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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 13, 1998
Mariner Health Group, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 0-21512 06-1251310
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(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
1881 Worcester Road
Framingham, Massachusetts 01701
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (860) 701-2000
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ITEM 5. OTHER EVENTS
On April 13, 1998, Mariner Health Group, Inc. ("Mariner"), Paragon
Health Network, Inc. ("Paragon") and Paragon Acquisition Sub, Inc. ("Sub")
entered into an Agreement and Plan of Merger (the "Merger Agreement"), providing
for the merger (the "Merger") of Sub with and into Mariner.
Pursuant to the Merger Agreement, each share of the $.01 par value
common stock of Mariner ("Mariner Common Stock") issued and outstanding at the
effective time of the Merger (other than treasury shares) will be exchanged for
one (1) share of the $.01 par value common stock of Paragon ("Paragon Common
Stock"). Consummation of the Merger is subject to approval of the stockholders
of both Paragon and Mariner and various state and Federal regulatory agencies
and other customary conditions. The Merger Agreement is attached hereto as
Exhibit 2.1 and is hereby incorporated by reference.
Holders of approximately 44% of the outstanding Paragon Common Stock
and approximately 21% of the outstanding Mariner Common Stock have agreed to
vote in favor of the transactions contemplated by the Merger Agreement. In
addition, Paragon and Mariner have each granted the other an option to acquire
19.9% of their common stock, respectively, upon certain events. The voting
agreements and stock option agreements are attached hereto as Exhibits 99.1,
99.2, 99.3 and 99.4, respectively, and are hereby incorporated by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated April 13, 1998, by and
between Paragon Health Network, Inc., a Delaware corporation,
Mariner Health Group, Inc., a Delaware corporation and
Paragon Acquisition Sub, Inc., a Delaware corporation.
99.1 Parent Stock Option Agreement dated April 13, 1998, by and
between Paragon Health Network, Inc., and Mariner Health
Group, Inc.
99.2 Company Stock Option Agreement dated April 13, 1998, by and
between Mariner Health Group, Inc., and Paragon Health
Network, Inc.
99.3 Parent Voting Agreement dated April 13, 1998, by and among
Mariner Health Group, Inc., and certain stockholders of
Paragon Health Network, Inc.
2
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Exhibit No. Description
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99.4 Company Voting Agreement dated April 13, 1998, by and among
Paragon Health Network, Inc., and certain stockholders of
Mariner Health Group, Inc.
99.5 Joint Press Release of Paragon Health Network, Inc. and
Mariner Health Group, Inc. dated April 13, 1998.
[Remainder of page intentionally left blank]
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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.
MARINER HEALTH GROUP, INC.
Date: April 23, 1998 By: /s/ David N. Hansen
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David N. Hansen
Executive Vice President,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
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Exhibit No. Description
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2.1 Agreement and Plan of Merger dated April 13, 1998, by and
between Paragon Health Network, Inc., a Delaware corporation,
Mariner Health Group, Inc., a Delaware corporation and
Paragon Acquisition Sub, Inc., a Delaware corporation.
99.1 Parent Stock Option Agreement dated April 13, 1998, by and
between Paragon Health Network, Inc., and Mariner Health
Group, Inc.
99.2 Company Stock Option Agreement dated April 13, 1998, by and
between Mariner Health Group, Inc., and Paragon Health
Network, Inc.
99.3 Parent Voting Agreement dated April 13, 1998, by and among
Mariner Health Group, Inc., and certain stockholders of
Paragon Health Network, Inc.
99.4 Company Voting Agreement dated April 13, 1998, by and among
Paragon Health Network, Inc., and certain stockholders of
Mariner Health Group, Inc.
99.5 Joint Press Release of Paragon Health Network, Inc. and
Mariner Health Group, Inc. dated April 13, 1998.
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 13, 1998
AMONG
PARAGON HEALTH NETWORK, INC.
PARAGON ACQUISITION SUB, INC.
AND
MARINER HEALTH GROUP, INC.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I CERTAIN DEFINITIONS.....................................................................................2
SECTION 1.01 Certain Definitions...............................................................................2
ARTICLE II THE MERGER............................................................................................3
SECTION 2.01 The Merger........................................................................................3
SECTION 2.02 Consummation of the Merger........................................................................3
SECTION 2.03 Effects of the Merger.............................................................................3
SECTION 2.04 Certificate of Incorporation and Bylaws...........................................................3
SECTION 2.05 Directors and Officers............................................................................4
SECTION 2.06 Conversion of Shares..............................................................................4
SECTION 2.07 Conversion of Common Stock of Sub.................................................................4
SECTION 2.08 Further Assurances................................................................................4
SECTION 2.09 Stockholders' Meetings............................................................................4
SECTION 2.10 Rights Under Stock Plans..........................................................................5
SECTION 2.11 Exchange of Certificates..........................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................8
SECTION 3.01 Organization and Qualification....................................................................8
SECTION 3.02 Capitalization....................................................................................8
SECTION 3.03 Authority.........................................................................................8
SECTION 3.04 Absence of Certain Changes.......................................................................10
SECTION 3.05 Reports..........................................................................................10
SECTION 3.06 Information Supplied.............................................................................11
SECTION 3.07 Consents and Approvals; No Violations............................................................11
SECTION 3.08 Brokers..........................................................................................12
SECTION 3.09 Employee Benefit Matters.........................................................................12
SECTION 3.10 Litigation, etc..................................................................................14
SECTION 3.11 Tax Matters......................................................................................15
SECTION 3.12 Compliance with Law..............................................................................15
SECTION 3.13 Environmental Compliance.........................................................................15
SECTION 3.14 Insurance........................................................................................16
SECTION 3.15 Opinion of Financial Advisor.....................................................................16
SECTION 3.16 State Takeover Laws..............................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB..............................................17
SECTION 4.01 Organization and Qualification...................................................................17
SECTION 4.02 Capitalization...................................................................................17
SECTION 4.03 Authority........................................................................................18
SECTION 4.04 Absence of Certain Changes.......................................................................18
SECTION 4.05 Reports..........................................................................................19
SECTION 4.06 Information Supplied.............................................................................19
SECTION 4.07 Consents and Approvals; No Violation.............................................................19
SECTION 4.08 Brokers..........................................................................................20
SECTION 4.09 Employee Benefit Matters.........................................................................20
SECTION 4.10 Litigation, etc..................................................................................23
SECTION 4.11 Tax Matters......................................................................................23
SECTION 4.12 Compliance with Law..............................................................................23
SECTION 4.13 Environmental Compliance.........................................................................24
SECTION 4.14 Insurance........................................................................................24
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<TABLE>
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SECTION 4.15 Opinion of Financial Advisor....................................................................24
SECTION 4.16 State Takeover Law..............................................................................24
ARTICLE V COVENANTS..............................................................................................25
SECTION 5.01 Conduct of Business..............................................................................25
SECTION 5.02 No Solicitation by the Company...................................................................27
SECTION 5.03 No Solicitation by Parent........................................................................28
SECTION 5.04 Access to Information............................................................................29
SECTION 5.05 Commercially Reasonable Efforts; Other Actions...................................................29
SECTION 5.06 Indemnification and Insurance....................................................................30
SECTION 5.07 Employee Plans and Benefits and Employment Contracts.............................................31
SECTION 5.08 Proxy Statement and S-4..........................................................................32
SECTION 5.09 Notification of Certain Matters..................................................................32
SECTION 5.10 Agreements of Rule 145 Affiliates................................................................32
SECTION 5.11 Stock Exchange Listings..........................................................................32
SECTION 5.12 Rights Agreement.................................................................................32
SECTION 5.13 Takeover Laws....................................................................................33
SECTION 5.14 Employee Stock Purchase Plan.....................................................................33
SECTION 5.15 Financing........................................................................................33
SECTION 5.16 Board of Designees...............................................................................33
SECTION 5.17 Parent By-laws...................................................................................33
SECTION 5.18 No Amendments....................................................................................34
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER..............................................................34
SECTION 6.01 Conditions to Each Party's Obligation to Effect the Merger.......................................34
SECTION 6.02 Additional Conditions to the Company's Obligation to Effect the Merger...........................34
SECTION 6.03 Additional Conditions to the Parent's and the Sub's Obligations to Effect the Merger.............35
ARTICLE VII TERMINATION; AMENDMENT; WAIVER.......................................................................36
SECTION 7.01 Termination......................................................................................36
SECTION 7.02 Effect of Termination............................................................................37
SECTION 7.03 Amendment........................................................................................38
SECTION 7.04 Extension; Waiver................................................................................38
ARTICLE VIII MISCELLANEOUS.......................................................................................38
SECTION 8.01 Survival of Representations and Warranties.......................................................38
SECTION 8.02 Entire Agreement; Assignment.....................................................................38
SECTION 8.03 Enforcement of the Agreement; Jurisdiction.......................................................39
SECTION 8.04 Validity.........................................................................................39
SECTION 8.05 Notices..........................................................................................39
SECTION 8.06 Governing Law....................................................................................40
SECTION 8.07 Descriptive Headings.............................................................................40
SECTION 8.08 Parties in Interest..............................................................................40
SECTION 8.09 Counterparts.....................................................................................40
SECTION 8.10 Fees and Expenses................................................................................40
SECTION 8.11 Press Releases...................................................................................40
SECTION 8.12 Obligation of the Parent.........................................................................41
SECTION 8.13 Facsimile Signatures............................................................................41
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EXHIBITS
Exhibit A - Company Option Agreement Exhibit B - Parent Option Agreement Exhibit
C - Company Voting Agreement Exhibit D - Parent Voting Agreement Exhibit E -
Rights Agreement Amendment Exhibit F - Form of Bylaw Amendment
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 13,
1998, among Paragon Health Network, Inc., a Delaware corporation (the "Parent"),
Mariner Health Group, Inc., a Delaware corporation (the "Company"), and Paragon
Acquisition Sub, Inc., a Delaware corporation wholly owned by Parent (the
"Sub").
RECITALS
WHEREAS, the Board of Directors of each of Parent and the Company have
determined that it is in the best interests of their respective stockholders for
Sub to merge with and into the Company (the "Merger") pursuant to Section 251 of
the Delaware General Corporation Law ("DGCL") upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors of each of Parent and the Company has
adopted resolutions approving the Merger of Sub with and into the Company, in
accordance with applicable Delaware law upon the terms and subject to the
conditions set forth herein, and Parent's Board of Directors has agreed to
recommend that Parent's stockholders approve the issuance of Parent Common Stock
(as defined below) pursuant to this Agreement and the Company's Board of
Directors has agreed to recommend that the Company's stockholders approve the
Merger and this Agreement;
WHEREAS, Parent and the Company have agreed (subject to the terms and
conditions of this Agreement), as soon as practicable following the approval by
the stockholders of the Company and Parent, to effect the Merger as more fully
described herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Board of Directors of the Company has determined that it
is appropriate, simultaneously with the execution and delivery of this
Agreement, to grant Parent an option (the "Company Option Agreement") and the
Board of Directors of the Parent has determined that it is appropriate,
simultaneously with the execution and delivery of this Agreement, to grant the
Company an option (the "Parent Option Agreement," and together with the Company
Option Agreement, the "Option Agreements") copies of which are attached hereto
as Exhibits A and B, to acquire such number of shares of Company Common Stock
(in the case of the Company Option Agreement) and Parent Common Stock (in the
case of the Parent Option Agreement), as equals 19.9% of the total number of
shares of Company Common Stock or Parent Common Stock issued and outstanding as
of the time of exercise of the rights set forth in such agreements;
WHEREAS, concurrent with the execution of this Agreement, Parent, Sub
and certain stockholders of the Company have executed and delivered the Company
Stockholder Voting Agreement attached as Exhibit C hereto (the "Company Voting
Agreement") providing for the voting of all Company Common Stock beneficially
owned by such stockholders in favor of the Merger, this Agreement and the
transactions contemplated hereby;
WHEREAS, concurrent with the execution of this Agreement, the Company
and certain stockholders of Parent have executed and delivered the Parent
Stockholder Voting Agreement attached as Exhibit D hereto (the "Parent Voting
Agreement", and, together with the Company Voting Agreement,
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the "Voting Agreements") providing for the voting of all Parent Common Stock
beneficially owned by such stockholders in favor of the issuance of Parent
Common Stock in connection with the Merger;
WHEREAS, concurrent with the execution of this Agreement, Parent and
certain stockholders of Parent (the "Apollo Stockholders") have executed and
delivered that certain Amendment No. 1 to Stockholders Agreement ("Amendment to
Stockholders Agreement") providing, inter alia, for certain changes in the
rights of the Apollo Stockholders to nominate certain individuals for election
to Parent's Board of Directors pursuant to that certain Stockholders Agreement
(the "Stockholders Agreement") dated as of November 4, 1997 by and among Parent
, the Apollo Stockholders and the other parties named therein;
WHEREAS, concurrent with the execution of this Agreement, Apollo
Management, L.P. ("Apollo Management") and certain stockholders of Parent have
executed and delivered that certain Termination and Release of Proxy and Voting
Agreement (the "Termination Agreement"), providing for the release of the shares
of Parent Common Stock beneficially owned by Keith B. Pitts from the rights and
obligations imposed by the Proxy and Voting Agreement, dated as of November 4,
1997, by and among Apollo Management and the Other Stockholders (as defined in
the Stockholders Agreement); and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01 Certain Definitions.
For purposes of this Agreement:
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law or executive order to close;
"Closing Date" shall mean the date of the Closing pursuant to Section
2.02 hereof.
"Company Plans" shall mean the Company's 1992 Stock Option Plan, 1994
Stock Plan, 1995 Non-Employee Director Stock Option Plan and 1993 Employee Stock
Purchase Plan.
"Environmental Law" means any law, regulation, decree, judgment, permit
or authorization relating to worker safety or the environment, including,
without limitation, environmental pollution, contamination, cleanup, regulation
and protection of the air, water or soils;
"Environmental Liabilities and Costs" means all damages, penalties,
obligations or clean-up costs assessed or levied pursuant to any Environmental
Law;
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time;
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"Material Adverse Effect" means, with respect to Parent or the Company,
as the case may be, (i) with respect to any event, occurrence, failure of event
or occurrence, change, effect, state of affairs, breach, default, violation,
fine, penalty or failure to comply (each, a "circumstance"), individually or
taken together with all other circumstances contemplated by or in connection
with any or all of the representations and warranties made in this Agreement, a
material adverse effect on the business, financial condition, results of
operations or prospects of either the Company or Parent, as appropriate, and its
respective Subsidiaries, taken as a whole;
"Parent Plans" shall mean the New GranCare Replacement Plan, the New
GranCare Stock Incentive Plan, the New GranCare Outside Directors Plan and the
Paragon 1997 Incentive Plan.
"Securities Act" means the Securities Act of 1933, as amended and in
effect from time to time; and
"Subsidiary" means, when used with reference to an entity, any other
entity of which a majority of the outstanding voting securities or other
ownership interests having ordinary voting power to elect a majority of the
members of the board of directors or other governing body performing similar
functions, are owned directly or indirectly by such former entity.
"Transaction Documents" means this Agreement, the Option Agreements,
the Voting Agreements, Amendment No. 1 to Stockholders Agreement and the Rights
Agreement Amendment.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, Sub shall be
merged with and into the Company as soon as practicable following the
satisfaction or waiver, if permissible, of the conditions set forth in Article
VI hereof. The Company shall be the surviving corporation in the Merger (the
"Surviving Corporation") under the name Mariner Health Group, Inc. (or such
other name as the parties shall agree) and shall continue its existence under
the laws of Delaware.
The separate corporate existence of Sub shall cease.
SECTION 2.02 Consummation of the Merger. Subject to the provisions of
this Agreement, the parties hereto shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a duly executed and
verified certificate of merger, as required by the DGCL, and shall take all such
other and further actions as may be required by law to make the Merger effective
as promptly as practicable. Prior to the filing referred to in this Section, a
closing (the "Closing") will be held at the offices of Sidley & Austin, 875
Third Avenue, New York, New York 10022 (or such other place as the parties may
agree) for the purpose of confirming all the foregoing. The time the Merger
becomes effective in accordance with applicable law is referred to as the
"Effective Time."
SECTION 2.03 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL and as set forth herein.
SECTION 2.04 Certificate of Incorporation and Bylaws. The Certificate
of Incorporation and the Bylaws of Sub, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
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SECTION 2.05 Directors and Officers. The directors of Sub immediately
prior to the Effective Time and the officers of the Company immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their respective successors are duly elected and
qualified.
SECTION 2.06 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company, or the
holders of any of the shares of Common Stock, par value $.01 per share, of the
Company ("Company Common Stock"):
(a) Subject to Section 2.06(b), each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger, be converted into, exchanged for and represent the right to
receive (without interest) one (1) (the "Exchange Ratio") share of common stock,
par value $.0l per share, of Parent (the "Parent Common Stock"; hereinafter
sometimes referred to as the "Merger Consideration").
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Sub, Parent or any
direct or indirect wholly owned subsidiary of Parent or the Company immediately
prior to the Effective Time shall be cancelled and cease to exist without any
conversion or other consideration with respect thereto.
SECTION 2.07 Conversion of Common Stock of Sub. Each share of common
stock of Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become at the Effective Time one share of common
stock of the Surviving Corporation.
SECTION 2.08 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Company and Sub or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Company and the Sub or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 2.09 Stockholders' Meetings. Subject to applicable law, each of
Parent and the Company, acting through its respective Board of Directors, shall,
in accordance with applicable law and subject to the fiduciary duties of their
respective Boards of Directors under applicable law as determined by such
directors in good faith after consultation with and based upon the advice of
outside counsel: (i) duly call, give notice of, convene and hold a special
meeting (which, as may be duly adjourned, shall be referred to as the "Special
Meetings" or "Stockholders Meetings") of its respective stockholders as soon as
practicable for the purpose (in the case of the Company) of approving and
adopting the agreement of merger (within the meaning of Section 251 of the DGCL)
set forth in this Agreement and approving the Merger (the "Company Stockholder
Approval") or (in the case of Parent) for the purpose of approving the issuance
of the Parent Common Stock in connection with the Merger (the "Parent
Stockholder Approval" and together with the Company Stockholder Approval, the
"Stockholder Approvals"), and (ii) include in the Proxy Statement (as defined in
Section 5.07) of each of the Company and Parent for use in connection with the
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Special Meeting of each of the Company and Parent, the recommendation of their
respective Board of Directors that stockholders vote in favor of the Company
Stockholder Approval or the Parent Stockholder Approval, as the case may be.
Parent, Sub and the Company will use commercially reasonable efforts to cause
the Special Meetings to occur within forty-five (45) days after Parent and the
Company have obtained from the Securities and Exchange Commission ("SEC") an
order declaring effective a registration statement on Form S-4 registering under
the Securities Act, the Parent Common Stock to be issued in the Merger.
SECTION 2.10 Rights Under Stock Plans.
(a) Each option to purchase shares of Company Common Stock issued
pursuant to the Company's 1992 Stock Option Plan and the 1994 Stock Plan ("Cash
Payment Options"), all of which issued and outstanding Cash Payment Options are
set forth on Section 3.02(a) of the Company Disclosure Letter, shall, at the
Effective Time, whether or not vested, constitute the right to receive, subject
to required withholding, a cash payment equal to the product of (i) the average
of the last reported sale prices per share of Parent Common Stock for the five
trading days immediately preceding the Closing Date; provided, however, that in
the event such average price is less than $20 or more than $22 then such average
price shall be deemed to be (A) $20 (when such average price is less than $20)
or (B) $22 (when such average price is more than $22) (the "Trailing Company
Stock Price"), less the per share exercise price required by such Cash Payment
Option and (ii) the number of shares subject to such Company Plan Option. Parent
shall, within five business days following the Closing Date, mail to each holder
of a Cash Payment Option (a "Cash Payment Optionee") a statement setting forth
in reasonable detail the calculation of the amount of the payment (the "Option
Settlement Payment") to be received by such Cash Payment Optionee and a form of
general release pursuant to which such Cash Payment Optionee shall forever
release any and all claims he or she may have against the Company, Parent or any
of their respective current or former affiliates or control persons arising out
of or in connection with such Cash Payment Option, which release shall be
effective upon receipt by the Cash Payment Optionee of the Option Settlement
Payment. Within five business days following the return of any such general
release, Parent shall mail to the relevant Cash Payment Optionee a check in the
amount of Option Settlement Payment to be received by such Cash Payment
Optionee.
(b) Each option to purchase shares of Company Common Stock issued
pursuant to the 1995 Non-Employee Director Stock Option Plan (the "Director
Options"), the Employee Stock Purchase Plan, (the "Stock Purchase Plan Options")
as well as options to purchase shares of Company Common Stock granted or assumed
in connection with certain historical transactions or otherwise (the "Non-Plan
Options"), all of which issued and outstanding Directors Options, Stock Purchase
Plan Options and Non-Plan Options (collectively, the "Assumed Options" and,
together with the Cash Payment Options, the "Company Options") are set forth on
Section 3.02(a) of the Company Disclosure Letter, shall, at the Effective Time,
whether or not vested, be assumed by Parent and shall constitute an option to
acquire, on the same terms and conditions as were applicable under such Assumed
Options, such number of shares of Parent Common Stock as is equal to the product
of the Exchange Ratio and the number of shares of Company Common Stock subject
to such Assumed Options, at a price per share equal to the amount obtained by
dividing the per share exercise price of such Assumed Options, by the Exchange
Ratio. As soon as practicable following the Effective Time, Parent shall deliver
to holders of Director Options and Non-Plan Options appropriate option
agreements representing the right to acquire shares of Parent Common Stock on
substantially the same terms and conditions as pertain to the outstanding
Assumed Options.
(c) (i) At the Effective Time, Parent shall assume the obligations of
the Company under each warrant to purchase Company Common Stock outstanding at
the Effective Time and set forth on Section 3.02(a) of the Company Disclosure
Letter and thereafter, the exercise price of such warrants shall be adjusted by
dividing the per share exercise price in effect prior to the Effective Time of
the Merger by
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the Exchange Ratio (or, if the exercise price of such warrant is not specified
or otherwise determinable as of the Effective Time, by making or providing for
an appropriate adjustment to the exercise price at the time the exercise price
shall become final in accordance with the terms of such warrant) and, upon
exercise, the holder of each such warrant shall receive the number of shares of
Parent Common Stock as would have been issued or delivered to the holder thereof
if such holder had exercised the warrant and had received the number of shares
of Company Common Stock to which such holder would have been entitled
immediately prior to the Merger; (ii) prior to the Effective Time of the Merger,
Parent shall deliver to the holders of such warrants an appropriate notice
setting forth such holders' rights pursuant to the applicable warrant agreements
with respect thereto to the extent required by the terms of the warrant
agreements with respect thereto; and (iii) Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the warrants.
(d) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of its Parent Common Stock for delivery
upon exercise of the Assumed Options assumed in accordance with this Section
2.10. Parent shall file and cause to be effective as of the Effective Time a
registration statement on Form S-8 or other appropriate form, with respect to
shares of Parent Common Stock that will be subject to the Assumed Options and
use commercially reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus
contained therein) for so long as any Assumed Options remain outstanding.
SECTION 2.11 Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit with a bank or trust
company designated by Parent to act as paying agent (the "Paying Agent") for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto and cash to be paid pursuant to Section
2.11(e) with respect to any fraction of a share of Parent Common Stock, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
2.06 in exchange for outstanding shares of Company Common Stock. The Paying
Agent shall, pursuant to irrevocable instructions, deliver the Parent Common
Stock contemplated to be issued pursuant hereto out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose.
