<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
ARBOR HEALTH CARE COMPANY
(Name of Subject Company)
AHC ACQUISITION CORP.
INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
(Bidders)
COMMON STOCK
(Title of class of securities)
03876L108
(CUSIP Number of Class of Securities)
BARRY L. STEPHENS
EXTENDICARE INC.
3000 STEELES AVENUE EAST
MARKHAM, ONTARIO
CANADA L3R 9W2
(905) 470-4000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
with a copy to:
MILTON G. STROM, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
SEPTEMBER 29, 1997
(Date of Event Which Requires Filing Statement on Schedule 13D)
CALCULATION OF FILING FEE
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<TABLE>
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Transaction valuation* $327,011,715 Amount of filing fee** $65,403
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</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes the
purchase of 7,266,927 shares of Common Stock, par value $0.03 per share, of
Arbor Health Care Company (the "Company") (the "Shares") at $45.00 net per
Share in cash. Such number of Shares represents all the Shares outstanding as
of September 26, 1997, plus 327,766 Shares issuable upon the exercise of
outstanding employee stock options, and 2,000 Shares which may be issued
pursuant to the Company's employee stock purchase plan.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by AHC Acquisition Corp. for such
number of shares.
[ ]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Dated Filed: Not applicable.
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<PAGE> 2
CUSIP NO. 03876L108
14D-1 AND 13D
<TABLE>
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1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
AHC Acquisition Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS)
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCES OF FUNDS
BK; AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f). [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,126,990
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7*
Approximately 15.5% of the Shares outstanding on a fully diluted basis as of
September 26, 1997
10. TYPE OF REPORTING PERSON
CO
</TABLE>
* See footnote on following page.
<PAGE> 3
CUSIP NO. 03876L108
14D-1 AND 13D
<TABLE>
<C> <S> <C>
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Extendicare Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR
2(f). [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,126,991
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)*
Approximately 15.5% of the Shares outstanding on a fully diluted basis as of
September 26, 1997
10. TYPE OF REPORTING PERSON
CO, HC
</TABLE>
* On September 29, 1997, Extendicare Inc. ("Parent") and AHC Acquisition Corp.,
an indirect wholly owned subsidiary of Parent (the "Purchaser") entered into a
Stockholder Agreement (the "Stockholder Agreement") with Pier C. Borra, Renee A.
Borra, Pier C. Borra and Renee A. Borra, as joint tenants, Borra Family
Foundation, Renee A. Borra, Trustee and Pier C. Borra, Jr. (the "Selling
Stockholders"). The Selling Stockholders collectively own an aggregate of
1,126,990 Shares, representing approximately 15.5% of the Shares outstanding on
a fully diluted basis as of September 26, 1997. Pursuant to the Stockholder
Agreement, the Selling Stockholders have agreed to validly tender, at the Offer
Price (as defined in the Offer to Purchase dated October 3, 1997 (the "Offer to
Purchase")), pursuant to the Offer (as defined in the Offer to Purchase) and not
withdraw all Shares which are beneficially owned by the Selling Stockholders not
later than the fifth business day after commencement of the Offer. The
Stockholder Agreement provides that Parent has an irrevocable option to acquire
from each Selling Stockholder, at the Offer Price, all of such Selling
Stockholder's Shares if the Merger Agreement (as defined in the Offer to
Purchase) is terminated by the Company Board (as defined in the Offer to
Purchase) as a result of its entering into a definitive agreement with respect
to a Superior Proposal (as defined in the Merger Agreement), or by Parent or the
Purchaser, if the Company Board shall have (A) withdrawn, modified or changed in
a manner adverse to Parent or the Purchaser its approval or recommendation of
the Offer, the Merger Agreement or the Merger (as defined in the Offer to
Purchase), (B) shall have approved or recommended an Acquisition Proposal (as
defined in the Merger Agreement), or (C) shall have executed an agreement in
principle or a definitive agreement providing for a tender offer, exchange
offer, merger or other business combination with a person other than Parent or
the Purchaser. Subject to certain conditions specified in the Stockholder
Agreement, such options are exercisable in whole but not in part for 60 days
following the first to occur of the foregoing events. Pursuant to the
Stockholder Agreement, each Selling Stockholder has also delivered a proxy to
the Purchaser to vote, or grant a consent or approval in respect of the Shares
subject to the Stockholder Agreement in favor of the Merger and against any
transaction with a third party that would impede or frustrate the Merger
Agreement. The Stockholder Agreement is more fully described in Section
12 -- "The Merger Agreement; Stockholder Agreement" of the Offer to Purchase.
