<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 9, 1994
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1-10915 62-1234332
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
4525 Harding Road, Nashville, Tennessee 37205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 383-4444
None
(Former name or former address, if changed since last report)<PAGE>
Item 5. Other Events
The Registrant hereby incorporates by reference
the description of the proposed transaction between
Registrant, Odyssey Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Registrant
("Odyssey") and EPIC Holdings, Inc., a Delaware corporation
("EPIC"), which is described in (1) the Agreement and Plan
of Merger among Registrant, Odyssey and EPIC dated as of
January 9, 1994 (such agreement being Exhibit 2.1 attached
hereto), (2) the press release of the Registrant dated
January 10, 1994 announcing the proposed transaction (such
press release being Exhibit 99.1 attached hereto) and (3)
the press release of the Registrant dated January 10, 1994
in connection with the proposed transaction (such press
release being Exhibit 99.2 attached hereto).
Item 7. Financial Statements and Exhibits
(c) Exhibits.
2.1 Agreement and Plan of Merger among
Registrant, Odyssey and EPIC, dated as
of January 9, 1994.
99.1 Registrant's press release, dated
January 10, 1994, announcing the
proposed transaction.
99.2 Registrant's press release, dated
January 10, 1994, in connection with
the proposed transaction.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By/s/Michael A. Koban, Jr.
Michael A. Koban, Jr.
Senior Vice President
Date: January 10, 1994
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
</CAPTION>
<C> <C>
Number Subject Matter
2.1 Agreement and Plan of Merger
among Registrant, Odyssey and EPIC,
dated as of January 9, 1994
99.1 Registrant's press release, dated
January 10, 1994, announcing
the proposed transaction
99.2 Registrant's press release, dated
January 10, 1994, in connection with
the proposed transaction
/TABLE
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
Dated as of January 9, 1994,
among
HEALTHTRUST, INC. - THE HOSPITAL COMPANY,
a Delaware corporation,
ODYSSEY ACQUISITION CORP.,
a Delaware corporation,
and
EPIC HOLDINGS, INC.,
a Delaware corporation.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
</CAPTION>
<C> <C>
ARTICLE I The Merger
1.01 The Merger
1.02 Effective Time of the Merger
1.03 Closing
1.04 Certificate of Incorporation; By-laws
1.05 Directors and Officers of the Surviving
Corporation
ARTICLE II Conversion and Exchange of Securities
2.01 Conversion of Capital Stock
2.02 Exchange of Certificates
2.03 No Further Ownership Rights in Company
Common Stock
2.04 Termination of Exchange Fund
2.05 No Liability
2.06 Lost Certificates
ARTICLE III Representations and Warranties of the
Company
3.01 Organization
3.02 Capitalization
3.03 Authority
3.04 Consents and Approvals; No Violations
3.05 No Default
3.06 SEC Reports and Financial Statements
3.07 No Undisclosed Liabilities
3.08 Absence of Certain Changes or Events
3.09 Litigation
3.10 Compliance with Applicable Law
3.11 Reimbursement; Accreditation; Hospital
Operations
3.12 Opinion of Financial Advisor
3.13 Parent Stock Ownership
3.14 Employee Benefit Plans; Labor Matters
3.15 Brokers
3.16 Related Party Transactions
3.17 Corporate Records
3.18 Accounting Records
3.19 Environmental Matters
3.20 Tax Matters
3.21 Properties
3.22 Contracts
3.23 Insurance; Malpractice
3.24 Patents, Licenses, Franchises and
Formulas
ARTICLE IV Representations and Warranties of Parent
and Sub
4.01 Organization
4.02 Authority
4.03 Consents and Approvals; No Violations
ARTICLE V Covenants
5.01 Conduct of Business by the Company
Pending the Merger
5.02 No Solicitation, Etc.
ARTICLE VI Additional Agreements
6.01 Proxy Statement
6.02 Meeting of Stockholders
6.03 Access to Information
6.04 Warrants; Company Options; SARs
6.05 Legal Requirements; Cooperation
6.06 Additional Agreements; Reasonable
Efforts
6.07 Expenses
6.08 Public Statements
6.09 Certification of Stockholder Vote
6.10 Indemnification and Insurance
6.11 Notification of Certain Matters
6.12 Accounting Matters
6.13 Employee Matters
ARTICLE VII Conditions
7.01 Conditions to Each Party's Obligations
To Effect the Merger
7.02 Conditions to Obligations of Parent and Sub
7.03 Conditions to Obligations of the Company
ARTICLE VIII Termination and Amendment
8.01 Termination
8.02 Effect of Termination
8.03 Amendment
8.04 Extension; Waiver
<PAGE>
ARTICLE IX Miscellaneous
9.01 Nonsurvival of Representations,
Warranties and Agreements
9.02 Notices
9.03 Headings
9.04 Counterparts
9.05 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership
9.06 Governing Law
9.07 Specific Performance
9.08 Assignment
9.09 Certain Definitions
9.10 Company Disclosure Schedule
</TABLE>
________________________
<TABLE>
<CAPTION>
Company Disclosure Schedule
<C> <C>
3.01 Organization
3.02(a) Capitalization
3.02(b) Subsidiaries
3.04 Violations of Instruments or Obligations
3.07 Liabilities
3.08 Absence of Certain Changes or Events
3.09 Litigation
3.10 Governmental Investigations or Reviews
3.11(a) Reimbursement
3.11(b) Hill-Burton
3.11(c) Licenses
3.14 Employee Benefit Plans; Labor Matters
3.16 Related Party Transactions
3.19 Environmental Matters
3.20 Tax Matters
3.21(a) Material Real Properties
3.21(b) Leases
3.22 Material Contracts
3.23 Insurance
5.01(f) Dispositions
5.01(l) Employee Benefits; Compensation
6.10(d) Indemnification Agreements
6.13(a) Severance Policy
</TABLE>
<TABLE>
<CAPTION>
Exhibits
<C> <C>
7.02(j) Facilities and Businesses
8.01(e) Form of Proxy
/TABLE
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
January 9, 1994, by and among HEALTHTRUST, INC. - THE
HOSPITAL COMPANY, a Delaware corporation ("Parent"),
ODYSSEY ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"), and EPIC
HOLDINGS, INC., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the
Company, Parent and Sub deem it advisable and in the best
interests of their respective stockholders to consummate,
and have unanimously approved, the merger of Sub with and
into the Company upon the terms and subject to the
conditions set forth herein (the "Merger").
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties,
covenants and agreements set forth herein, the parties
hereto agree as follows:
ARTICLE I
The Merger
Section 1.01 The Merger. Upon the terms and
subject to all of the conditions hereof, at the Effective
Time (as defined in Section 1.02) Sub shall be merged with
and into the Company, the separate corporate existence of
Sub shall cease (Sub and the Company are sometimes referred
to herein as the "Constituent Corporations") and the
Company shall continue as the surviving corporation (the
Company, in such capacity is sometimes referred to herein
as the "Surviving Corporation"). The Merger shall have the
effects set forth in the General Corporation Law of the
State of Delaware (the "DGCL").
Section 1.02 Effective Time of the Merger.
The Merger shall become effective at the time (the
"Effective Time") of filing with the Delaware Secretary of
State of a certificate of merger (the "Certificate of
Merger") in such form as is required by, and executed in
accordance with, the applicable provisions of the DGCL or
at such later time as may be agreed to by Parent and the
Company and specified in the Certificate of Merger. The
parties will cause the Certificate of Merger to be filed
with the Delaware Secretary of State as soon as practicable
after the Closing (as defined in Section 1.03).
<PAGE>
Section 1.03 Closing. Prior to the filing of
the Certificate of Merger, a closing (the "Closing") will
take place for the purpose of confirming the satisfaction
or, if permissible, waiver of the conditions set forth in
Article VII hereof. The Closing will take place on May 12,
1994 if the conditions set forth in Article VII hereof
shall then have been satisfied or, if permissible, waived,
or as soon thereafter as practicable after the satisfaction
or, if permissible, waiver of such conditions (the date and
time of the Closing being hereinafter referred to as the
"Closing Date"), at the offices of Dewey Ballantine, 1301
Avenue of the Americas, New York, New York, 10019, unless
another place is agreed to by the parties hereto.
Section 1.04 Certificate of Incorporation;
By-laws. (a) The Certificate of Incorporation of Sub as
in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation.
(b) The By-laws of Sub as in effect at the
Effective Time shall be the By-laws of the Surviving
Corporation.
Section 1.05 Directors and Officers of the
Surviving Corporation. (a) The directors of Sub
immediately prior to the Effective Time shall be the
directors of the Surviving Corporation until their
respective successors are duly elected and qualified or
until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of
Incorporation and By-laws, or as otherwise provided by
applicable law.
(b) The officers of Sub immediately prior to
the Effective Time shall be the officers of the Surviving
Corporation until their successors shall have been duly
appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws, or
as otherwise provided by applicable law.
ARTICLE II
Conversion and Exchange of Securities
Section 2.01 Conversion of Capital Stock. As
of the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof:
<PAGE>
(a) Each share of common stock, par value
$.01 per share, of Sub (the "Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall
be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(b) Each share of common stock, par value
$.01 per share, of the Company (the "Company Common Stock")
held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled and retired and shall
cease to exist and no stock of Parent or other
consideration shall be delivered in exchange for such
shares.
(c) Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock referred to in
Section 2.01(b) above and other than Dissenting Stock, as
defined in Section 2.01(d)) (the "Outstanding Common
Stock") shall be converted into the right to receive $7.00
in cash, without interest thereon (the "Merger
Consideration") upon surrender of the certificate formerly
representing such share of Company Common Stock.
(d) Notwithstanding any provision of this
Agreement to the contrary, shares of the Company Common
Stock with respect to which appraisal rights have been
demanded and perfected in accordance with Section 262 of
the DGCL (the "Dissenting Stock") shall not be converted
into the right to receive the Merger Consideration at or
after the Effective Time, and the holder thereof shall be
entitled only to such rights as are granted by the DGCL.
Notwithstanding the preceding sentence, if any holder of
shares of Company Common Stock who demands appraisal of
such shares under the DGCL shall effectively withdraw his
demand for such appraisal (in accordance with Section 262
of the DGCL) or becomes ineligible for such appraisal
(through failure to perfect or otherwise) then, as of the
Effective Time or the occurrence of such event, whichever
last occurs, such holder's Dissenting Stock shall cease to
be Dissenting Stock and shall be converted into and
represent the right to receive the Merger Consideration,
without interest thereon, as provided in Section 2.01(c).
The Company shall give Parent (i) prompt notice of any
written demands for appraisal, withdrawals of demands for
appraisal and any other instrument served pursuant to
Section 262 of the DGCL received by the Company and (ii)
the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under
such Section. Prior to the Effective Time, the Company<PAGE>
will not voluntarily make any payment with respect to any
demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any
such demands. From and after the Effective Time, any
payments with respect to any demands for appraisal or in
settlement of any such demands shall be made by the
Surviving Corporation in all circumstances. The parties
further agree that Parent shall have no obligation to make
such payments to the holders of Dissenting Stock pursuant
to this Agreement. Each holder of Dissenting Stock shall
have only such rights and remedies as are granted to such
holder under Section 262 of the DGCL. It is expressly
recognized by the Company and Parent that U.S. Trust
Company of California, N.A. (the "ESOP Trustee"), the
Trustee of the EPIC Healthcare Group, Inc. ("Group")
Employee Stock Ownership Plan (the "ESOP"), may exercise
appraisal rights to the extent permitted by and in
accordance with Section 262 of the DGCL on behalf of
participants of the ESOP so directing the ESOP Trustee, in
accordance with this Section 2.01(d); provided, however,
that nothing in this Section 2.01(d) shall be deemed to
waive or otherwise change the condition set forth in
Section 7.02(h) hereof.
Section 2.02 Exchange of Certificates. (a)
As of the Effective Time, Parent shall deposit with a bank
or trust company to be designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock,
for exchange in accordance with this Article II, through
the Exchange Agent, cash in an aggregate amount equal to
the number of shares of Outstanding Common Stock multiplied
by the Merger Consideration. The deposit made pursuant to
the preceding sentence is hereinafter referred to as the
"Exchange Fund." Any interest or other income earned on
the investment of cash held in the Exchange Fund shall be
paid to Parent as and when requested by Parent.
(b) As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which
immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted pursuant to
Section 2.01 into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions,
reasonably acceptable to the Company, as Parent shall<PAGE>
specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other
documents as Parent or the Exchange Agent shall reasonably
request, the holder of such Certificate shall be entitled
to receive in exchange therefor cash in an amount equal to
the number of shares of Company Common Stock represented by
such Certificate multiplied by the Merger Consideration,
and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of
Company Common Stock which is not registered in the
transfer records of the Company, the Merger Consideration
may be issued to a transferee if the Certificate
representing such Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence
satisfactory to Parent that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by
this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration as
contemplated by this Section 2.02.
(c) The parties hereto agree that the letter
of transmittal mailing described in clause (b) above shall
contain an affidavit to be executed by each person from
whom any interest in the Company is being acquired by
Parent certifying, under penalties of perjury, such
person's taxpayer identification number and that such
person is not a foreign person pursuant to Section
1445(b)(2) of the Code (as hereinafter defined). The
parties hereto acknowledge that if such person does not
provide a properly completed affidavit to the Exchange
Agent, 10% of the Merger Consideration otherwise payable to
such person will be withheld in accordance with Section
1445 of the Code.
Section 2.03 No Further Ownership Rights in
Company Common Stock. The Merger Consideration delivered
upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof shall be deemed
to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Common Stock, subject,
however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record
date prior to the Effective Time which may have been
declared or made by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement
or prior to the date hereof and which remain unpaid at the<PAGE>
Effective Time, and, at and after the Effective Time, there
shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.04 Termination of Exchange Fund.
Any portion of the Exchange Fund which remains
undistributed to the stockholders of the Company as of the
date which is six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of
the Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment
of their claim for the Merger Consideration.
Section 2.05 No Liability. None of Parent,
the Surviving Corporation or the Exchange Agent shall be
liable to any holder of shares of Company Common Stock
whose shares were converted pursuant to Section 2.01 into
the right to receive the Merger Consideration for any cash
delivered to a state abandoned property administrator or
other public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.06 Lost Certificates. In the event
any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed,
the Exchange Agent will issue in exchange for such lost,
stolen or destroyed certificate the Merger Consideration
deliverable in respect thereof as determined in accordance
with Section 2.02. When authorizing such payment in
exchange for any lost, stolen or destroyed Certificate, the
person to whom the Merger Consideration is to be issued
shall, as a condition precedent to the issuance thereof,
give Parent a bond satisfactory to Parent in such sum as it
may direct or otherwise indemnify Parent in a manner
satisfactory to Parent against any claim that may be made
against Parent or the Surviving Corporation with respect to
the Certificate alleged to have been lost, stolen or
destroyed.
<PAGE>
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to each of
Parent and Sub that, except as disclosed in the Disclosure
Schedule delivered herewith (the "Company Disclosure
Schedule"):
Section 3.01 Organization. Each of the
Company and its Subsidiaries (as defined in Section 9.09)
is, if a corporation, a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation (or, if a partnership or
other legal entity, is duly organized, is validly existing
under the laws of the jurisdiction of its organization and
has completed the filing of any certificates required by
such jurisdiction for the organization and continued
existence thereof) and has all requisite power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted, except when
the failure to be so organized, existing and in good
standing or to make such filings or to have such power and
authority would not, individually or in the aggregate, have
a material adverse effect on the business, operations,
properties, assets, liabilities, condition (financial or
otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse
Effect"). Each of the Company and its Subsidiaries is duly
qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and
in good standing would not, individually or in the
aggregate, have a Company Material Adverse Effect. Section
3.01 of the Company Disclosure Schedule lists, for the
Company and each of its Subsidiaries, (i) the jurisdiction
of incorporation or organization and (ii) each jurisdiction
in which such entity is qualified or licensed to do
business. The Company has previously delivered to Parent
complete and correct copies of (i) the Certificates of
Incorporation (or similar governing documents) and all
amendments thereto to the date hereof and (ii) the By-laws
(or similar governing documents) as in effect on the date
hereof, in each case for the Company and each of its
Subsidiaries.