(b) As soon as reasonably practicable after the Effective Time, the
Paying 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"): (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 Paying Agent and shall be in such form and have such other
provisions as Parent may reasonably specify); and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II and cash in lieu of
fractional shares of Parent Common Stock as contemplated by Section 2.11(e), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the appropriate
number of shares of Parent Common Stock may be issued to a transferee if the
Certificate representing such Company Common Stock is presented to the Paying
Agent accompanied by all documents required to evidence and effect such
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<PAGE> 11
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.11, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 2.11. The Paying Agent shall not be entitled to
vote or exercise any rights of ownership with respect to the Parent Common Stock
held by it from time to time hereunder, except that it shall receive and hold
all dividends or other distributions paid or distributed with respect thereto
for the account of persons entitled thereto.
(c) No dividends or other distributions with respect to shares of
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered certificate for shares of Company Common Stock
with respect to the shares of Parent Common Stock represented thereby and no
cash payment in lieu of fractional shares of Parent Common Stock shall be paid
to any such holder pursuant to Section 2.11(e) until the surrender of the
certificate for shares of Company Common Stock with respect to the shares of
Parent Common Stock represented thereby in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
certificates, there shall be paid to the holder of the certificate representing
whole shares of Parent Common Stock issued in connection therewith, without
interest at the time of such surrender the amount of any cash payable in lieu of
a fractional share to which such holder is entitled pursuant to Section 2.11(e)
and the appropriate amount of any dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to whole shares of
Parent Common Stock.
(d) All shares of Parent Common Stock issued upon the surrender for
exchange of certificates representing shares of Company Common Stock in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.11(c) or 2.11 (e)) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the shares of Company Common
Stock so exchanged.
(e) Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock (after taking into account
all shares of Company Common Stock delivered by such holder) shall receive, in
lieu thereof, a cash payment (without interest) equal to such fraction
multiplied by average price of the last reported sale prices per share of Parent
Common Stock for the five trading days immediately preceding the Closing Date.
(f) Any portion of the Merger Consideration deposited with the Paying
Agent pursuant to this Section 2.11 which remains undistributed to the holders
of the certificates representing shares of Company Common Stock for six months
after the Effective Time shall be delivered to Parent and any holders of shares
of Company Common Stock prior to the Effective Time who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of their claim for shares of Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock, and any dividends or distributions with respect
to Parent Common Stock.
(g) None of Sub or the Company or Parent or the Paying Agent shall be
liable to any person in respect of any cash or Parent Common Stock from the
Exchange Fund delivered to a public office pursuant to any applicable abandoned
property, escheat or similar law.
(h) The Paying Agent shall invest any cash included in the Exchange
Fund for payments in lieu of fractional shares, as directed by Parent, on a
daily basis. Any interest and other income resulting from such investments shall
be paid to Parent. To the extent that there are losses with respect to such
investments, or the Exchange Fund diminishes for other reasons below the level
required to make the payments contemplated hereby, Parent shall promptly replace
or restore the portion of the Exchange Fund
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<PAGE> 12
lost through investments or other events so as to ensure that the Exchange Fund
is, at all times, maintained at a level sufficient to make such payments.
(i) Parent shall pay all charges and expenses of the Paying Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the date of this Agreement
(or such other date as shall be expressly specified) to Parent and Sub as
follows:
SECTION 3.01 Organization and Qualification. Each of the Company and
its Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with all requisite
corporate power and other authority to own its properties and conduct its
business as it is being conducted on the date hereof and is duly qualified and
in good standing as a foreign corporation authorized to do business in each of
the jurisdictions in which the character of the properties owned or held under
lease by it or the nature of the business transacted by it makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company has heretofore made available to the
Parent accurate and complete copies of the Certificate of Incorporation and
Bylaws as currently in effect of the Company. Except as set forth in Section
3.01 of the Company Disclosure Letter, there are no provisions in the
certificate of incorporations or bylaws of any Subsidiary of the Company or any
agreement to which the Company or any of its Subsidiaries is bound that would
limit or restrict the ability of the Company to name or remove the directors and
officers of any Subsidiary of the Company following the Effective Time.
SECTION 3.02 Capitalization. (a) The authorized capital stock of the
Company consists of 50,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $.01 per share, of which 500,000 have been
designated as Series A Junior Participating Preferred Stock. As of the close of
business on April 1, 1998 (the "Capitalization Date"): 29,578,704 shares of
Company Common Stock were issued and outstanding; no shares of Preferred Stock
were issued and outstanding; and no shares of Company Common Stock were held in
the Company's treasury. As of the Capitalization Date, the outstanding options
to acquire Company Common Stock and all other outstanding warrants or
exchangeable or convertible securities or other rights to acquire Company Common
Stock were as set forth in Section 3.02(a) of the disclosure letter dated the
date hereof and delivered by the Company to the Parent on the date hereof
setting forth certain matters referred to in this Agreement (the "Company
Disclosure Letter"), and there were outstanding rights (the "Rights Agreement
Rights") under the Rights Agreement dated October 31, 1995 between the Company
and State Street Bank and Trust Company (the "Rights Agreement"). A list of all
outstanding options (other than the option to be granted pursuant to the Company
Option Agreement), warrants, or other rights to acquire common stock of the
Company as of the date hereof (including the name of each optionee and the
number of shares subject to each such option) and the form of each option
agreement that will be utilized to document those option grants that have not
been documented as of the date hereof is included in Section 3.02(a) of the
Company Disclosure Letter. Since the Capitalization Date, except as set forth in
Section 3.02(a) of the Company Disclosure Letter or in the Company SEC Reports
(as defined in Section 3.05), filed prior to April 1, 1998, the Company (i) has
not issued any Company Common Stock other than the issuance of shares of Company
Common Stock (A) upon the exercise of options granted pursuant to the Company
Plans prior to the Capitalization Date and listed on Section 3.02(a) of the
Company Disclosure Letter, (B) upon the exercise of warrants or the conversion
of convertible securities outstanding as of the Capitalization Date and listed
on Section 3.02(a) of the Company Disclosure Letter or (C) pursuant to the
Company's 1993
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<PAGE> 13
Employee Stock Purchase Plan, (ii) has not granted any options or rights to
purchase or acquire Company Common Stock (under the Company's employee benefit
plans or otherwise) other than the Company Option Agreement, and (iii) has not
split, combined or reclassified any of its shares of capital stock. All of the
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are free of preemptive rights.
Except for the Company Option Agreement or as set forth in this Section 3.02 or
in Section 3.02(a) of the Company Disclosure Letter or in the Company SEC
Reports filed prior to April 1, 1998, there are outstanding: (i) no shares of
capital stock or other voting securities of the Company, (ii) no securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company and (iii) no options, warrants, rights
(including preemptive rights) or other agreements or commitments to acquire from
the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and no obligation of the Company to
grant, extend or enter into any subscription, warrant, option, right,
convertible or exchangeable security or other similar agreement or commitment
(the items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). Except as set forth in Section 3.02(a) of the Company
Disclosure Letter, there are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any Company Securities.
Except as set forth in Section 3.02(a) of the Company Disclosure Letter, there
are no voting trusts or other agreements or understandings to which the Company
or any of its Subsidiaries is a party with respect to the voting of capital
stock of the Company or any of its Subsidiaries.
(b) Except as set forth in Section 3.02(b) of the Company Disclosure
Letter or in the Company SEC Reports filed prior to April 1, 1998, the Company
is, directly or indirectly, the record and beneficial owner of all the
outstanding shares of capital stock of each of its Subsidiaries, free and clear
of any lien, mortgage, pledge, charge, security interest or encumbrance of any
kind, and there are no irrevocable proxies with respect to any such shares.
Except as set forth in Section 3.02(b) of the Company Disclosure Letter or in
the Company SEC Reports filed prior to April 1, 1998, there are no outstanding
(i) securities of the Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any Subsidiary, or (ii) options, warrants, rights, (including preemptive rights)
or other agreements or commitments to acquire from the Company or any of its
Subsidiaries, and no other obligation of the Company or any of its Subsidiaries
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its Subsidiaries, or any other
obligation of the Company or any of its Subsidiaries to grant, extend or enter
into any subscription, warrant, option, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i) and
(ii) being referred to collectively as the "Subsidiary Securities"). Except as
set forth in Section 3.02(b) of the Company Disclosure Letter, there are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 3.03 Authority. The Company has the requisite corporate power
and authority to execute and deliver the Transaction Documents to which it is a
party and to consummate the transactions contemplated by such agreements. The
execution and delivery of the Transaction Documents to which it is a party by
the Company and the consummation by the Company of the transactions contemplated
by such agreements have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize such documents or to consummate the
transactions so contemplated, other than the approval and adoption of the
agreement of merger (as such term is used in Section 251 of the DGCL) contained
in this Agreement and the approval of the Merger by the holders of a majority of
the outstanding shares of Company Common Stock. The Transaction Documents to
which the Company is a party have been duly and validly executed and delivered
by the Company and, assuming such documents constitute a valid and binding
obligation of
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<PAGE> 14
each of the other parties thereto, each such Transaction Document to which the
Company is a party constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
SECTION 3.04 Absence of Certain Changes. Except as disclosed in the
Company SEC Reports filed prior to April 1, 1998 or in Section 3.04 of the
Company Disclosure Letter, since December 31, 1997 (i) the Company and its
Subsidiaries have not suffered any Material Adverse Effect, (ii) the Company and
its Subsidiaries have, in all material respects, conducted their respective
businesses only in the ordinary course consistent with past practice except in
connection with the negotiation and execution and delivery of the Transaction
Documents to which the Company is a party and (iii) there has not been (a) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the shares of Company Common Stock or any repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of any Company
Securities or Subsidiary Securities; or (b) any action by the Company which if
taken after the date hereof would constitute a breach of Section 5.01(a) hereof.
Except as disclosed in the Company SEC Reports filed prior to April 1, 1998 or
in Section 3.04 of the Company Disclosure Letter, since December 31, 1997, there
has not been any change by the Company in accounting methods, principles or
practices, except to the extent required by the SEC or United States generally
accepted accounting principles.
SECTION 3.05 Reports.
(a) Except as disclosed in Section 3.05 of the Company Disclosure
Letter, since January 1, 1996, the Company has timely filed with the SEC all
forms, reports and documents required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which have
heretofore been filed or are hereafter filed (the "Company SEC Reports") have
complied or will comply in form as of their respective filing dates in all
material respects with all applicable requirements of the Exchange Act and the
rules promulgated thereunder applicable thereto. Since January 1, 1996, none of
the Company SEC Reports, at the time filed, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) As of their respective dates, the audited and unaudited
consolidated financial statements of the Company included (or incorporated by
reference) in the Company SEC Reports were prepared (or will have been prepared)
in all material respects in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods therein
indicated (except as may be indicated in the notes thereto) and presented fairly
the consolidated financial position of the Company, and the consolidated results
of operations and changes in consolidated financial position or cash flows for
the periods presented therein, subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any other
adjustments described therein which would not have a Material Adverse Effect.
(c) As of December 31, 1997, to the knowledge of the Company or its
Subsidiaries, neither the Company nor any of its Subsidiaries had any
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due that are required to be recorded or reflected on a
balance sheet under United States generally accepted accounting principles,
except as reflected or reserved against or disclosed in the financial statements
of the Company included in the Company SEC Reports filed prior to April 1, 1998
or as set forth in the Company Disclosure Letter.
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<PAGE> 15
SECTION 3.06 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time the S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and none of the information supplied or to be supplied by the
Company and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Company, or at the time of the meeting of such stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the time of such meeting,
any event with respect to the Company or any of its Subsidiaries, or with
respect to other information supplied by the Company for inclusion in the Proxy
Statement or S-4, shall occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC. The Proxy Statement, insofar as it relates to other information supplied by
the Company for inclusion therein, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.07 Consents and Approvals; No Violations. Except as set forth
in Section 3.07 of the Company Disclosure Schedule, the execution and delivery
of the Transaction Documents to which the Company is a party and the
consummation by the Company of the transactions contemplated by such Transaction
Documents will not (i) conflict with or result in any breach of any provision of
the respective Certificates of Incorporation or Bylaws (or other similar
governing documents) of the Company or its Subsidiaries; (ii) require the
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except (A) in connection with the
HSR Act, (B) pursuant to the Securities Act or the Exchange Act, (C) in
connection with the consummation of the Merger pursuant to the DGCL, (D) any
applicable filings under state securities, blue sky or "takeover" laws, (E)
consents, approvals, authorizations or filings under laws of jurisdictions
outside the United States, (F) consents, approvals, authorizations, permits,
filings or notifications required by local, state and federal regulatory
agencies, commissions, boards or public authorities with jurisdiction over
health care facilities and providers or (G) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect on the
Company or have a material adverse effect on the ability of the Company to
consummate the transactions contemplated by such Transaction Documents; (iii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which any of its Subsidiaries or any of
their respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which would not have a Material Adverse Effect on
the Company or have a material adverse effect on the ability of the Company to
consummate the transactions contemplated by the Transaction Documents to which
the Company is a party; (iv) result in the creation or imposition of any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind on
any asset of the Company or any of its Subsidiaries which, individually or in
the aggregate, would have a Material Adverse Effect on the Company or have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated by such Transaction Documents; or (v) assuming the
Company obtains or makes such consents, approvals, acknowledgments, permits or
filings as the case may be referenced in Section 3.07(ii), violate any order,
writ, injunction, decree, statutes (including, without limitation, state laws
governing "business combinations," "moratorium," "control share" or other state
antitakeover statute or regulations) rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective assets, except for
violations which would not in the aggregate have a Material Adverse Effect
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<PAGE> 16
on the Company or have a material adverse effect on the ability of the Company
to consummate the transactions contemplated by the Transaction Documents.
SECTION 3.08 Brokers. No broker, finder or investment banker (other
than BT Alex. Brown Incorporated) is entitled to receive any brokerage, finder's
or other fee or commission in connection with this Agreement or such
transactions contemplated hereby based upon agreements made by or on behalf of
the Company.
SECTION 3.09 Employee Benefit Matters.
(a) For purposes of this Agreement, the term "Plan" shall refer to the
following maintained by the Company, Parent, the Sub or any of their
Subsidiaries or any of their respective ERISA Affiliates (as defined below), or
with respect to which the Company, the Parent, the Sub or any of their
Subsidiaries or any of their respective ERISA Affiliates contributes or has any
obligation to contribute or has any liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or similar
agreement): any plan, program, arrangement, agreement or commitment, whether
written or oral, which is an employment, consulting, deferred compensation or
change-in-control agreement, or an executive compensation, incentive bonus or
other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, change-in-control, life, health,
disability or accident insurance plan, or other employee benefit plan, program,
arrangement, agreement or commitment, written or oral, including, without
limitation, any material "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Section 3.09(a) of the Company Disclosure Letter sets forth each employment
agreement between a person and the Company or any of its Subsidiaries (other
than an employment agreement terminable without liability on no more than sixty
(60) days' notice).
(b) Except as set forth in Section 3.09(b) of the Company Disclosure
Letter or in the Company SEC Reports filed prior to April 1, 1998, none of the
Company, its Subsidiaries nor any of their respective ERISA Affiliates maintains
or contributes to, nor since January 1, 1992 have they maintained or contributed
to any:
(A) defined benefit plan subject to Title IV of ERISA;
(B) any other material employee benefits plan as defined in
Section 3(3) of ERISA; or
(C) "Multiemployer plan" as defined in Section 4001 of ERISA.
(c) No event has occurred and no condition or circumstance currently
exists in connection with which the Company, any of its Subsidiaries, their
respective ERISA Affiliates or any Plan, directly or indirectly, would be
subject to any liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan which would have a Material Adverse
Effect.
(d) Except as disclosed in the Company Disclosure Letter or in the
Company SEC Reports filed prior to April 1, 1998, the Company does not maintain,
nor has it at any time established or maintained, nor has it at any time been
obligated to make, or made, contributions to or under any plan that provides
post-retirement medical or health benefits with respect to former or current
employees or former or current directors of the Company, except as required by
Section 4980B of the Code.
(e) With respect to each Plan, (A) all material payments due from the
Company or any of its Subsidiaries to date have been made and all material
amounts properly accrued to date or as of the
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<PAGE> 17
Effective Time as liabilities of the Company or any of its Subsidiaries which
have not been paid have been properly recorded on the books of the Company; (B)
each such Plan which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) and intended to qualify under Section 401 of the Code has
either received a favorable determination letter from the Internal Revenue
Service with respect to such qualification as of the date specified in Section
3.09(d) of the Disclosure Letter or has filed for such a determination letter
with the Internal Revenue Service within the time permitted under Rev. Proc.
95-12 (December 29, 1994), 1995-3 IRB 24, and nothing has occurred since the
date of such letter that has resulted in or is likely to result in a tax
qualification defect which would have a Material Adverse Effect; and (C) there
are no material actions, suits or claims pending (other than routine claims for
benefits) or, to the best of Company's knowledge, threatened with respect to
such Plan or against the assets of such Plan.
(f) Except as Section 3.09(f) of the Company Disclosure Letter, as of
the last day of the most recent prior plan year, the market value of assets
under each employee pension benefit plan (as defined in Section 3(2) of ERISA)
equated or exceeded the present value of liabilities thereunder (determined in
accordance with then current funding assumptions). No Plan has suffered any
accumulated funding deficiency within the meaning of Section 302 of ERISA and
Section 412 of the Code. Neither the Company nor any ERISA Affiliate has any
outstanding liability under Section 4971 of the Code. As of the Effective Time,
all required premium payments for Plans have been made, when due, to the Pension
Benefit Guaranty Corporation ("PBGC"), and all required premium payments for the
Plans for plan years commencing in the plan year which would include the
Effective Time of the Merger have been made to the PBGC. No event or condition
exists with respect to any Plan which could be deemed a "reportable event" as
defined in Section 4043 of ERISA, with respect to which the 30-day notice
requirement has not been waived and which could result in a liability, and no
condition exists which would subject the Company to fine under Section 4071 of
ERISA. There is no lien upon any property of the Company or any ERISA Affiliate
outstanding pursuant to Section 4068 of ERISA in favor of the PBGC. There is no
lien upon any property of the Company or any ERISA Affiliate outstanding
pursuant to Code Section 412(n) in favor of any Plan and no assets of the
Company or any ERISA Affiliate have been provided as security for any Plan
pursuant to Code Section 401(a)(29).
(g) The Company has made available to the Parent, with respect to each
Plan for which the following exists:
(A) A copy of the most recent annual report on Form 5500, with
respect to such Plan including any Schedule B thereto;
(B) A copy of the current Summary Plan Description, together
with each current Summary of Material Modifications with respect to
such Plan and, unless the Plan is embodied entirely in an insurance
policy to which the Company or any of its Subsidiaries is a party, a
true and complete copy of such Plan; and
(C) If the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust
or other funding agreement and the latest financial statements thereof.
(h) Except as disclosed in Section 3.09(h) the Company Disclosure
Letter or the Company's SEC Reports filed prior to April 1, 1998, the Company
and each ERISA Affiliate has made fully and timely payment of all amounts
required to be contributed under the terms of each Plan and applicable law or
required to be paid as expenses under such Plan and no excise taxes are
assessable as a result of any nondeductible or other contributions made or not
made to a Plan. The assets of all Plans which are required under applicable laws
to be held in trust are in fact held in trust. The liabilities of each other
plan are properly and accurately reported on the financial statements and
records of the Company. The assets
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of each Plan are reported at their fair market value, as determined based on the
most recent valuation of such assets, on the books and records of each Plan.
(i) Except as disclosed in Section 3.09(i)of the Company Disclosure
Letter or the Company SEC Reports filed prior to April 1, 1998, to the knowledge
of the Company, neither the Company nor any ERISA Affiliate is subject to any
material liability, tax or penalty to any person as a result of the Company's or
any ERISA Affiliate's engaging in a prohibited transaction under ERISA or the
Code, and the Company has no knowledge of any circumstances which reasonably
might result in any such material liability, tax or penalty as a result of a
breach of fiduciary duty under ERISA.
(j) Except as disclosed in Section 3.11 of the Company Disclosure
Letter, no payment required to be made to any employee associated with the
Company as a result of the transactions contemplated hereby under any contract
or otherwise will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code.
(k) Except as disclosed in Section 3.09(k) of the Company Disclosure
Letter or the Company SEC Reports filed prior to April 1, 1998, the Company and
each ERISA Affiliate have complied with the continuation coverage requirements
of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, and ERISA Sections 601 through 608.
(l) Except as disclosed in Section 3.09(l) of the Company Disclosure
Letter, the consummation of the transactions contemplated hereby will not
accelerate or increase any liability under any Plan because of an acceleration
or increase of any of the rights or benefits to which employees of the Company
or any ERISA Affiliate may be entitled thereunder.
(m) Except as disclosed in Section 3.09(f) of the Company Disclosure
Letter or in the Company SEC Reports filed prior to April 1, 1998, neither the
Company nor any of its Subsidiaries has announced any Plan or has become subject
to any legally binding commitment to create any additional material Plans or to
make any material amendment or modification to any existing Plan, except in the
ordinary course of business in accordance with its customary practices or as
required by law or as necessary to maintain tax-qualified status.
(n) For purposes of this Section 3.09, ERISA Affiliates include each
corporation that is a member of the same controlled group as the Company or any
of its Subsidiaries within the meaning of Section 414(b) of the Code, any trade
or business, whether or not incorporated, under common control with the Company
or any of its Subsidiaries within the meaning of Section 414(c) of the Code and
any member of any affiliated service group that includes the Company, any of its
Subsidiaries and any of the corporations, trades or businesses described above,
within the meaning of Section 414(m) of the Code.
SECTION 3.10 Litigation, etc. Except as set forth in Section 3.10 of
the Company Disclosure Letter or as disclosed in the Company SEC Reports filed
prior to April 1, 1998, there is no pending audit, claim, action, proceeding,
citizen's suit and, to the knowledge of the Company, no audit, claim, action,
proceeding, citizen's suit or governmental investigation has been threatened
against the Company or any of its Subsidiaries before any court or governmental
or regulatory authority which, in the aggregate, (i) would have a Material
Adverse Effect or (ii) would have a material adverse effect on the ability of
the Company to consummate the transactions contemplated by the Transaction
Documents to which the Company is a party. Except as set forth in Section 3.10
of the Company Disclosure Letter or as disclosed in the Company SEC Reports
filed prior to April 1, 1998, neither the Company nor any Subsidiary of the
Company is subject to any outstanding judicial, administrative or arbitration
order, writ, injunction or decree that (i) has had a Material Adverse Effect or
(ii) would have a material adverse effect on the ability
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<PAGE> 19
of the Company to consummate the transactions contemplated by the Transaction
Documents to which the Company is a party.
SECTION 3.11 Tax Matters. Except as set forth in Section 3.11 of the
Company Disclosure Letter the Company and each of its Subsidiaries has duly
filed all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, except to the extent that such failures to file, in the
aggregate, would not have a Material Adverse Effect and such returns and reports
are true, correct and complete in all material respects. The Company and each of
its Subsidiaries has duly paid in full (or the Company has paid on its behalf)
or made adequate provision in the Company's accounting records for all taxes for
all past and current periods for which the Company or any of its Subsidiaries is
liable. The most recent financial statements contained in the Company SEC
Reports reflect adequate reserves for all taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its Subsidiaries
that are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, in the aggregate, have a
Material Adverse Effect. No requests for waivers of the time to assess any taxes
against the Company or any of its Subsidiaries have been granted or are pending,
except for requests with respect to such taxes that have been adequately
reserved for in the most recent financial statements contained in the Company
SEC Reports, or, to the extent not adequately reserved, the assessment of which
would not, in the aggregate, have a Material Adverse Effect. Except as set forth
in Section 3.11 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries has made any payments, is obligated to make any payments, or is
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code. As
used in this Agreement the term "taxes" includes all federal, state, local and
foreign income, franchise, property, sales, use, excise and other taxes,
including without limitation obligations for withholding taxes from payments due
or made to any other person and any interest, penalties or additions to tax.