<PAGE> 4
This statement relates to a tender offer by AHC Acquisition Corp., a
Delaware corporation (the "Purchaser" and an indirect wholly owned subsidiary of
Extendicare Inc., a Canadian corporation ("Parent")), to purchase all shares of
Common Stock, par value $0.03 per share (the "Shares") of Arbor Health Care
Company, a Delaware corporation, at $45.00 per Share net to seller in cash and
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase (the "Offer to Purchase"), a copy of which is attached
hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of
which is attached hereto as Exhibit(a)(2) (which together constitute the
"Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Arbor Health Care Company, a
Delaware corporation (the "Company"). The principal executive offices of the
Company are located at 1100 Shawnee Road, P.O. Box 840, Lima, Ohio 45802-0840.
(b) The information set forth in the Introduction to, and in Section 1,
"Terms of the Offer," of, the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 7, "Price Range of the Shares;
Dividends," of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Purchaser and Parent. The information
set forth in the Introduction to, and in Section 9, "Certain Information
Concerning the Purchaser and Parent," and Schedule I, "Information Concerning
the Directors and Executive Officers of Parent and the Purchaser," of, the Offer
to Purchase is incorporated herein by reference.
(a) - (d) and (g) The name, residence or business address, citizenship,
present principal occupation or employment and material occupations during the
last 5 years of each executive officer and director of the Purchaser and Parent
is set forth in Schedule I of the Offer to Purchase.
(e) and (f) During the last five years, neither the Purchaser, Parent nor
any of the persons listed in Schedule I of the Offer to Purchase has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, or finding any violation of
federal or state securities laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction to, and in
Section 9, "Certain Information Concerning the Purchaser and Parent," and
Section 10, "Background of the Offer; Contacts with the Company," of, the Offer
to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 13, "Source and Amount of
Funds," of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) -(e) The information set forth in the Introduction to, and in Section
11, "Purpose of the Offer and the Merger," and Section 13, "Source and Amount of
Funds," of, the Offer to Purchase is incorporated herein by reference.
4
<PAGE> 5
(f) and (g) The information set forth in Section 6, "Effect of the Offer on
the Market for the Shares; Exchange Listing and Exchange Act Registration," of
the Offer to Purchase is incorporated herein by reference.
Other than as set forth in the Introduction to, or the above-referenced
sections of, the Offer to Purchase, Purchaser has no plans or proposals that
relate to, or would result in, any transaction, change or other occurrence with
respect to the Company or the Shares that is set forth in any of paragraphs (a)
through (g) of Item 5 of the Schedule 14D-1.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction to, and in
Section 9, "Certain Information Concerning the Purchaser and Parent," and
Section 12, "The Merger Agreement; Stockholder Agreement," of, the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction to, and in Section 9,
"Certain Information Concerning the Purchaser and Parent," Section 10,
"Background of the Offer; Contacts with the Company," and Section 12, "The
Merger Agreement; Stockholder Agreement," of, the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16, "Fees and Expenses," of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9, "Certain Information Concerning the
Purchaser and Parent," including the financial statements and the notes thereto
incorporated by reference in Section 9, is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction to, and in Section 11,
"Purpose of the Offer and the Merger," of the Offer to Purchase is incorporated
herein by reference.
(b) and (c) The information set forth in the Introduction to, and in
Section 15, "Certain Legal Matters; Regulatory Approvals," of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 6, "Effect of the Offer on the
Market for the Shares; Exchange Listing and Exchange Act Registration," of the
Offer to Purchase is incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, and which are incorporated herein by reference in their entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
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(a)(1) Offer to Purchase, dated October 3, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
</TABLE>
5
<PAGE> 6
<TABLE>
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(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Letter addressed to Arbor 401(k) Plan participants.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(8) Text of Press Release, dated September 30, 1997, issued by
Extendicare Inc.
(b) Commitment Letter, dated September 29, 1997, among Extendicare
Health Services, Inc., NationsBank N.A. and Nationsbanc Capital
Markets, Inc.
(c)(1) Agreement and Plan of Merger, dated as of September 29, 1997
among Extendicare Inc., AHC Acquisition Corp. and Arbor Health
Care Company.
(c)(2) Stockholder Agreement, dated as of September 29, 1997, among
Extendicare Inc., AHC Acquisition Corp., Pier C. Borra, Renee A.