Section 3.02 Capitalization. (a) The
authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock of which, as of<PAGE>
January 8, 1994, 40,167,753 shares were issued and
outstanding (of which 230,535 shares are beneficially owned
by the Company but not yet reflected as such on the records
of the Company's transfer agent because the certificates
therefor have not yet been presented for transfer, and
which shares shall become treasury shares prior to the
Closing Date). As of December 6, 1993, all outstanding
shares of Company Common Stock are owned of record as set
forth in Section 3.02(a) of the Company Disclosure
Schedule. As of the date hereof, 32,000 shares of Company
Common Stock were reserved for issuance upon exercise of
outstanding options (the "Company Options") to purchase
Company Common Stock granted under the Group Stock Option
Plan (the "Stock Option Plan"), 5,902,116 shares of Company
Common Stock are reserved for issuance upon exchange of
Stock Appreciation Rights ("SAR"s) granted under the Second
Amended and Restated Stock Appreciation Rights Plan (the
"SAR Plan"), of which 5,790,708 SARs are outstanding, and
293,049 shares of Company Common Stock are reserved for
issuance upon exercise of outstanding warrants to purchase
Company Common Stock ("Warrants") issued pursuant to that
certain Warrant Agreement, dated September 30, 1988, among
the Company (as successor to Group) and the purchasers
named therein and that certain Warrant Agreement, dated
February 15, 1989, among the Company (as successor to
Group), Citibank, N.A. as Warrant Agent and the purchasers
named therein. All of the outstanding shares of the
Company's capital stock are, and all shares which may be
issued pursuant to the exercise of Company Options, SARs or
Warrants will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive
rights in respect thereto. No bonds, debentures, notes or
other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries are issued
or outstanding. Section 3.02(a) of the Company Disclosure
Schedule sets forth (i) all Company Options which are
outstanding on the date hereof, the number of shares of
Company Common Stock for which such Company Options are
exercisable, which of such Company Options are currently
exercisable, the exercise price and the identity of the
optionees; (ii) the number of SARs which are outstanding on
January 8, 1994, the number of shares of Company Common
Stock for which such SARs are exercisable and the record
holders thereof; and (iii) the number of Warrants which are
outstanding on the date hereof, the number of shares of
Company Common Stock for which such Warrants are
exercisable, the exercise price and the record holders
thereof. Except as set forth above, except for the
exercise or exchange of the Options, Warrants and SARs<PAGE>
listed in Section 3.02(a) of the Company Disclosure
Schedule, except for up to 111,408 SARs which may be
granted by the Company prior to the Effective Time, except
for shares of Company Common Stock to be allocated to
participants in the ESOP in the ordinary course of business
pursuant to the terms thereof in effect on the date hereof,
except for and pursuant to this Agreement and pursuant to
the ESOP Agreement, dated as of the date hereof, among
Parent, Sub, the Company, the ESOP Trustee and the ESOP
Committee (as defined in the ESOP) (the "ESOP Agreement")
and except as set forth in Section 3.02(a) of the Company
Disclosure Schedule, as of the date hereof, there are no,
and at the Effective Time there will be no, shares of
capital stock of the Company or any of its Subsidiaries
issued or outstanding or existing options, warrants, calls,
subscriptions or other rights or other agreements or
commitments of any character of the Company or any of its
Subsidiaries (i) relating to the issued or unissued capital
stock or Voting Debt of the Company or any of its
Subsidiaries, (ii) obligating the Company or any of its
Subsidiaries to issue, transfer or sell, or cause to be
issued, transferred or sold, or to grant rights of first
refusal or similar rights with respect to, any shares of
capital stock or Voting Debt of, or other equity interests
in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity
interests or (iii) with respect to the sale, transfer or
other disposition of, or grant of rights of first refusal
or similar rights in respect of, assets of the Company
other than in the ordinary course of business consistent
with past practice. In addition, there are no, and at the
Effective Time there will be no, rights or other agreements
or commitments obligating the Company or any of its
Subsidiaries to grant, extend or enter into any option,
warrant, call, subscription or other right, agreement or
commitment described in clauses (i), (ii) and (iii) above.
Except as set forth in Section 3.02(a) of the Company
Disclosure Schedule and except pursuant to the ESOP
Agreement, there are no, and at the Effective Time there
will be no, outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries. Except pursuant to
this Agreement and the ESOP Agreement, and except as set
forth in Section 3.02(a) of the Company Disclosure
Schedule, there are not now, and at the Effective Time
there will not be, any voting trusts or other agreements or
understandings to which the Company or any of its
Subsidiaries is a party or is bound with respect to the
voting of the capital stock (or other ownership interests)
of the Company or any of its Subsidiaries or any other<PAGE>
entities listed in Section 3.02(b) of the Company
Disclosure Schedule.
(b) The Company does not own any capital stock
or other equity securities of any corporation and has no
direct or indirect equity or ownership interest, by way of
stock ownership or otherwise, in any corporation,
partnership, joint venture, association or business
enterprise except for the Subsidiaries and other entities
listed in Section 3.02(b) of the Company Disclosure
Schedule. Section 3.02(b) of the Company Disclosure
Schedule lists the authorized capital stock (or other
ownership interests) of each Subsidiary of the Company, the
number of shares of such capital stock (or interests) of
each Subsidiary of the Company and, to the knowledge of the
Company, of such other entities, validly issued and
outstanding and the number of such shares (or interests) of
the Company's Subsidiaries and such other entities owned
beneficially and of record by the Company or any of its
Subsidiaries. Except as set forth in Section 3.02(b) of
the Company Disclosure Schedule, all of the outstanding
shares of capital stock (or interests) of each of the
Company's Subsidiaries, and, to the knowledge of the
Company, of the other entities listed in Section 3.02(b) of
the Company Disclosure Schedule, have been validly issued
and are fully paid and nonassessable. Except as set forth
in Section 3.02(b) of the Company Disclosure Schedule, all
of the shares of capital stock (or interests) of the
Company's Subsidiaries or such other entities owned
beneficially or of record by the Company or another of its
Subsidiaries are so owned free and clear of all liens,
security interests, charges, claims, options, rights of
first refusal, limitations on voting rights or rights to
transfer or other encumbrances.
Section 3.03 Authority. The Company has the
requisite corporate power and authority to execute and
deliver this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this
Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby (other
than, with respect to the Merger, the approval and adoption
of this Agreement by the stockholders of the Company in
accordance with the DGCL and the Company's Certificate of
Incorporation). This Agreement has been duly executed and
delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable against the<PAGE>
Company in accordance with its terms, except as may be
limited by or subject to any bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally, and subject to general principles of equity.
Section 3.04 Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), state securities
or blue sky laws, filings required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), certain federal, state and local regulatory
filings and the filing and recordation of the Certificate
of Merger as required by the DGCL, no filing with or notice
to, and no permit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or
regulatory body, agency or authority (a "Governmental
Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such
notice would not, individually or in the aggregate, have a
Company Material Adverse Effect or prevent or delay in any
material respect the consummation of the transactions
contemplated by this Agreement. Neither the execution,
delivery and performance of this Agreement by the Company
nor the consummation by the Company of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of
Incorporation or By-laws (or similar governing documents)
of the Company or of any its Subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or
acceleration) under, or result in the loss of a benefit
under, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any
of its Subsidiaries under any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their
respective properties or assets may be bound, except as set
forth in Section 3.04 of the Company Disclosure Schedule or
(iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or
any of its Subsidiaries or any of their respective<PAGE>
properties or assets, except in the case of (ii) or (iii)
for violations, breaches, defaults, terminations,
cancellations, accelerations, losses of benefits, liens or
encumbrances which would not, individually or in the
aggregate, have a Company Material Adverse Effect or
prevent or delay in any material respect the consummation
of the transactions contemplated by this Agreement.
Section 3.05 No Default. None of the Company
or any of its Subsidiaries is in default or violation (and
no event has occurred which with notice or the lapse of
time or both would constitute a default or violation) of
any term, condition or provision of (i) its Certificate of
Incorporation or By-laws (or similar governing documents),
(ii) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is now a party
or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any
of their respective properties or assets, except in the
case of (ii) or (iii) for violations, breaches or defaults
that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.06 SEC Reports and Financial
Statements. Each of the Company and its Subsidiaries has
filed with the Securities and Exchange Commission (the
"SEC") and has made available to Parent, all forms,
reports, statements and other material documents required
to be filed by it since January 1, 1989 under the Exchange
Act and the Securities Act (as filed with the SEC
(including exhibits and amendments thereto), collectively,
the "Company SEC Documents"). The Company SEC Documents,
including, without limitation, any financial statements or
schedules included therein, at the time filed, (i) did not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with
the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. The financial
statements of the Company and Group (including the related
notes thereto) included in the Company SEC Documents comply
in all material respects as to form with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting<PAGE>
principles applied on a consistent basis during the periods
involved (except as may be indicated in such financial
statements or in the notes thereto or, in the case of the
unaudited statements, as permitted by the requirements of
Form 10-Q) and fairly present (subject, in the case of the
unaudited statements, to normal recurring audit
adjustments) the consolidated financial position of each of
the Company and Group and their respective consolidated
Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended. The Company has previously made available to
Parent correct and complete copies of (i) annual management
letters from the Company's independent certified public
accountants and (ii) all material correspondence between
the SEC and the Company or its representatives, in each
case since January 1, 1989.
Section 3.07 No Undisclosed Liabilities.
Except as and to the extent disclosed in the Company SEC
Documents, as of September 30, 1993, neither the Company
nor any of its Subsidiaries had any liabilities or
obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by
generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto). Except as and
to the extent disclosed in the Company SEC Documents and
except as set forth in Section 3.07 of the Company
Disclosure Schedule, since September 30, 1993, neither the
Company nor any of its Subsidiaries has incurred any
liabilities of any nature, whether or not accrued,
contingent or otherwise, having or which would have, and
there have been no events, changes or effects with respect
to the Company and its Subsidiaries having or which would
have, in either case individually or in the aggregate, a
Company Material Adverse Effect.
Section 3.08 Absence of Certain Changes or
Events. Since September 30, 1993, except as set forth in
Section 3.08 of the Company Disclosure Schedule,
contemplated by this Agreement or disclosed in any Company
SEC Document filed since September 30, 1993 and prior to
the date of this Agreement, the Company and its
Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past
practice and, since September 30, 1993, there has not been
(i) any transaction or commitment, except in the ordinary
course of business, entered into by the Company or any of
its Subsidiaries; (ii) any damage, destruction or loss of
or to the property of the Company and its Subsidiaries
(whether or not covered by insurance) which, individually<PAGE>
or in the aggregate, would have a Company Material Adverse
Effect; (iii) any material change by the Company in its
accounting methods, principles or practices; (iv) any
declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company
or any of its Subsidiaries (other than dividends by a
Subsidiary to the Company); (v) any acquisition of any
material assets or stock or other material interests of a
third party or agreement with respect to the foregoing
other than in the ordinary course of business consistent
with past practice; (vi) any sale, transfer or other
disposition of assets of the Company or any Subsidiary or
agreement with respect to the foregoing other than in the
ordinary course of business consistent with past practice;
(vii) any material revaluation by the Company or any of its
Subsidiaries of any asset (including, without limitation,
any writing down of any accounts receivable or of the value
of inventory, other than the writing down of any accounts
receivable or of the value of inventory in the ordinary
course of business consistent with past practice);
(viii) any mortgage or pledge of any of the material assets
or properties of the Company or any of its Subsidiaries or
the subjection of any of the material assets or properties
of the Company or any of its Subsidiaries to any liens,
charges, encumbrances, imperfections of title, security
interests, options or rights or claims of others with
respect thereto, other than in the ordinary course of
business consistent with past practice; (ix) any assumption
or guarantee by the Company or any of its Subsidiaries of
the indebtedness of any person or entity other than in the
ordinary course of business consistent with past practice;
(x) any capital expenditures by the Company and its
Subsidiaries other than in the ordinary course of business
consistent with past practice; (xi) any cancellation,
satisfaction or prepayment of any debt, obligation,
liability or encumbrance, or waiver of any claim or right
of value of the Company or any of its Subsidiaries, other
than in the ordinary course of business consistent with
past practice and other than pursuant to the ESOP
Agreement; (xii) any labor organizational efforts or
complaints, or any labor trouble or controversies with any
employees, in each case, except as would not, individually
or in the aggregate, have a Company Material Adverse
Effect; (xiii) any deterioration or adverse change in
internal control systems, except as would not, individually
or in the aggregate, have a Company Material Adverse
Effect; (xiv) any incurrence by the Company or any of its
Subsidiaries of material obligations or liabilities to any
governmental or third party reimbursement program,
including but not limited to Medicare and Medicaid,
materially in excess of the amounts indicated as<PAGE>
contractual allowances or otherwise in the financial
statements of the Company and its Subsidiaries, other than
in the ordinary course of business consistent with past
practice or (xv) any increase in the compensation payable
or to become payable by the Company or any of its
Subsidiaries to any employees, officers, directors or
consultants as salary or wages or under any bonus,
insurance, welfare, severance, deferred compensation,
pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee
benefit plan, other than pursuant to the terms, as of
September 30, 1993, of the employment and consulting
agreements and employee benefit plans listed in Section
3.08 of the Company Disclosure Schedule and other than in
the ordinary course of business consistent with past
practice.
Section 3.09 Litigation. Except as disclosed
in the Company SEC Documents filed prior to the date hereof
and except as set forth in Section 3.09 of the Company
Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of
the Company, threatened against the Company or any of its
Subsidiaries or any of their respective properties or
assets before any Governmental Entity which, if decided
adversely, would, individually or in the aggregate, have a
Company Material Adverse Effect or would prevent or delay
in any material respect the consummation of the
transactions contemplated by this Agreement. Except as
disclosed in the Company SEC Documents filed prior to the
date hereof, neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ,
injunction or decree which, individually or in the
aggregate, would have a Company Material Adverse Effect or
would prevent or delay in any material respect the
consummation of the transactions contemplated hereby.
Section 3.10 Compliance with Applicable Law.
The Company and its Subsidiaries hold all permits,
licenses, variances, exemptions, authorizations, orders and
approvals of all Governmental Entities necessary for the
lawful conduct of their respective businesses (the "Company
Permits") and the Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except
where the failure to hold such Company Permits or be in
compliance therewith would not, individually or in the
aggregate, have a Company Material Adverse Effect. The
Company will, as promptly as practicable, make available to
Parent at the request of Parent correct and complete copies<PAGE>
of all Company Permits. The businesses of the Company and
its Subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental
Entity, except for any such violations which would not,
individually or in the aggregate, have a Company Material
Adverse Effect. Except as set forth in Section 3.10 of the
Company Disclosure Schedule, as of the date of this
Agreement, no investigation or review by any Governmental
Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the
Company, threatened, nor, to the knowledge of the Company,
has any Governmental Entity Indicated an intention to
conduct the same, except for any such investigations or
reviews which would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.11 Reimbursement; Accreditation;
Hospital Operations. (a) Except as set forth in Section
3.11(a) of the Company Disclosure Schedule, all of the
hospitals ("Hospitals") and specialty facilities
("Specialty Facilities") owned or operated by the Company
and its Subsidiaries, as listed in Section 3.11(a) of the
Company Disclosure Schedule, are certified for
participation or enrollment in the Medicare and Medicaid
programs, have a current and valid provider contract with
the Medicare and Medicaid programs, are in substantial
compliance with the terms and conditions of participation
in such programs and have received all approvals or
qualifications necessary for capital reimbursement of the
Company assets. To the knowledge of the Company, the
amounts established as provisions for the Medicare or
Medicaid adjustments and adjustments by any other third
party payors on the financial statements of the Company and
its Subsidiaries are sufficient to pay any amounts for
which the Company or any of its Subsidiaries may be liable.
Except as set forth in Section 3.11(a) of the Company
Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received notice from the regulatory
authorities which enforce the statutory or regulatory
provisions in respect of either the Medicare or the
Medicaid program of any pending or threatened
investigations or surveys, and neither the Company nor any
of its Subsidiaries has any reason to believe that any such
investigations or surveys are pending, threatened or
imminent which would have a Company Material Adverse
Effect. All of the Hospitals and Specialty Facilities are
accredited by the Joint Commission on Accreditation of
Healthcare Organizations.
<PAGE>
(b) Except as set forth in Section 3.11(b) of
the Company Disclosure Schedule, no funds were received on
behalf of the Company or any of its Subsidiaries to
construct, improve or acquire any of its facilities under
the "Hill-Burton" Act as a result of which Parent or any of
Parent's Subsidiaries are currently or will in the future
be required to pay any amounts for which there shall be any
"recapture" as a result of the consummation of the
transactions contemplated by this Agreement.
(c) Except as set forth in Section 3.11(c) of
the Company Disclosure Schedule, each Hospital and
Specialty Facility is an acute care medical-surgical
hospital licensed by the proper state department of health
to conduct its business in substantially the manner
conducted by such Hospital or Specialty Facility and is
authorized to operate the number of beds utilized therein.
The Hospitals and Specialty Facilities are presently in
substantial compliance with all of the terms, conditions
and provisions of such licenses. The Company will, as
promptly as practicable, make available to Parent at the
request of Parent correct and complete copies of all such
licenses. The facilities, equipment, staffing and
operations of the Hospitals and Specialty Facilities
satisfy the applicable state hospital licensing
requirements in all material respects.
Section 3.12 Opinion of Financial Advisor.
The Company has received the written opinion of Smith
Barney Shearson Inc. to the effect that the Merger
Consideration is fair to the holders of Company Common
Stock from a financial point of view.
Section 3.13 Parent Stock Ownership. Neither
the Company nor any of its Subsidiaries owns any shares of
Parent Common Stock or any securities convertible into
Parent Common Stock.
Section 3.14 Employee Benefit Plans; Labor
Matters. (a) Section 3.14(a) of the Company Disclosure
Schedule sets forth any pension, retirement, savings,
disability, medical, dental, health, life (including any
individual life insurance policy as to which the Company is
the owner, beneficiary or both of such policy), death
benefit, group insurance, profit sharing, deferred
compensation, stock option, bonus, incentive, vacation pay,
severance pay, Internal Revenue Code of 1986, as amended
(the "Code") Section 125 "cafeteria" or "flexible benefit"
plan, or other employee benefit plan, trust, arrangement,
contract, agreement, policy or commitment (including,
without limitation, any employee pension benefit plan (as<PAGE>
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any
employee welfare benefit plan (as defined in Section 3(1)
of ERISA), under which current or former employees of the
Company or its ERISA Affiliates (as defined in Section
3.14(b) below) are entitled to participate by reason of
their employment with the Company or its ERISA Affiliates,
whether or not any of the foregoing is funded, whether
insured or self-funded, and whether written or oral, (i) to
which the Company or its ERISA Affiliates is a party or a
sponsor or a fiduciary thereof or by which the Company or
its ERISA Affiliates (or any of their rights, properties or
assets) is bound or (ii) with respect to which the Company
or its ERISA Affiliates has any obligation to make payments
or contributions or may otherwise have any liability (the
"Employee Benefit Plans"). Any failure to satisfy the
foregoing requirements of this Section 3.14(a) shall not be
considered a breach of the representations contained herein
except to the extent that the existence of any Employee
Benefit Plans which are not listed in Section 3.14(a) of
the Company Disclosure Schedule would, individually or in
the aggregate, result in a Company Material Adverse Effect.
