
MISCELLANEOUS
10.1. Confidentiality. The Company agrees that from the date hereof until
the Closing Date or earlier termination of this Agreement it will not, and
will use reasonable best efforts to ensure that none of its directors,
officers, Representatives, agents or employees will, without the prior written
consent of Recap, submit or disclose to or file with any other Person, or use,
any confidential or non-public information relating to the Company or Recap,
except for such disclosure as may be required by Law, applicable accounting
regulations and as permitted pursuant to the provisions of Section 7.5 hereof.
Recap agrees that from the date hereof until the Closing Date or earlier
termination of this Agreement it will not, and will use reasonable best
efforts to ensure that none of its directors, officers, Representatives,
agents or employees will, without the prior written consent of the Company,
submit or disclose to or file with any other Person, or use, any confidential
or non-public information relating to the Company, except for such disclosure
as may be required by Law or applicable accounting regulations. Without
limiting the generality of the foregoing, Recap and the Company agree and
acknowledge that they will continue to be bound by the Confidentiality
Agreement dated November 15, 1999 between the Company and Leonard Green &
Partners, L.P.
10.2. Expenses. Except as otherwise specifically provided for herein
(including without limitation under Article 9 hereof), each of the Company, on
the one hand, and Recap, on the other, shall pay all of its costs and expenses
(including attorneys', accountants' and investment bankers' fees) incurred in
connection with this Agreement and the transactions contemplated hereby.
10.3. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight delivery (with delivery confirmed the next day) or three (3)
Business Days after sent by registered or certified mail (postage prepaid,
return receipt requested). Notices shall be addressed as follows:
To The Company:
Veterinary Centers of America, Inc.
12401 West Olympic Boulevard
Los Angeles, California 90064
Attention: Chief Executive Officer
Facsimile: (310) 584-6701
With a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, Twenty-Fourth Floor
Los Angeles, California 90067
Attention: C.N. Franklin Reddick III, Esq.
Facsimile: (310) 728-2304
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<PAGE>
To Recap:
Vicar Recap, Inc.
11111 Santa Monica Blvd.
Los Angeles, California 90025
Attention: John Baumer
Facsimile: 310-954-0404
With a copy to:
Irell & Manella LLP
333 S. Hope Street, Suite 3300
Los Angeles, California 90071
Attention: Ed Kaufman
Facsimile: 213-229-0515
To the Special Committee:
c/o Veterinary Centers of America, Inc.
12401 West Olympic Boulevard
Los Angeles, California 90064
Attention: John Chickering
Facsimile: (310) 584-6701
With a copy to:
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Paul Tosetti, Esq.
Facsimile: 213-891-8763
Either party may from time to time change its address for the purpose of
notices by a similar notice specifying the new address but no such change
shall be effective as against any Person until such Person shall have actually
received it.
10.4. Entire Agreement. This Agreement contains the final and entire
agreement between the parties with respect to the transactions contemplated
hereby and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date hereof, other than the
Confidentiality Agreement, dated November 15, 1999. No reference shall be made
to any draft of this Agreement for purposes of interpretation or resolution of
ambiguity or otherwise. All Schedules referred to herein, are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.
10.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.6. Severability. If any provision hereof shall be held to be
unenforceable or invalid by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly
construed and shall not alter the enforceability, validity or effect of any
other provision hereof.
10.7. Assignability. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this
Agreement nor any right or obligation hereunder may be assigned by either
party without the prior written consent of the other to be given in the other
party's sole discretion.
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<PAGE>
10.8 Captions. The descriptive headings herein are inserted for convenience
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
10.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10.10. Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of
the terms hereof (without requirement to post bond), in addition to any and
all other remedies at law or in equity.
10.11. Amendment and Waiver. This Agreement may be amended, modified or
supplemented at any time, whether before or after stockholder approval only by
an instrument in writing signed by all parties hereto; provided, however, this
Agreement may not be amended, modified or supplemented following approval of
the Merger by the holders of the Company's outstanding capital stock entitled
to vote thereon without the further approval of such stockholders if such
amendment, modification or supplement would adversely affect such stockholders
and the further approval of the Special Committee if such amendment,
modification or supplement would adversely affect the Company. No waiver by
any party of any of the provisions hereof shall be effective unless set forth
in writing and executed by the party so waiving. Any waiver or failure to
insist upon strict compliance with any obligation, covenant, agreement,
provision, term or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure to comply.
10.12. Actions by the Company. Any action requiring the approval of the
Company Board which is to be taken or which is made or required to be taken or
made by or for the benefit of the Company pursuant to, in connection with, or
in furtherance of this Agreement shall, prior to the Effective Time, be made
or taken, as applicable, upon the recommendation of and with the approval of
the Special Committee.
10.13. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
10.14. Publicity. Except as hereinafter provided, the Company and Recap
shall not, and each of them shall use reasonable best efforts to cause their
respective directors, officers, employees, Representatives and agents not to,
discuss publicly or make any public statement with respect to this Agreement
or the transactions contemplated hereby without the other party's approval.
Before making any such public announcements, the parties hereto shall use good
faith efforts to agree upon the text of a joint announcement to be made by the
parties hereto or use good faith efforts to obtain the other party's approval
of the text of any public announcement to be made solely on behalf of such
party. If the parties hereto are unable to agree on or approve such a public
statement or announcement and legal counsel for a party is of the opinion that
such statement or announcement is required by law or the rules of any stock
exchange on which the parties' securities are traded or the NASD, then such
party may make or issue the legally required statement or announcement.
10.15. Force Majeure. Anything to the contrary in this Agreement
notwithstanding, no party hereto shall be liable to the other parties hereto
for any loss, injury, delay, damages or other casualty suffered or incurred by
such other party hereto due to strikes, riots, storms, fires, explosions, acts
of God, war, governmental action, or any other cause similar thereto which is
beyond the reasonable control of such parties, and any failure or delay by any
party hereto in performance of any of its obligations under this Agreement due
to one or more of the foregoing causes shall not be considered as a breach of
this Agreement. In the event that performance of any of the material
obligations under this Agreement shall be suspended due to one or more of the
foregoing causes and such suspension shall have a material adverse impact on
consummation of the transactions as contemplated
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in this Agreement or on the operations or financial conditions or prospects of
the Company, then the aggrieved party which shall be materially and adversely
affected thereby may terminate this Agreement.
10.16. Attorneys' Fees. In any suit or proceeding arising out of this
Agreement or to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to all reasonable out-of-pocket expenses
and reasonable attorneys' fees incurred by such party in connection with such
suit or proceeding.
10.17. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
VETERINARY CENTERS OF AMERICA, INC.,
a Delaware corporation
By: /s/ Robert Antin
--------------------------------
Name: Robert Antin
Title: Chief Executive Officer
VICAR RECAP, INC.,
a Delaware corporation
By: /s/ John Danhakl
--------------------------------
Name: John Danhakl
Title: President
VICAR OPERATING, INC.,
a Delaware corporation
By: /s/ Robert Antin
--------------------------------
Name: Robert Antin
Title: Chief Executive Officer
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