Borra, Pier C. Borra and Renee A. Borra, as joint tenants, Borra
Family Foundation, Renee A. Borra, trustee and Pier C. Borra, Jr.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
6
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: October 3, 1997 AHC ACQUISITION CORP.
By: /s/ BARRY L. STEPHENS
------------------------------------
Name: Barry L. Stephens
Title: Vice-President
7
<PAGE> 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: October 3, 1997 EXTENDICARE INC.
By: /s/ BARRY L. STEPHENS
------------------------------------
Name: Barry L. Stephens
Title: Senior Vice-President,
Finance
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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(a)(1) Offer to Purchase, dated October 3, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(6) Letter addressed to Arbor 401(k) Plan participants.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute W-9.
(a)(8) Text of Press Release, dated September 30, 1997, issued by Extendicare Inc.
(b) Commitment Letter, dated September 29, 1997, among Extendicare Health Services,
Inc., NationsBank N.A. and Nationsbanc Capital Markets, Inc.
(c)(1) Agreement and Plan of Merger, dated as of September 29, 1997 among Extendicare
Inc., AHC Acquisition Corp. and Arbor Health Care Company.
(c)(2) Stockholder Agreement, dated as of September 29, 1997, among Extendicare Inc., AHC
Acquisition Corp., Pier C. Borra, Renee A. Borra, Pier C. Borra and Renee A.
Borra, as joint tenants, Borra Family Foundation, Renee A. Borra, trustee and Pier
C. Borra, Jr.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
9
<PAGE> 1
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
AT
$45.00 NET PER SHARE IN CASH
BY
AHC ACQUISITION CORP.,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF ARBOR HEALTH CARE COMPANY (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (EACH AS DEFINED HEREIN), HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS DEFINED HEREIN) REPRESENTING AT LEAST A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal (or such facsimile)
together with the certificate(s) representing tendered Shares and any other
required documents to the Depositary or, in lieu of delivering certificates
representing such Shares, tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3, or (b) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies. Holders of Shares may
also contact brokers, dealers, commercial banks and trust companies for
assistance concerning the Offer.
------------------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
October 3, 1997
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION.......................................................................... 1
THE TENDER OFFER...................................................................... 2
1. Terms of the Offer........................................................... 2
2. Acceptance for Payment and Payment for Shares................................ 4
3. Procedures for Tendering Shares.............................................. 5
4. Withdrawal Rights............................................................ 7
5. Certain United States Federal Income Tax Consequences........................ 8
6. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration.................................................... 9
7. Price Range of the Shares; Dividends......................................... 10
8. Certain Information Concerning the Company................................... 10
9. Certain Information Concerning the Purchaser and Parent...................... 13
10. Background of the Offer; Contacts with the Company........................... 15
11. Purpose of the Offer and the Merger; Plans for the Company................... 17
12. The Merger Agreement; Stockholder Agreement.................................. 19
13. Source and Amount of Funds................................................... 26
14. Certain Conditions of the Offer.............................................. 29
15. Certain Legal Matters; Regulatory Approvals.................................. 30
16. Fees and Expenses............................................................ 34
17. Miscellaneous................................................................ 35
Schedule I -- Information Concerning the Directors and Executive Officers of Parent and
the Purchaser............................................................... I-1
</TABLE>
<PAGE> 3
To the Holders of Shares of Common Stock
of Arbor Health Care Company:
INTRODUCTION
AHC Acquisition Corp. (the "Purchaser"), a Delaware corporation and an
indirect wholly owned subsidiary of Extendicare Inc., a corporation existing
under the laws of Canada ("Parent"), hereby offers to purchase all outstanding
shares of the Common Stock, par value $.03 per share (the "Shares"), of Arbor
Health Care Company, a Delaware corporation (the "Company"), at a price of
$45.00 per Share, net to the seller in cash, without interest thereon (the
"Offer Price"), upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer").
Tendering stockholders will be responsible for the payment of any stock
transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser
will pay all charges and expenses of Bear, Stearns & Co. Inc. ("Bear Stearns"),
as Dealer Manager (in such capacity, the "Dealer Manager"), IBJ Schroder Bank &
Trust Company, as Depositary (the "Depositary"), and MacKenzie Partners, Inc.,
as Information Agent (the "Information Agent"), incurred in connection with the
Offer. See Section 16.