(b) For purposes of this Agreement, "ERISA
Affiliates" shall mean any trade or business (whether or
not incorporated) that is part of the same controlled
group, or under common control with, or part of an
affiliated service group that includes, the Company within
the meaning of Section 414(b), (c), (m) or (o) of the Code.
(c) As used in this Agreement, "Pension Plan"
means any Employee Benefit Plan which is an employee
pension benefit plan as defined in Section 3(2) of ERISA
and "Welfare Plan" means any Employee Benefit Plan which is
defined in Section 3(1) of ERISA.
(d) The following representations are true
with respect to each Employee Benefit Plan, except to the
extent that, if untrue, any such representations, whether
individually or in the aggregate, would not have a Company
Material Adverse Effect.
(i) No Employee Benefit Plan is (A) a
"multiemployer plan" as defined in Section 3(37) of
ERISA, (B) a multiple employer plan subject to the
requirements of Section 413(c) of the Code, (C) a
"defined benefit plan" as defined in Section 3(35) of
ERISA or (D) a plan which is subject to Section 412
of the Code, nor has the Company or any of its ERISA
Affiliates ever had an obligation with respect to any
such Plan, and neither the Company nor any of its<PAGE>
ERISA Affiliates has incurred or reasonably expects
to incur any direct or indirect liability under or by
operation of Title IV of ERISA.
(ii) There are no Employee Benefit Plans
which promise or provide health or life benefits to
retirees or former employees of the Company or its
ERISA Affiliates other than as required by Section
4980B of the Code or Section 601 of ERISA or those
identified in Section 3.14(d)(ii) of the Company
Disclosure Schedule.
(iii) Except as otherwise disclosed in
Section 3.14(d)(iii) of the Company Disclosure
Schedule, each Employee Benefit Plan has been
operated and administered in compliance with the
applicable requirements of ERISA, the Code and any
other applicable law (including regulations and
rulings thereunder), and its terms.
(iv) Each Employee Benefit Plan that is
intended to be tax qualified under Section 401(a) of
the Code has received a favorable determination
letter from the Internal Revenue Service stating that
the Plan meets all the requirements of the Code as of
the date stated in the application for such letter
and that any trust or trusts associated with the plan
are tax exempt under Section 501(a) of the Code. To
the knowledge of the Company, there is no reason why
the qualified status under Section 401(a) of the Code
of any such tax qualified Employee Benefit Plan would
be denied or revoked, whether retroactively or
prospectively, by any governmental agency including
the Internal Revenue Service or the United States
Department of Labor. All amendments to the Employee
Benefit Plans which were required to be made through
the date hereof and the Effective Time to maintain
the continued qualified status of such Employee
Benefit Plans under Section 401(a) of the Code
subsequent to the issuance of each Plan's
determination letter have been made, including all
amendments required to be made by each respective
date by the Tax Reform Act of 1986 and any other tax
acts or legislation affecting such Employee Benefit
Plans, except for such amendments for which the
remedial amendment period of Section 401(b) of the
Code has not expired. Except as set forth in Section
3.14(d)(iv) of the Company Disclosure Schedule, there
is no amendment which needs to be made, and no
provision or amendment to the Employee Benefit <PAGE>
Plan(s) which adversely affects the continued
qualified status of such Plan(s) under Section 401(a)
of the Code.
(v) Except as set forth in Section 3.14(d)(v)
of the Company Disclosure Schedule, to the knowledge
of the Company, no actual or threatened disputes,
lawsuits, claims (other than routine claims for
benefits), investigations, audits or complaints to,
or by, any person or governmental entity have been
filed with respect to the Employee Benefit Plans or
the Company or its ERISA Affiliates in connection
with any Employee Benefit Plan or the fiduciaries
responsible for such Employee Benefit Plans, and to
the knowledge of the Company, no state of facts or
conditions exist which could subject the Company or
its ERISA Affiliates to any liability (other than
routine claims for benefits) under the terms of the
Plan or applicable law.
(vi) All contributions made or deemed to have
been made to each Pension Plan are presently, and
have been during the years to which they relate,
fully deductible pursuant to Section 404 of the Code
and are not presently, and have never been during the
years to which they relate, subject to any excise tax
under Section 4972 of the Code.
(vii) All group health Employee Benefit Plans
have been operated in compliance with the group
health plan continuation coverage requirements of
Section 4980B of the Code to the extent such
requirements are applicable.
(viii) Except as otherwise disclosed in
Section 3.14(d)(viii) of the Company Disclosure
Schedule, the following clauses are true with respect
to each Employee Benefit Plan:
(A) The Company and each of its ERISA
Affiliates is in compliance with the reporting and
disclosure requirements of ERISA and the Code and the
regulations thereunder with respect to each such
Employee Benefit Plan, and neither the Company nor
any of its ERISA Affiliates has incurred any
liability in connection with such requirements.
(B) Neither the Company nor any of its
ERISA Affiliates has made, or committed to make,
whether written, oral or through other
representation, any payment, contribution or award to<PAGE>
or under any Employee Benefit Plan (other than as
required by its terms, the Code or ERISA and other
than pursuant to the ESOP Agreement).
(C) Except as set forth in Section
3.14(d)(viii) of the Company Disclosure Schedule, the
following statements are true: there are no
delinquent contributions or payments to or in respect
of any Employee Benefit Plan; there are no unfunded
liabilities as of the Effective Time associated with
any Employee Benefit Plan that is a Pension Plan
qualified under Section 401(a) of the Code; as of the
Effective Time, all payments of outstanding
contributions, due on or prior to that date, shall
have been made with respect to each and every
Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code or any trust that is
intended to be tax-exempt under Section 501 of the
Code and that is maintained in connection with an
Employee Benefit Plan; and all contributions to and
payments with respect to or under the Employee
Benefit Plans that are required to be made with
respect to periods ending on or before the Effective
Time (including periods from the first day of the
then current plan or policy year to the Effective
Time) have been made or accrued before the Effective
Time by the Company in accordance with the
appropriate plan documents, financial statement,
collective bargaining agreements or insurance
contracts or arrangements.
(D) With respect to each such Employee
Benefit Plan, the Company shall deliver to Parent as
soon as possible upon the request of Parent true and
complete copies of the following documents to the
extent in each case that such documents exist or are
required by law:
(1) current plan documents,
subsequent plan amendments, or any and all
other documents that establish or describe the
existence of the plan, trust, arrangement,
contract, policy or commitment;
(2) current summary plan
descriptions and summaries of material
modifications;
<PAGE>
(3) the most recent tax qualified
determination letters, if any, received from
or applications pending with the Internal
Revenue Service;
(4) the three most recent Form
5500 Annual Reports, including related
schedules and audited financial statements and
opinions of independent certified public
accountants;
(5) all related trust agreements,
insurance contracts or other funding
agreements that implement each such Employee
Benefit Plan;
(6) the three most recent Form 990
and Form 1041 reports relating to any trust or
account maintained in connection with any
Employee Benefit Plan;
(7) with respect to each 401(k)
Plan: nondiscrimination testing results and
the most recent annual and quarterly or
monthly valuations; and
(8) a schedule of any penalties
and/or fines levied, imposed or assessed
during the preceding 5 calendar years by the
Internal Revenue Service and/or the United
States Department of Labor on the Company or
its ERISA Affiliates or in connection with any
Employee Benefit Plan; such schedule shall
indicate (1) the amount of such penalty and/or
fine and (2) the amount of such penalty or
fine, if any, outstanding as of the Effective
Time.
(ix) Each trust fund associated with a
Welfare Plan that is established under Section
501(c)(9) of the Code and is intended to be tax-
exempt under Section 501(a) of the Code (a "VEBA")
has received a favorable determination letter from
the Internal Revenue Service stating that the trust
fund is so exempt. To the knowledge of the Company,
there is no reason why the tax-exempt status under
Section 501(a) of the Code of any such VEBA would be
denied or revoked, whether retroactively or
prospectively, by any governmental agency, including
without limitation the Internal Revenue Service and<PAGE>
the United States Department of Labor. Each VEBA has
Satisfied all applicable requirements of Section 419,
419A and 505 of the Code, and neither the Company nor
any Subsidiary has become subject to any excise tax
under Section 4976 of the Code.
(x) Except as otherwise disclosed in Section
3.14(d)(x) of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate is
subject to any liability with respect to any
"employee benefit plan" as defined in Section 3(3) of
ERISA, or with respect to any other plan, trust,
arrangement, contract, agreement, policy or
commitment maintained for the purpose of providing
compensation or benefits to any current or former
employees of the Company or its ERISA Affiliates, in
either such case that has been terminated or
otherwise discontinued.
(xi) Except as otherwise disclosed in Section
3.14(d)(xi) of the Company Disclosure Schedule, the
benefits to be provided to participants under each
Welfare Plan are to be provided exclusively from the
general assets of the Company or through insurance
contracts, or a combination thereof.
(xii) Except as otherwise disclosed in
Section 3.14(d)(xii) of the Company Disclosure
Schedule, the benefits to be provided to participants
under each Pension Plan, other than a tax qualified
Pension Plan under Code Section 401(a), are to be
provided exclusively from the general assets of the
Company.
(xiii) Except as set forth in Section
3.14(d)(xiii) of the Company Disclosure Schedule,
with respect to each Employee Benefit Plan, there has
not occurred, and no person or entity is
contractually bound to enter into, any nonexempt
"prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA.
(xiv) The audited financial statements, if
any, for each Employee Benefit Plan and any
underlying trust fairly reflect the net assets
available for plan benefits and changes in net assets
of the Employee Benefit Plan as of the date of such
financial statements, and, to the knowledge of the
Company, no adverse change has occurred with respect
to the net assets available for plan benefits with<PAGE>
respect to the Employee Benefit Plan since the date
of such financial statements.
(xv) Except as otherwise disclosed in Section
3.14(d)(xv) of the Company Disclosure Schedule, the
following clauses are true with respect to the ESOP:
(A) The ESOP constitutes an "employee
stock ownership plan," as defined in Section
4975(e)(7) of the Code and the Treasury Regulations
promulgated thereunder, and as defined in Section
407(d)(6) of ERISA, except as otherwise contemplated
pursuant to the ESOP Agreement.
(B) Each of the loans to the trust
created pursuant to a Trust Agreement between Group
and the ESOP Trustee, dated as of September 30, 1988
(the "ESOP Trust"), pursuant to the ESOP Loan
Agreement and the Substitute ESOP Loan Agreement,
each between Group and the ESOP Trustee and dated as
of September 30, 1988 and July 30, 1991, respectively
(collectively, the "ESOP Loan Agreements"), and each
of the pledges of shares of common stock, par value
$.01 per share, of Group (the "Group Common Stock"),
by the ESOP Trust pursuant to the Pledge Agreement
and the Amendment to ESOP Pledge Agreement, each
between Group and the ESOP Trust and dated as of
September 30, 1988 and July 30, 1991, respectively
(collectively, the "ESOP Pledge Agreements"),
satisfies the requirements of Section 4975(d)(3) of
the Code and Section 408(b)(3) of ERISA, and has not
and will not subject Group or the Company to a tax
imposed under Section 4975 of the Code or a civil
penalty assessed under Section 502(i) of ERISA.
(C) The Group Common Stock and the
Company Common Stock each have satisfied the
definition, for all relevant periods, of a
"qualifying employer security," within the meaning
of Section 4975(e)(8) of the Code and Section
407(d)(5) of ERISA.
(D) The sales of shares of Group Common
Stock to the ESOP Trust pursuant to the Subscription
Agreement between Group and the ESOP Trustee, dated
as of September 30, 1988 (the "ESOP Subscription
Agreement"), satisfies the requirements of Section
4975(d)(13) of the Code and Section 408(e) of ERISA,
and such sale has not and will not subject Group or <PAGE>
the Company to a tax imposed under Section 4975 or
the Code of a civil penalty assessed under Section
502(i) of ERISA.
(E) None of the transactions contemplated
by the ESOP Agreement will constitute a violation or
result in any liability under ERISA or the Code
(including, without limitation, any tax under
Sections 4975 or 4978B of the Code).
(F) No opinion, correspondence or other
communication, whether written or otherwise, shall
have been received by Group, the Company or any of
their respective agents, affiliates, associates,
officers or directors, or any fiduciary of the ESOP,
from the United States Department of Labor, the
Internal Revenue Service or any other Federal or
State governmental or regulatory agency, body or
authority, which the Company has determined, in its
sole and absolute discretion, to be unsatisfactory,
to the effect that either of the loans to the ESOP
Trust pursuant to the ESOP Loan Agreements, either of
the pledges of shares of Company Common Stock by the
ESOP Trust pursuant to the ESOP Pledge Agreements or
the sale of shares of Group Common Stock to the ESOP
Trust pursuant to the ESOP Subscription Agreement may
or will constitute a violation of or result in any
liability under ERISA or the Code.
(e) Except as set forth in Section 3.14(e) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries is a party to any collective
bargaining or other labor union contracts applicable to any
person employed by the Company or its Subsidiaries. Except
as set forth in Section 3.14(e) of the Company Disclosure
Schedule, there is no pending or, to the knowledge of the
Company, threatened labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries, except as
would not, individually or in the aggregate, have a Company
Material Adverse Effect. Except as set forth in Section
3.14(e) of the Company Disclosure Schedule, to the
knowledge of the Company, neither the Company nor its
Subsidiaries, nor their respective representatives or
employees, has committed any unfair labor practices in
connection with the operation of the respective businesses
of the Company or its Subsidiaries, and there is no pending
or, to the knowledge of the Company, threatened charge or
complaint against the Company or its Subsidiaries by the
National Labor Relations Board or any comparable state
agency, in each case, except as would not, individually or <PAGE>
in the aggregate, have a Company Material Adverse Effect.
The Company and all of its Subsidiaries are in compliance
with all applicable laws respecting employment, consulting,
employment practices, wages, hours, and terms and
conditions of employment, except as would not, individually
or in the aggregate, have a Company Material Adverse
Effect. Except as otherwise disclosed in Section 3.14(e)
of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has closed any facility,
effectuated any layoffs of employees or implemented any
early retirement incentive program, nor has the Company or
any of its Subsidiaries planned or announced any such
action or program for the future, in each case, other than
those which would not, individually or in the aggregate,
have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has had a "plant
closing" or "mass layoff" within the meaning of the Worker
Adjustment and Retraining Notification Act, 29 U.S.C.
Section 2101 et seq. ("WARN"), except as would not,
individually or in the aggregate, have a Company Material
Adverse Effect.
(f) Section 3.14(f) of the Company Disclosure
Schedule sets forth all written employment agreements,
employment contracts or, to the knowledge of the Company,
understandings relating to employment to which the Company
or any of its Subsidiaries is a party, other than the
Master Severance Agreement, dated as of the date hereof,
between Parent and the Company (the "Master Severance
Agreement") and the release agreements contemplated thereby
and other than the general employment of employees pursuant
to an at-will understanding, in each case with respect to
(i) officers or directors of the Company or any of its
Subsidiaries or (ii) the executive directors of any of the
Hospitals or Specialty Facilities. Copies of all such
agreements have previously been delivered to Parent. Any
failure to satisfy the foregoing requirements of this
Section 3.14(f) shall not be considered a breach of the
representations contained herein except to the extent that
the existence of any agreements which are not listed in
Section 3.14(f) of the Company Disclosure Schedule would,
individually or in the aggregate, result in a Company
Material Adverse Effect.
Section 3.15 Brokers. No broker, finder or
investment banker (other than Smith Barney Shearson Inc.)
is entitled to any brokerage, finder's or other fee or
commission payable by the Company in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of <PAGE>
its Subsidiaries. The Company will not pay to Smith Barney
Shearson Inc. any fees in excess of $2,250,000 in the
aggregate plus reasonable expenses (including reasonable
attorney's fees not to exceed $25,000 in the aggregate)
plus a retainer as previously disclosed to Parent in
connection with the transactions contemplated by this
Agreement.
Section 3.16 Related Party Transactions.
Except as listed in Section 3.16 of the Company Disclosure
Schedule, since September 30, 1993, there have been no
material transactions between the Company or any of its
Subsidiaries on the one hand, and any (i) officer or
director of the Company or any of its Subsidiaries, (ii)
record or beneficial owner of five percent or more of the
voting securities of the Company, or (iii) affiliate (as
such term is defined in Regulation 12b-2 promulgated under
the Exchange Act) of any such officer, director or
beneficial owner, on the other hand, other than payment of
compensation for services rendered to the Company or any of
its Subsidiaries pursuant to the employment agreements
listed in Section 3.14 of the Company Disclosure Schedule
as in effect on the date hereof.
Section 3.17 Corporate Records. The minute
books of the Company and its Subsidiaries accurately
reflect in all material respects all actions taken to this
date by the stockholders, board of directors and committees
of the board of directors of the Company and its
Subsidiaries. The stock certificate books and records of
the Company and its Subsidiaries accurately reflect on the
date hereof, and will accurately reflect as of the
Effective Time, the ownership of the Company Common Stock
and the capital stock (or other ownership interests) of the
Company's Subsidiaries by the persons and in the amounts
set forth in Section 3.02(b) of the Company Disclosure
Schedule.