SECTION 3.12 Compliance with Law. Except as set forth in Section 3.12
of the Company Disclosure Letter or in the Company SEC Reports filed prior to
April 1, 1998, neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of, any law, rule, regulation, order, judgment
or decree applicable to the Company or any Subsidiary or by which any property
or asset of the Company or any Subsidiary is bound or affected, except for any
such conflicts, defaults or violations that would not in the aggregate have a
Material Adverse Effect. Except as set forth in Section 3.12 of the Company
Disclosure Letter or in the Company SEC Reports filed prior to April 1, 1998,
the Company and its Subsidiaries have all permits, licenses, authorizations,
consents, approvals and franchises from governmental agencies required to
conduct their businesses as now being conducted (the "Company Permits"), except
for such permits, licenses, authorizations, consents, approvals and franchises
the absence of which would not in the aggregate have a Material Adverse Effect.
Except as set forth in Section 3.12 of the Company Disclosure Letter or in the
Company SEC Reports filed prior to April 1, 1998, the Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not in the aggregate have a Material
Adverse Effect.
SECTION 3.13 Environmental Compliance. Except as set forth in Section
3.13 of the Company Disclosure Letter or in the Company SEC Reports filed prior
to April 1, 1998, (i) the assets, properties, businesses and operations of the
Company and its Subsidiaries are in compliance with applicable Environmental
Laws (as defined in Section 1.01 hereof), except for such non-compliance which
has not had and will not have a Material Adverse Effect; (ii) the Company and
its Subsidiaries have obtained and, as currently operating, are in compliance
with all Company Permits necessary under any Environmental Law for the conduct
of the business and operations of the Company and its Subsidiaries in the manner
now conducted except for such non-compliance which has not had and will not have
a Material Adverse
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<PAGE> 20
Effect; and (iii) neither the Company nor any of its Subsidiaries nor any of
their respective assets, properties, businesses or operations has received or is
subject to any outstanding order, decree, judgment, complaint, agreement, claim,
citation, notice, or proceeding indicating that the Company or any of its
Subsidiaries is or may be (a) liable for a violation of any Environmental Law or
(b) liable for any Environmental Liabilities and Costs, where in each case such
liability would have a Material Adverse Effect.
SECTION 3.14 Insurance. Except as set forth in Section 3.14 of the
Company Disclosure Letter or the Company SEC Reports filed prior to April 1,
1998, the Company and each of its Subsidiaries maintains, and through the
Closing Date will maintain, insurance with reputable insurers (or pursuant to
prudent self-insurance programs) in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its Subsidiaries and owning property
in the same general areas in which the Company and each of its Subsidiaries
conducts their businesses. The Company and each of its Subsidiaries may
terminate each of its insurance policies or binders at or after the Closing and
will incur no material penalties or other material costs in doing so. None of
such policies or binders was obtained through the use of false or misleading
information or the failure to provide the insurer with all information requested
in order to evaluate the liabilities and risks insured. There is no material
default with respect to any provision contained in any such policy or binder,
nor has the Company or any of its Subsidiaries failed to give any material
notice or present any material claim under any such policy or binders in due and
timely fashion. There are no billed but unpaid premiums past due under any such
policy or binder, the failure of which to be paid would result in the
cancellation of such policy or binder. Except as otherwise set forth in the
Company SEC Reports filed prior to April 1, 1998 or in the Company Disclosure
Letter, (a) there are no outstanding claims in excess of normal retentions that
are not covered under any such policies or binders and, to the best knowledge of
the Company, there has not occurred any event that might reasonably form the
basis of any claim in excess of normal retentions that are not covered against
or relating to the Company or any of its Subsidiaries that is not covered by any
of such policies or binders; (b) no notice of cancellation or non-renewal of any
such policies or binders has been received; and (c) there are no performance
bonds outstanding with respect to the Company or any of its Subsidiaries.
SECTION 3.15 Opinion of Financial Advisor. The Company has received
from a financial advisor satisfactory to the Company's Board of Directors, an
opinion to the effect that, as of the date hereof, the Exchange Ratio is fair,
from a financial point of view, to the Company's stockholders. Such opinion (a
copy of which has been delivered to Parent) has not been withdrawn, revoked or
modified.
SECTION 3.16 State Takeover Laws. With respect to the Company, the
Board of Directors of the Company has taken all actions necessary to render the
restrictions contained in Section 203 of the DGCL, and such restrictions are
inapplicable to the Transaction Documents and the transactions contemplated
thereby, including without limitation the Merger and the exercise of the option
granted pursuant to the Company Option Agreement.
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<PAGE> 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub (effective upon its becoming a party hereto),
jointly and severally, represent and warrant as of the date of this Agreement
(or such other date as shall be expressly specified) to the Company as follows:
SECTION 4.01 Organization and Qualification. Each of the Parent and the
Sub is a duly organized and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation, with all requisite corporate
power and other authority to own its properties and conduct its business as it
is being conducted on the date hereof and is duly qualified and in good standing
as a foreign corporation authorized to do business in each of the jurisdictions
in which the character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on Parent or
Sub. The Parent has heretofore made available to the Company accurate and
complete copies of the Certificates of Incorporation and Bylaws as currently in
effect of the Parent and its Subsidiaries. All of the issued and outstanding
capital stock of the Sub is owned directly by the Parent, free and clear of any
lien, mortgage, pledge, charge, security interest or encumbrance of any kind.
SECTION 4.02 Capitalization. (a) The authorized capital stock of the
Parent consists of 75,000,000 shares of Parent Common Stock and 5,000,000 shares
of preferred stock, par value $.0l (the "Preferred Stock") none of which has
been designated. As of the Capitalization Date, 41,336,682 shares of Parent
Common Stock were issued and outstanding; no shares of Preferred Stock were
issued and outstanding; and no shares of Parent Common Stock were held in the
Parent's treasury. Since the Capitalization Date, except as set forth in Section
4.02(a) of the Parent Disclosure Letter or in the Parent SEC Reports (as defined
in Section 4.05) filed prior to April 1, 1998, Parent (i) has not issued any
shares of Parent Common Stock other than the issuance of shares of Parent Common
Stock upon the exercise of options granted pursuant to the Parent Plans, (ii)
has not granted any options, restricted stock or rights to purchase or acquire
shares of Parent Common stock (under the Parent's employee benefit plans or
otherwise) other than the Parent Option Agreement and options granted to newly
hired officers and employees of the Parent and its Subsidiaries and (iii) has
not split, combined or reclassified any of its shares of capital stock. All of
the outstanding shares of Parent Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable and are free of preemptive
rights. Except for the Parent Option Agreement or as set forth in this Section
4.02 or in Section 4.02(a) of the Parent Disclosure Letter or in the Parent SEC
Reports filed prior to April 1, 1998, there are outstanding: (i) no shares of
capital stock or other voting securities of the Parent; (ii) no securities of
the Parent convertible into or exchangeable for shares of capital stock or
voting securities of the Parent and (iii) no options, warrants, rights
(including preemptive rights), or other agreements or commitments to acquire
from the Parent, and except as contemplated by this Agreement and by those
matters set forth on Section 5.01(b) of the Parent Disclosure Letter), no
obligation of the Parent to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Parent, and no obligation of the Parent to grant, extend or
enter into any subscription, warrant, option, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "Parent Securities").
Except as set forth in Section 4.02(a) of the Parent Disclosure Letter, there
are no outstanding obligations of the Parent or any Subsidiary to repurchase,
redeem or otherwise acquire any Parent Securities. There are no voting trusts or
other agreements or understandings to which the Parent or any of its
Subsidiaries is a party with respect to the voting of capital stock of the
Parent or any of its Subsidiaries.
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<PAGE> 22
(b) Except as set forth in Section 4.02(b) of the Parent Disclosure
Letter or in the Parent SEC Reports filed prior to April 1, 1998, the Parent is,
directly or indirectly, the record and beneficial owner of all the outstanding
shares of capital stock of each of its Subsidiaries, free and clear of any lien,
mortgage, pledge, charge, security interest or encumbrance of any kind, and
there are no irrevocable proxies with respect to any such shares. Except as set
forth in Section 4.02(b) of the Parent Disclosure Letter or in the Parent SEC
Reports filed prior to April 1, 1998, there are no outstanding (i) securities of
the Parent or any Subsidiary convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary, or (ii) options, warrants, rights, (including preemptive rights), or
other agreements or commitments to acquire from the Parent or any of its
Subsidiaries, and no other obligation of the Parent or any of its Subsidiaries
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its Subsidiaries, or any other
obligation of the Parent or any of its Subsidiaries to grant, extend or enter
into any subscription, warrant, option, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i) and
(ii) being referred to collectively as the "Parent Subsidiary Securities").
There are no outstanding obligations of the Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Parent Subsidiary
Securities.
SECTION 4.03 Authority. Each of the Parent and the Sub has the
requisite corporate power and authority to execute and deliver the Transaction
Documents to which it is a party and to consummate the transactions contemplated
by such agreements. The execution and delivery by each the Parent and the Sub of
the Transaction Documents to which they are parties and the consummation by the
Parent and the Sub of the transactions contemplated by such documents have been
duly and validly authorized by the Board of Directors of each of the Parent and
the Sub, and by the Parent as the sole stockholder of Sub, and no other
corporate proceedings on the part of the Parent and the Sub are necessary to
authorize the Transaction Documents to which Parent or Sub are parties or
consummate the transactions so contemplated, other than the approval of the
holders of a majority of the quorum at the Parent Stockholder Meeting to obtain
the Parent Stockholder Approval shares of Parent Common Stock. The Transaction
Documents to which Parent or Sub are parties have been duly and validly executed
and delivered by the Parent and the Sub and, assuming such documents constitute
the valid and binding obligation of the other parties thereto, each such
Transaction Document constitutes a valid and binding agreement of each of the
Parent and the Sub, as the case may be, enforceable against each of the Parent
and the Sub in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity (whether
considered in a proceeding in equity or at law).
SECTION 4.04 Absence of Certain Changes. Except as disclosed in the
Parent SEC Reports filed prior to April 1, 1998 or in Section 4.04 of the Parent
Disclosure Letter, since September 30, 1997, (i) the Parent and its Subsidiaries
have not suffered any Material Adverse Effect, (ii) the Parent and its
Subsidiaries have, in all material respects, conducted their respective
businesses only in the ordinary course consistent with past practice, except in
connection with the negotiation and execution and delivery of the Transaction
Documents to which Parent or Sub are parties and (iii) there has not been (a)
any declaration, setting aside or payment of any dividend or other distribution
in respect of the Parent Common Stock or any repurchase, redemption or other
acquisition by Parent or any of its Subsidiaries of any Parent Securities; or
(b) any action by Parent which if taken after the date hereof would constitute a
breach of Section 5.01(b) hereof. Except as disclosed in the Parent SEC Reports
filed prior to April 1, 1998 or in Section 4.04 of the Parent Disclosure Letter,
since December 31, 1997, there has not been any change by the Parent in
accounting methods, principles or practices, except to the extent required by
the SEC or United States generally accepted accounting principles.
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<PAGE> 23
SECTION 4.05 Reports.
(a) Since January 1, 1996, Parent has timely filed with the SEC all
forms, reports and documents required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which have
heretofore been filed or are hereafter filed (the "Parent SEC Reports") have
complied or will comply in form as of their respective filing dates in all
material respects with all applicable requirements of the Exchange Act and the
rules promulgated thereunder applicable thereto. Since January 1, 1996, none of
the Parent SEC Reports, at the time filed, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) As of their respective dates, the audited and unaudited
consolidated financial statements of the Parent included (or incorporated by
reference) in the Parent SEC Reports were prepared (or will have been prepared)
in all material respects in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods therein
indicated (except as may be indicated in the notes thereto) and presented fairly
the consolidated financial position of the Parent. and the consolidated results
of operations and changes in consolidated financial position or cash flows for
the periods presented therein, subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any other
adjustments described therein which were not expected to have a Material Adverse
Effect.
(c) As of December 31, 1997, to the knowledge of the Parent or its
Subsidiaries, neither the Parent nor any of its Subsidiaries had any liabilities
of any nature, whether accrued, absolute, contingent or otherwise, whether due
or to become due that are required to be recorded or reflected on a balance
sheet under United States generally accepted accounting principles, except as
reflected or reserved against or disclosed in the financial statements of the
Parent included in the Parent SEC Reports filed prior to April 1, 1998 or the
Parent Disclosure Letter.
SECTION 4.06 Information Supplied. None of the information supplied or
to be supplied by the Parent for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC jointly by Parent
and Company in connection with the issuance of shares of Parent Common Stock in
the Merger will, at the time the S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and none of the information supplied or to be supplied by the
Parent and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Parent, or at the time of the meeting of such stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the time of such meeting,
any event with respect to the Parent or any of its Subsidiaries, or with respect
to other information supplied by the Parent for inclusion in the Proxy Statement
or S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the S-4, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC. The Proxy
Statement, insofar as it relates to other information supplied by the Parent for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 4.07 Consents and Approvals; No Violation. Except as set forth
in Section 4.07 of the Parent Disclosure Letter, the execution and delivery by
each of the Parent or the Sub of the Transaction Documents to which they are a
party and the consummation of the transactions contemplated by such
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<PAGE> 24
Transaction Documents will not (i) conflict with or result in any breach of any
provision of the respective Certificates of Incorporation or Bylaws (or other
similar governing documents) of the Parent, the Sub or any of their
Subsidiaries; (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
(A) in connection with the HSR Act, (B) pursuant to the Securities Act or the
Exchange Act, (C) pursuant to the requirements of the DGCL, (D) any applicable
filings under state securities, blue sky or "takeover" laws, (E) consents,
approvals, authorizations or filings under laws of jurisdictions outside the
United States, (F) consents, approvals, authorizations, permits, filings or
notifications required by local, state and federal regulatory agencies,
commissions, boards or public authorities with jurisdiction over health care
facilities and providers or (G) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect on the Parent or the Sub or
has a material adverse effect on the ability of the Parent or the Sub to
consummate the transactions contemplated by the Transaction Documents; (iii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which the Parent or the
Sub or any of their Subsidiaries is a party or by which any of its Subsidiaries
or any of their respective assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or which would not have a Material
Adverse Effect on the Parent or the Sub or has a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated by
Transaction Documents; (iv) result in the creation or imposition of any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind on
any asset of the Parent or the Sub or any of their Subsidiaries which,
individually or in the aggregate, would have a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated
hereby by the Transaction Document; or (v) violate any order, writ, injunction,
decree, statute (including, without limitation, state laws governing "business
combinations," "moratorium," "control share," or other state antitakeover
statutes or regulations), rule or regulation applicable to the Parent, the Sub
or any of their Subsidiaries or any of their respective assets, except for
violations which would not in the aggregate have a Material Adverse Effect on
the Parent or the Sub or have a material adverse effect on the ability of the
Parent or the Sub to consummate the transactions contemplated by the Transaction
Documents.
SECTION 4.08 Brokers. No broker, finder or other investment banker
(other than Morgan Stanley & Co., Incorporated) is entitled to receive any
brokerage, finder's or other fee or commission in connection with this Agreement
or the transactions contemplated hereby based upon agreements made by or on
behalf of the Parent or the Sub.
SECTION 4.09 Employee Benefit Matters.
(a) Section 4.09(a) of the Parent Disclosure Letter sets forth each
employment agreement between a person and Parent or any of its Subsidiaries
(other than an employment agreement terminable without liability on no more than
sixty (60) days' notice).
(b) Except as set forth in Section 4.09(b) of the Parent Disclosure
Letter, neither the Parent nor the Sub, nor any of their Subsidiaries, nor any
of their respective ERISA Affiliates maintains or contributes to, nor have they
maintained or contributed to any:
(A) defined benefit plan subject to Title IV of ERISA;
(B) any other material employee benefits plan as defined in
Section 3(3) of ERISA; or
(C) "multiemployer plan" as defined in Section 4001 of ERISA.
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<PAGE> 25
(c) No event has occurred and no condition of circumstance currently
exists in connection with which Parent or the Sub, or any of their Subsidiaries,
their respective ERISA affiliates or any Plan, directly or indirectly, would be
subject to any liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan which would have a Material Adverse
Effect.
(d) Except as disclosed in the Parent Disclosure Letter or in the
Parent SEC Reports filed prior to April 1, 1998, Parent does not maintain, nor
has it at any time established or maintained, nor has it at any time been
obligated to make, or made, contributions to or under any plan that provides
post-retirement medical or health benefits with respect to former or current
employees as former or current directors of Parent.
(e) With respect to each Plan, (a) all material payments due from the
Parent or any of its Subsidiaries to date have been made and all material
amounts properly accrued to date or as of the Effective Time as liabilities of
the Company or any of its Subsidiaries which have not been paid have been
properly recorded on the books of the Company; (b) each such Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has either received a
favorable determination letter from the Internal Revenue Service with respect to
such qualification as of the date specified in Section 4.09(d) of the Parent
Disclosure Letter or has filed for such a determination letter with the Internal
Revenue Service within the time permitted under Rev. Proc. 95-12 (December 29,
1994), 1995-3 IRB 24, and nothing has occurred since the date of such letter
that has resulted in or is likely to result in a tax qualification defect which
would have a Material Adverse Effect; and (c) there are no material actions,
suits or claims pending (other than routine claims for benefits) or, to the best
of Parent's knowledge, threatened with respect to such Plan or against the
assets of such Plan.
(f) Except as disclosed in the Parent Disclosure Letter, as of the last
day of the most recent prior plan year, the market value of assets under each
employee pension benefit plan (as defined in Section 3(2) of ERISA) equated or
exceeded the present value of liabilities thereunder (determined in accordance
with then current funding assumptions). No Plan has suffered any accumulated
funding deficiency within the meaning of Section 302 of ERISA and Section 412 of
the Code. Neither Parent nor any ERISA Affiliate has any outstanding liability
under Section 4971 of the Code. As of the Effective Time, all required premium
payments for Plans have been made, when due, to the PBGC, and all required
premium payments for the Plans for plan years commencing in the plan year which
would include the Effective Time of the Merger have been made to the PBGC. No
event or condition exists with respect to any Plan which could be deemed a
"reportable event" as defined in Section 4043 of ERISA, with respect to which
the 30-day notice requirement has not been waived and which could result in a
liability, and no condition exists which would subject the Company to a fine
under Section 4071 of ERISA. There is no lien upon any property of Parent or any
ERISA Affiliate outstanding pursuant to Section 4068 of ERISA in favor of the
PBGC. There is no lien upon any property of Parent or any ERISA Affiliate
outstanding pursuant to Code Section 412(n) in favor of any Plan and no assets
of Parent or any ERISA Affiliate have been provided as security for any Plan
pursuant to Code Section 401(a)(29).
(g) The Parent has made available to the Company, with respect to each
Plan for which the following exists:
(A) A copy of the most recent Annual Report on Form 5500,
with respect to such Plan, including any Schedule B
thereto;
(B) A copy of the current Summary Plan Description,
together with each Summary of Material Modifications
with respect to such Plan and, unless the Plan is
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<PAGE> 26
embodied entirely in an insurance policy to which the
Company or any of its Subsidiaries is a party, a true
and complete copy of such Plan; and
(C) If the Plan is funded through a trust or any third
party funding vehicle (other than an insurance
policy), a copy of the trust or other funding
agreement and the latest financial statements
thereof.
(h) Except as disclosed in Section 4.09(h) of the Parent Disclosure
Letter, Parent and each ERISA Affiliate has made full and timely payment of all
amounts required to be contributed under the terms of each Plan and applicable
law or required to be paid as expenses under such Plan and no excise taxes are
assessable as a result of any nondeductible or other contributions made or not
made to a Plan. The assets of all Plans which are required under applicable laws
to be held in trust are in fact held in trust. The liabilities of each other
plan are properly and accurately reported on the financial statements and
records of Parent. The assets of each Plan are reported at their fair market
value on the books and records of each Plan.
(i) Except as disclosed in the Section 409(i) of Parent Disclosure
Letter, neither Parent nor any ERISA Affiliate is subject to any material
liability, tax or penalty whatsoever to any person as a result of Parent or any
ERISA Affiliate's engaging in a prohibited transaction under ERISA or the Code,
and has no knowledge of any circumstances which reasonably might result in any
such material liability, tax or penalty as a result or a breach of fiduciary
duty under ERISA.
(j) Except as disclosed in Section 4.11 of the Parent Disclosure
Letter, no payment required to be made to any employee associated with Parent as
a result of the transactions contemplated hereby under any contract or otherwise
will, if made, constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
(k) Except as disclosed in Section 4.09(k) of the Parent Disclosure
Letter or the Parent SEC Reports filed prior to April 1, 1998, Parent and each
ERISA Affiliate have complied with the continuation coverage requirements of
Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and ERISA Sections 601 through 608.
(l) Except as disclosed in Section 4.09(l) of the Parent Disclosure
Letter, the consummation of the transactions contemplated hereby will not
accelerate or increase of any liability under any Plan because of an
acceleration or increase of the rights or benefits to which employees of Parent
or any ERISA Affiliate may be entitled thereunder.
(m) Except as disclosed in Section 4.09(f) of the Parent Disclosure
Letter or in the Parent SEC Reports filed prior to April 1, 1998 , neither the
Parent nor the Sub nor any of their Subsidiaries has announced any Plan or
become subject to any legally binding commitment to create any additional
material Plans or to make any material amendment or modification to any existing
Plan, except in the ordinary course of business in accordance with its customary
practices as required by law or as necessary to maintain tax-qualified status.
(n) For purposes of this Section 4.09, ERISA affiliates include each
corporation that is a member of the same controlled group as the Parent, the Sub
or any of their respective Subsidiaries within the meaning of Section 414(b) of
the Code, any trade or business, whether or not incorporated, under common
control with the Parent, the Sub or any of their respective Subsidiaries within
the meaning of Section 414(c) of the Code and any member of any affiliated
service group that includes the Parent or the Sub, or any of their respective
Subsidiaries, and any of the corporations, trades or businesses described above,
within the meaning of Section 414(m) of the Code.
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SECTION 4.10 Litigation, etc. Except as set forth in Section 4.10 of
the Disclosure Letter or as disclosed in the Parent SEC Reports filed prior to
April 1, 1998, there is no pending audit, claim, action, proceeding, citizen's
suit and, to the knowledge of the Parent, no audit, claim, action, proceeding,
citizen's suit or governmental investigation has been threatened against the
Parent or any of its Subsidiaries before any court or governmental or regulatory
authority which, in the aggregate, (i) would have a Material Adverse Effect, or
(ii) would have a material adverse effect on the ability of the Parent and the
Sub to consummate the transactions contemplated by the Transaction Documents.
Except as set forth in Section 4.10 of the Parent Disclosure Letter or as
disclosed in the Parent SEC Reports filed prior to April 1, 1998, neither the
Parent nor any Subsidiary of the Parent is subject to any outstanding judicial,
administrative or arbitration order, writ, injunction or decree that (i) has had
a Material Adverse Effect, or (ii) would have a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated by
the Transaction Documents to which either of them is a party.