The purpose of the Offer is for Parent, through the Purchaser, to acquire
control of, and the entire equity interest in, the Company. See Section 11. The
Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
September 29, 1997 (the "Merger Agreement"), by and among Parent, the Purchaser
and the Company. See Section 12. The Merger Agreement provides that, except as
provided therein, following satisfaction or waiver, if possible, of the
conditions to the Offer and subject to the terms and conditions thereof, the
Purchaser will accept for payment and will pay for, in accordance with the terms
of the Offer, all Shares validly tendered pursuant to the Offer, and not
properly withdrawn, as soon as it is permitted to do so pursuant to applicable
law. See Section 2. The Offer will not remain open following the time Shares are
accepted for payment.
Pursuant to the Merger Agreement, as soon as practicable after the
satisfaction or waiver, if permissible, of all conditions to the Offer and
completion of the Offer, the Purchaser will be merged with and into the Company
(the "Merger") with the Company continuing as the surviving corporation (the
"Surviving Corporation") and an indirect wholly owned subsidiary of Parent. At
the time at which the Merger is consummated in accordance with the terms of the
Merger Agreement (the "Effective Time"), each Share then outstanding (other than
Shares owned by the Company or any wholly owned subsidiary of the Company,
Shares owned by Parent, the Purchaser or any other direct or indirect wholly
owned subsidiary of Parent and Shares ("Dissenting Shares") held by stockholders
who properly exercise appraisal rights under the Delaware General Corporation
Law (the "DGCL")) will be converted into the right to receive $45.00 in cash or
any higher price per Share paid in the Offer. See Section 11. The Offer and the
Merger are sometimes collectively referred to herein as the "Transaction."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"). For purposes of the Offer, "fully
diluted basis" assumes that all outstanding stock options are presently
exercisable. The Company has represented and warranted to the Purchaser and
Parent in the Merger Agreement that, as of September 26, 1997, 6,937,161 Shares
were issued and outstanding, 2,000 Shares were issuable pursuant to the Arbor
Health Care Company Employee Stock Purchase Plan and 327,766 Shares were
issuable pursuant to options ("Options") granted under the Company Option Plans
(as defined in Section 12). Based on the foregoing and assuming no additional
Shares (or options, warrants or rights exercisable for, or convertible
securities convertible into Shares) have been issued since September 26, 1997
(other than Shares issued pursuant to the exercise of the stock options referred
to above), if 3,633,464 Shares are validly tendered and not withdrawn prior to
the Expiration Date pursuant to the terms of the Offer, the Minimum Condition
will be satisfied.
<PAGE> 4
Certain other conditions to consummation of the Offer are described in
Section 14. The Purchaser expressly reserves the right to waive any one or more
of the conditions to the Offer. See Section 14.
In the event that all of the conditions of the Offer have not been
satisfied or waived by the initial scheduled expiration date of the Offer (the
"Initial Expiration Date"), which is Friday, October 31, 1997, the Purchaser has
the right from time to time, in its sole discretion, to extend the expiration
date. The Purchaser will, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
validly tendered and not properly withdrawn as soon as it is legally permitted
to do so under applicable law; provided, however, that if, immediately prior to
the Initial Expiration Date of the Offer (as it may be extended pursuant to the
preceding sentence or otherwise), the Shares validly tendered and not properly
withdrawn pursuant to the Offer constitute less than 90% of the outstanding
Shares, the Purchaser may extend the Offer for a period not to exceed 10
business days, notwithstanding that all conditions to the Offer are satisfied as
of such Initial Expiration Date of the Offer. The Purchaser is obligated by the
Merger Agreement to extend the Initial Expiration Date for a period of the
lesser of (i) 2 business days after the date that all such approvals have been
obtained and (ii) 35 days after such Initial Expiration Date, if, and only if,
the Company, Parent and the Purchaser have not obtained the approvals of any
Governmental Entity (as defined in the Merger Agreement) required by the Merger
Agreement.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES.
Concurrently with entering into the Merger Agreement, Pier C. Borra (the
Chairman and Chief Executive Officer of the Company), Renee A. Borra (the spouse
of Mr. Borra), Pier C. Borra and Renee A. Borra, as joint tenants, Borra Family
Foundation, Renee A. Borra, trustee and Pier C. Borra, Jr. (the son of Mr.