Section 3.18 Accounting Records. The Company
and its Subsidiaries maintain accounting records which
fairly and validly reflect, in all material respects, their
transactions and maintain accounting controls sufficient to
provide reasonable assurances that such transactions are,
in all material respects, (i) executed in accordance with
management's general or specific authorization, and (ii)
recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted
accounting principles.
<PAGE>
Section 3.19 Environmental Matters. (a)
Except as disclosed in the applicable subsection of Section
3.19 of the Company Disclosure Schedule and except for
those matters which, considered either individually or
collectively, have not, individually or in the aggregate,
had and would not, individually or in the aggregate, have a
Company Material Adverse Effect, (i) the Company and each
of its Subsidiaries and each of their businesses,
operations and Properties comply with all Environmental
Laws; (ii) the Company and each of its Subsidiaries have
obtained all Environmental Permits necessary for the
ownership and operation of their respective businesses,
operations and Properties, and all such Environmental
Permits are in good standing and are not the subject of any
modification or revocation proceeding, and the Company and
each of its Subsidiaries are in compliance with all terms
and conditions of such Environmental Permits, and, to the
Company's knowledge, all such Environmental Permits are
valid; (iii) neither the Company nor any of its
Subsidiaries nor any of their businesses, operations or
Properties is the subject of any outstanding written order,
judgment, writ, decree, injunction, citation, directive, or
summons of, or agreement or settlement with, any
Governmental Entity or other person respecting (A) any
alleged or asserted violation of or noncompliance with
Environmental Laws, (B) any Remedial Actions, or (C) any
Environmental Claims arising from the Release or threat of
Release of a Contaminant; (iv) neither the Company nor any
of its Subsidiaries is a party, defendant or respondent in
any pending judicial or administrative proceeding alleging
a violation of any Environmental Law, or asserting any
Environmental Claim arising from the Release or threat of
Release of a Contaminant or relating to any Remedial
Action; (v) to the Company's knowledge, none of the
businesses, operations or Properties of the Company or any
of its Subsidiaries is the subject of any investigation by
any Governmental Entity (other than periodic and ordinary
inspections) evaluating any alleged or asserted violation
of or noncompliance with any Environmental Law, including,
without limitation, a determination whether any Remedial
Action is needed with respect to a Release or threatened
Release of any Contaminant; (vi) neither the Company nor
any Subsidiary of the Company has filed any written notice
under any Environmental Law indicating past or present
treatment, storage or disposal of a hazardous waste or
solid waste or reporting a spill or Release of a
Contaminant into the environment under any Environmental
Law; (vii) to the Company's knowledge, neither the Company
nor any Subsidiary of the Company has any contingent
liability in connection with any Release or threat of <PAGE>
Release of any Contaminant at any location; (viii) neither
the Company nor any Subsidiary of the Company has received
any written notice or claim or is otherwise aware of any
notice or claim concerning (A) any alleged violation of any
Environmental Law, (B) any alleged liability of the Company
or any of its Subsidiaries for any Environmental Claim, or
(C) any alleged liability of the Company or any of its
Subsidiaries arising out of or related to the Release or
threat of Release of a Contaminant at any location; (ix)
neither the Company nor any of its Subsidiaries has engaged
in or permitted any generation, storage, transportation,
treatment, recycling, reclamation, handling, use or
disposal of any Contaminant, except in compliance with
Environmental Laws; (x) neither the Company nor any of its
Subsidiaries has disposed of or released any Contaminant at
any of the Properties and, to the Company's knowledge,
neither has any prior owner or operator or other person;
(xi) none of the Company's or any of its Subsidiaries'
Properties contain, or, to the Company's knowledge, have
ever contained, any underground storage tanks, surface
impoundments, asbestos-containing materials or
polychlorinated biphenyls; (xii) no Environmental Lien in
favor of any Governmental Entity has been filed or attached
to any of the Properties and, to the Company's knowledge,
there are no conditions or facts in existence that with the
passage of time could give rise to the filing or attachment
of such an Environmental Lien; (xiii) none of the
Properties is listed or proposed for listing on the
National Priorities List ("NPL") pursuant to the
Comprehensive Environmental Response, Compensation and
Liability Act or any similar state or foreign list of
sites, and none of the Major Properties is listed on the
Comprehensive Environmental Response Compensation and
Liability Information System List ("CERCLIS") or any
similar state or foreign list of sites; (xiv) to the
Company's knowledge, no Contaminant has migrated from any
of the Properties onto or underneath other properties, nor
has any Contaminant migrated from other properties upon,
about or beneath any of the Properties; (xv) neither the
Company nor any of its Subsidiaries has received or is
otherwise aware of any written notice, claim or other
communication alleging liability on the part of the Company
or any of its Subsidiaries, and to the Company's knowledge,
neither the Company nor any of its Subsidiaries has any
liability, for the violation of any Environmental Law, for
any Environmental Claim, or for the Release or threatened
Release of any Contaminant in connection with any
businesses, operations or properties previously owned or
operated by the Company or any of its Subsidiaries or any
predecessors thereto.
<PAGE>
(b) Prior to the Closing Date, the Company
and its Subsidiaries shall have complied fully with all
Environmental Notice Requirements, and any related
Environmental Permits shall have been issued, and at
Parent's request, the Company shall have furnished to
Parent documentation of the Company's and its Subsidiaries'
compliance with such Environmental Notice Requirements and
copies of such related Environmental Permits, except where
the failure to so comply or to have obtained such
Environmental Permits would not have a Company Material
Adverse Effect.
(c) No later than fifteen (15) business days
following Parent's request, the Company shall have provided
written notice to Parent of each financial responsibility
requirement issued by any governmental authority pursuant
to 42 U.S.C. 6991b(c)(6) or any state or local equivalents
applicable to the businesses, operations or Properties of
the Company and each of its Subsidiaries. Any failure to
satisfy the requirements of this Section 3.19(c) shall not
be considered a breach of the representations contained
herein except to the extent that the failure to provide
such notice would not, individually or in the aggregate,
result in a Company Material Adverse Effect.
"Contaminant" means those substances,
materials, articles and items, in any form, whether solid,
liquid, gaseous, semisolid or any combination thereof,
whether waste materials, raw materials, chemicals, finished
products, by products or any other substance, material,
article or item, which are regulated by or form the basis
of liability under any applicable Environmental Law,
including, without limitation, hazardous wastes, hazardous
substances, pollutants, contaminants, toxic substances,
infectious waste, medical waste, special waste, asbestos,
polychlorinated biphenyls, petroleum (including, but not
limited to, crude oil, petroleum-derived substances, waste
or breakdown or decomposition products thereof or any
fraction thereof) and radioactive substances.
"Environmental Claim" means any written notice
of violation (including, without limitation, any notice of
expenditures necessary to come into compliance with or
maintain compliance with, any Environmental Law or
Environmental Permit), claim (whether based on strict
liability or otherwise), judgment, encumbrance, lien,
settlement, citation, demand, abatement, order or direction
(conditional or otherwise) by any Governmental Entity or
other person for personal injury or death, toxic tort,
tangible or intangible property damage, damage to the <PAGE>
environment, trespass, damage to natural resources,
nuisance, pollution, contamination or other adverse effects
on the environment, or for fines, penalties or
prohibitions, arising out of, related to, resulting from or
based upon (a) the existence, or the continuation of the
existence, of a Release or a threatened Release of any
Contaminant, odor or audible noise, (b) the environmental
aspects of the transportation, storage, treatment,
disposal, generation, recycling, reclamation, use or
handling of any Contaminants or other materials in
connection with the businesses, operations or properties,
or (c) the violation, or alleged violation, of any
Environmental Law by the Company or any of its
Subsidiaries.
"Environmental Damages" means all claims,
judgments, damages (including punitive damages), losses,
penalties, fines, interest, fees, liabilities (including
strict liability), encumbrances, liens, costs, and expenses
of investigation and defense of any Environmental Claim,
whether or not such Environmental Claim is ultimately
defeated, and of any good faith settlement or judgment, of
whatever kind or nature, contingent or otherwise, matured
or unmatured, foreseeable or unforeseeable, including,
without limitation, reasonable attorneys' fees and
disbursements and consultants' fees, any of which are
incurred at any time as a result of the existence of
Contaminants or noncompliance with any Environmental Law.
"Environmental Laws" means all applicable
federal, state, local or foreign laws, statutes, codes,
ordinances, rules, regulations, Environmental Permits,
judgments, orders, decrees or settlements relating to the
environment, natural resources, safety, health or the
regulation of Contaminants, including, without limitation,
the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"),
the Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Resource Conservation and
Recovery Act 42U.S.C. Section 6901 et seq.) ("RCRA"), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean
Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), the
Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq.), the Safe Drinking Water Act
(42 U.S.C Section 201 and Section 300f et seq.), The Rivers
and Harbors Act (33 U.S.C. Section 401 et seq.), The Oil
Pollution Act (33 U.S.C. Section 2701 et seq.) and the <PAGE>
Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.), as such laws, statutes, codes, ordinances, rules,
regulations, Environmental Permits, judgments, orders,
decrees and settlements have been and may be amended or
supplemented from time to time, and any analogous future
enacted or adopted federal, state, local or foreign laws,
statutes, codes, ordinances, rules, regulations,
Environmental Permits, judgments, orders, decrees and
settlements.
"Environmental Lien" means a Lien in favor of
any Governmental Entity for (i) liability under
Environmental Laws or (ii) damages arising from, or costs
incurred by such Governmental Entity in response to, a
Release or threatened Release of a Contaminant.
"Environmental Notice Requirements" means
requirements under any Environmental Law which are
applicable to the transactions contemplated by this
Agreement and which require notification, registration or
filing of information pertaining to such transactions, the
Properties, and/or the parties to such transactions, to or
with any governmental authority or Parent, including,
without limitation, any Environmental Permit transfer or
modification requirements and any so-called "environmental
cleanup responsibility acts."
"Environmental Permit" means any permit,
approval, authorization, registration, license, variance or
permission required from a Governmental Entity having
jurisdiction under an applicable Environmental law.
"Major Properties" means the Hospitals and the
Specialty Facilities.
"Properties" means all real or personal
property of any kind or description presently owned,
leased, operated or under the control of the Company or any
of its Subsidiaries.
"Release" means any release, spill, emission,
leaking, pumping, emptying, dumping, injection,
abandonment, deposit, disposal, discharge, dispersal,
leaching or migration of any Contaminant (including, but
not limited to, the abandonment or discarding of
Contaminants in barrels, drums or other containers) into
the indoor or outdoor environment or into or out of any
real property, including the movement of Contaminants,
into, under, on, through or in the air, soil, subsurface <PAGE>
strata, surface water, groundwater, drinking water supply,
any sediments associated with any water bodies or any other
environmental medium.
"Remedial Action" means all actions required
to: (i) clean up, remove, treat, dispose of or in any
other way remolded or undertake corrective action with
respect to Contaminants in the indoor or outdoor
environment; (ii) prevent, mitigate or minimize the Release
or threat of Release of Contaminants; or (iii) perform pre-
remedial studies and investigations and post-remedial
monitoring and care in respect of actions contemplated in
the preceding clauses (i) and (ii).
Section 3.20 Tax Matters.
(a) For purposes of this Agreement, "Taxes"
means any federal, state, county, local or foreign taxes,
charges, fees, levies, or other assessments, including,
without limitation, all net income, gross income, sales and
use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt,
capital stock, business and occupation, disability,
employment, payroll, license, estimated, or withholding
taxes or charges imposed by any governmental entity, and
includes any interest and penalties (civil or criminal) on
or additions to any such taxes.
(b) For purposes of this Agreement, "Tax
Return" means a report, return or other information
required to be supplied to a governmental entity with
respect to Taxes including, where permitted or required,
combined or consolidated returns for any group of entities
that includes the Company or any of its Subsidiaries.
(c) Except as disclosed in Section 3.20 (c)
of the Company Disclosure Schedule, the Company and each of
its Subsidiaries have (i) filed all Tax Returns required to
be filed by applicable law and all such Tax Returns were in
all respects (and, as to Tax Returns not filed as of the
date hereof but filed on or before the Closing Date, will
be) true, complete and correct and filed on a timely basis
and (ii) within the time and in the manner prescribed by
law, paid (and until the Closing Date will pay within the
time and in the manner prescribed by law) all Taxes that
are were or are due and payable, except to the extent that
the failure to file a Tax Return or Tax Returns, the
failure of a Tax Return or Tax Returns to be true, correct
and complete or the failure to pay Taxes due and payable
would not, individually or in the aggregate, have a Company
Material Adverse Effect.<PAGE>
(d) The Company has established (and until
the Closing Date will maintain) on their books and records
reserves adequate to pay all Taxes of the Company and each
of its Subsidiaries not yet due and payable in accordance
with generally accepted accounting principles ("GAAP")
which are reflected in the Company Financial Statements to
the extent required by GAAP.
(e) Except as disclosed in Section 3.20(e) of
the Company Disclosure Schedule, as of the date hereof,
there are no, and, as of the Closing Date, there will be no
Tax liens upon the assets of the Company or any of its
Subsidiaries except (i) liens for Taxes not yet due or (ii)
liens for Taxes which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
(f) Except as disclosed in Section 3.20(f) of
the Company Disclosure Schedule, the Company and each of
its Subsidiaries have complied (and until the Closing Date
will comply) in all material respects with the provisions
of the Code relating to the payment and withholding of
Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through
1464, 3401 through 3406, and 6041 through 6049, as well as
similar provisions under any other laws, and have, within
the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental
authorities all amounts required, except for those payment,
withholding and reporting obligations which, individually
or in the aggregate, would not have a Company Material
Adverse Effect.
(g) Except as disclosed in Section 3.02(g) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has requested any extension of time
within which to file any federal income Tax Return or any
material state or local income or franchise Tax Return,
which Tax Return has not been filed as of the date hereof.
(h) Except as disclosed in Section 3.20(h) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has executed any outstanding
waivers or comparable consents regarding the application of
the statute of limitations with respect to any federal
income taxes, federal income Tax Returns, material state or
local income or franchise taxes or material state or local
income or franchise Tax Returns.
(i) The statute of limitations for the
assessment of all Taxes has expired for all applicable <PAGE>
federal income Tax Returns of the Company and each of its
Subsidiaries for all periods through September 30, 1989.
Those federal income Tax Returns for which the statute of
limitations has not yet expired have been examined by the
Internal Revenue Service for all periods through September
30, 1989.
(j) Except as provided in Section 3.20(j) of
the Company Disclosure Schedule, no deficiency for any
Taxes has been proposed, asserted or assessed against the
Company or any of its Subsidiaries that has not been
resolved and paid in full or otherwise settled, no audits
or other administrative proceedings or court proceedings
are presently in progress or pending (or, to the knowledge
of EPIC Healthcare Management Company, threatened) with
regard to any material Taxes or material Tax Returns of the
Company or any of its Subsidiaries, and no claim is
currently being made by any authority in a jurisdiction
where any of the Company and its Subsidiaries does not file
Tax Returns that it is or may be subject to Tax in that
jurisdiction.
(k) Except as disclosed in Section 3.20(k) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has received a Tax Ruling (as
defined below) or entered into a Closing Agreement (as
defined below) with the Internal Revenue Service that would
have any continuing effect after the Closing Date. "Tax
Ruling" shall mean a written ruling of a taxing authority
relating to Taxes. "Closing Agreement" shall mean a
written and legally binding agreement with a taxing
authority relating to Taxes.
(l) The Company and its Subsidiaries have
made available (or, in the case of federal income Tax
Returns filed after the date hereof, will make available)
to Parent complete and accurate copies of all federal
income Tax Returns, and amendments thereto, filed by the
Company's consolidated group for all taxable years ending
on or prior to the Closing Date.
(m) No agreements relating to allocating or
sharing of Taxes exist among the Company and any of its
Subsidiaries.
(n) None of the Company, any Subsidiary
formed by the Company, any Subsidiary not formed by the
Company during the period such entity was a Subsidiary of
the Company, or, to the knowledge of EPIC Healthcare
Management Company, any Subsidiary not formed by the <PAGE>
Company for periods prior to such entity becoming a
Subsidiary of the Company, has filed (or will file prior to
the Closing) a consent pursuant to Code Section 341(f) or
has agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as that term is
defined in Code Section 341(f)(4)) owned by the Company or
any of its Subsidiaries.
(o) No property of the Company, no property
of any of Subsidiary formed by the Company, no property of
any Subsidiary not formed by the Company acquired by the
Subsidiary during the period such entity was a Subsidiary
of the Company, and, to the knowledge of EPIC Healthcare
Management Company, no property of any Subsidiary not
formed by the Company acquired during periods prior to such
entity becoming a Subsidiary of the Company, is property
that the Company or any Subsidiary or any party to this
transaction is or will be required to treat as being owned
by another person pursuant to the provisions of Code
Section 168(f)(8) (as in effect prior to its amendment by
the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168.
(p) Neither the Company nor any of its
Subsidiaries is required to include in income any
adjustment pursuant to Code Section 481(a) by reason of a
voluntary change in federal income tax accounting method
(other than a change of federal income tax accounting
method required as a result of a change in law) initiated
by the Company or any of its Subsidiaries, and to the
knowledge of the Company, the Internal Revenue Service has
not proposed any such adjustment or change in accounting
method.
(q) Neither the Company nor any of its
Subsidiaries is a party to any agreement, contract, or
arrangement, other than the Master Severance Agreement and
the employment agreements with Kenneth S. George, W.
Theodore Shaw, Stanley F. Baldwin, S. Kent Fannon, Thomas
L. Rine, D. Stephen Hall, Gary E. Griffith and W. Warren
Wilkey listed in Section 3.14(f) of the Company Disclosure
Schedule, that would require the Company to make any gross-
up payments with respect to any Taxes or otherwise
indemnify or hold harmless any employee with respect to any
Taxes.