SECTION 4.11 Tax Matters. Except as set forth in Section 4.11 of the
Parent Disclosure Letter, the Parent and each of its Subsidiaries has duly filed
all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, except to the extent that such failures to file, in the
aggregate, would not have a Material Adverse Effect and such returns and reports
are true, correct and complete in all material respects. The Parent and each of
its Subsidiaries has duly paid in full (or the Parent has paid on its behalf) or
made adequate provision in the Company's accounting records for all taxes for
all past and current periods for which the Parent or any of its Subsidiaries is
liable. The most recent financial statements contained in the Parent SEC Reports
reflect adequate reserves for all taxes payable by the Parent and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Parent or any of its Subsidiaries
that are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, in the aggregate, have a
Material Adverse Effect. No requests for waivers of the time to assess any taxes
against the Parent or any of its Subsidiaries have been granted or are pending,
except for requests with respect to such taxes that have been adequately
reserved for in the most recent financial statements contained in the Parent SEC
Reports, or, to the extent not adequately reserved, the assessment of which
would not, in the aggregate, have a Material Adverse Effect. Except as set forth
in Section 4.11 of the Parent Disclosure Letter, neither the Parent nor any of
its Subsidiaries has made any payments, is obligated to make any payments, or is
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
SECTION 4.12 Compliance with Law. Except as set forth in Section 4.12
of the Parent Disclosure Letter or as disclosed in the Parent SEC Reports filed
prior to April 1, 1998, neither the Parent nor the Sub, nor any of their
Subsidiaries, is in conflict with, or in default or in violation of, any law,
rule, regulation, order, judgment or decree applicable to Parent or Sub, or any
of their respective Subsidiaries, or by which any property or asset of the
Parent or the Sub, or any of their respective Subsidiaries is bound or affected,
except for such conflicts, defaults or violations that would not, in the
aggregate, have a Material Adverse Effect. Except as set forth in Section 4.12
of the Parent Disclosure Letter or as disclosed in the Parent SEC Reports filed
prior to April 1, 1998, Parent and Sub and their respective Subsidiaries have
all permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their business as now being conducted
(the "Parent Permits"), except for such permits, licenses, authorizations,
consents, approvals and franchises, the absence of which would not have a
Material Adverse Effect. Except as set forth in Section 4.12 of the Parent
Disclosure Letter or as disclosed in the Parent SEC Reports filed prior to April
1, 1998, Parent and Sub, and their respective Subsidiaries are in compliance
with the terms of the Parent Permits, except where the failure to so comply
would not, in the aggregate, have a Material Adverse Effect.
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SECTION 4.13 Environmental Compliance. Except as set forth in Section
4.13 of the Parent Disclosure Letter or in the Parent SEC Reports filed prior to
April 1, 1998, (i) the assets, properties, businesses and operations of Parent
and Sub and their respective Subsidiaries are in compliance with applicable
Environmental Laws (as defined in Section 1.01 hereof), except for such
non-compliance which has not had, and will not have, any Material Adverse
Effect; (ii) the Company and its Subsidiaries have obtained and, as currently
operating, are in compliance with all Parent Permits necessary under any
Environmental Law for the conduct of the business and operations of Parent and
Sub, and their Subsidiaries in the manner now conducted, except for such
non-compliance which has not had, and will not have, any Material Adverse
Effect; and (iii) neither Parent nor Sub, nor any of their Subsidiaries nor any
of the respective assets, properties, businesses or operations has received or
is subject to any order, decree, judgment, complaint, agreement, claim,
citation, notice or proceeding indicating that Parent or Sub, or any of their
Subsidiaries is or may be (a) liable for a violation of any Environmental Law,
or (b) liable for any Environmental Liabilities and Costs, where in each case
such liability would have a Material Adverse Effect.
SECTION 4.14 Insurance. Except as set forth in Section 4.14 of the
Parent Disclosure Schedule or the Parent SEC reports filed prior to April 1,
1998, Parent and Sub, and each of their Subsidiaries, maintains, and through the
Closing Date will maintain, insurance with reputable insurers (or pursuant to
prudent self-insurance programs) in such amounts and covering such risks as are
in accordance with normal industry practice with companies engaged in businesses
similar to those the Parent and Sub, and each of their Subsidiaries, and owning
property in the same general areas in which Parent and Sub, and each of their
Subsidiaries, conducts their businesses. None of such policies or binders was
obtained through the use of false or misleading information or the failure to
provide the insurer with all information requested in order to evaluate the
liabilities and risks insured. There is no material default with respect to any
provision contained in any such policy or binder, nor has Parent or Sub, or any
of their Subsidiaries, failed to give any material notice or present any
material claim under any such policy or binders in due and timely fashion. There
are no billed but unpaid premiums past due under any such policy or binder, the
failure of which to be paid would result in the cancellation of such policy or
binder. Except as set forth in Section 4.14 of the Parent Disclosure Letter or
in the Parent SEC Reports filed prior to April 1, 1998, (a) there are no
outstanding claims in excess of normal retentions that are not covered under any
such policy or binders, and, to the best knowledge of Parent and Sub, there has
not occurred any event that might reasonably form the basis of any claim in
excess of normal retentions that are not covered against or relating to the
Parent or the Sub, or any of their Subsidiaries, that is not covered by any of
such policy or binder; (b) no notice of cancellation or non-renewal of any such
policies or binders has been received; and (c) there are no performance bonds
outstanding with respect to the Parent, the Sub or any of their Subsidiaries.
SECTION 4.15 Opinion of Financial Advisor. Parent has received from a
financial advisor satisfactory to Parent's Board of Directors, an opinion to the
effect that, as of the date hereof, the Exchange Ratio is fair, from a financial
point of view, to Parent. Such opinion ( a copy of which has been delivered to
the Company) has not been withdrawn, revoked or modified.
SECTION 4.16 State Takeover Law With respect to Parent, the Board of
Directors of Parent has taken all actions necessary to render the restrictions
contained in Section 203 of the DGCL, and such restrictions and provisions are,
inapplicable to the Transaction Documents and the transactions contemplated
thereby, including without limitation the Merger and the exercise of the option
granted pursuant to the Parent Option Agreement.
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ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business.
(a) Except as contemplated by the Transaction Documents and in the
Company Disclosure Letter, during the period from the date of this Agreement to
the Effective Date, the Company and its Subsidiaries will each conduct its
operations according to its ordinary and usual course of business and consistent
with past practice and will use all commercially reasonable efforts consistent
with prudent business practice to preserve intact the business organization of
the Company and each of its Subsidiaries, to keep available the services of its
and their current officers and key employees and to maintain existing
relationships with those having significant business relationships with the
Company and its Subsidiaries, in each case in all material respects. Without
limiting the generality of the foregoing, except as otherwise expressly provided
in or contemplated by the Transaction Documents or Section 5.01(a) of the
Company Disclosure Letter, prior to the time specified in the preceding
sentence, neither the Company nor any of its Subsidiaries, as the case may be,
will, without the prior written consent of the Parent (not to be unreasonably
withheld), (i) except for issuances of capital stock of the Company's
Subsidiaries to the Company or a wholly owned subsidiary of the Company or
issuances of securities upon exercise or exchange of the Rights Agreement Rights
(as defined below) in accordance with the terms of the Rights Agreement (as
defined below), so long as the Company has complied with its obligations
pursuant to Section 5.12 hereof, issue, sell or pledge, or authorize or propose
the issuance, sale or pledge of (A) Company Securities or Subsidiary Securities,
in each case, other than Company Common Stock issuable upon the exercise of
rights under any Company Plan or any agreement referred to in Section 3.02 of
the Company Disclosure Letter, or (B) any other securities in respect of, in
lieu of or in substitution for Company Common Stock outstanding on the date
hereof; (ii) otherwise acquire or redeem, directly or indirectly, any Company
Securities or Subsidiary Securities (including the Company Common Stock); (iii)
split, combine or reclassify its capital stock or declare, set aside, make or
pay any dividend or distribution (whether in cash, stock or property) on any
shares of capital stock of the Company or any of its Subsidiaries (other than
cash dividends paid to the Company by its wholly owned Subsidiaries with regard
to their capital stock); (iv) (1) make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or other
disposition of assets or securities, in each case involving the payment or
receipt of consideration of $20,000,000 or more (excluding any assumed
indebtedness) other than pursuant to definitive agreements entered into prior to
the date of this Agreement that are identified in Section 5.01(a) of the Company
Disclosure Letter, or (2) other than in the ordinary course of business, enter
into a material contract or grant any release or relinquishment of any material
contract rights; (v) incur or assume any long-term debt for borrowed money,
except for debt incurred in the ordinary course of business consistent in all
material respects with past practice in a principal amount not to exceed
$15,000,000; (vi) assume, guarantee , endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except wholly owned Subsidiaries of the Company, except in the
ordinary course of business consistent in all material respects with past
practice; (vii) except in connection with transactions permitted by (iv) above,
make any loans, advances or capital contributions to, or investments in, any
other person (other than wholly owned Subsidiaries of the Company); (viii)
change any of the accounting methods, principles or practices used by it or any
of its Subsidiaries, except as required by the SEC or required by United States
generally accepted accounting principles; (ix) adopt any amendments to the
Certificate of Incorporation or Bylaws (or similar documents) of the Company or
any Subsidiary except as may be required in order to consummate the Merger and
the transactions contemplated by the Transaction Documents; (x) except as may be
required under any previous existing agreement or Company Plan, grant any
options or stock related awards; (xi) except as may be required by applicable
law or as contemplated by the Transaction
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Documents, enter into any new, or amend in any material respect any existing,
employee benefit, pension or other plan (whether or not subject to ERISA) or
employment, severance, consulting or salary continuation agreements with any
officers, directors or key employees of the Company or its Subsidiaries, or
grant any increases in the compensation or benefits to such officers, directors
and key employees; (xii) enter into, amend, or extend any material collective
bargaining or other labor agreement, except as required by law; (xiii) adopt,
make any material amendment to or terminate any material employee benefit plan,
except as required by law or to maintain tax qualified status or as requested by
the Internal Revenue Service in order to receive a determination letter for such
employee benefit plan; (xiv) merge or consolidate with or transfer all or
substantially all of its assets to another corporation or other business entity
or individual (other than mergers, consolidations or transfers (A) involving
wholly owned Subsidiaries or (B) in which the Company or its Subsidiary is the
surviving corporation and such acquisition would be permitted by (iv) above);
(xv) liquidate, wind-up or dissolve (or suffer any liquidation or dissolution);
or (xvi) agree in writing or otherwise to take any of the foregoing actions.
(b) Except as contemplated by the Transaction Documents and in the
Parent Disclosure Letter, during the period from the date of this Agreement to
the Effective Date, the Parent and its Subsidiaries will each conduct its
operations according to its ordinary and usual course of business and consistent
with past practice and will use all commercially reasonable efforts consistent
with prudent business practice to preserve intact the business organization of
the Parent and each of its Subsidiaries, to keep available the services of its
and their current officers and key employees and to maintain existing
relationships with those having significant business relationships with the
Parent and its Subsidiaries, in each case in all material respects. Without
limiting the generality of the foregoing, except as otherwise expressly provided
in or contemplated by this Agreement or in Section 5.01(b) of the Parent
Disclosure Letter, prior to the time specified in the preceding sentence,
neither the Parent nor any of its Subsidiaries, as the case may be, will,
without the prior written consent of the Company (not to be unreasonably
withheld), (i) except for issuances of capital stock of the Parent's
Subsidiaries to the Parent or a wholly owned subsidiary of the Parent, issue,
sell or pledge, or authorize or propose the issuance, sale or pledge of (A)
Parent Securities or Parent Subsidiary Securities, in each case, other than
Parent Common Stock issuable upon the exercise of rights under any Company Plan
or any agreement referred to in Section 4.02 of the Parent Disclosure Letter, or
(B) any other securities in respect of, in lieu of or in substitution for Parent
Common Stock outstanding on the date hereof, (ii) otherwise acquire or redeem,
directly or indirectly, any Parent Securities or Parent Subsidiary Securities
(including the Parent Common Stock); (iii) split, combine or reclassify its
capital stock or declare, set aside, make or pay any dividend or distribution
(whether in cash, stock or property) on any shares of capital stock of the
Parent or any of its Subsidiaries (other than cash dividends paid to the Parent
by its wholly owned Subsidiaries with regard to their capital stock); (iv) (1)
make any acquisition, by means of a merger or otherwise, of assets or
securities, or any sale, lease, encumbrance or other disposition of assets or
securities, in each case involving the payment or receipt of consideration of
$40,000,000 or more (excluding any assumed indebtedness) other than pursuant to
definitive agreements entered into prior to the date hereof that are identified
on Schedule 5.01(b) of the Parent Disclosure Letter, or (2) other than in the
ordinary course of business, enter into a material contract or grant any release
or relinquishment of any material contract rights; (v) incur or assume any
long-term debt for borrowed money except for debt incurred in the ordinary
course of business consistent in all material respects with past practice in an
aggregate principal amount not to exceed $30,000,000 or in connection with the
transactions contemplated hereby; (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except wholly owned Subsidiaries of the
Parent, except in the ordinary course of business consistent in all material
respects with past practice; (vii) except in connection with transactions
permitted by (iv) above, make any loans, advances or capital contributions to,
or investments in, any other person (other than wholly owned Subsidiaries of the
Parent); (viii) change any of the accounting methods, principles or practices
used by it or any of its Subsidiaries, except as required by the SEC or required
by United States generally accepted accounting principles; (ix) adopt any
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amendments to the Amended and Restated Certificate of Incorporation or Bylaws
(or similar documents) of the Parent or any Subsidiary except as may be required
in order to consummate the Merger and the transactions contemplated by the
Transaction Documents or effect a change in the name of Parent; (x) except as
may be required under any previously existing agreement or Plan grant any
options or stock related awards; (xi) enter into any new, or amend any existing,
employee benefit, pension or other plan (whether or not subject to ERISA) or any
employment, severance, consulting or salary continuation agreements with any
officers, directors or key employees of Parent, or grant any increases in the
compensation or benefits to such officers, directors and key employees; (xii)
enter into, amend, or extend any material collective bargaining or other labor
agreement, except as required by law; (xiii) adopt, make any material amendment
to or terminate any material employee benefit plan, except as required by law or
to maintain tax qualified status or as requested by the Internal Revenue Service
in order to receive a determination letter for such employee benefit plan; (xiv)
merge or consolidate with or transfer all or substantially all of its assets to
another corporation or other business entity or individual (other than mergers,
consolidations or transfers (A) involving wholly owned subsidiaries or (B) in
which Parent or its Subsidiary is the surviving corporation and such acquisition
would be permitted by (iv) above); (xv) liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution); or (xvi) agree in writing or otherwise
to take any of the foregoing actions.
SECTION 5.02 No Solicitation by the Company.
(a) Immediately following the execution of this Agreement, the Company
will terminate any and all existing activities, arrangements, discussions and
negotiations with third parties (other than Parent and Sub), with respect to any
possible Company Acquisition Transaction (defined below). Except as expressly
provided in Sections 5.02(b), 5.02(c) and 7.01, prior to the Effective Time, the
Company shall not, and shall not authorize or permit any of its Subsidiaries or
any of its or its Subsidiaries' directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information) (i) any
merger, consolidation, or other business combination involving the Company or
its Subsidiaries, (ii) any acquisition, sale, lease, exchange, mortgage, pledge,
transfer or other disposition of, or tender offer for, all or a substantial
portion of the assets or capital stock of the Company or any of its material
Subsidiaries or (iii) inquiries or proposals concerning or which may reasonably
be expected to lead to, any of the foregoing (a "Company Acquisition
Transaction"), or negotiate, explore or otherwise enter into discussions in any
way with any third party (other than Parent or its affiliates) with respect to
any Company Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by the Transaction Documents. The
Company shall promptly advise Parent of the terms, conditions and identity of
the third party making any inquiries or proposals relating to any Company
Acquisition Transaction.
(b) Notwithstanding the foregoing, in the event that the Company
receives an unsolicited bona fide written proposal for a Company Acquisition
Transaction from a third party, the Company may furnish non-public information
to, and negotiate with, such third party; provided that the Company (i) provides
prior written notice to Parent, (ii) such third party enters into a
confidentiality agreement having terms no more favorable to such third party
than the terms of the Confidentiality Agreement are to Parent and (iii) (A) the
Company's Board of Directors shall have concluded in good faith, based on the
advice of its investment banker, that such Company Acquisition Transaction may
reasonably be expected, if consummated, to result in a transaction more
favorable to the Company and it stockholders than the Merger, and such third
party is financially capable of consummating such Company Acquisition
Transaction, and (B) the Company's Board of Directors shall have concluded in
good faith, based on the advice of outside counsel to the Company, that any
failure to provide such non-public information to, or negotiate with, such party
would be inconsistent with the Company's Board of Directors' fiduciary duties to
stockholders of the Company.
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(c) Nothing in this Section 5.02 shall prohibit the Board of Directors
of the Company from withdrawing or modifying its recommendation referred to in
Section 2.09 if there exists a Company Acquisition Transaction and the Board of
Directors of the Company, after one (1) business day prior written notice to
Parent and consultation with and based upon the advice of independent legal
counsel, determines in good faith that any failure to do so would be
inconsistent with the fiduciary duties of the Board of Directors of the Company
to stockholders of the Company.
SECTION 5.03 No Solicitation by Parent.
(a) Immediately following the execution of this Agreement, Parent will
terminate any and all existing activities, arrangements, discussions and
negotiations with third parties (other than the Company and those entities
identified in Section 5.01(b)(iv)(1) of the Parent Disclosure Letter) with
respect to any possible Parent Acquisition Transaction (as defined below).
Except as expressly provided in Sections 5.03(b), 5.03(c) and 7.01, prior to the
Effective Time, Parent shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives to, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing
information) (i) any merger, consolidation, other business combination involving
Parent or its Subsidiaries (other than mergers, consolidations or transfers
solely between and among Parent and any wholly-owned Subsidiary), (ii) any
acquisition, sale, lease, exchange, mortgage, pledge, transfer or other
disposition of, or tender offer for, all or any substantial portion of the
assets or capital stock of Parent or any of its material Subsidiaries taken as a
whole, or (iii) inquiries or proposals concerning or which may reasonably be
expected to lead to, any of the foregoing (a "Parent Acquisition Transaction")
or negotiate, explore or otherwise enter into discussions in any way with any
third party (other than the Company or its affiliates) with respect to any
Parent Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by the Transaction Documents.
Parent shall promptly advise the Company of the terms, conditions and identity
of the third party making any inquiries or proposals relating to any Parent
Acquisition Transaction.
(b) Notwithstanding the foregoing in the event that Parent receives an
unsolicited bona fide written proposal for a Parent Acquisition Transaction from
a third party, Parent may furnish non-public information to, and negotiate with,
such third party; provided that Parent (i) provides prior written notice to the
Company; (ii) such third party enters into a confidentiality agreement having
terms no more favorable to such third party than the terms of the
Confidentiality Agreement are to the Company; (iii) (A) Parent's Board of
Directors shall have concluded in good faith based on the advice of its
investment banker, that such Parent Acquisition Transaction may reasonably be
expected, if consummated, to result in a transaction more favorable to Parent
and its stockholders than the Merger and such third party is financially capable
of consummating such Parent Acquisition Transaction, and (B) Parent's Board of
Directors shall have concluded in good faith based on the advice of outside
counsel to Parent, that any failure to provide such non-public information to,
or negotiate with, such party would be inconsistent with Parent's Board of
Directors' fiduciary duties to stockholders of Parent.
(c) Nothing in this Section 5.03 shall prohibit the Board of Directors
of Parent from withdrawing or modifying its recommendation referred to in
Section 2.09 if there exists a Parent Acquisition Transaction and the Board of
Directors of the Company, after one (1) business day prior written notice to the
Company and consultation with and based upon the advice of independent legal
counsel, determines in good faith that any failure to do so would be
inconsistent with the fiduciary duties of the Board of Directors of Parent to
stockholders of the Company.
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SECTION 5.04 Access to Information.
(a) From the date of this Agreement until the Effective Time, the
Company will give Parent and its authorized representatives (including counsel,
environmental and other consultants, accountants, auditors, and intellectual
property counsel and agents) reasonable access in light of the terms of this
Agreement during normal business hours to all facilities, personnel and
operations and to all books and records of the Company and its Subsidiaries,
will permit Parent to make such inspections as it 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.
(b) From the date of this Agreement until the Effective Time, Parent
will give the Company its authorized representatives (including counsel,
environmental and other consultants, accountants, auditors, and intellectual
property counsel and agents) reasonable access in light of the terms of this
Agreement during normal business hours to all facilities, personnel and
operations and to all books and records of Parent and its Subsidiaries, will
permit the Company to make such inspections as it may reasonably require and
will cause its officers and those of its Subsidiaries to furnish the Company
with such financial and operating data and other information with respect to the
business and properties of Parent and its Subsidiaries as the Company may from
time to time reasonably request.
(c) Information obtained by the Company, Parent or the Sub or their
respective representatives pursuant to this Section 5.04 shall be subject to the
provisions of the Confidentiality Agreement, dated as of April 1, 1998, between
the Parent and the Company (the "Confidentiality Agreement") the terms of which
are incorporated herein by reference; provided that the provisions of Section 9
of the Confidentiality Agreement shall cease to have any further effectiveness
(i) with respect to the restrictions on Parent set forth therein, upon
termination of this Agreement under circumstances in which the Company Option
Agreement becomes exercisable and (ii) with respect to the restrictions on the
Company set forth therein, upon termination of this Agreement under
circumstances in which the Parent Option Agreement becomes exercisable.
SECTION 5.05 Commercially Reasonable Efforts; Other Actions
(a) Subject to the terms and conditions provided in this Agreement,
Parent and the Company shall use all commercially reasonable efforts to take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement at
the earliest practicable time, including, without limitation, (i) the filings of
Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and using all commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for additional information of documentation, (ii) if required
by any governmental, regulatory or administrative agency, authority or
commission (a "Governmental Entity") as a condition to the obtaining of any
consent of such Governmental Entity or the agreement of such Governmental Entity
not to raise any objection to the transactions contemplated by the Transaction
Documents, agreeing to make any undertakings or satisfy any commitments with
respect to the Company, Parent or their respective Subsidiaries or dispose of
any operations of the Company, Parent or their respective Subsidiaries the
making, satisfaction or disposal of which (after taking into account the net
proceeds realized upon such disposal) could not reasonably be expected to have a
Material Adverse Effect with respect to Parent, the Company and their
Subsidiaries, taken as a whole, (iii) defending any lawsuits or other
proceedings challenging this Agreement or the transactions contemplated by this
Agreement, (iv) the obtaining of all necessary consents, approvals or waivers,
and (v) the lifting of any legal bar to the Merger. Parent shall not take any
action which would
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cause the Company to fail to perform its obligations hereunder. The Company
shall not take any action which would cause Parent to fail to perform its
obligations hereunder.
(b) Company and Parent, as the case may be, shall use all commercially
reasonable efforts to cause to be delivered to each other a comfort letter
prepared by their respective independent auditors, dated a date within two
business days of the effective date of the S-4 in form reasonably satisfactory
to Company or Parent, as the case may be, and customary in scope and substance
for such letters in connection with similar registration statements.
SECTION 5.06 Indemnification and Insurance.
(a) Parent and Sub agree that all rights to indemnification existing in
favor of the present or former directors, officers and employees of the Company
(as such) or any of its Subsidiaries or present or former directors of the
Company or any of its Subsidiaries serving or who served at the Company's or any
of its Subsidiaries' request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, as provided in the Company's Certificate of Incorporation or
Bylaws, or the articles of incorporation, bylaws or similar documents of any of
the Company's Subsidiaries and the indemnification agreements with such present
and former directors, officers and employees as in effect as of the date hereof
with respect to matters occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect and without
modification (other than modifications which would enlarge the indemnification
rights) for a period of not less than the statute of limitations applicable to
such matters, and the Surviving Corporation shall comply fully with its
obligations hereunder and thereunder. Without limiting the foregoing, the
Company shall, and after the Effective Time, the Surviving Corporation shall
periodically advance reasonable expenses as incurred with respect to the
foregoing (including with respect to any action to enforce rights to
indemnification or the advancement of expenses) to the fullest extent permitted
under applicable law; provided, however, that the person to whom the expenses
are advanced provides an undertaking (without delivering a bond or other
security) to repay such advance if it is ultimately determined that such person
is not entitled to indemnification.
(b) For a period of six (6) years after the Effective Time the
Surviving Corporation shall maintain officers' and directors' liability
insurance and fiduciary liability insurance covering the persons described in
paragraph (a) of this Section 5.06 (whether or not they are entitled to
indemnification thereunder) who are currently covered by the Company's existing
officers' and directors' or fiduciary liability insurance policies on terms no
less advantageous to such indemnified parties than such existing insurance.