Borra) (collectively, the "Selling Stockholders") have entered into a
Stockholder Agreement, dated as of September 29, 1997 (the "Stockholder
Agreement"), among Parent, the Purchaser and the Selling Stockholders. Pursuant
to the Stockholder Agreement, the Selling Stockholders have agreed to tender an
aggregate of 1,126,990 Shares (the "Stockholder Shares") (constituting in the
aggregate approximately 16.2% of the outstanding Shares, or approximately 15.5%
of the fully diluted Shares) pursuant to the Offer and have otherwise agreed to
sell to the Purchaser the Stockholder Shares at $45.00 per Share under certain
circumstances, all as more fully set forth in the Stockholder Agreement. In
addition, the Selling Stockholders have agreed, if requested by the Company, to
the cancellation or substitution of an aggregate of 50,000 Options (constituting
in the aggregate approximately 0.7% of the fully diluted Shares) in accordance
with the terms of the Merger Agreement. The Stockholder Agreement is more fully
described in Section 12.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any such extension or amendment), the Purchaser will purchase, by accepting
for payment, and will pay for, as soon as it is permitted to do so under
applicable law, all Shares validly tendered on or prior to the Expiration Date
and not properly withdrawn in accordance with the procedures set forth in
Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time,
on Friday, October 31, 1997, unless and until the Purchaser shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition and the other conditions set forth in Section 14. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive, in whole or in part, at any time
and from
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time to time, any or all of such conditions, provided that the Minimum Condition
cannot be waived by the Purchaser without the written consent of the Company.
Pursuant to the Merger Agreement, the Purchaser may not, without the
written consent of the Company (such consent to be authorized by the Company
Board or a duly authorized committee thereof), (i) amend or waive the Minimum
Condition, (ii) decrease the Offer Price, (iii) decrease the number of Shares
sought in the Offer or (iv) amend any other condition of the Offer in any manner
adverse to the holders of the Shares (other than with respect to insignificant
changes or amendments); provided, however, that (a) if on the Initial Expiration
Date, October 31, 1997, all conditions to the Offer shall not have been
satisfied or waived, the Purchaser may, from time to time, in its sole
discretion, extend the Expiration Date, (b) if immediately prior to the
scheduled expiration date of the Offer (as it may have been extended), the
Shares validly tendered and not withdrawn pursuant to the Offer equal less than
90% of the outstanding Shares, the Purchaser may, in its sole discretion, extend
the Offer for a period not to exceed 10 business days, notwithstanding that all
conditions to the Offer are satisfied as of such scheduled expiration date, (c)
the Purchaser must extend the scheduled expiration date of the Offer for a
period of the lesser of (i) 2 business days after the date that all such
approvals have been obtained and (ii) 35 days after such Initial Expiration
Date, if, and only if, the Company, Parent and the Purchaser have not obtained
any approval of any Governmental Entity required by the Merger Agreement and (d)
the Offer Price may be increased and the Offer may be extended to the extent
required by law in connection with such increase, in each case without the
consent of the Company.
There can be no assurance that the Purchaser will exercise its rights to
extend the Offer (other than as required by the Merger Agreement or applicable
law). Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a public
announcement. In the case of an extension, Rule 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Exchange Act. As
used in this Offer to Purchase, "business day" has the meaning set forth in Rule
14d-1 under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the Offer be promptly disseminated to stockholders in a manner reasonably
designed to inform stockholders of such change), and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. During any extension of the Offer, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the rights
of a tendering stockholder to withdraw its Shares in accordance with the
procedures set forth in Section 4. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION
TO PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE
PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares (whether before or after its
acceptance for payment of Shares) or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, the Minimum Condition), the Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following material
changes in the terms of the Offer or information concerning the
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Offer, other than a change in price or a change in the percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. With respect to a
change in price or a change in the percentage of securities sought, a minimum
period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listing for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and will be furnished by the Purchaser to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, as soon as it is permitted to do so under applicable law, all Shares
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures set forth in Section 4. Subject to applicable
rules of the Securities and Exchange Commission (the "Commission"), the
Purchaser is required by the Merger Agreement to delay acceptance for payment
of, or payment for, Shares in order to comply in whole or in part with any
applicable law, including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR
Act"). See Section 15.