(r) The Company has made available to Parent
all relevant information with respect to the federal income
tax net operating loss carryovers and federal income tax
credit carryovers of the Company and its Subsidiaries as of
September 30, 1992, based on the federal income Tax Returns
filed by the Company as of such date as adjusted pursuant
to the audit by the Internal Revenue Service of the
Company's consolidated federal income Tax Return for the
taxable year ended September 30, 1989, which information
indicates that as of such date the net operating loss
carryovers were approximately $63,000,000 and the federal
income tax credit carryovers were approximately $253,000.
The Company has also made available to Parent its estimate
of taxable federal income or loss, as the case may be, and
federal income tax credits, with respect to the Company and
its Subsidiaries as calculated for purposes of GAAP tax
provisions for the taxable year ending September 30, 1993.
Section 3.20(r) of the Company Disclosure Schedule sets
forth, based on the federal income Tax Returns filed by the
Company as of September 30, 1992 as adjusted pursuant to
the audit by the Internal Revenue Service of the Company's
consolidated federal income Tax Return for the taxable year
ended September 30, 1989, the approximate amount of the
Company's net operating loss carryovers and the approximate
amount of the Company's tax credit carryovers.
(s) All material elections that have been
made with respect to federal income tax affecting the
Company or any of its Subsidiaries that were not part of
the federal income Tax Returns made available to Parent
pursuant to subsection (l) hereof (including, without
limitation, any election under Code Section 338), whether
or not currently in effect, are set forth in Section
3.20(s) of the Company Disclosure Schedule.
(t) Except as set forth in Section 3.20(t) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has been an "includible
corporation" in an "affiliated group of corporations" with
a "common parent corporation" other than the Company or
American Medical International, Inc. ("AMI"), within the
meaning of Code Section 1504.
(u) Fifty percent of the interest income
received by the holders of (i) the "Tranche B Loans" made
pursuant to the Credit Agreement among Group, various Banks
and Swiss Bank Corporation, New York Branch, as Agent and
General Electric Capital Corporation, as Co-Agent, dated as
of September 30, 1988; (ii) the Class 1 First Priority
Mortgage Notes of EPIC Properties, Inc., a wholly-owned
Subsidiary of the Company and (iii) the Group Senior ESOP
Notes (collectively, the "ESOP Debt") with respect to the
ESOP Debt is excludable from the gross income of such
holders under Code Section 133, except to the extent the <PAGE>
failure of any such amounts of interest income to be
excludable under Code Section 133 would not, individually
or in the aggregate, have a Company Material Adverse
Effect.
(v) Prior to the Closing Date, the Company
shall notify Parent in writing of any power of attorney
granted by the Company or any of its Subsidiaries
concerning any Tax matter that will be in force as of the
Effective Time.
(w) Prior to the Closing Date, the Company
shall notify Parent in writing of all material intercompany
transactions (within the meaning of Treasury Regulations
Section 1.1502-13) engaged in by the Company and any of its
Subsidiaries for which any income remained unrecognized as
of the close of the last taxable year prior to the Closing
Date.
(x) For the purposes of subsections (c) and
(f) of this Section 3.20, (i) any matter concerning
government revenue accounting issues of the Company or any
of its Subsidiaries, (ii) any matter impacted by the
valuation of Company capital stock, or stock of any
corporation that is a stockholder of the Company, in
connection with any transfers of such stock, (iii) any
matter relating to the definition of employee as regards
the Company or any of its Subsidiaries, and/or (iv) any
matter related to the characterization of supplies of the
Company or any of its Subsidiaries, shall be deemed not to,
individually or in the aggregate, cause a breach of a
representation and warranty under such subsections.
Section 3.21 Properties. (a) Each of the
Company and its Subsidiaries has good fee or leasehold
title to all of its real property, other than property the
failure of which to so own would not, individually or in
the aggregate, have a Company Material Adverse Effect (the
"Material Real Properties"). Except as set forth in the
title insurance policies listed in Section 3.21(a) of the
Company Disclosure Schedule or as otherwise set forth in
Section 3.21(a) of the Company Disclosure Schedule, no
Material Real Property is subject to claims, liens, or
encumbrances whether by mortgage, pledge, lien, conditional
sales agreement, charge or otherwise, except for those
which would not, individually or in the aggregate, have a
Company Material Adverse Effect. Section 3.21(a) of the
Company Disclosure Schedule contains a complete and correct
list of the Material Real Properties. Each of the Company
and its Subsidiaries owns all of its personal property <PAGE>
(except for leased property or assets), other than property
the failure of which to so own would not, individually or
in the aggregate, have a Company Material Adverse Effect.
(b) The Company has previously made available
to Parent complete and correct copies of each lease to
which the Company or any of its Subsidiaries is a party or
any of its properties are bound, except for such leases the
loss of which would not, individually or in the aggregate,
have a Company Material Adverse Effect. A complete and
correct list of each such lease is set forth in Section
3.21(b) of the Company Disclosure Schedule. All of the
leases so listed are valid and subsisting and in full force
and effect with respect to the Company and its Subsidiaries
and, to the Company's knowledge, with respect to any other
party thereto.
Section 3.22 Contracts. Section 3.22 of the
Company Disclosure Schedule sets forth an accurate list of
any of the following to which the Company or any of its
Subsidiaries is a party or by which any of them or their
properties or assets may be bound: (i) any contract,
commitment or agreement involving a partnership, joint
venture or similar arrangement, (ii) any contract,
commitment or agreement in which rights or obligations
change upon a change in control of the Company or any of
its Subsidiaries and which has not been filed as an exhibit
to any Company SEC Document, and (iii) any secrecy, non-
compete or other agreement which (A) restricts the right of
the Company, its Subsidiaries or any of their respective
officers or employees to engage in any type of business or
activity (other than any such agreement of which the
Company or any of its Subsidiaries is a beneficiary) or (B)
would restrict in any manner the right of Parent or any of
its Subsidiaries to engage in any type of business or
activity after the consummation of the transactions
contemplated by this Agreement (collectively, the "Material
Contracts"). The Company has previously delivered to
Parent complete and correct copies of all Material
Contracts. All Material Contracts are in full force and
effect and, to the knowledge of the Company, no default or
breach exists by any other party to a Material Contract and
no such other party intends to terminate or modify a
Material Contract.
Section 3.23 Insurance; Malpractice. (a)
The Company has previously delivered to Parent correct and
complete copies of all material documents relating to self
insurance and third party administration. The Company has
previously delivered to Parent correct and complete copies <PAGE>
of the audited annual financial statements for the fiscal
year ended September 30, 1992 and the unaudited quarterly
financial statements since September 30, 1992 and through
the fiscal quarter ended June 30, 1993 (together with all
related notes, exhibits and schedules thereto, the "NISC
Statements") of Nenelani Insurance Services Corporation
("NISC") filed with the Department of Insurance of the
State of Hawaii (the "Hawaii Department"). Such statements
(i) were prepared from the books of account and other
financial records of NISC, (ii) were prepared in accordance
with generally accepted accounting principles applied on a
basis consistent with the past practices of NISC (except as
set forth in the notes, exhibits or schedules thereto)
pursuant to the requirements of the insurance regulatory
authority in the State of Hawaii, and complied on their
respective dates of filing or submission in all material
respects with applicable law, (iv) present fairly the
financial position, results of operations and cash flows of
NISC as of the dates thereof or for the periods covered
thereby (subject, in the case of quarterly statements, to
normal recurring audit adjustments). To the knowledge of
the Company, all reserves and other liabilities reflected
in the NISC Statements ("Reserve Liabilities") (i) were
determined in accordance with commonly accepted actuarial
standards consistently applied, (ii) were fairly stated in
accordance with sound actuarial principles, (iii) met the
requirements of the insurance laws of the State of Hawaii
and any other applicable law in all material respects and
(iv) reflected (on a net basis) in all material respects
any related reinsurance, coinsurance and other similar
agreements of NISC. To the Company's knowledge, the
Company's actuary was provided with all claims data and
other information required to perform its actuarial
analysis and produce the actuarial studies delivered to
Parent, and all information so provided was complete and
correct in all material respects. Adequate provision for
all such Reserve Liabilities has been made (under commonly
accepted actuarial principles consistently applied) to
cover the total amount of all reasonably anticipated
matured and unmatured benefits, claims and other
liabilities of NISC on the respective dates of the NISC
Statements based on commonly accepted actuarial assumptions
as to future contingencies which are reasonable and
appropriate under the circumstances, except as would not,
individually or in the aggregate, result in a Company
Material Adverse Effect.
(b) Section 3.23 of the Company Disclosure
Schedule sets forth a complete and correct list of all
material insurance policies currently in force insuring <PAGE>
against risks of the Company and its Subsidiaries, and the
Company has previously delivered to Parent copies of its
directors and officers insurance policies for the fiscal
year ended September 30, 1993 and the binder for such
policies for the fiscal year ending September 30, 1994, the
NISC policy and, with respect to the other policies listed
in Section 3.23 of the Company Disclosure Schedule, has
previously delivered to Parent true and correct schedules
listing the name of carrier, policy coverage, policy limits
and deductibles. The Company and its Subsidiaries are in
compliance with the terms of such policies and there are no
claims by the Company or any of its Subsidiaries under any
such policy as to which any insurance company is denying
liability or defending under a reservation of rights
clause, in each case except as would not, individually or
in the aggregate, result in a Company Material Adverse
Effect.
Section 3.24 Patents, Licenses, Franchises
and Formulas. Each of the Company and its Subsidiaries
owns all of the patents, trademarks, service marks,
copyrights, permits, trade names, licenses, franchises and
formulas, or rights with respect to the foregoing, and has
obtained assignments of all such rights and other rights of
whatever nature, necessary for the present conduct of its
business, without any known conflict with any rights of
others, in each case except as would not constitute a
Company Material Adverse Effect.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub represent and warrant to the
Company that:
Section 4.01 Organization. Each of Parent
and Sub is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted, except when the failure to be so
organized, existing and in good standing or to have such
power and authority would not, individually or in the
aggregate, prevent or delay in any material respect the
consummation of the transactions contemplated by this
Agreement.
<PAGE>
Section 4.02 Authority. Each of Parent and
Sub has the requisite corporate power and authority to
execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the
Merger and of the other transactions contemplated hereby
have been duly authorized by all necessary corporate action
on the part of Parent and Sub (including by Parent as the
sole stockholder of Sub) and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize
this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Sub and constitutes the
valid and binding obligation of each of Parent and Sub,
enforceable against them in accordance with their
respective terms, except as may be limited by or subject to
any bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally, and subject
to general principles of equity.
Section 4.03 Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the
Securities Act, state securities or blue sky laws, filings
required under the HSR Act, certain federal, state and
local regulatory filings and the filing and recordation of
the Certificate of Merger as required by the DGCL, no
filing with or notice to, and no permit, authorization,
consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent and Sub
of this Agreement or the consummation by Parent and Sub of
the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would
not, individually or in the aggregate, prevent or delay in
any material respect the consummation of the transactions
contemplated by this Agreement. Neither the execution,
delivery and performance of this Agreement by Parent and
Sub nor the consummation by Parent and Sub of the
transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective
Certificates of Incorporation or By-laws of Parent or Sub,
(ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a
default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result
in the loss of a benefit under, or result in the creation
of a lien or other encumbrance on any property or asset of
Parent or Sub under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or
obligation to which Parent or Sub is a party or by which
either of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation
applicable to Parent or Sub or any of their respective
properties or assets, except in the case of (ii) and (iii)
for violations, breaches, defaults, terminations,
cancellations, accelerations, losses of benefits, liens or
encumbrances which would not, individually or in the
aggregate, prevent or delay in any material respect the
consummation of the transactions contemplated by this
Agreement.
ARTICLE V
Covenants
Section 5.01 Conduct of Business by the
Company Pending the Merger. During the period from the
date of this Agreement and continuing until the Effective
Time, the Company agrees as to itself and its Subsidiaries
that (except as expressly permitted by this Agreement or to
the extent that Parent shall otherwise consent in writing,
which consent shall not be unreasonably withheld):
(a) The Company and its Subsidiaries shall
carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as
heretofore conducted and shall use all reasonable efforts
to preserve intact their present business organizations,
assets, prospects and advantageous business relationships,
maintain in effect all Company Permits, keep available the
services of their present officers and employees, preserve
their relationships with those persons having business
dealings with them and consult in good faith on a regular
basis with representatives of Parent to report material
operational developments and the general status of ongoing
operations.
(b) Neither the Company nor any of its
Subsidiaries shall, nor shall any of them propose to, (i)
declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, other
than dividends payable by a Subsidiary of the Company to
the Company or to a wholly owned Subsidiary of the Company,
<PAGE>
dividends payable with respect to Subsidiaries of the
Company which are joint ventures in accordance with the
terms of agreements governing such joint ventures in effect
on the date hereof and shares of Company Common Stock to be
allocated to ESOP participants in the ordinary course of
business pursuant to the terms of the ESOP in effect on the
date hereof, (ii) split, combine or reclassify any shares
of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or
(iii) except pursuant to the ESOP Agreement, repurchase,
redeem or otherwise acquire, or permit any of its
Subsidiaries to repurchase, redeem or otherwise acquire,
any shares of capital stock or Voting Debt or any
securities convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, shares of
capital stock or Voting Debt of the Company or any of its
Subsidiaries, other than repurchases by the Company of
Company Common Stock from ESOP participants in the ordinary
course of business pursuant to the terms of the ESOP in
effect on the date hereof, which repurchases are otherwise
permitted under the terms of the debt instruments of the
Company and its Subsidiaries.
(c) Neither the Company nor any of its
Subsidiaries shall issue, deliver, sell, pledge, dispose of
or encumber, or authorize or propose the issuance,
delivery, sale, pledge, disposition or encumbrance of, any
shares of its capital stock of any class, any Voting Debt
or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, any
such shares, Voting Debt or convertible securities, other
than the issuance of shares of Company Common Stock upon
the exercise of Company Options, SARs or Warrants, in each
case outstanding on the date of this Agreement and in
accordance with their present terms and the issuance of up
to an additional 111,408 SARs (plus any SARs awarded to SAR
Plan participants as of the date hereof (as indicated in
Section 3.02(a)(Item 3) of the Company Disclosure Schedule)
which are subsequently forfeited by such participants and
are available for award under the terms of the SAR Plan existing
on the date hereof) under the SAR Plan and any
shares of the Company Common Stock issued upon the exercise
thereof.
(d) Neither the Company nor any of its
Subsidiaries shall amend or propose to amend its
Certificate of Incorporation or By-laws.
(e) Neither the Company nor any of its
Subsidiaries shall acquire or agree to acquire by merging
or consolidating with, or by purchasing an equity interest
in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association
or other business organization or division thereof or <PAGE>
otherwise acquire or agree to acquire any assets, except
for such acquisitions which individually do not exceed
$1,000,000 or which in the aggregate do not exceed
$3,000,000.
(f) Except as set forth in Section 5.01(f) of
the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries shall sell, lease, license,
encumber or otherwise dispose of, or agree to sell, lease,
license, encumber or otherwise dispose of, any of its
material assets (other than in the ordinary course of
business consistent with past practice); provided, however,
that prior to the consummation of any disposition set forth
in Section 5.01(f) of the Company Disclosure Schedule,
Parent shall approve the terms of such disposition (which
approval shall not be unreasonably withheld).
(g) Neither the Company nor any of its
Subsidiaries shall incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any
debt securities of the Company or any of its Subsidiaries
or guarantee any debt securities of others (in each case
other than in the ordinary course of business consistent
with past practice).
(h) Except as to projects in progress on the
date hereof and such other projects as have been previously
disclosed to Parent in writing, neither the Company nor any
of its Subsidiaries shall authorize or make any capital
expenditures (including by lease) which exceed $500,000
individually without first consulting with Parent with
respect thereto; provided, however, that in no event shall
the Company and its Subsidiaries authorize or make any
capital expenditures (including by lease) in an aggregate
amount in excess of $64 million.
(i) Neither the Company nor any of its
Subsidiaries shall authorize or enter into any settlement
of professional or general liability claims which exceed
$500,000 individually or $1,500,000 in the aggregate.
(j) The Company shall not make any material
change in any of the accounting principles or practices
used by it except as required by the SEC or the Financial
Accounting Standards Board.
(k) The Company shall not permit NISC to
transfer, loan or otherwise dispose of the excess reserve
amounts held thereby.
<PAGE>
(l) Except as set forth in Section 5.01(l) of
the Company Disclosure Schedule and except pursuant to the
ESOP Agreement, neither the Company nor any of its
Subsidiaries shall (x) enter into, adopt, amend in any
material respect (except as required by law) or terminate
any Employee Benefit Plan or any agreement, arrangement,
plan or policy between the Company and one or more of its
directors, officers, employees or independent contractors
or (y) increase in any manner the compensation or fringe
benefits (including, but not limited to, severance
benefits) payable or to become payable to any director,
officer, employee or independent contractor (except for
increases in salary or wages payable or to become payable
in the ordinary course of business consistent with past
practice) or pay any benefit not required by any plan or
arrangement as in effect as of the date hereof (including,
without limitation, the granting of Company Options, SARs
or performance units), except, with respect to any benefit
payable by a Subsidiary of the Company, in the ordinary
course of business consistent with past practice, or enter
into any contract, agreement, commitment or arrangement to
do any of the foregoing.