(c) The Surviving Corporation shall indemnify and hold harmless (and
shall advance expenses to), to the fullest extent permitted under applicable
law, each director, officer, employee, fiduciary and agent of the Company or any
Subsidiary of the Company including, without limitation, officers and directors,
serving as such on the date hereof against any cost and expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation relating to any of the transactions
contemplated hereby, and in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the indemnified parties, promptly as statements therefor
are received and (ii) the parties hereto will cooperate in the defense of any
such matter; provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent, which
consent shall not unreasonably be withheld.
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(d) The Surviving Corporation shall pay all reasonable costs and
expenses, including attorneys' fees, that may be incurred by any indemnified
parties in enforcing the indemnity and other obligations provided for in this
Section 5.06.
(e) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, proper provisions shall be made so that the successors and assigns of
the Surviving Corporation assume the obligations set forth in this Section 5.06.
(f) This Section 5.06, which shall survive the consummation of the
Merger at the Effective Time and shall continue for the periods specified
herein, is intended to benefit the Company, the Surviving Corporation, and any
person or entity referenced in this Section 5.06 or indemnified hereunder each
of whom may enforce the provisions of this Section 5.06 (whether or not parties
to this Agreement).
(g) Parent guarantees as primary obligor, and not as surety, the full
and punctual performance of the Surviving Corporation of its obligations
hereunder to the extent of the rights of indemnification provided for in the
Certificate of Incorporation or Bylaws of the Company or its Subsidiaries.
SECTION 5.07 Employee Plans and Benefits and Employment Contracts.
(a) From and after the Effective Time, the Surviving Corporation and
its Subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between the
Company or any of its Subsidiaries and any current or former officer, director,
employee or consultant of the Company or any of its Subsidiaries or group of
such officers, directors, employees or consultants described in Section 5.07(a)
of the Company Disclosure Letter.
(b) In addition to honoring the agreements referred to in Section
5.07(a), until the first anniversary of the Effective Time, the Surviving
Corporation and its Subsidiaries will provide or will cause to be provided to
each current or former employee presently entitled to benefits of the Company or
its Subsidiaries (excluding employees covered by collective bargaining
agreements) (i) employee compensation, benefit plans, programs, policies and
arrangements, that are in the aggregate no less favorable than those currently
provided by the Company and its Subsidiaries to each such employee and former
employee; and (ii) severance benefits that are in the aggregate no less
favorable to any employee of the Company or any of its Subsidiaries than those
currently provided to each such employee. Nothing in this Section 5.07(b) shall
be deemed to prevent the Surviving Corporation or any of its Subsidiaries from
making any change required by law.
(c) To the extent permitted under applicable law, each employee of the
Company or its Subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
Subsidiaries) in accordance with the customary practices of the Parent and its
Subsidiaries under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation or the Parent in which they
participate or in which they become participants for purposes of eligibility,
vesting and benefit accrual including, without limitation, for purposes of
determining (i) short-term and long-term disability benefits, (ii) severance
benefits, (iii) vacation benefits and (iv) benefits under any retirement plan.
(d) This Section 5.07, which shall survive the consummation of the
Merger at the Effective Time and shall continue without limit, is intended to
benefit and bind the Company, the Surviving
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Corporation and any person or entity referenced in this Section 5.07, each of
whom may enforce the provisions of this Section 5.07 (whether or not parties to
this Agreement). Except as provided in clause (a) above, nothing contained in
this Section 5.07 shall create any beneficiary rights in any employee or former
employee (including any dependent thereof) of the Company, any of its
Subsidiaries or the Surviving Corporation in respect of continued employment or
participation in Parent benefit plans, programs, policies or arrangements for
any specified period of any nature or kind whatsoever.
SECTION 5.08 Proxy Statement and S-4. The Company and Parent shall
promptly prepare and file with the SEC, as soon as practicable, a preliminary
joint proxy statement (the "Proxy Statement") and S-4 relating to the Merger as
required by the Exchange Act and the Securities Act and the rules and
regulations thereunder. Each of Parent and the Company shall use commercially
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing. The Company, Parent and Sub will
cooperate with each other in the preparation of the Proxy Statement. The Company
and Parent shall use all commercially reasonable efforts to respond promptly to
any comments made by the SEC with respect to the Proxy Statement, and to cause
the Proxy Statement to be mailed to the Company's and Parent's stockholders at
the earliest practicable date.
SECTION 5.09 Notification of Certain Matters. The Company shall give
prompt notice to Parent and the Sub, and Parent or Sub, as the case may be,
shall give prompt notice to the Company, of (i) the occurrence, or
non-occurrence, of any event the effect of which is likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective Time
and (ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.09 shall not limit or otherwise affect the remedies available
hereunder to any of the parties receiving such notice.
SECTION 5.10 Agreements of Rule 145 Affiliates. Prior to the Effective
Time, the Company shall cause to be and delivered to Parent a list identifying
all persons who, at the time of the Company stockholder meeting, may be deemed
to be "affiliates" of the Company, as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates"). The
Company shall use its commercially reasonable efforts to cause each person who
is identified as a Rule 145 Affiliate in such list to deliver to Parent, at or
prior to the Effective Time, a written agreement, in the form to be approved by
the parties hereto, that such Rule 145 Affiliate will not sell, pledge, transfer
or otherwise dispose of any shares of Parent Common Stock issued to such Rule
145 Affiliate pursuant to the Merger, except pursuant to an effective
registration statement or in compliance with Rule 145 or an exemption from the
registration requirements of the Securities Act.
SECTION 5.11 Stock Exchange Listings. Parent shall use all commercially
reasonable efforts to have the Parent Common Stock to be issued in connection
with the Merger authorized for listing on the New York Stock Exchange subject to
notice of issuance.
SECTION 5.12 Rights Agreement.
(a) The Company shall promptly enter into an amendment to the Rights
Agreement, (the "Rights Agreement Amendment") substantially in the form of
Exhibit E hereto in form and substance acceptable to Parent pursuant to which
the execution of this Agreement and the Company Option Agreement and the
consummation of the transactions contemplated hereby and thereby, shall not
result in Parent or Sub or any of their affiliates being an "Acquiring Person"
or an "Adverse Person" or result in the occurrence of a "Triggering Event,"
"Stock Acquisition Date," or "Distribution Date" under the Rights Agreement. In
the event that the Rights Agreement Amendment is not entered into within ten
(10) days of the date hereof or a "Distribution Date") otherwise occurs as a
result of the execution of this
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Agreement or the Company Option Agreement, the Company will to redeem all Rights
immediately upon such distribution.
(b) The Company shall cause the Rights Agreement to be further amended
at or prior to the Effective Time to provide that the Effective Date shall
constitute the "Expiration Date" thereunder.
(c) Except as expressly provided herein, the Company shall not amend,
modify or waive any provision of the Rights Agreement or redeem the Rights
without the prior written consent of Parent.
SECTION 5.13 Takeover Laws. No party hereto will take or permit to be
taken any action that could cause the transactions contemplated by the
Transaction Documents to be subject to requirements imposed by Section 203 of
the DGCL and any "moratorium," "control share," "fair price," "affiliate
transaction," "control transaction," "business combination" or other
antitakeover laws and regulations (collectively, "Takeover Laws") and each party
hereto shall take all necessary steps within its control to exempt (or ensure
the continued exemption of) the transactions contemplated by the Transaction
Documents from, or if necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect.
SECTION 5.14 Employee Stock Purchase Plan. The Company will terminate
its 1993 Employee Stock Purchase Plan (the "Purchase Plan") effective as of June
30, 1998 pursuant to Article 15 thereof and the Payment Period (as defined
therein) for the six months ending June 30, 1998 will be the last Payment Period
under the Purchase Plan; provided, however, that such termination shall not
affect options issued with respect to the Payment Period ending June 30, 1998.
SECTION 5.15 Financing. Not later than the earlier of (i) the 30th
calendar day after the mailing of the Proxy Statement to the stockholders of
Parent and the Company and (ii) the date of the earlier of the two Stockholder
Meetings, Parent shall enter into one or more definitive financing agreements
(the "Definitive Financing Agreements") pursuant to which Parent shall have the
right to borrow as of the Closing Date an aggregate amount sufficient to
refinance on terms reasonably acceptable to Parent, the Company's senior bank
credit facility, the 9 1/2% Senior Subordinated Notes due 2006 and any other
indebtedness of the Company, Parent and its Subsidiaries if (A) as a result of
the Merger such indebtedness would be in default (or that with notice of the
passage of time or both would be in default) or entitle the holder of such
indebtedness to require Parent, the Company or any of their Subsidiaries to
repurchase such indebtedness and (B) Parent or the Company shall not, as of the
Closing Date, have obtained consents, modifications or waivers relating to the
Merger with respect to such indebtedness. Parent, Sub and the Company shall each
use its best efforts to satisfy on the earlier of the date required (if so
required) or the Closing Date all requirements of the Definitive Financing
Agreements to be satisfied or complied with by it thereunder which are
conditions to closing thereunder; provided, however, that the Company's
obligations under this sentence shall apply only to such requirements which
Parent has informed the Company and to which the Company consents (not to be
unreasonably withheld). The Company shall use its best efforts to assist the
Parent and Sub, to the extent reasonably requested by them, in the negotiation
and preparation of the Definitive Financing Agreements and in effecting such
financing on or prior to the Closing Date.
SECTION 5.16 Board Designees. Parent shall take all necessary corporate
action to appoint two designees of the Company reasonably acceptable to Parent
to the Parent Board of Directors as of the Effective Time.
SECTION 5.17 Parent By-laws. Parent shall take all necessary corporate
action to amend its bylaws to read as set forth on Exhibit F hereto, effective
as of the Effective Time.
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SECTION 5.18 No Amendments. Parent will not execute any amendments to,
or otherwise take any action to modify or change the terms and provisions of the
Amendment to Stockholders Agreement or the Stockholders Agreement prior to the
Effective Time without the prior written consent of the Company
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, by each party hereto
prior to the proposed Effective Time, of the following conditions:
(a) the Company Stockholder Approval and the Parent Stockholder
Approval shall have been obtained;
(b) no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority against the Parent, the Sub or the Company and be in
effect that prohibits or restricts the consummation of the Merger or makes such
consummation illegal (each party agreeing to use all commercially reasonable
efforts to have any such prohibition lifted);
(c) the S-4 shall have become effective, and any required
post-effective amendment shall have become effective, under the Securities Act,
and shall not be the subject of any stop order or proceedings seeking a stop
order, and any material "blue sky" and other state securities laws applicable to
the registration of the Parent Common Stock shall have been complied with;
(d) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and all filings required
to be made prior to the Effective Time with, and all consents, approvals,
authorizations and permits required to be obtained prior to the Effective Time
from, any governmental authority in connection with the consummation of the
Merger shall have been made or obtained (as the case may be), except where the
failure to obtain such consents, approvals, authorizations and permits would not
be reasonably likely to result in a Material Adverse Effect on Parent, Sub or
the Company or to materially adversely affect the consummation of the Merger;
(e) the Company and Parent shall have received an opinion from their
respective counsel, reasonably acceptable to the Company and the Parent, to the
effect that (i) the Merger will qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code; and (ii) the Company, Parent and Sub will
each be a "party to a reorganization" within the meaning of Section 368(b) of
the Code with respect to the Merger.
SECTION 6.02 Additional Conditions to the Company's Obligation to
Effect the Merger. The obligations of the Company to effect the Merger shall be
subject to the satisfaction, or waiver by the Company, prior to the proposed
Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing, and no statute,
rule, regulation, judgment, administrative interpretation, order or injunction
shall have been enacted, promulgated, entered, enforced or deemed applicable to
the Merger, which would (i) make illegal or prohibit the consummation of the
Merger or (ii) render the Company unable to effect the Merger;
(b) no action or proceeding brought by any governmental, regulatory or
administrative agency, authority or commission shall have been instituted and be
pending that would be reasonably
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likely to result in any of the consequences referred to in clauses (i) or (ii)
of Section 6.02(a) above; and there shall be no proceeding or other action
(including without limitation, relating to health care, regulatory,
environmental and pension matters) pending or threatened against the Parent or
its Subsidiaries which is reasonably likely to have a Material Adverse Effect;
(c) the representations and warranties of Parent and Sub contained in
Article IV hereof (without regard to any materiality exception or provisos
therein) shall be true and correct in all material respects on the Closing Date
as though such representations and warranties were made at and on such date,
except (i) for those untruths or inaccuracies which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and (ii)
for changes permitted or contemplated by the Transactions Documents. For
purposes of the foregoing, notwithstanding any other provisions of this
Agreement to the contrary, the effects arising out of or relating to (i)
economic conditions affecting the U.S. economy or the health care industry
generally, (ii) the proposal, adoption or implementation after the date hereof
of any law, statute, rule or regulation relating to health care, Medicaid or
Medicare, including, without limitation, the proposal, adoption or
implementation of prospective payment systems and "salary equivalency" rates
(including amendments to any salary equivalency rates currently in effect),
(iii) the Merger or the announcement thereof, including without limitation,
resignations of key employees; (iv) any action or event permitted by Section
5.1(a) hereof; or (v) any matter identified in Section 3.04 of the Company
Disclosure Letter shall not constitute a circumstance which will be a basis for
asserting the existence or occurrence of a Material Adverse Effect. The
existence or occurrence of a Material Adverse Effect notwithstanding the
exclusions referred to in the immediately preceding sentence is hereinafter
referred to as an "Omnibus Parent Material Adverse Event."
(d) Parent shall have entered into the Definitive Financing Agreements
referred to in Section 5.14.
(e) Parent and Sub shall have performed in all material respects all
covenants, agreements and obligations required to be performed by them under the
Agreement at or prior to the Effective Time.
SECTION 6.03 Additional Conditions to the Parent's and the Sub's
Obligations to Effect the Merger. The obligations of Parent and Sub to effect
the Merger shall be subject to the satisfaction, or waiver by Parent and Sub,
prior to the proposed Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing, and no statute,
rule, regulation, judgment, administrative interpretation, order or injunction
shall have been enacted, promulgated, entered, enforced or deemed applicable to
the Merger, which would (i) make illegal or prohibit the consummation of the
Merger or (ii) render Parent or Sub unable to effect the Merger;
(b) no action or proceeding brought by any governmental, regulatory or
administrative agency, authority or commission shall have been instituted and be
pending that would be reasonably likely to result in any of the consequences
referred to in clauses (i) or (ii) of Section 6.03(a) above; and there shall be
no proceeding or other action (including, without limitation, relating to health
care, regulatory, environmental and pension matters) pending or threatened
against the Company or its Subsidiaries which is reasonably likely to have a
Material Adverse Effect;
(c) during the 30 day period ending on the Closing Date, there shall
not have occurred and be continuing the declaration of any banking moratorium or
any suspension of payments in respect of banks or any material limitation
(whether or not mandatory) on the extension of credit by lending institutions in
the United States; and
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(d) the representations and warranties of the Company contained in
Article III hereof (without regard to any materiality exceptions or provisos
contained therein) shall be true and correct in all respects on the Closing Date
as though such representations and warranties were made at and on such date,
except (i) for those untruths or inaccuracies which would not, singly or in the
aggregate, reasonably be expected to have Material Adverse Effect and (ii) for
changes expressly permitted or contemplated by the Transaction Documents. For
purposes of the foregoing, notwithstanding any other provisions of this
Agreement to the contrary, the effects arising out of or relating to (i)
economic conditions affecting the U.S. economy or the health care industry
generally, (ii) the proposal, adoption or implementation after the date hereof
of any law, statute, rule or regulation relating to health care, Medicaid or
Medicare, including, without limitation, the proposal, adoption or
implementation of prospective payment systems and "salary equivalency" rates
(including amendments to any salary equivalency rates currently in effect),
(iii) the Merger or the announcement thereof, including without limitation,
resignations of key employees; (iv) any action or event permitted by Section
5.1(a) hereof; or (v) any matter identified in Section 3.014 of the Parent
Disclosure Letter shall not constitute a circumstance which will be a basis for
asserting the existence or occurrence of a Material Adverse Effect. The
existence or occurrence of a Material Adverse Effect notwithstanding the
exclusions referred to in the immediately preceding sentence is hereinafter
referred to as an "Omnibus Company Material Adverse Event."
(e) The Company shall have performed in all material respects all
covenants, agreements and obligations required to be performed by it under this
Agreement at or prior to the Effective Time.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time notwithstanding approval thereof by the
stockholders of each of the Company and Parent:
(a) Mutual Consent. By mutual written consent of the Boards of
Directors of the Company and Parent;
(b) Expiration. By Parent or the Company if the Effective Time shall
not have occurred on or before December 31, 1998 (the "Expiration Time")
(provided that the right to terminate this Agreement under this Section 7.01(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Effective Time to occur on or before such date);
(c) Court Order. By either Parent or the Company if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order (other than a temporary restraining order),
decree, judgment or ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such, judgment, order, decree, ruling or
other action shall have become final and non-appealable;
(d) Material Parent Breach. By the Company (i) if at any time prior to
the Closing Date an Omnibus Parent Material Adverse Event shall have occurred or
(ii) Parent or Sub shall have breached or failed to comply in any material
respect with any of their obligations under this Agreement and, in each case,
such Omnibus Parent Material Adverse Event, breach or failure shall continue
unremedied for ten (10) days after Parent or Sub has received written notice
from the Company of the occurrence of such Omnibus Parent Material Adverse
Event, breach or failure;
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(e) Adverse Parent Recommendation. Prior to obtaining the Parent
Stockholder Approval, by the Company if the Board of Directors of Parent fails
to make, withdraws or modifies in a manner adverse to the Company its favorable
recommendation of the Merger or shall have recommended or entered into a
definitive agreement with respect to a Parent Acquisition Transaction with a
party other than the Company or any of its affiliates;
(f) Parent Acquisition Transaction. Prior to the Effective Time, by
Parent if Parent receives a written offer with respect to a Parent Acquisition
Transaction with a party other than the Company or its affiliates or such other
party has commenced a tender offer which, in either case, the Board of Directors
of Parent determines in good faith is more favorable to Parent's stockholders
than the transactions contemplated by this Agreement;
(g) Material Company Breach. By Parent if (i) at any time prior to the
Closing Date an Omnibus Company Material Adverse Event shall have occurred or
(ii) the Company shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement and, in each case, such Omnibus
Company Material Adverse Event, breach or failure shall continue unremedied for
ten (10) days after the Company has received written notice from Parent or Sub
of the occurrence of such Omnibus Company Material Adverse Event, breach or
failure;
(h) Adverse Company Recommendation. Prior to obtaining the Company
Stockholder Approval, by Parent if the Board of Directors of the Company fails
to make, withdraws or modifies in a manner adverse to Parent or Sub its
favorable recommendation of the Merger or shall have recommended or entered into
a definitive agreement with respect to a Company Acquisition Transaction with a
party other than Parent or any of its affiliates;
(i) Company Acquisition Transaction. Prior to the Effective Time, by
the Company if the Company receives a written offer with respect to a Company
Acquisition Transaction with a party other than the Parent or its affiliates or
such other party has commenced a tender offer which, in either case, the Board
of Directors of the Company determines in good faith is more favorable to the
Company's stockholders than the transactions contemplated by this Agreement;
(j) Non-Approval. By Parent or the Company (i) if the Company fails to
obtain the Company Stockholder Approval or (ii) if the Parent fails to obtain
the Parent Stockholder Approval.
SECTION 7.02 Effect of Termination.
(a) If this Agreement is terminated and the Merger is abandoned
pursuant to Section 7.01 hereof, this Agreement, except for the provisions of
Section 5.04(c) this Section 7.02 and Section 8.10 hereof, shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or stockholders. The Confidentiality Agreement
(subject to Section 5.04(c) hereof) shall remain in full force and effect
following any termination of this Agreement.
(b) If this Agreement is terminated pursuant to Section 7.01(h) or (i),
the Company promptly, but in no event later than one business day after
termination of this Agreement will pay to Parent a fee (the "Termination Fee")
equal to $12,000,000 in same day funds, in respect of the fees and expenses of
Parent incurred in connection with pursuing the transactions contemplated
hereby. If this Agreement is terminated pursuant to (i) Section 7.01(b) and, at
the Expiration Time any person has made (or publicly disclosed an intention to
make) a proposal to effect a Company Acquisition Transaction or (ii) Section
7.01(j)(i) and, at the time of the stockholder vote referred to therein, any
person has made (or publicly disclosed an intention to make) a proposal to
effect a Company Acquisition and, in either case, within 12 months after such
termination a Company Acquisition Transaction shall be consummated, the
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Company shall promptly (but in no event later than one business day) after such
consummation, pay the Termination Fee to Parent. Nothing in this Section 7.02
shall relieve any party to this Agreement of liability for breach of this
Agreement.
(c) If this Agreement is terminated pursuant to Section 7.01(e) or (f),
Parent promptly, but in no event later than one business day after termination
of this Agreement will pay to the Company the Termination Fee in same day funds,
in respect of the fees and expenses of the Company incurred in connection with
pursuing the transactions contemplated hereby. If this Agreement is terminated
pursuant to (i) Section 7.01(b) and, at the Expiration Time any person has made
(or publicly disclosed an intention to make) a proposal to effect a Parent
Acquisition Transaction or (ii) Section 7.01(j)(ii) and, at the time of the
stockholder vote referred to therein, any person has made (or publicly disclosed
an intention to make) a proposal to effect a Parent Acquisition Transaction and,
in either case, within 12 months after such termination a Parent Acquisition
Transaction, shall be consummated, Parent shall promptly (but in no event later
than one business day) after such consummation, pay the Termination Fee to the
Company. Nothing in this Section 7.02 shall relieve any party to this Agreement
of liability for breach of this Agreement.
SECTION 7.03 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and Sub, at any time before or after adoption
of this Agreement by the stockholders of each of the Company and Parent but,
after any such stockholder approval, no amendment shall be made which decreases
the Exchange Ratio or which adversely affects the rights of the Company's
stockholders hereunder in any material respect without the approval of the
stockholders of the Company that beneficially own a majority of the shares of
Company Common Stock. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent and Sub may (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 by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Representations and Warranties. The
representations and warranties made in Articles III and IV shall not survive
beyond the Effective Time. This Section 8.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
SECTION 8.02 Entire Agreement; Assignment. Except for the
Confidentiality Agreement and the Company Disclosure Letter and the Parent
Disclosure Letter, this Agreement together with the other Transaction Documents
(a) constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise; provided, however, that Parent or Sub may assign any of its rights
and obligations to any
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wholly-owned direct subsidiary of Parent incorporated in Delaware, but no such
assignment shall relieve Parent or Sub, as the case may be, of its obligations
hereunder.
SECTION 8.03 Enforcement of the Agreement; Jurisdiction. (a) The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any federal or state court located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity.
(b) The parties hereto consent and agree that the state or federal
courts located in Delaware shall have exclusive jurisdiction to hear and
determine any claims or disputes pertaining to this Agreement or to any matter
arising out of or related to this Agreement and each party hereto waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue or forum non conveniens and hereby consents to the granting of such legal
or equitable relief as is deemed appropriate by such court.
SECTION 8.04 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 8.05 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, or by facsimile transmission with
confirmation of receipt, three Business Days following deposit in the Untied
States mails, by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to Parent or Sub:
Paragon Health Network, Inc.
One Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
Attention: General Counsel
Fax No.: (770) 677-7902
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street N.E.
Atlanta, Georgia 30303-1740
Attention: Rick Miller
Fax No.: (404) 572-6999
and
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Sidley & Austin
555 West Fifth Street, Suite 4000
Los Angeles, California 90013
Attention: Robert W. Kadlec
Fax No.: (213) 896-6600
If to the Company:
Mariner Health Group, Inc.
125 Eugene O'Neill Drive
New London, Connecticut 06320
Attention: General Counsel
Fax No.: (860) 701-2201
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, Massachusetts 02110
Attention: Mark H. Burnett
Fax No.: (617) 248-7100
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 8.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 8.07 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 8.08 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except for Sections 2.10, 2.11, 5.06 and 5.07 (which are intended to
be for the benefit of the persons referred to therein, and may be enforced by
such persons).
SECTION 8.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.10 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
SECTION 8.11 Press Releases. Subject to the proviso to this sentence,
Parent, Sub and the Company will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any such press release
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or make any such public statement prior to such consultation, except as may be
required by law or by obligations pursuant to the rules of The New York Stock
Exchange, Inc., the Nasdaq National Market and any other appropriate exchange.
SECTION 8.12 Obligation of the Parent.. Whenever this Agreement
requires Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Sub to take such action.
SECTION 8.13 Facsimile Signatures. A facsimile of this Agreement
containing signatures of all the parties hereto shall constitute an original
document for all purposes.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized.
PARAGON HEALTH NETWORK, INC.
By: /s/ KEITH B. PITTS
----------------------------------
Its: Chairman, President & Chief
Executive Officer
PARAGON ACQUISITION SUB, INC.
By: /s/ KEITH B. PITTS
----------------------------------
Its: President
MARINER HEALTH GROUP, INC.
By: /s/ ARTHUR W. STRATTON, JR., M.D.
----------------------------------
Its: Chairman, President & Chief
Executive Officer
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EXHIBIT 99.1
PARENT STOCK OPTION AGREEMENT
THIS PARENT STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of April 13, 1998 by and between Paragon Health Network, Inc., a
Delaware corporation ("Paragon"), and Mariner Health Group, Inc., a Delaware
corporation (the "Company").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Paragon, the Company, and Paragon Acquisition Sub, Inc., a Delaware corporation
("Sub"), are entering into an Agreement and Plan of Merger, dated as of April
13, 1998 (the "Merger Agreement"), which provides, among other things, upon the
terms and subject to the conditions thereof, for the merger of Sub with and into
the Company in accordance with the laws of the State of Delaware (the "Merger");
and
B. As a condition and inducement to the Company's willingness to enter
into the Merger Agreement, the Company has requested that Paragon agree, and
Paragon has agreed, to grant to the Company an option to acquire certain shares
of Paragon's authorized but unissued common stock, $.01 par value per share
("Paragon Common Stock").
NOW, THEREFORE, to induce the Company to enter into the Merger
Agreement and in consideration of the representations, warranties, covenants and
agreements contained herein and in the Merger Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows. Capitalized terms used
herein but not defined herein shall have the respective meanings ascribed to
them in the Merger Agreement.
1. GRANT OF OPTION. Paragon hereby grants to the Company an irrevocable
option (the "Paragon Option") to purchase a number of shares of Paragon Common
Stock equal to the Option Number (as defined in Section 2(d)), on the terms and
subject to the conditions set forth below.
2. EXERCISE AND TERMINATION OF PARAGON OPTION.
(A) EXERCISE. The Paragon Option may be exercised by the
Company, in whole or in part, at any time or from time to time after the
occurrence of a Purchase Event and prior to the termination of the Company's
right to exercise the Paragon Option by the terms of this Agreement. Paragon
shall notify the Company promptly in writing of the occurrence of any Trigger
Event; however, such notice shall not be a condition to the right of the Company
to exercise the Paragon Option. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
<PAGE> 2
"Purchase Event" means the consummation of any transaction the
proposal of which would constitute a Parent Acquisition Transaction (as defined
in the Merger Agreement) within twelve (12) months following the occurrence of a
Trigger Event.
"Trigger Event" means a termination of the Merger Agreement
under circumstances that causes a Termination Fee (as defined in the Merger
Agreement) to become payable by Paragon to the Company pursuant to Section
7.02(c) of the Merger Agreement or that would cause a Termination Fee to become
payable if the provisions of the penultimate sentence of Section 7.02(c) were
satisfied.
(B) EXERCISE PROCEDURE. In the event that the Company wishes
to exercise the Paragon Option, the Company shall deliver to Paragon written
notice (an "Exercise Notice") specifying the total number of shares of Paragon
Common Stock that the Company wishes to purchase. To the extent permitted by law
and the Certificate of Incorporation of Paragon and provided that the conditions
set forth in Section 3 to Paragon's obligation to issue the shares of Paragon
Common Stock to the Company hereunder have been satisfied or waived, the Company
shall, upon delivery of the Exercise Notice and tender of the applicable
aggregate Exercise Price, immediately be deemed to be the holder of record of
the shares of Paragon Common Stock issuable upon such exercise, notwithstanding
that the stock transfer books of Paragon shall then be closed or that
certificates representing such shares of Paragon Common Stock shall not
theretofore have been delivered to the Company. Each closing of a purchase of
shares of Paragon Common Stock hereunder (a "Closing") shall occur at a place,
on a date, and at a time designated by the Company in an Exercise Notice
delivered at least two (2) business days prior to the date of such Closing.
(C) TERMINATION OF PARAGON OPTION. The Company's right to
exercise the Paragon Option shall terminate upon the earliest to occur of: (i)
the Effective Time of the Merger; (ii) the termination of the Merger Agreement
other than under circumstances which also constitute or may lead to a Trigger
Event under this Agreement; or (iii) 12 months following the receipt by the
Company of written notice from Paragon of the occurrence of a Trigger Event
unless a Purchase Event shall have occurred prior thereto in which case the
right to exercise the Paragon Option shall terminate 12 months following the
occurrence of such Purchase Event. Notwithstanding the foregoing, if the Paragon
Option cannot be exercised as of the date the Paragon Option would have
otherwise terminated pursuant to the preceding sentence by reason of any
applicable judgment, decree, order, law or regulation, the Paragon Option shall
remain exercisable and shall not terminate until the earlier of (x) the date on
which such impediment shall become final and not subject to appeal and (y) 5:00
p.m., Eastern Time, on the tenth (10th) business day after such impediment shall
have been removed. The rights of the Company set forth in Section 7 shall not
terminate upon termination of the Company's right to exercise the Paragon
Option, but shall extend to the time provided in such sections. Notwithstanding
the termination of the Paragon Option, the Company shall be entitled to purchase
the shares of Paragon Common Stock with respect to which the Company had
exercised the Paragon Option prior to such termination.
(D) OPTION NUMBER. The Option Number shall initially be the
number of shares equal to nineteen and nine-tenths percent (19.9%) of the total
number of shares of Paragon Common Stock issued and outstanding as of the date
of this Agreement, and shall be adjusted hereafter to reflect changes in Paragon
capitalization occurring after the date hereof in accordance with Section 8.
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<PAGE> 3
(E) EXERCISE PRICE. The purchase price per share of Paragon
Common Stock pursuant to the Paragon Option (the "Exercise Price") shall be
$19.75 per share, payable in cash.
3. CONDITIONS TO CLOSING. The obligation of Paragon to issue the shares
of Paragon Common Stock to the Company hereunder is subject to the conditions
that (a) all waiting periods, if any, under the Hart Scott Rodino Antitrust
Improvements Act of 1975, as amended (the "HSR Act"), applicable to the issuance
of the shares of Paragon Common Stock by Paragon and the acquisition of such
shares by the Company hereunder shall have expired or have been terminated; (b)
no preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect; and (c) all consents, approvals, orders, authorizations and permits of
any federal, state, local or foreign governmental authority, if any, required in
connection with the issuance of the shares of Paragon Common Stock and the
acquisition of such shares by the Company hereunder shall have been obtained;
provided, however, that the parties hereto shall use their best efforts to cause
all such conditions to be fulfilled as promptly as possible. In the event the
closing is delayed as a result of the immediately preceding sentence, the date
of the closing shall be within five business days following the date such
condition has been fulfilled; provided that, notwithstanding any prior notice of
intention to exercise the Option, the Company shall not be obligated to purchase
any share of Paragon Common Stock pursuant hereto after the date three months
following the date of such Exercise Notice.
4. CLOSING. At any Closing:
(A) Paragon shall deliver to the Company or its designee a
certificate or certificates in definitive form representing the number of shares
of Paragon Common Stock in the denominations designated by the Company in its
Exercise Notice, such certificate to be registered in the name of the Company
and to bear the legend set forth in Section 9;
(B) the Company shall deliver to Paragon the aggregate
Exercise Price for the shares of Paragon Common Stock so designated and being
purchased by wire transfer of immediately available funds to the account or
accounts specified in writing by Paragon;
(C) Paragon shall pay all expenses, and any and all federal,
state and local taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under this Section 4;
and
(D) Paragon shall cause the shares of Paragon Common Stock
being delivered at the Closing to be approved for listing on the New York Stock
Exchange, Inc. and shall pay all expenses in connection with the application for
approval of such listing.
5. REPRESENTATIONS AND WARRANTIES OF PARAGON. Paragon represents and
warrants to the Company that:
(A) Paragon is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to carry on its business as such
business is being conducted as of the date of this Agreement. Paragon is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the
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nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than any such jurisdiction where the
failure to be so qualified or licensed (individually or in the aggregate) would
not have a material adverse effect on Paragon.
(B) Paragon has all corporate power and authority required to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Paragon and the consummation by
Paragon of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Paragon and no other corporate actions
or proceedings on the part of Paragon or Paragon's stockholders are necessary to
authorize this Agreement or any of the transactions contemplated hereby; this
Agreement has been duly and validly executed and delivered by Paragon, and,
assuming the due authorization, execution and delivery hereof by the Company and
the receipt of any required governmental approvals, constitutes the valid and
binding obligation of Paragon, enforceable against Paragon in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, may be subject to the discretion of any court
before which any proceeding therefor may be brought;
(C) Paragon has taken all necessary corporate action to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the Paragon Option, and at all times from the date hereof through the expiration
of the Paragon Option will have reserved, a number of authorized and unissued
shares of Paragon Common Stock not less than the Option Number, such amount
being subject to adjustment as provided in Section 8, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable;
(D) the shares of Paragon Common Stock issued to the Company
upon the exercise of the Paragon Option will be, upon delivery thereof to the
Company, free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever and shall not be subject to any preemptive
right of any stockholder of Paragon;
(E) the execution and delivery of this Agreement by Paragon
does not, and, the consummation by Paragon of the transactions contemplated
hereby will not, violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation, or acceleration
of any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest or other encumbrance on assets (any such
violation, conflict, breach, default, termination, acceleration, right of
termination, cancellation or acceleration, loss, or creation, a "Violation") of
Paragon or any of its subsidiaries, pursuant to (i) any provision of Paragon
Certificate of Incorporation or the Bylaws of Paragon, (ii) any provision of any
material loan or credit agreement, note, mortgage, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise
or license (a "Material Contract") of Paragon or any of its subsidiaries or to
which any of them is a party or by which any of them or their properties or
assets are bound, or (iii) assuming the regulatory requirements referred to in
Section 5(f) are satisfied, any judgment, order, decree, statute, law,
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<PAGE> 5
ordinance, rule or regulation applicable to Paragon or any of its subsidiaries
or any of their properties or assets;
(F) the execution and delivery of this Agreement by Paragon
does not, and (except for the expiration or early termination of the waiting
period under the HSR Act and any consent, approval or notice required by
federal, state and local regulatory agencies, commissions, boards or public
authorities with jurisdiction over healthcare facilities and providers) the
performance of this Agreement by Paragon and the consummation of the
transactions contemplated hereby will not, require any consent, approval, order,
authorization or permit of, filing with, or notification to any governmental or
regulatory authority; and
(G) none of Paragon or any of its affiliates or anyone acting
on its or their behalf has issued, sold or offered any security of Paragon to
any person under circumstances that would cause the issuance and sale of shares
of Paragon Common Stock hereunder to be subject to the registration requirements
of the Securities Act as in effect on the date hereof, and, assuming the
representations and warranties of the Company contained in Section 6 are true
and correct, the issuance, sale and delivery of the shares of Paragon Common
Stock hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof, and Paragon
shall not take any action which would cause the issuance, sale, and delivery of
shares of Paragon Common Stock hereunder not to be exempt from such
requirements.
6. REPRESENTATIONS AND WARRANTIES OF REBEL. The Company represents and
warrants to Paragon that any shares of Paragon Common Stock acquired by the
Company upon exercise of the Paragon Option will be acquired for the Company's
own account, for investment purposes only and will not be, and the Paragon
Option is not being, acquired by the Company with a view to the public
distribution thereof, in violation of any applicable provision of the Securities
Act.
7. REGISTRATION RIGHTS. At any time after the Paragon Option becomes
exercisable, Paragon shall, at the request of the Company, promptly prepare,
file and keep current a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering any shares issued and issuable
pursuant to the Paragon Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Paragon Common Stock issued upon
total or partial exercise of the Paragon Option ("Option Shares") in accordance
with any plan of disposition requested by the Company. Paragon will use its best
efforts to cause such registration statement promptly to become effective and
then to remain effective (i) in the case of a "shelf" registration on Form S-3
or any successor form thereto, until the second anniversary of the latest date
on which any Option Shares were issued upon exercise of the Paragon Option or in
the event that the Company is deemed to be an affiliate of Paragon as of such
date, the date that is 90 days following the date the Company ceases to be an
affiliate of Paragon, or (ii) in all other events for such period not in excess
of 180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. The Company shall have the right to demand no more than two such
registrations. Paragon shall bear the costs of such registrations (including,
but not limited to, Paragon's attorneys' fees (but excluding the fees and
expenses of counsel for the Company) printing costs and filing fees), except for
underwriting discounts or commissions and brokers' fees. The foregoing
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<PAGE> 6
notwithstanding, if, at the time of any request by the Company for registration
of Option Shares as provided above, Paragon is in registration with respect to
an underwritten public offering by Paragon of shares of Paragon Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Paragon Common Stock offered by Paragon,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however in no event
shall the number of Option Shares to be included in such offering for the
account of the Company constitute less than 25% of the total number of shares to
be sold by the Company and Paragon in the aggregate; and provided further,
however, that if such reduction occurs, then Paragon shall file a registration
statement for the balance of the Option Shares excluded from such prior offering
as promptly as practicable thereafter as to which no reduction pursuant to this
Section 7 shall be permitted or occur and the Company shall thereafter be
entitled to one additional registration. The Company shall provide all
information reasonably requested by Paragon for inclusion in any registration
statement to be filed hereunder. If requested by the Company in connection with
such registration, Paragon shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating itself
in respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting for Paragon. Upon receiving any
request under this Section 7 from the Company, Paragon agrees to send a copy
thereof to any other person known to Paragon to be entitled to registration
rights under this Section 7, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Paragon is obligated to effect be
increased by reason of the fact that there shall be more than one holder of
Option Shares as a result of any assignment or division of the Paragon Option
and this Agreement.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(A) Without limiting any restriction on Paragon contained in
this Agreement or in the Merger Agreement, in the event of any change in Paragon
Common Stock by reason of any stock dividend, stock split, merger (other than
the Merger), recapitalization, combination, exchange of shares, spin-off or
other change in the corporate or capital structure of Paragon which could have
the effect of diluting or otherwise diminishing the Company's rights hereunder
(including any issuance of Paragon Common Stock or other equity security of
Paragon at a price below the fair value thereof), the type and number of shares
or securities subject to the Paragon Option, and the Exercise Price per share
provided herein, shall be adjusted appropriately and proper provision shall be
made in the agreements governing such transaction so that the Company shall
receive, upon exercise of the Paragon Option, the number and class of securities
or property that the Company would have received in respect of the shares of
Paragon Common Stock issuable to the Company if the Paragon Option had been
exercised immediately prior to such event or the record date therefor, as
applicable.
(B) In the event that Paragon shall enter into an agreement:
(i) to consolidate with or merge into any person, other than the Company or one
of its subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person,
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other than the Company or one of its subsidiaries, to merge into Paragon and
Paragon shall be the continuing or surviving corporation, but, in connection
with such merger, the then-outstanding shares of Paragon Common Stock shall be
changed into or exchanged for stock or other securities of Paragon or any other
person or cash or any other property; or (iii) to sell or otherwise transfer all
or substantially all of its assets to any person, other than the Company or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that upon the consummation of such
transaction and upon the subsequent exercise of the Paragon Option, the Company
shall be entitled to receive, for each share of Paragon Common Stock with
respect to which the Paragon Option has not theretofore been exercised, an
amount of consideration in the form of and equal to the per share amount of
consideration that would be received by the holder of one share of Paragon
Common Stock upon consummation of such transaction (and, in the event of an
election or similar arrangement with respect to the type of consideration to be
received by the holders of Paragon Common Stock, subject to the foregoing,
proper provision shall be made so that the holder of the Paragon Option would
have the same election or similar rights as would the holder of the number of
shares of Paragon Common Stock for which the Paragon Option is then
exercisable).
9. RESTRICTIVE LEGENDS. Each certificate representing shares of Paragon
Common Stock issued to the Company upon exercise of the Paragon Option shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or Blue Sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Company or Paragon, as the case may be, shall have delivered to the other
party a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the other party, to the effect that such legend is not required
for purposes of the Securities Act or such laws; and (ii) the legend shall be
removed in its entirety if the conditions in the preceding clause (i) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered public
offering pursuant to Section 7 shall not be required to bear the legend set
forth in this Section 9.
10. BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party, and any such attempted
assignment in violation of this Agreement shall be void and of no force or
effect. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever.
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11. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
if for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, whether at law or in equity, the other party shall be entitled to an
injunction to prevent or restrain any violation or threatened violation of the
provisions of this Agreement, and to enforce specifically the terms and
provisions hereof, in any court of the State of Delaware or of the United States
of America located in the State of Delaware. In the event that any action should
be brought in equity to enforce the provisions of this Agreement, neither party
will allege, and each party hereby waives the defense, that there is an adequate
remedy at law. Each party hereto irrevocably and unconditionally consents and
submits to the jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware for any actions, suits
or proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby, and further agrees that service of any process, summons,
notice or document by U.S. registered or certified mail to the respective
addresses set forth in the Merger Agreement shall be effective service of
process for any action, suit or proceeding brought against such party in any
such court. Each party hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit, or proceeding arising out
of this Agreement or the transactions contemplated hereby, in the courts of the
State of Delaware or of the United States of America located in Wilmington,
Delaware, and hereby further irrevocable and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
12. VALIDITY.
(A) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
(B) In the event any court or other governmental or regulatory
authority holds any provisions of this Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith the execution
and delivery of an amendment to this Agreement in order, as nearly as possible,
to effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof.
(C) If for any reason any such court or other governmental or
regulatory authority determines that the Company is not permitted to acquire the
full number of shares of Paragon Common Stock provided in this Agreement (as the
same may be adjusted), it is the express intention of Paragon to allow the
Company to acquire or to require Paragon to repurchase such lesser number of
shares as may be permissible without any other amendment or modification hereof.
(D) Each party agrees that, should any court or other
governmental or regulatory authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith, or not take any action required herein, the
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other party shall not be entitled to specific performance of such provision or
part hereof or to any other remedy, including but not limited to money damages,
for breach hereof or of any other provision of this Agreement or part hereof as
the result of such holding or order.
13. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered personally, or (b) if sent by
overnight courier service (receipt confirmed in writing), or (c) if delivered by
facsimile transmission (with receipt confirmed), or (d) five days after being
mailed by registered or certified mail (return receipt requested) to the parties
in each case to the respective addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State and without regard to its choice
of law principles.
15. INTERPRETATION. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or interpretation
of the Agreement. When reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement, unless otherwise indicated.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense. The words "herein," "hereby," "hereof," "hereto,"
"hereunder" and words of similar import refer to this Agreement.
16. COUNTERPARTS; EFFECT. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
17. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
18. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
19. EXTENSION OF TIME PERIODS. The time periods for exercises of
certain rights hereunder shall be extended (but in no event by more than twelve
(12) months): (a) to the extent necessary to obtain all governmental approvals
for the exercise of such rights, and for the expiration of all statutory waiting
periods; and (b) to the extent necessary to avoid any liability or disgorgement
of profits under Section 16(b) of the Exchange Act by reason of such exercise.
20. FURTHER ASSURANCE. Each party agrees to execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
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21. FACSIMILE EXECUTION. A facsimile of this Agreement containing
signatures of all the parties hereto shall constitute an original document for
all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective duly authorized officers as of the date first above
written.
MARINER HEALTH GROUP, INC.
By: /s/ Arthur W. Stratton, Jr., M.D.
------------------------------------
Name: Arthur W. Stratton, Jr., M.D.
Title: Chairman, President and Chief
Executive Officer
PARAGON HEALTH NETWORK, INC.
By: /s/ R. Jeffrey Taylor
------------------------------------
Name: R. Jeffrey Taylor
Title: Senior Vice President
<PAGE> 1
EXHIBIT 99.2
COMPANY STOCK OPTION AGREEMENT
THIS COMPANY STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of April 13, 1998 by and between Paragon Health Network, Inc., a
Delaware corporation ("Paragon"), and Mariner Health Group, Inc., a Delaware
corporation (the "Company").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Paragon, the Company, and Paragon Acquisition Sub, Inc., a Delaware corporation
("Sub"), are entering into an Agreement and Plan of Merger, dated as of April
13, 1998 (the "Merger Agreement"), which provides, among other things, upon the
terms and subject to the conditions thereof, for the merger of SUB with and into
the Company in accordance with the laws of the State of Delaware (the "Merger");
and
B. As a condition and inducement to Paragon's willingness to enter into
the Merger Agreement, Paragon has requested that the Company agree, and the
Company has agreed, to grant to Paragon an option to acquire certain shares of
The Company's authorized but unissued common stock, $.01 par value per share
("Company Common Stock").
NOW, THEREFORE, to induce Paragon to enter into the Merger Agreement
and in consideration of the representations, warranties, covenants and
agreements contained herein and in the Merger Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows. Capitalized terms used
herein but not defined herein shall have the respective meanings ascribed to
them in the Merger Agreement.
1. GRANT OF OPTION. The Company hereby grants to Paragon an irrevocable
option (the "Company Option") to purchase a number of shares of Company Common
Stock equal to the Option Number (as defined in Section 2(d)), on the terms and
subject to the conditions set forth below.
2. EXERCISE AND TERMINATION OF THE COMPANY OPTION.
(A) EXERCISE. The Company Option may be exercised by Paragon,
in whole or in part, at any time or from time to time after the occurrence of a
Purchase Event and prior to the termination of Paragon's right to exercise the
Company Option by the terms of this Agreement. The Company shall notify Paragon
promptly in writing of the occurrence of any Trigger Event; however, such notice
shall not be a condition to the right of Paragon to exercise the Company Option.
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
"Purchase Event" means the consummation of any transaction the
proposal of which would constitute a Company Acquisition Transaction (as defined
in the Merger Agreement) within twelve (12) months following the occurrence of a
Trigger Event.
<PAGE> 2
"Trigger Event" means a termination of the Merger Agreement
under circumstances that causes a Termination Fee (as defined in the Merger
Agreement) to become payable by the Company to Paragon pursuant to Section
7.02(b) of the Merger Agreement or that would cause a Termination Fee to become
payable if the provisions of the penultimate sentence of Section 7.02(b) were
satisfied.
(B) EXERCISE PROCEDURE. In the event that Paragon wishes to
exercise the Company Option, Paragon shall deliver to the Company written notice
(an "Exercise Notice") specifying the total number of shares of Company Common
Stock that Paragon wishes to purchase. To the extent permitted by law and the
Certificate of Incorporation of the Company (the "Company Charter") and provided
that the conditions set forth in Section 3 to the Company's obligation to issue
the shares of Company Common Stock to Paragon hereunder have been satisfied or
waived, Paragon shall, upon delivery of the Exercise Notice and tender of the
applicable aggregate Exercise Price, immediately be deemed to be the holder of
record of the shares of Company Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Company Common Stock
shall not theretofore have been delivered to Paragon. Each closing of a purchase
of shares of Company Common Stock hereunder (a "Closing") shall occur at a
place, on a date, and at a time designated by Paragon in an Exercise Notice
delivered at least two (2) business days prior to the date of such Closing.