(m) Except pursuant to the ESOP Agreement,
neither the Company nor any of its Subsidiaries will (i)
waive, release, grant or transfer any material rights of
value other than in the ordinary course of business
consistent with past practice or (ii) enter into, modify or
change any license, lease or contract involving payments in
excess of $500,000 individually; provided, however, that in
no event may the Company or any of its Subsidiaries enter
into any agreement with American Health, Inc.
(n) Neither the Company nor any of its
Subsidiaries will make any tax election or settle or
compromise any federal, state, local or foreign income tax
liability either not in accordance with prior practice or
which would have a Company Material Adverse Effect.
(o) Neither the Company nor any of its
Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of
the Company or any of its Subsidiaries.
(p) Neither the Company nor any of its
Subsidiaries shall take any action that would result in any
of the Company's representations and warranties set forth <PAGE>
in this Agreement not being true or in any of the
conditions to the Merger set forth in Article VII not being
satisfied or agree in writing or otherwise to take any of
the actions specified in this Section 5.01.
Section 5.02 No Solicitation, Etc. Prior to
the Effective Time, the Company and each of its
Subsidiaries shall not, and shall direct and use their best
efforts to cause each of their officers, directors,
employees, agents, advisors and affiliates not to, directly
or indirectly, make, solicit, encourage (including by way
of furnishing information or assistance), initiate, endorse
or take any other action to facilitate, any inquiries or
the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Third Party
Transaction (as defined below in this Section 5.02) or
participate in any negotiations or discussions regarding,
or enter into any agreement or agreement in principle, or
announce any intention to do any of the foregoing, with
respect to, any Third Party Transaction. Nothing in this
Section 5.02 shall prohibit the Board of Directors of the
Company from (i) furnishing information to, or entering
into discussions or negotiations with, any person or entity
that makes an unsolicited written bona fide proposal which
is not subject to any material contingencies relating to
financing to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination,
purchase of all or substantially all of its assets, tender
or exchange offer or other similar transaction (provided
that if any such proposal contains a condition relating to
the modification of the terms of any outstanding
indebtedness of the Company and its Subsidiaries, such
condition shall be substantially similar to the condition
set forth in Section 7.02(e) hereof) if, and only to the
extent that, (A) the Board of Directors of the Company is
advised by outside legal counsel that, in the exercise of
the fiduciary obligations of the Board of Directors of the
Company under applicable law, such information is required
to be provided to or such discussions or negotiations are
required to be undertaken with the person or entity
submitting such proposal; and (B) prior to furnishing such
information to, or entering into discussions or
negotiations with, such person or entity, the Company
receives from such person or entity an executed
confidentiality agreement in customary form on terms not
less favorable in any material respect to the Company than
the terms of the Confidentiality Agreement, dated October
13, 1993, between the Company and Parent (the
"Confidentiality Agreement"); or (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the
<PAGE>
Exchange Act with regard to a Third Party Transaction.
Nothing in this Section 5.02 shall (x) permit the Company
to terminate this Agreement, (y) permit the Company to
enter into any agreement with respect to a Third Party
Transaction during the term of this Agreement or (z) affect
any other obligation of the Company under this Agreement.
The Company represents it is not currently involved in any
existing discussions or negotiations with any party with
respect to a Third Party Transaction. Prior to the
Effective Time, the Company will promptly communicate to
Parent the terms of any proposal which it may receive in
respect of any Third Party Transaction and will keep Parent
informed as to the status of any actions, including
negotiations or discussions taken pursuant to this Section
5.02. As soon as practicable following the Effective Time,
the Company shall promptly request each person who has
executed a confidentiality agreement in connection with its
consideration of a Third Party Transaction to return all
confidential information that has been furnished to such
person by or on behalf of the Company. For purposes of
this Agreement, "Third Party Transaction" shall mean any of
the following involving the Company or any of its
Subsidiaries (other than transactions permitted by Section
5.01(f) hereof): (i) any merger, consolidation, share
exchange, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 15% or more of the
assets of the Company and its Subsidiaries, taken as a
whole; (iii) any tender offer or exchange offer for 25% of
the outstanding shares of capital stock of the Company or
the filing of a registration statement under the Securities
Act in connection therewith; (iv) any person having
acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been
formed which beneficially owns, or has the right to acquire
beneficial ownership of, 15% or more of the outstanding
shares of capital stock of the Company; or (v) any public
announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the
foregoing.
ARTICLE VI
Additional Agreements
Section 6.01 Proxy Statement. As promptly as
practicable after the execution of this Agreement, the
Company shall prepare a proxy statement and a form of proxy<PAGE>
in connection with the vote of the Company's stockholders
with respect to the Merger (such proxy statement, together
with any amendments thereof or supplements thereto, in each
case in the form or forms sent to the Company's
stockholders, the "Proxy Statement"). Parent will furnish
to the Company all information concerning Parent or Sub
required for inclusion in the Proxy Statement. The Company
covenants to Parent that the Proxy Statement shall not, at
the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders, at the
time of the meeting of the Company's stockholders to
consider and vote upon the Merger (the "Stockholders'
Meeting") or at the Effective Time, contain any untrue
statement of a material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading; provided, however, that the Company shall not
be liable for any statement or omissions made in reliance
upon, and in conformity with, written information
concerning Parent or Sub furnished by Parent specifically
for use in the Proxy Statement. Parent covenants to the
Company that the written information concerning Parent or
Sub furnished to the Company by Parent specifically for use
in the Proxy Statement shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto)
is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting or at the Effective Time,
contain any untrue statement of a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. The Proxy Statement
shall include the recommendation of the Company's Board of
Directors in favor of the Merger (i) unless otherwise
required by the fiduciary duties of the directors under
applicable law as advised by outside legal counsel and (ii)
with respect to the ESOP, to the extent permitted by
applicable law or the documents governing the ESOP.
Section 6.02 Meeting of Stockholders. The
Company shall take all action necessary, in accordance with
the DGCL and its Certificate of Incorporation and By-Laws,
to convene the Stockholders' Meeting. The Company shall
use reasonable efforts to solicit from stockholders of the
Company proxies in favor of the adoption and approval of
this Agreement and to secure the vote of stockholders
required by law to effect the Merger (i) unless otherwise
required by the fiduciary duties of the directors of the
Company under applicable law as advised by outside legal
counsel and (ii) with respect to the ESOP, to the extent
permitted by applicable law or the documents governing the
ESOP.<PAGE>
Section 6.03 Access to Information. (a)
Between the date hereof and the Effective Time, the Company
will give Parent and its authorized representatives
reasonable access to all personnel, offices, and other
facilities and to all books and records of the Company and
its Subsidiaries and will permit Parent to make such
inspections as Parent may reasonably require and will cause
its officers and those of its subsidiaries to furnish
Parent such financial and operating data and other
information with respect to the business and properties of
the Company and its Subsidiaries as Parent may from time to
time reasonably request. The representations and
warranties of the Company contained herein or in any
certificate or other document delivered to Parent or the
Purchaser shall not be deemed waived or otherwise affected
by any such investigation made by Parent or any of its
representatives.
(b) Without limiting the provisions of clause
(a) above, the Company will make available to Parent and
its authorized representatives for review at the Company's
offices information regarding tax matters reasonably
requested by Parent, including, without limitation, all (i)
Tax Rulings (as defined in Section 3.20(k) hereof) entered
into by the Company or any of its Subsidiaries relating to
state or local taxes, (ii) Closing Agreements (as defined
in Section 3.20(k) hereof) entered into by the Company or
any of its Subsidiaries with any state or local taxing
authority, (iii) information concerning any elections that
have been made with respect to state or local taxes that
would have a continuing effect after the Closing Date and
(iv) all state and local Tax Returns (as defined in Section
3.20(b) hereof), and any amendments thereto, filed by the
Company or any of its Subsidiaries for all taxable years
ending on or prior to the Closing Date.
(c) All information obtained by Parent
pursuant to Section 6.03(a) and (b) shall be kept
confidential in accordance with the provisions of the
Confidentiality Agreement.
Section 6.04 Warrants; Company Options; SARs.
(a) The Company shall use all reasonable efforts to cause
each holder of Warrants to exercise all such Warrants and
purchase Company Common Stock in accordance with the terms
thereof prior to the Closing Date. In the event that there
are any unexercised Warrants outstanding at the Effective
Time, each such Warrant shall, by virtue of the Merger and
without any action on the part of the holder thereof other <PAGE>
than proper execution of a notice of exercise of such
Warrant, be converted into the right to receive, for each
share of Company Common Stock subject thereto, the Merger
Consideration, less the per share exercise price of such
Warrant.
(b) Prior to the Closing Date, the Company
shall cause all outstanding Company Options to be exercised
for Company Common Stock in accordance with the terms
thereof; provided that in no event shall Parent be liable
for the payment of any amounts in connection with such
actions other than payment of the Merger Consideration
pursuant to Article II hereof with respect to the Company
Common Stock received upon such exercise.
(c) Prior to the Closing Date, the Company
shall amend the SAR Plan to provide that on the first
business day after the Closing Date, each SAR outstanding
thereunder, whether or not vested and regardless of whether
or not the employment of the holder thereof is being
terminated, shall be cancelled and converted into the right
to receive $7.00 per SAR, less any applicable withholding
taxes. On such first business day after the Closing Date,
Parent will cause the Company to pay (or will pay on the
Company's behalf) in same day funds to each holder of such
cancelled and converted SARs the amount owed to such holder
by the Company as contemplated by this clause (c), less any
applicable withholding tax due with respect to such
payment.
Section 6.05 Legal Requirements; Cooperation.
Each of the Company, Parent and Sub will take, or cause to
be taken, all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed
on it with respect to the transactions contemplated hereby
and will promptly cooperate with and furnish information to
the other in connection with any such requirements imposed
upon any of them or any of their Subsidiaries in connection
with the transactions contemplated hereby. Each of the
Company, Parent and Sub will promptly make its respective
filings, and thereafter make any other required
submissions, under the HSR Act with respect to the
transactions contemplated hereby. Each of the Company,
Parent and Sub will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by,
any Governmental Entity or other public or private third
party, required to be obtained or made by Parent, Sub or
the Company or any of their Subsidiaries in connection with
<PAGE>
the Merger or the taking of any action contemplated by this
Agreement. Without limiting the foregoing, the Company
agrees to cooperate with Parent and to take all actions
necessary to consummate the Tender Offers/Consent
Solicitations (as hereinafter defined) in an expeditious
manner, including without limitation the making of any
filings, registrations or notices with or to any third
party or any Governmental Entity. Parent will promptly
furnish to the Company any information required in
connection with the Tender Offers/Consent Solicitations and
the Company will promptly furnish to Parent in writing such
information in connection with the Tender Offers/Consent
Solicitations as Parent shall request. The Company
covenants that any information so furnished in writing will
not, at the date any such information is provided to
securityholders, at the date any registration statement
containing such information is declared effective by the
SEC or at the Effective Time, contain any untrue statement
of a material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading. Parent shall receive "agreed upon procedures"
letters from the Company's independent certified public
accountants, in form and substance reasonably satisfactory
to Parent, in connection with the information so provided
and reasonably customary in scope and substance for such
letters delivered in connection with transactions similar
to those contemplated in this Section 6.05.
Section 6.06 Additional Agreements;
Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use
its reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the
appropriate vote of stockholders of the Company described
in Section 7.01(a). In case at any time after the
Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement or to vest the
Surviving Corporation with full title to and possession of
all properties, assets, rights, approvals, immunities and
franchises of either of the Constituent Corporations, the
proper officers and directors of each party to this
Agreement are fully authorized to, and shall, take all such
necessary action; and such officers and directors shall be
deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all
such proper deeds, assignments and assurances in law and to
<PAGE>
do all acts necessary or proper to vest such title to and
possession of such properties, assets, rights, approvals
and franchises and otherwise to carry out the purposes of
this Agreement.
Section 6.07 Expenses. Except as provided in
Section 8.02, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense; provided,
however, that all reasonable costs and expenses incurred by
the Company and its officers and directors in connection
with the Tender Offers/Consent Solicitations (including,
without limitation, legal fees, accounting fees, filing
fees and printing expenses but excluding the fees and
expenses of any investment banker retained by the Company
or any of its officers or directors) shall be paid (i) if
the Tender Offers/Consent Solicitations are consummated, by
the issuers of the applicable Debt Securities (as
hereinafter defined) or (ii) otherwise, by Parent; and
provided, further, that if this Agreement shall have been
terminated pursuant to Section 8.01 as a result of the
willful breach by a party of any of its representations,
warranties, covenants or agreements set forth in this
Agreement, such breaching party shall pay the reasonable
costs and expenses incurred by the other parties in
connection with this Agreement.
Section 6.08 Public Statements. The parties
shall consult with each other prior to issuing any public
announcement or statement with respect to this Agreement or
the transactions contemplated hereby and shall not issue
any such public announcement or statement prior to such
consultation, except that any party may issue such a public
announcement or statement prior to such consultation if and
to the extent required by law or any listing agreement with
a national securities exchange or any other similar
regulatory bodies, in which case such party shall use its
best efforts to consult with the other parties prior to
issuing such public announcement or statement.
Section 6.09 Certification of Stockholder
Vote. At or prior to the closing of the transactions
contemplated by this Agreement, the Company shall deliver
to Parent a Certificate of the Company's Secretary setting
forth (i) the number of shares of Company Common Stock
voted in favor of adoption of this Agreement and the
consummation of the Merger and the number of shares of
Company Common Stock voted against adoption of this
Agreement and consummation of the Merger; and (ii) the
number of shares of Dissenting Stock.<PAGE>
Section 6.10 Indemnification and Insurance.
(a) For a period of six years from and after the Effective
Time, Parent and the Surviving Corporation shall indemnify
to the fullest extent permitted under applicable law the
present and former directors and officers of the Company
against all losses, damages, liabilities, claims, costs or
expenses (including reasonable attorney's fees), judgments,
fines, penalties and amounts paid in settlement in
connection with any claim, action, suit, proceeding or
investigation arising from their service in such capacities
prior to and including the Effective Time. In the event of
any such claim, action, suit, proceeding or investigation,
(i) Parent and the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by Parent
(which counsel shall be reasonably acceptable to the
indemnified party) in advance of the final disposition of
any such action to the fullest extent permitted under
applicable law, upon receipt from the indemnified party of
any undertaking contemplated by applicable law and (ii)
Parent and the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that neither
Parent nor the Surviving Corporation shall be liable for
any settlement effected without its written consent (which
consent shall not be unreasonably withheld).
(b) Parent shall cause the Surviving
Corporation to keep in effect provisions in its Certificate
of Incorporation and Bylaws providing for exculpation of
director and officer liability and indemnification of the
present and former directors and officers of the Company to
the fullest extent permitted by the DGCL, which provisions
shall not be amended for a period of six years after the
Effective Time except as required by applicable law or
except to make changes permitted by law that would enlarge
the rights to indemnification thereunder. Should any claim
or claims be made against any present or former director or
officer of the Company, arising from his services as such,
on or prior to the sixth anniversary of the Effective Time,
the provisions of this Section 6.10 respecting the
Certificate of Incorporation and By-laws shall continue in
effect until the final disposition of all such claims.
(c) The Surviving Corporation shall cause to
be maintained in effect for a period ending not sooner than
the sixth anniversary of the Effective Time, at no expense
to the beneficiaries thereof, directors' and officers'
liability insurance providing at least the same coverage
with respect to the Company's officers and directors as the
current policies maintained by or on behalf of the Company,
and containing terms and conditions which are substantially<PAGE>
no less advantageous, with respect to matters occurring
prior to the Effective Time (to the extent such insurance
is currently available with respect to such matters).
Notwithstanding the foregoing, the Surviving Corporation
shall not be obligated to provide any greater directors'
and officers' liability insurance coverage than generally
afforded to directors and officers of Parent under policies
maintained by Parent with respect to its directors and
officers.
(d) Parent acknowledges and agrees that the
Surviving Corporation will continue to honor, and at the
Effective Time Parent will honor, the Indemnification
Agreements with certain executive officers of the Company
identified on Section 6.10(d) of the Company Disclosure
Schedule, true and correct copies of which Indemnification
Agreements have been delivered to Parent.
(e) In connection with the Tender
Offers/Consent Solicitations and whether or not the Tender
Offers/Consent Solicitations are consummated, Parent shall
indemnify the Company and its Subsidiaries and their
respective officers, directors, agents, affiliates and
persons deemed to be in control of the Company within the
meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (the "Company Indemnified
Parties") from and against all losses, damages,
liabilities, claims, costs or expenses (including
reasonable attorney's fees), judgments, fines, penalties
and amounts paid in settlement to which such Company
Indemnified Parties may become subject insofar as such
losses, damages, liabilities, claims, costs, expenses,
judgments, fines, penalties and amounts arise out of or are
related to the Tender Offers/Consent Solicitations;
provided, however, that Parent shall not be liable in any
such case to the extent that any such losses, damages,
liabilities, claims, costs, expenses, judgments, fines,
penalties or amounts arise out of or relate to (i) an
untrue statement in or omission from any information
requested by Parent and provided in writing by the Company
or any of its Subsidiaries or any representative or agent
thereof or (ii) the gross negligence or wilful misconduct
of any Company Indemnified Party. Parent further agrees
that if any indemnification or reimbursement sought
pursuant to this paragraph (e) were for any reason not to
be available to any Company Indemnified Party or
insufficient to hold it harmless, in each case as and to
the extent contemplated by this paragraph (e), then Parent
shall contribute to the amount paid or payable by such
Company Indemnified Party in respect of losses, damages,
liabilities, claims, costs, expenses, judgments, fines,<PAGE>
penalties or amounts in such proportion as is appropriate
to reflect the relative benefits to the Company Indemnified
Party on the one hand and Parent on the other hand in
connection with the transactions contemplated by this
Agreement. The rights under this paragraph (e) shall be in
addition to, and not in lieu of, any rights available under
the other paragraphs of this Section 6.10.
(f) The provisions of this Section 6.10 are
intended to be for the benefit of, and shall be enforceable
by, each indemnified party and his or her heirs and
representatives.
(g) In the event that there shall occur any
transaction involving a change in control of Parent
pursuant to which the party acquiring control shall agree
to indemnify the officers and directors of Parent in
connection with any claim arising out of the service of
such persons as officers and directors of Parent, then
proper provision shall be made so that the acquiring party
shall assume the obligations of Parent under this Section
6.10; provided, however, that the obligations of the
acquiring party pursuant to this Section 6.10 shall be no
greater than the obligations of such acquiring party to the
officers and directors of Parent.
Section 6.11 Notification of Certain Matters.
The Company shall give prompt notice to Parent, and
Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause (x)
any representation or warranty contained in this Agreement
to be untrue or inaccurate or (y) any covenant, condition
or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or
Parent, as the case maybe, to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of
any notice pursuant to this Section 6.11 shall not limit or
otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 6.12 Accounting Matters. The Company
agrees that it shall, immediately prior to the Effective
Time, make such adjustments to its books and records as are
requested by Parent; provided that no such adjustments
shall be deemed to cause the breach of a condition to this
Agreement or otherwise constitute a violation of any
provision of this Agreement.
<PAGE>
Section 6.13 Employee Matters. (a) Parent
agrees that, for one year following the Effective Time, it
shall cause the Surviving Corporation to honor that portion
of the severance policy of the Company described in Section
6.13(a) of the Company Disclosure Schedule with respect to
the employees of the Surviving Corporation.
(b) Parent agrees that, following the
Effective Time, it shall cause the Surviving Corporation to
honor the severance agreements referenced in item 9 of
Section 3.08 of the Company Disclosure Schedule and
described in a letter agreement between Parent and the
Company dated the date hereof.
(c) Parent agrees to provide to the employees
of the Surviving Corporation health benefits comparable to
the health benefits generally provided to the employees of
Parent.
ARTICLE VII
Conditions
Section 7.01 Conditions to Each Party's
Obligations To Effect the Merger. The respective
obligations of each party to effect the Merger shall be
subject to the satisfaction or, where permissible, waiver
at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have been approved
and adopted by the requisite vote of the stockholders of
the Company in accordance with the DGCL and the Company's
Certificate of Incorporation.
(b) No statute, rule, regulation, executive
order, decree, preliminary or permanent injunction or
restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent
jurisdiction or other Governmental Entity which prohibits
or restricts the consummation of the Merger or any other
material transaction contemplated by this Agreement;
provided, however, that the parties shall use their best
efforts to cause any such decree, judgment or other order
to be vacated or lifted.
(c) The waiting period applicable to the
consummation of the Merger under the HSR Act shall have
expired or been terminated.
<PAGE>
Section 7.02 Conditions to Obligations of
Parent and Sub. The obligations of Parent and Sub to
effect the Merger are subject to the satisfaction of the
following conditions unless waived by Parent and Sub:
(a) The representations and warranties of the
Company set forth in this Agreement which are qualified
with respect to a Company Material Adverse Effect or
materiality shall be true and correct, and such
representations and warranties that are not so qualified
shall be true and correct in all material respects, in each
case as of the date of this Agreement and (except to the
extent such representations and warranties speak
specifically as of an earlier date) as of the Effective
Time as though made on and as of the Effective Time, and
the Company shall have performed in all material respects
all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and Parent
shall have received a certificate signed on behalf of the
Company by the chief executive officer or chief financial
officer of the Company to such effect.
(b) All consents and approvals of
Governmental Entities or third parties necessary for
consummation of the transactions contemplated by this
Agreement shall have been obtained, other than those which,
if not obtained, would not (i) have a Company Material
Adverse Effect, (ii) have a material adverse effect on the
consolidated business, operations, properties, assets,
liabilities, condition (financial or otherwise), or results
of operations of Parent and its Subsidiaries taken as a
whole or (ii) prevent or delay in any material respect the
consummation of the transactions contemplated by this
Agreement.
(c) There shall not have occurred after the
date hereof any events resulting in or which would result
in, individually or in the aggregate, a Company Material
Adverse Effect.
(d) Simultaneously with the Closing, all
transactions contemplated by the ESOP Agreement shall have
been consummated in accordance with the terms thereof.
(e) In connection with the tender offers for
the outstanding debt securities of the Company and its
Subsidiaries listed in a letter agreement (the "Letter
Agreement") between Parent and the Company dated as of the
date hereof (the "Debt Securities") and the solicitation of
the consent of holders of the Debt Securities to certain <PAGE>
amendments to and/or waivers of provisions of the
indentures and other documents governing the Debt
Securities (the "Consents") (collectively, the "Tender
Offers/Consent Solicitations"), and unless waived by
Parent, the holders of at least a majority of the
outstanding aggregate principal amount of the Debt
Securities issued pursuant to each Indenture referenced in
the Letter Agreement shall have validly delivered, and not
withdrawn, the Consents and such Consents shall have been
implemented pursuant to the Letter Agreement.
(f) Parent shall have received the opinion of
Johnson & Gibbs, P.C., counsel to the Company, dated the
date of the Effective Time, in form satisfactory to Parent,
substantially to the effect that:
(i) each of the Company and its Subsidiaries
(as identified on a schedule to such opinion, which
shall be all Subsidiaries of the Company as of the
date of such opinion based upon information as to a
list of such Subsidiaries provided to such counsel by
the Company) is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and
operate its properties and to carry on its business as
described in the Annual Report on Form 10-K of the
Company for the fiscal year ended September 30, 1993,
except when the failure to be so organized, existing
and in good standing or to have such power and
authority would not individually or in the aggregate
have a Company Material Adverse Effect. Each of the
Company and its Subsidiaries is duly qualified or
licensed to do business and in good standing in the
states indicated on a schedule to such opinion. Such
states, to the knowledge of such firm, are the only
states within the United States in which the Company
or any of its Subsidiaries owns or leases any property
or conducts any business in which the failure to be so
qualified or licensed would have a Company Material
Adverse Effect;
(ii) the Company has the corporate power to
enter into this Agreement and to consummate the
transactions contemplated hereby; and the execution
and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by all requisite corporate action taken on
the part of the Company;
<PAGE>
(iii) this Agreement has been executed and
delivered by the Company and is a valid and binding
obligation of the Company enforceable against the
Company in accordance with its terms, except (A) as
enforceability may be limited by any bankruptcy,
insolvency, reorganization, fraudulent transfer
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, (B) as such
enforceability is subject to general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and
(C) as enforceability of the obligations contained in
Section 6.10 may be limited by applicable law or
public policy;
(iv) to the knowledge of such counsel, none of
the Company or any of its Subsidiaries is in default
or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a
default or violation) of any term, condition or
provision of (i) its Certificate of Incorporation or
By-laws (or similar governing documents) or (ii) any
note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is now
a party or by which any of them or any of their
respective properties or assets may be bound and which
is identified in the list of exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993 (provided that such firm shall
express no opinion with respect to any numeric or
financial standards contained in any such note, bond,
mortgage, indenture, lease license, contract,
agreement or other instrument or obligation), except
in the case of (ii) for violations, breaches or
defaults that would not, individually or in the
aggregate, have a Company Material Adverse Effect;
(v) as of the date of such opinion, the number
of shares of authorized capital stock of the Company,
the number of such shares which are issued and
outstanding and the number of such shares which are
held in treasury (such firm shall be permitted to rely
exclusively on a certificate of the transfer agent for
the Company Common Stock with respect to its opinion
regarding the number of outstanding shares of Company
Common Stock and the number of shares held in the
treasury of the Company).
<PAGE>
(vi) except for filings, permits,
authorizations, consents and approvals as may be
required under, and other applicable requirements of,
the Securities Act, the Exchange Act, state securities
or blue sky laws, filings required under the HSR Act,
certain federal, state and local regulatory filings
and the filing and recordation of the Certificate of
Merger as required by the DGCL, no filing with or
notice to, and no permit, authorization, consent or
approval of, any court or tribunal or Governmental
Entity of the United States, the State of Texas or the
State of Delaware is necessary for the execution and
delivery by the Company of this Agreement or the
consummation by the Company of the transactions
contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice
would not, individually or in the aggregate, have a
Company Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement
by the Company nor the consummation by the Company of
the transactions contemplated hereby will (A) conflict
with or result in any breach of any provision of the
respective Certificate of Incorporation or By-laws (or
similar governing documents) of the Company or of any
its Subsidiaries, (B) result in a violation or breach
of, or constitute (with or without due notice or lapse
oftime or both) a default (or give rise to any right
of termination, amendment, cancellation or
acceleration) under, or result in the loss of a
benefit under, or result in the creation of a lien or
other encumbrance on any property or asset of the
Company or any of its Subsidiaries under any of the
terms, conditions or provisions of, any note, bond,
mortgage, indenture (other than any indenture as
modified by the Consents), lease, license, contract,
agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or
by which any of them or any of their respective
properties or assets may be bound and which is
identified in the list of exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993 or (C) except with respect to the
Tender Offers/Consent Solicitations, violate any
order, writ, injunction, decree, law, statute, rule or
regulation known to such firm applicable to the
Company or any of its Subsidiaries or any of their
respective properties or assets, except in the case of
(B) or (C) for violations, breaches, defaults,
terminations, cancellations, accelerations, losses of <PAGE>
benefits, liens or encumbrances which would not,
individually or in the aggregate, have a Company
Material Adverse Effect; and
(vii) such opinions as to the ESOP as are
mutually agreed upon by Parent and the Company.
As to any matter in such opinion which involves
matters of fact or matters relating to laws other than
federal securities, Texas or Delaware law, such counsel may
rely upon the certificates of officers and directors of the
Company and of public officials and opinions of local
counsel, reasonably acceptable to Parent, provided a copy
of such reliance opinion shall be attached as an exhibit to
the opinion of such counsel. Such opinion shall be subject
to the normal exceptions and qualifications taken by such
firm; provided that such exceptions and qualifications
shall be reasonably acceptable to Parent.
(g) Parent shall have received the opinion of
Stanley F. Baldwin, Esq., General Counsel of the Company,
dated the date of the Effective Time, in form satisfactory
to Parent, substantially to the effect that:
(i) To the knowledge of such counsel, none
of the Company or any of its Subsidiaries is in
default or violation (and no event has occurred which
with notice or the lapse of time or both would
constitute a default or violation) of any term,
condition or provision of any order, writ, injunction,
decree, law, statute, rule or regulation applicable to
the Company, any of its Subsidiaries or any of their
respective properties or assets, except for violations
or defaults that would not, individually or in the
aggregate, have a Company Material Adverse Effect;
(ii) Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement
and except as set forth in Section 3.09 of the Company
Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the
knowledge of such counsel, threatened against the
Company or any of its Subsidiaries or any of their
respective properties or assets before any
Governmental Entity which, if decided adversely,
would, individually or in the aggregate, have a
Company Material Adverse Effect or would prevent or
delay in any material respect the consummation of the
transactions contemplated by this Agreement. Except
as disclosed in the Company SEC Documents filed prior <PAGE>
to the date of this Agreement, neither the Company nor
any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, individually
or in the aggregate, would have a Company Material
Adverse Effect or would prevent or delay in any
material respect the consummation of the transactions
contemplated hereby; and
(iii) Except as set forth in Section 3.11(a) of
the Company Disclosure Schedule, all of the Hospitals
and Specialty Facilities are certified for
participation or enrollment in the Medicare and
Medicaid programs, have a current and valid provider
contract with the Medicare and Medicaid programs, are
in substantial compliance with the terms and
conditions of participation in such programs and have
received all approvals or qualifications necessary for
capital reimbursement of the Company assets. All of
the Hospitals and Specialty Facilities are accredited
by the Joint Commission on Accreditation of Healthcare
Organizations. Except as set forth in Section 3.11(c)
of the Company Disclosure Schedule, each Hospital and
Specialty Facility is an acute care medical-surgical
hospital licensed by the proper state department of
health to conduct its business in substantially the
manner conducted by such Hospital or Specialty
Facility and is authorized to operate the number of
beds utilized therein.
As to any matter in such opinion which involves
matters of fact or matters relating to laws other than
federal securities, Texas or Delaware law, such counsel may
rely upon the certificates of officers and directors of the
Company and of public officials and opinions of local
counsel, reasonably acceptable to Parent, provided a copy
of such reliance opinion shall be attached as an exhibit to
the opinion of such counsel. Such opinion shall be subject
to the normal exceptions and qualifications taken by such
counsel; provided that such exceptions and qualifications
shall be reasonably acceptable to Parent. Parent and the
Company agree that no personal liability to Parent, the
Company or any other person shall attach to the rendering
of such opinion.
(h) No more than ten percent (10%) of the
Company Common Stock outstanding immediately prior to the
Closing Date shall constitute Dissenting Stock.
(i) The officers and directors of the Company
and each of its Subsidiaries shall have tendered their <PAGE>
written resignations of all such positions held with the
Company and its Subsidiaries except, with respect to
Subsidiaries of the Company that are joint ventures, to the
extent that the Company and its Subsidiaries are prohibited
from causing such resignations by the terms of agreements
governing such joint ventures as in effect on the date
hereof. Prior to the Closing Date, the Company shall have
delivered to Parent a correct and complete list of any such
positions with respect to which resignations cannot be
obtained.
(j) (A) There shall have been no change in the
ownership of the facilities and businesses of the Company
listed on Exhibit 7.02(j) hereof since the date of this
Agreement (other than transfers of ownership interests
among the Company and its wholly owned Subsidiaries and
transfers of ownership interests in the Company's
Subsidiaries that are joint ventures which transfers are
required under the terms of agreements governing such joint
ventures as in effect on the date hereof) and neither the
Company nor any of its Subsidiaries shall have entered into
any agreement, commitment or other arrangement that could
result in any such change of ownership; and (B) immediately
following the consummation of the transactions contemplated
by this Agreement, Parent (directly or indirectly through
its Subsidiaries) shall have the ability to conduct the
material businesses and operations of such facilities and
businesses substantially in the manner in which they are
conducted on the date of this Agreement (other than any
inability to conduct such businesses and operations arising
solely from obligations of Parent prior to the Closing
Date).
(k) Parent shall have received, in the forms
attached as exhibits to, and in conformity with, the Master
Severance Agreement, dated as of the date hereof, between
Parent and the Company, the written agreement and release
of each officer and employee of the Company and its
Subsidiaries who is to receive severance, gross-up or other
similar payments or benefits in connection with the
transactions contemplated by this Agreement.
Section 7.03 Conditions to Obligations of the
Company. The obligation of the Company to effect the
Merger is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) The representations and warranties of Parent
and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this <PAGE>
Agreement and (except to the extent such representations
and warranties speak specifically as of an earlier date) as
of the Effective Time as though made on and as of the
Effective Time, and Parent and Sub shall have performed in
all material respects all obligations required to be
performed by them under this Agreement at or prior to the
Effective Time, and the Company shall have received a
certificate signed on behalf of Parent by the chief
executive officer or chief financial officer of Parent to
such effect.
(b) The Company shall have received the opinion
of Dewey Ballantine, counsel to Parent, or Philip D.
Wheeler, Esq., General Counsel of Parent, dated the date of
the Effective Time, in form satisfactory to the Company,
substantially to the effect that:
(i) Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease
and operate its properties and to carry on its
business as now being conducted, except where the
failure to be so organized, existing and in good
standing or to have such power and authority would not
individually or in the aggregate prevent or delay in
any material respect the consummation of the
transactions contemplated by this Agreement;
(ii) Parent and Sub each has the corporate
power to enter into this Agreement and to consummate
the transactions contemplated hereby; and the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate
action taken on the part of Parent and Sub,
respectively;
(iii) this Agreement has been executed and
delivered by each of Parent and Sub and is a valid and
binding obligation of Parent and Sub enforceable
against each of Parent and Sub in accordance with its
terms, except (A) as enforceability may be limited by
any bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, (B)
as such enforceability is subject to general
principles of equity (regardless of whether such <PAGE>
enforceability is considered in a proceeding in equity
or at law) and (C) as enforceability of the
obligations contained in Section 6.10 may be limited
by applicable law or public policy; and
(iv) Except for filings, permits,
authorizations, consents and approvals as may be
required under, and other applicable requirements of,
the Exchange Act, the Securities Act, state securities
or blue sky laws, filings required under the HSR Act,
certain federal, state and local regulatory filings
and the filing and recordation of the Certificate of
Merger as required by the DGCL, no filing with or
notice to, and no permit, authorization, consent or
approval of, any Governmental Entity of the United
States or the State of Delaware is necessary for the
execution and delivery by Parent and Sub of the
transactions contemplated hereby, except where failure
to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice
would not, individually or in the aggregate, prevent
or delay in any material respect the consummation of
the transactions contemplated by this Agreement.
Neither the execution, delivery and performance of
this Agreement by Parent and Sub nor the consummation
by Parent and Sub of the transactions contemplated
hereby will (A) conflict with or result in any breach
of any provision of the respective Certificate of
Incorporation or By-Laws of Parent or Sub, (B) result
in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment,
cancellation or acceleration) under, or result in the
loss of a benefit under, or result in the creation of
a lien or other encumbrance on any property or asset
of Parent or Sub under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other
instrument or obligation to which Parent or Sub is a
party or by which either of them or any of their
respective properties or assets may be bound and which
is identified in the list of exhibits to Parent's
Annual Report on Form 10-K for the fiscal year ended
August 31, 1993 or (C) violate any order, writ,
injunction, decree, law, statute, rule or regulation
applicable to Parent or Sub or any of their respective
properties or assets, except in the case of (B) and
(C) for violations, breaches, defaults, terminations,
cancellations, accelerations, losses of benefits,
liens or encumbrances which would not, individually or
<PAGE>
in the aggregate, prevent or delay in any material
respect the consummation of the transactions
contemplated by this Agreement.