(C) TERMINATION OF THE COMPANY OPTION. Paragon's right to
exercise the Company Option shall terminate upon the earliest to occur of: (i)
the Effective Time of the Merger; (ii) the termination of the Merger Agreement
other than under circumstances which also constitute or may lead to a Trigger
Event under this Agreement; or (iii) 12 months following the receipt by Paragon
of written notice from the Company of the occurrence of a Trigger Event unless a
Purchase Event shall have occurred prior thereto in which case the right to
exercise the Company Option shall terminate 12 months following the occurrence
of such Purchase Event. Notwithstanding the foregoing, if the Company Option
cannot be exercised as of the date the Company Option would have otherwise
terminated pursuant to the preceding sentence by reason of any applicable
judgment, decree, order, law or regulation, the Company Option shall remain
exercisable and shall not terminate until the earlier of (x) the date on which
such impediment shall become final and not subject to appeal and (y) 5:00 p.m.,
Eastern Time, on the tenth (10th) business day after such impediment shall have
been removed. The rights of Paragon set forth in Section 7 shall not terminate
upon termination of Paragon's right to exercise the Company Option, but shall
extend to the time provided in such sections. Notwithstanding the termination of
the Company Option, Paragon shall be entitled to purchase the shares of Company
Common Stock with respect to which Paragon had exercised the Company Option
prior to such termination.
(D) OPTION NUMBER. The Option Number shall initially be the
number of shares equal to nineteen and nine-tenths percent (19.9%) of the total
number of shares of Company Common Stock issued and outstanding as of the date
of this Agreement, and shall be adjusted hereafter to reflect changes in the
Company capitalization occurring after the date hereof in accordance with
Section 8.
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<PAGE> 3
(E) EXERCISE PRICE. The purchase price per share of Company
Common Stock pursuant to the Company Option (the "Exercise Price") shall be
$19.75 per share, payable in cash.
3. CONDITIONS TO CLOSING. The obligation of the Company to issue the
shares of Company Common Stock to Paragon hereunder is subject to the conditions
that (a) all waiting periods, if any, under the Hart Scott Rodino Antitrust
Improvements Act of 1975, as amended (the "HSR Act"), applicable to the issuance
of the shares of Company Common Stock by the Company and the acquisition of such
shares by Paragon hereunder shall have expired or have been terminated; (b) no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect; and (c) all consents, approvals, orders, authorizations and permits of
any federal, state, local or foreign governmental authority, if any, required in
connection with the issuance of the shares of Company Common Stock and the
acquisition of such shares by Paragon hereunder shall have been obtained;
provided, however, that the parties hereto shall use their best efforts to cause
all such conditions to be fulfilled as promptly as possible. In the event the
closing is delayed as a result of the immediately preceding sentence, the date
of the closing shall be within five business days following the date such
condition has been fulfilled; provided that, notwithstanding any prior notice of
intention to exercise the Option, Paragon shall not be obligated to purchase any
share of Company Common Stock pursuant hereto after the date three months
following the date of such Exercise Notice.
4. CLOSING. At any Closing:
(A) The Company shall deliver to Paragon or its designee a
certificate or certificates in definitive form representing the number of shares
of Company Common Stock in the denominations designated by Paragon in its
Exercise Notice, such certificate to be registered in the name of Paragon and to
bear the legend set forth in Section 9;
(B) Paragon shall deliver to the Company the aggregate
Exercise Price for the shares of Company Common Stock so designated and being
purchased by wire transfer of immediately available funds to the account or
accounts specified in writing by the Company;
(C) The Company shall pay all expenses, and any and all
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 4; and
(D) The Company shall cause the shares of Company Common Stock
being delivered at the Closing to be approved for quotation on The Nasdaq
National Market and shall pay all expenses in connection with the application
for approval of such quotation.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Paragon that:
(A) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and
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authority to carry on its business as such business is being conducted as of the
date of this Agreement. The Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than any such jurisdiction where the failure to be so
qualified or licensed (individually or in the aggregate) would not have a
material adverse effect on the Company.
(B) The Company has all corporate power and authority required
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company and no other corporate
actions or proceedings on the part of the Company or the Company's stockholders
are necessary to authorize this Agreement or any of the transactions
contemplated hereby; this Agreement has been duly and validly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Paragon and the receipt of any required governmental
approvals, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceeding therefor may
be brought;
(C) The Company has taken all necessary corporate action to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the Company Option, and at all times from the date hereof through the expiration
of the Company Option will have reserved, a number of authorized and unissued
shares of Company Common Stock not less than the Option Number, such amount
being subject to adjustment as provided in Section 8, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable;
(D) the shares of Company Common Stock issued to Paragon upon
the exercise of the Company Option will be, upon delivery thereof to Paragon,
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever and shall not be subject to any preemptive
right of any stockholder of the Company;
(E) the execution and delivery of this Agreement by the
Company does not, and, the consummation by the Company of the transactions
contemplated hereby will not, violate, conflict with, or result in a breach of
any provision of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to the termination of, or accelerate the
performance required by, or result in a right of termination, cancellation, or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets
(any such violation, conflict, breach, default, termination, acceleration, right
of termination, cancellation or acceleration, loss, or creation, a "Violation")
of the Company or any of its subsidiaries, pursuant to (i) any provision of the
Company Certificate of Incorporation or the Bylaws of the Company, (ii) any
provision of any material loan or credit agreement, note, mortgage, indenture,
lease, benefit plan or other agreement, obligation,
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<PAGE> 5
instrument, permit, concession, franchise or license (a "Material Contract") of
the Company or any of its subsidiaries or to which any of them is a party or by
which any of them or their properties or assets are bound, or (iii) assuming the
regulatory requirements referred to in Section 5(f) are satisfied, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its subsidiaries or any of their properties or assets;
(F) the execution and delivery of this Agreement by the
Company does not, and (except for the expiration or early termination of the
waiting period under the HSR Act and any consent, approval or notice required by
federal, state and local regulatory agencies, commissions, boards or public
authorities with jurisdiction over healthcare facilities and providers) the
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, require any consent, approval, order,
authorization or permit of, filing with, or notification to any governmental or
regulatory authority; and
(G) none of the Company or any of its affiliates or anyone
acting on its or their behalf has issued, sold or offered any security of the
Company to any person under circumstances that would cause the issuance and sale
of shares of Company Common Stock hereunder to be subject to the registration
requirements of the Securities Act as in effect on the date hereof, and,
assuming the representations and warranties of Paragon contained in Section 6
are true and correct, the issuance, sale and delivery of the shares of Company
Common Stock hereunder would be exempt from the registration and prospectus
delivery requirements of the Securities Act, as in effect on the date hereof,
and the Company shall not take any action which would cause the issuance, sale,
and delivery of shares of Company Common Stock hereunder not to be exempt from
such requirements.
6. REPRESENTATIONS AND WARRANTIES OF REBEL. Paragon represents and
warrants to the Company that any shares of Company Common Stock acquired by
Paragon upon exercise of the Company Option will be acquired for Paragon's own
account, for investment purposes only and will not be, and the Company Option is
not being, acquired by Paragon with a view to the public distribution thereof,
in violation of any applicable provision of the Securities Act.
7. REGISTRATION RIGHTS. At any time after the Company Option becomes
exercisable, the Company shall, at the request of Paragon, promptly prepare,
file and keep current a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering any shares issued and issuable
pursuant to this Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Company Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance with
any plan of disposition requested by Paragon. The Company will use its best
efforts to cause such registration statement promptly to become effective and
then to remain effective (i) in the case of a "shelf" registration on Form S-3
or any successor form thereto, until the second anniversary of the latest date
on which any Option Shares were issued upon exercise of the Option or in the
event that Paragon is deemed to be an affiliate of the Company as of such date,
the date that is 90 days following the date Paragon ceases to be an affiliate of
the Company, or (ii) in all other events for such period not in excess of 180
days from the day such registration statement first becomes effective or such
shorter time as may be reasonably necessary to effect such sales or other
dispositions. Paragon shall have the right to
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<PAGE> 6
demand no more than two such registrations. The Company shall bear the costs of
such registrations (including, but not limited to, the Company's attorneys' fees
(but excluding the fees and expenses of counsel for Paragon) printing costs and
filing fees), except for underwriting discounts or commissions and brokers'
fees. The foregoing notwithstanding, if, at the time of any request by Paragon
for registration of Option Shares as provided above, the Company is in
registration with respect to an underwritten public offering by the Company of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the offer and sale of the Option Shares would
interfere with the successful marketing of the shares of Common Stock offered by
the Company, the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced; provided, however in
no event shall the number of Option Shares to be included in such offering for
the account of Paragon constitute less than 25% of the total number of shares to
be sold by Paragon and the Company in the aggregate; and provided further,
however, that if such reduction occurs, then the Company shall file a
registration statement for the balance of the Option Shares excluded from such
prior offering as promptly as practicable thereafter as to which no reduction
pursuant to this Section 7 shall be permitted or occur and Paragon shall
thereafter be entitled to one additional registration. Paragon shall provide all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If requested by Paragon in
connection with such registration, the Company shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting for
the Company. Upon receiving any request under this Section 7 from Paragon, the
Company agrees to send a copy thereof to any other person known to the Company
to be entitled to registration rights under this Section 7, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
the Company is obligated to effect be increased by reason of the fact that there
shall be more than one holder of Option Shares as a result of any assignment or
division of the Option and this Agreement.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(A) Without limiting any restriction on the Company contained
in this Agreement or in the Merger Agreement, in the event of any change in the
Company Common Stock by reason of any stock dividend, stock split, merger (other
than the Merger), recapitalization, combination, exchange of shares spin-off or
other change in the corporate or capital structure of the Company which could
have the effect of diluting or otherwise diminishing Paragon's rights hereunder
(including any issuance of Company Common Stock or other equity security of the
Company at a price below the fair value thereof), the type and number of shares
or securities subject to the Company Option, and the Exercise Price per share
provided herein, shall be adjusted appropriately and proper provision shall be
made in the agreements governing such transaction so that Paragon shall receive,
upon exercise of the Company Option, the number and class of securities or
property that Paragon would have received in respect of the shares of Company
Common Stock issuable to Paragon if the Company Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
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<PAGE> 7
(B) In the event that the Company shall enter into an
agreement: (i) to consolidate with or merge into any person, other than Paragon
or one of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger; (ii) to permit any person, other
than Paragon or one of its subsidiaries, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then-outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other person or cash or any other property; or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Paragon or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that upon the
consummation of such transaction and upon the subsequent exercise of the Company
Option, Paragon shall be entitled to receive, for each share of Company Common
Stock with respect to which the Company Option has not theretofore been
exercised, an amount of consideration in the form of and equal to the per share
amount of consideration that would be received by the holder of one share of
Company Common Stock upon consummation of such transaction (and, in the event of
an election or similar arrangement with respect to the type of consideration to
be received by the holders of Company Common Stock, subject to the foregoing,
proper provision shall be made so that the holder of the Company Option would
have the same election or similar rights as would the holder of the number of
shares of Company Common Stock for which the Company Option is then
exercisable).
9. RESTRICTIVE LEGENDS. Each certificate representing shares of Company
Common Stock issued to Paragon upon exercise of the Company Option shall include
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or Blue Sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if Paragon or the Company, as the case may be, shall have delivered to the other
party a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the other party, to the effect that such legend is not required
for purposes of the Securities Act or such laws; and (ii) the legend shall be
removed in its entirety if the conditions in the preceding clause (i) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered public
offering pursuant to Section 7 shall not be required to bear the legend set
forth in this Section 9.
10. BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party, and any such attempted
assignment in violation of this
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Agreement shall be void and of no force or effect. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever.
11. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
if for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, whether at law or in equity, the other party shall be entitled to an
injunction to prevent or restrain any violation or threatened violation of the
provisions of this Agreement, and to enforce specifically the terms and
provisions hereof, in any court of the State of Delaware or of the United States
of America located in the State of Delaware. In the event that any action should
be brought in equity to enforce the provisions of this Agreement, neither party
will allege, and each party hereby waives the defense, that there is an adequate
remedy at law. Each party hereto irrevocably and unconditionally consents and
submits to the jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware for any actions, suits
or proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby, and further agrees that service of any process, summons,
notice or document by U.S. registered or certified mail to the respective
addresses set forth in the Merger Agreement shall be effective service of
process for any action, suit or proceeding brought against such party in any
such court. Each party hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit, or proceeding arising out
of this Agreement or the transactions contemplated hereby, in the courts of the
State of Delaware or of the United States of America located in Wilmington,
Delaware, and hereby further irrevocable and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
12. VALIDITY.
(A) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
(B) In the event any court or other governmental or regulatory
authority holds any provisions of this Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith the execution
and delivery of an amendment to this Agreement in order, as nearly as possible,
to effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof.
(C) If for any reason any such court or other governmental or
regulatory authority determines that Paragon is not permitted to acquire the
full number of shares of Company Common Stock provided in this Agreement (as the
same may be adjusted), it is the express intention of the Company to allow
Paragon to acquire or to require the Company to repurchase such lesser number of
shares as may be permissible without any other amendment or modification hereof.
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<PAGE> 9
(D) Each party agrees that, should any court or other
governmental or regulatory authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith, or not take any action required herein, the other
party shall not be entitled to specific performance of such provision or part
hereof or to any other remedy, including but not limited to money damages, for
breach hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
13. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered personally, or (b) if sent by
overnight courier service (receipt confirmed in writing), or (c) if delivered by
facsimile transmission (with receipt confirmed), or (d) five days after being
mailed by registered or certified mail (return receipt requested) to the parties
in each case to the respective addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State and without regard to its choice
of law principles.
15. INTERPRETATION. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or interpretation
of the Agreement. When reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement, unless otherwise indicated.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense. The words "herein," "hereby," "hereof," "hereto,"
"hereunder" and words of similar import refer to this Agreement.
16. COUNTERPARTS; EFFECT. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
17. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
18. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
19. EXTENSION OF TIME PERIODS. The time periods for exercises of
certain rights hereunder shall be extended (but in no event by more than twelve
(12) months): (a) to the extent necessary to obtain all governmental approvals
for the exercise of such rights, and for the expiration of all statutory waiting
periods; and (b) to the extent necessary to avoid any liability or disgorgement
of profits under Section 16(b) of the Exchange Act by reason of such exercise.
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20. FURTHER ASSURANCE. Each party agrees to execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
21. FACSIMILE EXECUTION. A facsimile of this Agreement containing
signatures of all the parties hereto shall constitute an original document for
all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Company Stock
Option Agreement to be executed by their respective duly authorized officers as
of the date first above written.
MARINER HEALTH GROUP, INC.
By: /s/ Arthur W. Stratton, Jr., M.D.
--------------------------------------
Name: Arthur W. Stratton, Jr., M.D
Title: President and Chief Executive Officer
PARAGON HEALTH NETWORK, INC.
By: /s/ R. Jeffrey Taylor
--------------------------------------
Name: R. Jeffrey Taylor
Title: Senior Vice President
<PAGE> 1
EXHIBIT 99.3
PARENT VOTING AGREEMENT
VOTING AGREEMENT dated as of April 13, 1998 (this "Agreement") by and
among Mariner Health Group, Inc., a Delaware corporation (the "Company"), and
Apollo Management, L.P., Apollo Investment Fund III, L.P., Apollo UK Partners,
III, L.P. and Apollo Overseas Partners III, L.P. (collectively, "Apollo")
WHEREAS, Apollo is the beneficial owner of shares of common stock, par
value $.01 per share (the "Parent Common Stock"), of Paragon Health Network,
Inc., a Delaware corporation ("Parent"), and through a Proxy and Voting
Agreement dated as of November 4, 1997 (the "Proxy and Voting Agreement"),
Apollo has the right to vote additional shares of Parent Common Stock;
WHEREAS, Paragon Acquisition Sub, Inc., a Delaware corporation and
wholly owned subsidiary of the Parent (the "Subsidiary"), Mariner Health Group,
Inc. and Parent have entered into an Agreement and Plan of Merger, dated as of
the date hereof (as the same may be amended or supplemented, the "Merger
Agreement"), with respect to the merger of Subsidiary with and into the Company
(the "Merger") with the Company surviving the Merger; and
WHEREAS, as an inducement to the Company to enter into, execute and
deliver the Merger Agreement, the Company requested that Apollo execute this
Agreement pursuant to which Apollo will agree to vote the shares of Parent
Common Stock which Apollo beneficially owns or has the right to vote as provided
herein.
NOW, THEREFORE, in consideration of the execution and delivery by the
Company of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. VOTING AGREEMENTS. Subject to the provisions of Section 6 hereof, in
connection with the efforts of the Parent to cause the Merger Agreement and the
Merger to receive the required approval of the stockholders of Parent and to be
consummated, Apollo agrees with, and covenants to, the Company as follows:
(a) At any meeting of stockholders of Parent called to vote
upon the Merger and the Merger Agreement or at any adjournment thereof
or in any other circumstance upon which a vote, consent or other
approval of stockholders of Parent is sought with respect to the
issuance of shares of Parent Common Stock in connection with the Merger
and pursuant to the Merger Agreement (the "Issuance"), Apollo shall (i)
appear or otherwise take appropriate action to ensure that the Apollo
Shares (as defined below) are present at such meeting for the purpose
of obtaining a quorum and (ii) vote (or cause to be voted) or execute a
written consent with respect to the Apollo Shares in favor of the
Issuance and each of the other transactions contemplated by or in any
way related to the Merger Agreement.
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(b) At any meeting of stockholders of Parent or at any
adjournment thereof or in any other circumstance upon which the vote,
consent or other approval of stockholders of Parent is sought, Apollo
shall vote (or cause to be voted) or execute a written consent in
connection with the Apollo Shares against (i) any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by
Parent or (ii) any action or agreement, including any proposed
amendment of Parent's Certificate of Incorporation or By-laws or other
proposal or transaction involving Parent or any of its subsidiaries
which action, agreement, amendment or other proposal or transaction is
intended, or could reasonably be expected to impede, interfere with,
delay, or attempt to frustrate, prevent or nullify the Merger, the
Merger Agreement or any of the other transactions contemplated thereby
(each of the foregoing in clauses (i) or (ii) above, a "Competing
Transaction").
2. REPRESENTATIONS AND WARRANTIES. Apollo represents and warrants to
the Company as follows:
(a) Through its beneficial ownership and pursuant to the Proxy
and Voting Agreement, Apollo has the right to vote 17,777,778 shares of
Parent Common Stock (the "Apollo Shares"). Except for the Apollo
Shares, Apollo is not the record or beneficial owner of any shares of
Parent Common Stock.
(b) This Agreement has been duly executed and delivered by
Apollo and Apollo intends for this to be a valid and binding agreement
and will not take any action to contest the valid and binding nature of
this Agreement. Apollo is a limited partnership duly formed, validly
existing and in good standing under the laws of the state of its
formation with full partnership power and authority necessary to enter
into this Agreement and to perform its obligations hereunder.
(c) Except as described on Schedule 2(c) hereof, neither the
execution and delivery of this Agreement nor the consummation by Apollo
of the transactions contemplated hereby will result in a violation of,
or a default under, or conflict with, any contract, trust, commitment,
agreement, understanding, arrangement or restriction of any kind to
which Apollo is a party or bound or to which the Apollo Shares are
subject. Neither the execution and delivery of this Agreement nor the
consummation by Apollo of the transactions contemplated hereby will
violate, or require any consent, approval or notice under any provision
of any judgment, order or decree applicable to Apollo or the Apollo
Shares, except for any necessary consent, approval or notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
Section 13 of the Securities Exchange Act of 1934, as amended, and (ii)
required by local, state and federal regulatory agencies, commissions,
boards or public authorities with jurisdiction over health care
facilities and providers.
(d) Except as described on Schedule 2(d) hereof, none of which
as of the date hereof impede the ability of Apollo to fulfill its
obligations under this Agreement, the
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Apollo Shares owned by affiliates of Apollo (the "Affiliate Shares")
and the certificates representing such Shares are now and at all times
during the term hereof will be held by such affiliates, or by a nominee
or custodian for the benefit of such affiliate, free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising
hereunder.
(e) Apollo understands and acknowledges that the Company is
entering into the Merger Agreement in reliance upon Apollo's execution
and delivery of this Agreement.
3. COVENANTS. Apollo agrees with, and covenants to, the Company as
follows:
(a) Apollo shall not (i) transfer (which terms shall include,
without limitation, for the purposes of this Agreement, any sale, gift,
pledge, alienation, assignment or other disposition, directly or
indirectly, by operation of law, in connection with any merger or
otherwise (collectively, a "Transfer")), or consent to any Transfer of,
any or all of the Affiliate Shares or any interest therein, except
pursuant to the Merger or as set forth on Schedule 3(a) hereof, (ii)
enter into any contract, option or other agreement or understanding
with respect to any Transfer of any or all of the Affiliate Shares or
any interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to the Affiliate Shares, except for
this Agreement and any proxy granted in connection with any meeting of
stockholders of Parent called to vote upon the Issuance or at any
adjournment thereof which contains voting instructions consistent with
Apollo's obligations under this Agreement, or (iv) deposit the
Affiliate Shares into a voting trust or enter into a voting agreement
or any other arrangement with respect to such Shares; provided, that
Apollo may, subject to the provisions of Section 4 hereof, transfer any
Affiliate Shares to another affiliate of Apollo or other party to the
Proxy and Voting Agreement so long as Apollo continues to be able to
vote such Shares in accordance with the terms of this Agreement.
(b) Subject to the provisions of Section 6 hereof, Apollo
shall not, in its capacity as a stockholder of Parent, and shall
instruct any investment banker, attorney or other adviser or
representative of Apollo not to, directly or indirectly, (i) solicit,
initiate, facilitate, or encourage any Competing Transactions or (ii)
participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, 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, a Competing
Transaction. Apollo shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. Without
limiting the foregoing, it is understood that solely for purposes of
enabling the Company to avail itself of the remedies available pursuant
to Section 9(h) hereof, any violation of the restrictions set forth in
the preceding sentence by an investment banker, attorney or other
adviser or representative of Apollo, whether or not such person is
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purporting to act on behalf of Apollo or otherwise, shall be deemed to
be a violation of this Section 3(b) by Apollo.
4. CERTAIN EVENTS. Apollo agrees that this Agreement and the
obligations hereunder shall attach to the Apollo Shares and shall be binding
upon any person or entity to which legal or beneficial ownership of the Apollo
Shares shall pass, whether by operation of law or otherwise. In the event of any
stock split, stock dividend, merger, reorganization, recapitalization or other
change in the capital structure of Parent affecting Parent Common Stock, or the
acquisition of additional shares of Parent Common Stock or other voting
securities of Parent by Apollo, the obligations hereunder shall attach to any
additional shares of Parent Common Stock or other voting securities of Parent
issued to or acquired by Apollo.
5. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of Parent shall not have duly and validly authorized and approved by
all necessary corporate action the Merger Agreement and the transactions
contemplated thereby, so that by the execution and delivery hereof the Company
would become, or could reasonably be expected to become, an "interested
stockholder" with whom Parent would be prevented for any period pursuant to
Section 203 of the DGCL from engaging in any "business combination" (as such
terms are defined in Section 203 of the DGCL), then this Agreement shall be void
and unenforceable until such time as such authorization and approval shall have
been duly and validly obtained.
6. STOCKHOLDER CAPACITY. Certain persons affiliated with Apollo are
directors of Parent and Apollo does not make any agreement or understanding
herein with respect to such individuals in their capacity as directors and the
provisions of this Agreement shall not restrict or limit the discharge of their
fiduciary duties as directors of Parent. Apollo signs solely in its capacity as
the beneficial owner or holder of a proxy with respect to the Apollo Shares.