As to any matter in any such opinion which
involves matters of fact or matters relating to laws other
than federal securities, New York or Delaware law, such
counsel may rely upon the certificates of officers and
directors of Parent and Sub and of public officials and
opinions of local counsel, reasonably acceptable to the
Company, provided a copy of such reliance opinion shall be
attached as an exhibit to the opinion of such counsel. Any
such opinion shall be subject to the normal exceptions and
qualifications taken by such counsel; provided that such
exceptions and qualifications shall be reasonably
acceptable to the Company.
(c) All consents and approvals of Governmental
Entities or third parties necessary for the consummation of
the transactions contemplated by this Agreement shall have
been obtained, other than those which would not prevent or
delay in any material respect the consummation of the
transactions contemplated by this Agreement.
ARTICLE VIII
Termination and Amendment
Section 8.01 Termination. This Agreement may be
terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after
approval and adoption of this Agreement by the stockholders
of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if any
permanent injunction or other order of a court or other
competent Governmental Entity preventing the consummation
of the Merger shall have become final and non-appealable;
provided that the party seeking to terminate this Agreement
pursuant to this clause (b) shall have used its reasonable
best efforts to remove such injunction or order;
(c) by either Parent or the Company if the
Merger shall not have been consummated before June 30,
1994; provided, that the right to terminate this Agreement
under this Section 8.01(c) shall not be available to any
party whose breach of its representations and warranties in
this Agreement or whose failure to perform any of its <PAGE>
covenants and agreements under this Agreement has been the
cause of or resulted in the failure of the Merger to occur
on or before such date.
(d) by either Parent or the Company if this
Agreement and the Merger fail to receive the requisite vote
for approval and adoption by the stockholders of the
Company at the Stockholders' Meeting;
(e) by Parent if (i) the Board of Directors of the
Company shall withdraw, modify or change its recommendation
of this Agreement or the Merger in a manner adverse to
Parent or shall have resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company shall have
recommended to the stockholders of the Company a Third
Party Transaction; (iii) a tender offer or exchange offer
for 25% or more of the outstanding shares of capital stock
of the Company is commenced and the Board of Directors of
the Company, within 10 business days after such tender
offer or exchange offer is commenced, either fails to
recommend against acceptance of such tender offer or
exchange offer by its stockholders or takes no position
with respect to the acceptance of such tender offer or
exchange offer by its stockholders; or (iv) any person
shall have acquired beneficial ownership of or the right to
acquire beneficial ownership of or any "group" (as such
term is defined in Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder) shall
have been formed which beneficially owns, or has to right
to acquire beneficial ownership of, 25% or more of the then
outstanding shares of capital stock of the Company (other
than (A) the ESOP, provided that the ESOP does not increase
its ownership of such capital stock after the date hereof
except as a result of the allocations to ESOP participants
contemplated by Section 3.02(a) or (B) AMI, provided that
AMI does not increase its ownership of such capital stock
after the date hereof); provided, however, that Parent may
not terminate this Agreement pursuant to this clause (iv)
based solely upon the transfer by AMI of shares of capital
stock of the Company to any other person or upon the
subsequent transfer of such shares by such person to any
other person (any such person is hereinafter referred to as
a "Transferee") if (i) simultaneously with the execution of
this Agreement, AMI grants to Parent a proxy to vote its
shares in favor of the Merger in the form of Exhibit
8.01(e) hereto and (ii) simultaneously with any transfer,
the Transferee grants to Parent an irrevocable proxy to
vote such shares in favor of the Merger in form and
substance reasonably satisfactory to Parent;
<PAGE>
(f) by the Company if the Board of Directors of
the Company (i) fails to make or withdraws its
recommendation of this Agreement or the Merger if there
exists at such time a tender offer or exchange offer or
proposal by a third party to acquire the Company pursuant
to a merger, consolidation, share exchange, business
combination, tender offer, exchange offer or sale of all or
substantially all of the assets or other similar
transaction or (ii) recommends to the Company's
stockholders approval or acceptance of any of the foregoing
transactions, in the case of clauses (i) and (ii) only if
the Board of Directors of the Company determines in good
faith and upon advice of outside legal counsel that such
action is necessary for the Board of Directors to comply
with its fiduciary duties to stockholders under applicable
law;
(g) by Parent, upon a breach of any representa-
tion, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, or if any representa-
tion or warranty of the Company shall have become untrue,
in either case such that the conditions set forth in
Section 7.02(a) would be incapable of being satisfied by
June 30, 1994 (or as such date may otherwise be extended);
or
(h) by the Company, upon a breach of any
representation, warranty, covenant or agreement on the part
of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth
in Section 7.03(a) would be incapable of being satisfied by
June 30, 1994 (or as such date may otherwise be extended).
Section 8.02 Effect of Termination. (a) Except
as provided in Section 8.02(b) or Section 9.01, in the
event of a termination of this Agreement by either the
Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Sub or the
Company or their respective officers, directors or
stockholders; provided, however, that nothing herein shall
relieve any party from liability for the willful breach by
a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
(b) The Company agrees that if this Agreement
shall be terminated pursuant to:
<PAGE>
(i) Section 8.01(g) and (A) such termination
is the result of willful breach of any covenant,
agreement, representation or warranty contained
herein, (B) the Company shall have had contacts or
entered into negotiations relating to a Business
Combination (as defined below), in any such case at
any time within the period commencing on the date of
this Agreement through the date of termination of this
Agreement and (C) within nine months after the
termination of this Agreement, and with respect to any
person, entity or group with whom the contacts or
negotiations described in clause (B) shall have
occurred, a Business Combination shall have occurred
or the Company shall have entered into a definitive
agreement providing for a Business Combination;
(ii) Section 8.01(d) because this Agreement and
the Merger shall fail to receive the requisite vote
for approval and adoption by the stockholders of the
Company at the Stockholders' Meeting and at the time
of the Stockholders' Meeting there shall exist a Third
Party Transaction;
(iii) Section 8.01(e)(i), (ii) or (iii);
(iv) Section 8.01(e)(iv) and this Agreement and
the Merger fail to receive the requisite vote for
approval and adoption by the stockholders of the
Company at the Stockholders' Meeting; or
(v) Section 8.01(f);
then the Company shall pay to Parent an amount equal to
$10,000,000 which amount is inclusive of all of Parent's
expenses.
(c) Any payment required to be made pursuant to
Section 8.02(b) shall be made as promptly as practicable
but not later than five business days after termination of
this Agreement and shall be made by wire transfer of
immediately available funds to an account designated by
Parent, except that any payment to be made as a result of
an event described in Section 8.02(b)(i) shall be made as
promptly as practicable but not later than five business
days after the occurrence of a Business Combination or the
execution of the definitive agreement providing for a
business Combination.
(d) For purposes of this Section 8.02, the term
"Business Combination" shall mean (i) a merger,
consolidation, share exchange, business combination or<PAGE>
similar transaction involving the Company, (ii) a sale,
lease, exchange, transfer or other disposition of 15% or
more of the assets of the Company and its Subsidiaries,
taken as whole, in a single transaction or a series of
transactions or (iii) the acquisition by a person or
entity, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) of beneficial ownership
of 25% or more of the Company Common Stock.
Section 8.03 Amendment. This Agreement may be
amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any
time before or after approval and adoption of this
Agreement by the stockholders of the Company, but, after
any such approval, no amendment shall be made which by law
requires further approval by such stockholders without such
further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.04 Extension; Waiver. At any time
prior to the Effective Time, the parties hereto may, to the
extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of
such party.
ARTICLE IX
Miscellaneous
Section 9.01 Nonsurvival of Representations,
Warranties and Agreements. None of the representations,
warranties, covenants and agreements in this Agreement (or
the exhibits and schedules hereto) or in any instrument
delivered pursuant to this Agreement shall survive the
Effective Time or termination of this Agreement pursuant to
Section 8.01, except that the agreements contained in
Articles I, II and IX and Sections 6.04, 6.06, 6.10, and
6.13 shall survive the Effective Time and those set forth
in Sections 6.03(b), 6.07, 6.10(e) and 8.02 and Article IX
hereof shall survive termination.
<PAGE>
Section 9.02 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
<TABLE>
<CAPTION>
<C> <C>
(a) if to Parent or Sub, to
Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, Tennessee 37205
Att: Philip D. Wheeler, Esq.
Telephone: (615) 298-6226
Telecopier: (615) 298-6122
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Att: Morton A. Pierce, Esq.
Telephone: (212) 259-8000
Telecopier: (212) 259-6333
(b) if to the Company, to
EPIC Holdings, Inc.
3333 Lee Parkway
Dallas, Texas 75219
Att: Stanley F. Baldwin, Esq.
Telephone: (214) 443-3749
Telecopier: (214) 443-3552
with a copy to:
Johnson & Gibbs, P.C.
900 Jackson Street
Dallas, Texas 75202
Att: Jim A. Watson, Esq.
Telephone: (214) 977-9000
Telecopier: (214) 977-9004
</TABLE>
<PAGE>
Section 9.03 Headings. When a reference is made
in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 9.04 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement.
Section 9.05 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement
(including the documents, exhibits and instruments referred
to herein or executed simultaneously herewith) and the
Confidentiality Agreement (i) constitutes the entire
agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (ii) except
as provided in Sections 6.04(c), 6.10 and 6.13, are not
intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 9.06 Governing Law. This Agreement shall
be governed and construed in accordance with the laws of the
State of Delaware without regard to any applicable
principles of conflicts of law.
Section 9.07 Specific Performance. Each of the
parties hereto acknowledges and agrees that the other party
or parties hereto would be irreparably damaged in the event
any of the covenants or agreements contained in this
Agreement are not performed in accordance with their
specific terms or are otherwise breached. Accordingly, each
of the parties hereto agrees that each of them shall be
entitled, without bond or other security, to an injunction
or injunctions to prevent breaches of the covenants or
agreements contained in this Agreement and to enforce
specifically this Agreement and the covenants and agreements
contained herein in any action instituted in any court of
the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which such
party may be entitled at law or in equity.
Section 9.08 Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign,
subject to the reasonable approval of the Company, any or <PAGE>
all of its rights, interests and obligations hereunder to
Parent or to any wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.
Section 9.09 Certain Definitions. (a) As used
in this Agreement, the word "Subsidiary" means, with respect
to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of
which held by such party or any Subsidiary of such party do
not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities
or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of
its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(b) For purposes of this Agreement, the loss of
the Company's affiliation agreements with respect to
Riverside Hospital and North Texas Medical Center shall not
be deemed to constitute a Company Material Adverse Effect.
Section 9.10 Company Disclosure Schedule. Parent
and Sub acknowledge that the disclosure of any item in the
Company Disclosure Schedule shall not be deemed to be an
acknowledgement or indication that such item met any
required materiality standard for the applicable disclosure
or would otherwise meet the standard for a Company Material
Adverse Effect.<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first
written above.
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By:/S/Michael A. Koban, Jr.
Name: Michael A. Koban, Jr.
Title:Senior Vice President
ODYSSEY ACQUISITION CORP.
By:/s/ Michael A. Koban, Jr.
Name: Michael A. Koban, Jr.
Title: Vice President
EPIC HOLDINGS, INC.
By:/s/ Kenn S. George
Name: Kenn S. George
Title: Chairman, President and
<PAGE>
Chief Executive Officer
<LOGO>
<TABLE>
<C> <C>
HealthTrust: EPIC:
Merilyn Herbert Gary Griffith
HealthTrust, Inc. EPIC Holdings, Inc.
615/298-6261 214/443-3333
or
Paula Lovell
Lovell Communications
615/297-7766
</TABLE>
HEALTHTRUST AGREES TO ACQUIRE EPIC HOLDINGS
FOR APPROXIMATELY $1 BILLION
NASHVILLE, TN, and DALLAS, TX, January 10, 1994 --
Healthtrust, Inc. -The Hospital Company (NYSE:HTI) and EPIC
Holdings, Inc. jointly announced today the signing of an
agreement under which HealthTrust will acquire EPIC in a
transaction valued at approximately $1 billion.
EPIC owns and operates 34 hospitals with 4,444 beds in
10 states. HealthTrust currently has 81 hospital
affiliates in 21 states with a total of 11,011 beds.
Following the acquisition, HealthTrust will operate 115
acute care hospitals in 22 states and will have
approximately 37,000 employees. For the most recent fiscal
years of HealthTrust and EPIC, the two companies had
combined revenues of approximately $3.4 billion.
Under the terms of the definitive agreement
unanimously approved by the boards of both companies,
shareholders of EPIC will receive $7.00 per share of EPIC
common stock, or approximately $277 million in the
aggregate. Following the acquisition, EPIC will operate as
a subsidiary of HealthTrust. HealthTrust will assume or
refinance approximately $727 million of EPIC indebtedness.
In connection with the acquisition, HealthTrust intends to
offer to purchase the following outstanding EPIC indebtedness;
EPIC Holdings' 12% Senior Deferred Coupon Notes due 2002;
EPIC Healthcare Group, Inc.'s 10 % Senior Subordinated Notes
due 2003; and EPIC Properties, Inc.'s 11 % Class B-1 First Priority
Mortgage Notes due 2001; 11 1/2% Class B-2 First Priority
Mortgage Notes due 2001 and Floating Rate Class B-3 First
Priority Mortgage Notes due 1998. HealthTrust also plans
to seek the consent of the holders of this indebtedness to
amend certain restrictive provisions. In addition,
following the acquisition, HealthTrust expects to redeem<PAGE>
other outstanding EPIC bonds in accordance with their
terms.
HealthTrust intends to finance approximately 15% of
the transaction through a public offering of its common
stock and approximately 20% through the public offering of
a new series of debt securities. Each of those offerings
will be made only by means of a prospectus. HealthTrust
had 81,167,288 shares of common stock outstanding as of
December 31, 1993. Approximately 60% of funding will be
obtained through the refinancing of HealthTrust's existing
bank credit facility and with available cash.
Approximately 5% of the acquisition will be financed by
assuming EPIC indebtedness.
R. Clayton McWhorter, Chairman, President, and Chief
Executive Officer of HealthTrust, said, "The EPIC
acquisition is in keeping with HealthTrust's strategy and
will improve HealthTrust's position as a provider of cost
effective, high quality care in the changing health care
environment. This transaction will broaden our coverage of
the markets we currently serve, provide access to new
geographical markets and expand our operations in related
health care areas. We expect to achieve operating and
market synergies of approximately $50 million in fiscal
year 1995 as a result of this acquisition through cost
reduction and improved efficiency."
Kenn S. George, Chairman, President and Chief
Executive Officer of EPIC, stated, "This transaction offers
EPIC hospitals greater access to capital and will thereby
expedite implementation of the Integrated Delivery Systems
strategy we've had in place since last year. In addition,
I think this transaction is a credit to the commitment and
hard work of our people, and clearly positions our
hospitals as winners in each of our markets."
Consummation of the acquisition is subject to a number
of conditions, including the approval of EPIC's
shareholders and the consummation of the debt consent
solicitations described above. American Medical
International, Inc. and the trustee of EPIC's employee
stock ownership plan have agreed, subject to the
fulfillment of certain conditions, to vote their shares of
EPIC common stock in favor of the acquisition. AMI and the
EPIC ESOP trustee each currently hold approximately 26%
(excluding shares over which ESOP participants exercise
voting power) of the EPIC common stock presently
outstanding. The transaction is expected to close in April
or May of 1994.
<PAGE>
Based in Dallas, Texas, EPIC owns and operates 34
acute-care community hospitals throughout 10 states. In
addition to its hospital operations, EPIC owns subsidiaries
which provide contract management services in the areas of
gero-psych, hospital management, rehab and home health.
With FY93 net revenue of $1.02 billion, EPIC is the second
largest employee-owned company in the nation.
HealthTrust is one of the largest health care
providers in the United States with revenues of $2.4
billion. Operating in 84 markets in 21 southern and
western states, the Company delivers a variety of inpatient
and outpatient health care services through its 81
affiliated hospitals and 3 hospital joint ventures in
Orlando, Florida; Encino, California and Charlotte, North
Carolina.
# # #
<PAGE>
<LOGO>
Merilyn Herbert
HealthTrust, Inc.
615/297-6261
or
Paula Lovell
Lovell Communications
615/297-7766
NASHVILLE, TN, January 10, 1994: Healthtrust, Inc. - The
Hospital Company (NYSE:HTI) announed that, in connection with its
acquisition of EPIC Holdings, Inc., it is purchasing the equity
of EPIC for $7.00 per share, or approximately $277 million,
in cash, and will assume or refinance approximately $727 million
of EPIC indebtedness. In addition, the acquisition of EPIC is
expected to have no material effect on Healthtrust earnings
for the remainder of the 1994 fiscal year, and to add $.10
to $.12 per share to earnings in fiscal year 1995, the first
full year of operation following the transaction. Healthtrust
anticipates that the acquisition will create goodwill of
approximately $400 million to $450 million.
Healthtrust is one of the largest health care providers in
the United States with revenues of $2.4 billion. Operating
in 84 markets in 21 southern and western states, the Company
delivers a variety of inpatient and outpatient health care
services through its 81 affiliated hospitals and 3 hospital
joint ventures in Orlando, Florida; Encino, California; and
Charlotte, North Carolina.
# # #