7. REGULATORY APPROVAL. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions.
8. FURTHER ASSURANCES. Apollo shall, upon request of the Company,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by the Company to be necessary or desirable to carry
out the provisions hereof.
9. TERMINATION. It is a condition precedent to the effectiveness of
this Agreement that the Merger Agreement shall have been executed and delivered
and be in full force and effect. This Agreement shall automatically terminate
and be of no further force and effect upon the first to occur of (i) the
Effective Time of the Merger or (ii) the date upon which the Merger Agreement is
terminated in accordance with its terms. Upon such termination, except for any
rights any party may have in respect of any breach by any other party of its or
his obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder
10. MISCELLANEOUS.
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(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given upon the same terms as set forth in Section 8.05 of the
Merger Agreement, except that notices to Apollo shall be sent to:
Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attention: Peter P. Copses
With a copy to:
Robert W. Kadlec
Sidley & Austin
555 West Fifth Street, 40th Floor
Los Angeles, California 90013-1010
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the Company and Apollo and delivered to Company,
Subsidiary, Parent and Apollo.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in
part, through any merger, by operation of law or otherwise, by any of
the parties without the prior written consent of the other parties,
except by laws of descent or as expressly contemplated by Section 3(a)
hereof. Any assignment in violation of the foregoing shall be void.
(h) Apollo agrees that irreparable damage would occur and that
the Company would not have any adequate remedy at law in the event that
any of the provisions of this
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Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the Company
shall be entitled to an injunction or injunctions to prevent breaches
or threatened breaches by Apollo of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of
the United States located in the State of Delaware or in Delaware state
court, this being in addition to any other remedy to which the Company
may be entitled at law or in equity. In addition, each of the parties
hereto irrevocably and unconditionally (i) consents to be subject to
the personal jurisdiction of any Federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat the
personal jurisdiction of such courts by motion or other request for
leave from any such court, (iii) agrees that such party will not bring
any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in
the State of Delaware or a Delaware state court and (iv) that service
of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal
Service constituting evidence of, valid service, and that service made
pursuant to this clause (iv) shall have the same legal force and effect
as if served upon such party personally within the State of Delaware.
(i) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any
way be affected, impaired, or invalidated, and shall be enforced to the
fullest extent permitted by law and the provision found to be invalid,
void or unenforceable shall be immediately revised by the parties
hereto so as to be valid, binding and enforceable to the greatest
extent then permitted by applicable law.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in
writing and signed by such party.
(k) A facsimile of this Agreement containing signatures of all
of the parties hereto shall constitute an original document for all
purposes.
[BALANCE OF PAGE INTENTIONALLY OMITTED]
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IN WITNESS WHEREOF, the Company and Apollo have caused this Parent
Voting Agreement to be duly executed and delivered on day and year first above
written.
MARINER HEALTH GROUP, INC.
By:
-----------------------------
Name:
Title:
APOLLO MANAGEMENT, L.P.
By: AIF III Management, Inc.,
Its General Partner
By:
-----------------------------
Name:
Title:
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.,
Its General Partner
By: Apollo Capital Management II, Inc.,
Its General Partner
By:
-----------------------------
Name:
Title:
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APOLLO UK PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
Its General Partner
By: Apollo Capital Management II, Inc.,
Its General Partner
By:
-----------------------------
Name:
Title:
APOLLO OVERSEAS PARTNERS, III, L.P.
By: Apollo Advisors II, L.P.,
Its General Partner
By: Apollo Capital Management II, Inc.,
Its General Partner
By:
-----------------------------
Name:
Title:
8
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EXHIBIT 99.4
COMPANY VOTING AGREEMENT
VOTING AGREEMENT dated as of April 13, 1998 (this "Agreement") by and
among Paragon Health Network, Inc., a Delaware corporation (the "Parent"), and
the other parties signatory hereto (each a "Stockholder")
WHEREAS, each Stockholder is the beneficial owner of shares (the
"Company Common Stock") of common stock, par value $.01 per share, of Mariner
Health Group, Inc., a Delaware corporation (the "Company"), Paragon Acquisition
Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Parent (the
"Subsidiary") and the Parent enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended or supplemented, the "Merger
Agreement") with respect to the merger of Subsidiary with and into the Company
(the "Merger") with the Company surviving the Merger; and
WHEREAS, as an inducement to the Parent and the Subsidiary to enter
into, execute and deliver the Merger Agreement, Parent and Subsidiary requested
that each Stockholder execute this Agreement pursuant to which each Stockholder
will agree to vote the shares of Common Stock beneficially owned by such
Stockholders as provided herein.
NOW, THEREFORE, in consideration of the execution and delivery by the
Parent and the Subsidiary of the Merger Agreement and the mutual covenants,
conditions and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. VOTING AGREEMENTS. Subject to the provisions of Section 6 hereof, in
connection with the efforts of the Company to cause the Merger Agreement and the
Merger to receive the required approval of the stockholders of the Company and
to be consummated, each Stockholder severally agrees with, and covenants to, the
Parent as follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstance upon which a vote, consent or
other approval of stockholders of the Company is sought with respect to
the Merger and the Merger Agreement, such Stockholder shall (i) appear
or otherwise take appropriate action to ensure that such Stockholder's
Shares (as defined below) are present at such meeting for the purpose
of obtaining a quorum and (ii) vote (or cause to be voted) or execute a
written consent with respect to such Stockholder's Shares in favor of
the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval thereof and each of the other transactions
contemplated by or in any way related to the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstance upon which the vote,
consent or other approval of stockholders of the Company is sought,
such Stockholder shall vote (or cause to be voted) or execute a written
consent in connection with such Stockholder's Shares against (i) any
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merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding
up of or by the Company or (ii) any action or agreement, including any
proposed amendment of the Company's Certificate of Incorporation or
By-laws or other proposal or transaction involving the Company or any
of its subsidiaries which action, agreement, amendment or other
proposal or transaction is intended, or could reasonably be expected to
impede, interfere with, delay, or attempt to frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other
transactions contemplated thereby (each of the foregoing in clauses (i)
or (ii) above, a "Competing Transaction").
2. REPRESENTATIONS AND WARRANTIES. Each Stockholder severally
represents and warrants to the Parent as follows:
(a) Such Stockholder is the record and beneficial owner of, or
is a trustee of a trust that is the record holder of, the number of
shares of the Company Common Stock set forth opposite such
Stockholder's name in Schedule A hereto (as to any Stockholder, such
"Stockholder's Shares"). Except for such Stockholder's Shares, such
Stockholder is not the record or beneficial owner of any shares of
Company Common Stock.
(b) This Agreement has been duly executed and delivered by
such Stockholder and such Stockholder intends for this to be a valid
and binding agreement and will not take any action to contest the valid
and binding nature of this Agreement. If such Stockholder is a natural
person, such Stockholder (i) has the full power and capacity necessary
to enter into and perform his or her obligations under this Agreement,
(ii) has read all provisions of this Agreement, has reviewed such
provisions with counsel to the extent such Stockholder deemed
appropriate, understands each of such provisions and voluntarily agrees
to be bound thereby and (iii) if such Stockholder is married and such
Stockholder's Shares constitute community property, this Agreement has
been duly executed and delivered by and constitutes a valid and binding
agreement of such Stockholder's spouse and such Stockholder's spouse
intends for this to be a valid and binding agreement and will not take
any action to contest the valid and binding nature of this Agreement.
If such Stockholder is an entity, such Stockholder is duly organized,
validly existing and in good standing under the laws of the state of
its organization with full power and authority necessary to enter into
this Agreement and to perform its obligations hereunder. If such
Stockholder is a partnership, such partnership is duly formed, validly
existing and in good standing under the laws of the state of its
organization with full partnership power and authority necessary to
enter into this Agreement and to perform its obligations hereunder.
(c) Except as described on Schedule 2(c) hereof, neither the
execution and delivery of this Agreement nor the consummation by such
Stockholder of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction
of any kind to which such Stockholder is a party or bound or to which
such Stockholder's Shares
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are subject. Except as described on Schedule 2(c) hereof, neither the
execution and delivery of this Agreement nor the consummation by such
Stockholder of the transactions contemplated hereby will violate, or
require any consent, approval or notice under any provision of any
judgment, order or decree applicable to such Stockholder or such
Stockholder's Shares, except for any necessary consent, approval or
notice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or Section 13 of the Securities Exchange Act of 1934, as
amended, and (ii) required by local, state and federal regulatory
agencies, commissions, boards or public authorities with jurisdiction
over health care facilities and providers.
(d) Except as described on Schedule 2(d) hereof, none of which
as of the date hereof impede the ability of the Stockholders to fulfill
its obligations under this Agreement, such Stockholder's Shares and the
certificates representing such Shares are now and at all times during
the term hereof will be held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising
hereunder.
(e) Such Stockholder understands and acknowledges that the
Parent is entering into the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
3. COVENANTS. Each Stockholder severally agrees with, and covenants to,
the Parent as follows:
(a) Such Stockholder shall not (i) transfer (which terms shall
include, without limitation, for the purposes of this Agreement, any
sale, gift, pledge, alienation, assignment or other disposition,
directly or indirectly, by operation of law, in connection with any
merger or otherwise (collectively, a "Transfer")), or consent to any
Transfer of, any or all of such Stockholder's Shares or any interest
therein, except pursuant to the Merger, (ii) enter into any contract,
option or other agreement or understanding with respect to any Transfer
of any or all of such Stockholder's Shares or any interest therein,
(iii) grant any proxy, power of attorney or other authorization in or
with respect to such Stockholder's Shares, except for this Agreement
and any proxy granted in connection with any meeting of stockholders of
the Company called to vote upon the Merger and the Merger Agreement or
at any adjournment thereof which contains voting instructions
consistent with such Stockholder's obligations under this Agreement, or
(iv) deposit such Stockholder's Shares into a voting trust or enter
into a voting agreement or any other arrangement with respect to such
Shares; provided, that any such Stockholder may, subject to the
provisions of Section 4 hereof, transfer any of such Stockholder's
Shares to any other Stockholder who is on the date hereof a party to
this Agreement, or to any family member of a Stockholder, charitable
institution or affiliate (as defined in the Securities Act (as defined
in the Merger Agreement)) of such Stockholder which prior to
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such Transfer becomes a party to this Agreement bound by all
obligations of a "Stockholder" hereunder.
(b) If a majority of the holders of Company Common Stock
approve the Merger and the Merger Agreement, upon consummation of the
Merger such Stockholder's Shares shall, subject to the terms and
conditions of the Merger Agreement, be converted into the right to
receive the consideration provided in the Merger Agreement. Such
Stockholder hereby waives any rights of appraisal, or rights to dissent
from the Merger, that such Stockholder may have.
(c) Subject to the provisions of Section 6 hereof, such
Stockholder shall not, in its, his or her capacity as a stockholder of
the Company, and shall instruct any investment banker, attorney or
other adviser or representative of such Stockholder not to, directly or
indirectly, (i) solicit, initiate, facilitate, or encourage any
Competing Transactions or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, 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, a Competing Transaction. Each Stockholder shall immediately
cease and cause to be terminated any existing activities, discussions
or negotiations with any parties conducted heretofore with respect to
any of the foregoing. Without limiting the foregoing, it is understood
that solely for purposes of enabling Parent to avail itself of the
remedies available pursuant to Section 9(h) hereof, any violation of
the restrictions set forth in the preceding sentence by an investment
banker, attorney or other adviser or representative of such
Stockholder, whether or not such person is purporting to act on behalf
of such Stockholder or otherwise, shall be deemed to be a violation of
this Section 3(c) by such Stockholder.
4. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Stockholder's Shares shall pass, whether by operation of law or otherwise,
including without limitation, such Stockholder's heirs, guardians,
administrators or successors. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Company Common Stock, or the acquisition
of additional shares of Company Common Stock or other voting securities of the
Company by any Stockholder, the number of Stockholder's Shares listed in
Schedule A beside the name of such Stockholder shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional
shares of the Company Common Stock or other voting securities of the Company
issued to or acquired by such Stockholder.
5. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the Merger Agreement and the transactions
contemplated thereby, so that by the execution and delivery hereof the Parent
would become, or could reasonably be expected to become, an "interested
stockholder" with whom the Company would be prevented for any period pursuant to
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Section 203 of the DGCL from engaging in any "business combination" (as such
terms are defined in Section 203 of the DGCL), then this Agreement shall be void
and unenforceable until such time as such authorization and approval shall have
been duly and validly obtained.
6. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer and the provisions of this Agreement shall not restrict or limit any
such person in the discharge of his or her fiduciary duties as an officer or
director of the Company. Each Stockholder signs solely in his or her capacity as
the record and beneficial owner or the trustee of a trust whose beneficiaries
are the beneficial owners of such Stockholder's Shares.
7. REGULATORY APPROVAL. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions.
8. FURTHER ASSURANCES. Each Stockholder shall, upon request of the
Parent, execute and deliver any additional documents and take such further
actions as may reasonably be deemed by the Parent to be necessary or desirable
to carry out the provisions hereof.
9. TERMINATION. It is a condition precedent to the effectiveness of
this Agreement that the Merger Agreement shall have been executed and delivered
and be in full force and effect. This Agreement shall automatically terminate
and be of no further force and effect upon the first to occur of (i) the
Effective Time of the Merger or (ii) the date upon which the Merger Agreement is
terminated in accordance with its terms. Upon such termination, except for any
rights any party may have in respect of any breach by any other party of its or
his obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder
10. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given upon the same terms as set forth in Section 8.05 of the
Merger Agreement, except that notices to the undersigned Stockholders
shall be sent to the address set forth in Schedule A hereto opposite
each such Stockholder's name.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective as to any Stockholder when one or
more counterparts have been signed by each of Parent and such
Stockholder and delivered to Company, Subsidiary, Parent and such
Stockholder.
5
<PAGE> 6
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in
part, through any merger, by operation of law or otherwise, by any of
the parties without the prior written consent of the other parties,
except by laws of descent or as expressly contemplated by Section 3(a)
hereof. Any assignment in violation of the foregoing shall be void.
(h) Each Stockholder agrees that irreparable damage would
occur and that Parent would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that Parent shall be entitled to an injunction or
injunctions to prevent breaches or threatened breaches by any
Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located
in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which Parent may be entitled at law or
in equity. In addition, each of the parties hereto irrevocably and
unconditionally (i) consents to be subject to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat the personal jurisdiction of
such courts by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court
other than a Federal court sitting in the State of Delaware or a
Delaware state court and (iv) that service of process may also be made
on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of,
valid service, and that service made pursuant to this clause (iv) shall
have the same legal force and effect as if served upon such party
personally within the State of Delaware.
(i) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any
way be affected, impaired, or invalidated, and shall be enforced to the
fullest extent permitted by law and the provision found to be invalid,
void or unenforceable shall be immediately revised by the parties
6
<PAGE> 7
hereto so as to be valid, binding and enforceable to the greatest
extent then permitted by applicable law.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in
writing and signed by such party.
(k) A facsimile of this Agreement containing signatures of all
of the parties hereto shall constitute an original document for all
purposes.
[BALANCE OF PAGE INTENTIONALLY OMITTED]
7
<PAGE> 8
IN WITNESS WHEREOF, the Parent and each Stockholder have caused this
Company Voting Agreement to be duly executed and delivered on day and year first
above written.
PARAGON HEALTH NETWORK, INC.
By: /s/ R. Jeffrey Taylor
-----------------------------
Name: R. Jeffrey Taylor
Title: Senior Vice President
STOCKHOLDERS:
/s/ Stiles A. Kellett, Jr.
----------------------------------
Name: Individually
/s/ Stiles A. Kellett, Jr.
----------------------------------
Name: Kellett Partners, L.P. as
General Partner
/s/ Samuel B. Kellett
----------------------------------
Name: Samuel B. Kellett
/s/ William R. Bassett
----------------------------------
Name: William R. Bassett as Trustee of
the Samuel B. Kellett, Jr.
Irrevocable Trust Dated 11/1/91
/s/ William R. Bassett
----------------------------------
Name: William R. Bassett as Trustee of
the Charlotte Rich Kellett
Irrevocable Trust Dated 11/1/91
8
<PAGE> 9
SCHEDULE A
<TABLE>
<CAPTION>
STOCKHOLDER ADDRESS OF STOCKHOLDER NUMBER OF SHARES OF COMPANY
COMMON STOCK
<S> <C> <C>
Stiles A. Kellett, Jr. 200 Galleria Parkway, Suite 1800 2,181,183
Atlanta, Georgia 30339
Kellett Partners, L.P. 200 Galleria Parkway, Suite 1800 862,760
Atlanta, Georgia 30339
Samuel B. Kellett 1935 Garraux Road, N.W. 2,154,696
Atlanta, Georgia 30327
William R. Bassett, TR 2970 Clairmont Road, Suite 600 427,066
Charlotte R. Kellett IRR Atlanta, Georgia 30329
Trust dated 11/1/91
William R. Bassett, TR 2970 Clairmont Road, Suite 600 427,066
Samuel B. Kellett, Jr. Atlanta, Georgia 30329
IRR Trust dated 11/1/91
</TABLE>
<PAGE> 10
SCHEDULE 2(C)
Certain of the stock beneficially owned by Stiles A. Kellett, Jr. has been
pledged to NationsBank, N.A. ("NationsBank") to secure financing extended by
NationsBank to Stiles A. Kellett. As a part of that pledge, a contingent proxy
has been granted to NationsBank.
<PAGE> 11
SCHEDULE 2(D)
Certain of the shares of stock beneficially owned by Stiles A. Kellett, Jr. are
subject to a pledge in favor of NationsBank, N.A.
<PAGE> 1
EXHIBIT 99.5
Paragon Health Network and Mariner Health Group Announce a
Stock-for-Stock Merger
NEW LONDON, Conn.--(BUSINESS WIRE)--April 13, 1998--Paragon
Health Network, Inc. (NYSE: PGN) and Mariner Health Group, Inc.
(NASDAQ: MRNR) today jointly announced the signing of a definitive
agreement to merge in a tax-free stock-for-stock transaction that will result in
a combined company with pro forma revenues approaching $3 billion. The merger
will result in a premier healthcare company that is a significant provider of
post-acute services in major strategic markets.
"This is an extremely exciting opportunity for Paragon, Mariner and our
shareholders," stated Keith B. Pitts, Chairman, President and Chief Executive
Officer of Paragon Health Network. "Mariner is known for its high-acuity care
and clinical expertise. Adding this to Paragon's strong cost discipline will
enhance the services provided to patients while increasing revenue growth and
achieving meaningful cost reductions."
The merged entity, to be named at a later date, will be the second-largest
long-term care provider in the United States with over 400 facilities,
representing more than 50,000 beds. The merger results in a significant
ancillary platform serving not only the combined companies' in-patient
facilities, but also a substantial number of non-affiliated long-term care
providers. In this regard, rehabilitation services contracts will double,
resulting in one of the largest rehabilitation services providers in the
country. The merger also solidifies the company's prominent position as a
provider of institutional pharmacy services to owned and independent skilled
nursing facilities. The company will continue to operate outpatient therapy
clinics, assisted living facilities and provide geriatric specialty healthcare
services nationwide.
Under the terms of the agreement, which has been unanimously approved by the
Boards of Directors of both companies, Mariner shareholders will receive one
share of Paragon common stock for each Mariner share held. Each company has been
granted an option to acquire 19.9% of the other company's stock under certain
events. Upon completion of the merger, former Mariner shareholders will own
approximately 44% of the combined company. Paragon will assume or refinance
Mariner's existing debt. Following the merger, there will be approximately 73
million shares of the newly merged company's common stock outstanding. The
merger is anticipated to be accretive to consensus estimates for Paragon's
fiscal year ending September 30, 1999, and consensus estimates for Mariner's
fiscal year ending December 31, 1999. The merger is anticipated to close during
the third calendar quarter of 1998.
Management of the newly-formed company will be comprised of Keith B. Pitts, as
Chairman and Chief Executive Officer, and Arthur W. Stratton Jr.,
<PAGE> 2
M.D., as Vice Chairman, President and Chief Operating Officer. The merger is
subject to regulatory and shareholder approval. Apollo Management, L.P., which
has voting rights for approximately 44% of Paragon's common stock, and the
Kellett Stockholder Group, which controls approximately 21% of Mariner's shares,
have endorsed the agreement and have agreed to vote in favor of the transaction.
"Since founding Mariner Health Group, we have strived to provide the
highest-quality care to our patients while creating value for our shareholders,"
commented Arthur W. Stratton, Chairman, President and Chief Executive Officer of
Mariner Health Group. "The merged company, with its complementary strengths and
leadership in key markets, will hold a significant advantage in an environment
of changing reimbursement systems and managed care pressure, while maintaining
the level of care our patients and customers have come to expect."
"This merger will immediately add value for our patients and our shareholders
through insourcing of key services and cross selling in strategic marketplaces,"
commented Mr. Pitts. "We anticipate achieving synergies, principally from cost
savings of approximately $30 million by the end of the first full year of
combined operations and approximately $40 million by the end of the following
year of combined operations. In addition, we believe there are revenue synergy
opportunities which will accrue to the combined entity."
Paragon Health Network, Inc., headquartered in Atlanta, GA, is a diversified
healthcare company providing, through its subsidiaries, an array of long-term
and specialty healthcare services. The post-acute division operates 328 skilled
nursing and assisted living facilities, as well as 40 branches providing home
health, hospice and private duty nursing services. American Pharmaceutical
Services, the Company's institutional pharmacy subsidiary, operates 35
institutional pharmacies serving more than 1,000 facilities with more than
100,000 beds. American Rehability Services, the Company's rehabilitation
services subsidiary, contracts with approximately 450 long-term care facilities
and over 40 hospitals for therapy services and operates 130 outpatient therapy
clinics. Cornerstone Health Management, the Company's hospital services
subsidiary, manages more than 115 programs for acute-care hospitals. The Company
operates in 36 states.
Mariner Health Group, Inc., is a leading national health service company that
coordinates and manages clinical resources to achieve desired clinical and
financial outcomes. Currently, the Company's continuum of non-acute products and
services includes sub-acute and long-term care, rehabilitation therapies, home
health, rehabilitation staffing, physician management services, institutional
pharmacy services and medical equipment and supplies. Mariner Health currently
operates or manages 94 inpatient centers over 12,000 beds, 16 home
<PAGE> 3
care agencies, eight institutional pharmacies, 43 outpatient clinics, and
manages 39 hospital skilled nursing facilities or units with more than 700 beds.
The Company operates in 39 states.
Statements contained in this press release which are not historical facts may be
considered forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 relating to, among other things, the
Companies' future performance and operations, managements' future plans and
goals, and business environment changes. Such forward-looking statements are
subject to risks and uncertainties, which could cause actual results to differ
materially from those projected. Such risks and uncertainties could include
changes in the healthcare industry as a result of political, economic or
regulatory influences including the emergence of a prospective pay system;
changes in regulations governing the healthcare industry; changes in the
competitive marketplace; dependence on reimbursement by third-party payors;
expansion risk and impact on future operating results; the difficulty in
integrating recent acquisitions; and variability of quarterly operating results.
For additional information, refer to the "Risk Factors" and "Management's
Discussion and Analysis" sections detailed in both companies' Securities and
Exchange Commission Forms 10-K, filed by Paragon Health Network on December 29,
1997, and by Mariner Health Group on March 31, 1998.
CONTACT: Mariner Health Group, Inc.
David N. Hansen, 508/598-8110
Jill L. Baker, 860/701-2102
or
Paragon Health Network, Inc.
Boyd P. Gentry, 770/677-7958
Chris A. Snow, 770/673-2528
or
Dewe Rogerson, Inc.
Media Contact: Elissa Grabowski, 212/688-6840