Any such delays will be effected in compliance with Rule 14e-1(c)
promulgated under the Exchange Act (relating to a bidder's obligation to pay for
or return tendered securities promptly after the termination or withdrawal of
such bidder's offer). In all cases, payment for Shares purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares, if such procedure is available, into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below)
and (iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn if, as and when the Purchaser gives
oral or written notice to the Depositary of the Purchaser's acceptance of such
Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted pursuant to the Offer will
be made by deposit of the aggregate purchase price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payment from the Purchaser and transmitting payment to such tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, the Purchaser's obligation to make
such payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. Tendering stockholders
will be responsible for the
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payment of any stock transfer taxes incident to the transfer by them of validly
tendered Shares. The Purchaser will pay any charges and expenses of the
Depositary and the Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing such
unpurchased Shares or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares tendered by book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination or withdrawal of the Offer. Certificates
representing Shares cancelled in the Merger will not be returned.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to holders of Shares pursuant to the Offer, such increased consideration
will be paid to all holders whose Shares are purchased in the Offer whether or
not such Shares were tendered prior to such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal or a facsimile thereof, properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary along with the Letter of Transmittal,
or (ii) Shares must be tendered pursuant to the procedure for book-entry
transfer described below and a Book-Entry Confirmation must be received by the
Depositary, or (iii) the tendering stockholder must comply with the guaranteed
delivery procedures described below, in each case on or prior to the Expiration
Date.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY THEREOF WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed and with any required signature guarantees, or an Agent's
Message in connection with a book-entry delivery of Shares, and any other
required documents, must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date or the tendering stockholder must
comply with the guaranteed delivery procedures described below. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible
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Institution"), unless the Shares tendered thereby are tendered (i) by a
registered holder of Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates for all tendered Shares, in proper form
for transfer, or a Book-Entry Confirmation, together with a properly
completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signature guarantee (or, in the case
of a book-entry transfer, an Agent's Message) and any other documents
required by such Letter of Transmittal, are received by the Depositary
within three trading days after the date of execution of the Notice of
Guaranteed Delivery. A "trading day" is any day on which the New York Stock
Exchange, Inc. ("NYSE") is open for business.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) (or, in the case of a book-entry transfer, an Agent's Message) and
(iii) any other documents required by the Letter of Transmittal. Accordingly,
tendering stockholders may be paid at different times depending upon when the
foregoing materials are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment to certain stockholders of the purchase
price of Shares purchased pursuant to the Offer, each such stockholder must
provide the Depositary with such stockholder's correct taxpayer identification
number and certify, under penalty or perjury, that such taxpayer identification
number is correct and that such stockholder is not subject to backup federal
income tax withholding by completing the Substitute Form W-9 included in the
Letter of Transmittal. Non-corporate foreign stockholders must submit a
completed Form W-8, Certificate of Foreign Status, in order to avoid backup
withholding. This form may be obtained from the Depositary. See Instruction 9
and discussion under the heading, "Important Tax Information," of the Letter of
Transmittal.
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Appointment as Proxy; Distributions. By executing a Letter of Transmittal
as set forth above, a tendering stockholder irrevocably appoints designees of
the Purchaser as such stockholder's attorneys-in-fact and proxies, in the manner
set forth in the Letter of Transmittal, each with full power of substitution, to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by the Purchaser (and any and all
non-cash dividends, distributions, rights, other Shares, or other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment will be
effective if, when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior powers of attorney and proxies given by such stockholder with respect to
such Shares and other securities will, without further action, be revoked, and
no subsequent powers of attorney or proxies may be given (and, if given, will
not be deemed effective). The designees of the Purchaser will, with respect to
the Shares and other securities for which the appointment is effective, be
empowered to exercise all voting and other rights of such stockholder as they in
their sole discretion may deem proper at any annual, special, adjourned or
postponed meeting of the Company's stockholders, by written consent or
otherwise, and the Purchaser reserves the right to require that, in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares the Purchaser must be able to
exercise full voting, consent and other rights with respect to such Shares and
other securities, including voting at any meeting of stockholders. Such powers
of attorney and proxies will be irrevocable and will be granted in consideration
of the purchase of the Shares by the Purchaser in accordance with the terms of
the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares of
any particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, the Purchaser, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
Binding Agreement. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn on or at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after Monday, December 1, 1997 or at such later
time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
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For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of Parent, the Purchaser, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of perfected appraisal rights under
the DGCL). The discussion applies only to stockholders in whose hands Shares are
capital assets, and may not apply to Shares received pursuant to the exercise of
employee stock options or otherwise as compensation, or to stockholders who are
in special tax situations (such as insurance companies, tax-exempt organizations
or dealers in securities). This discussion does not discuss the federal income
tax consequences to a stockholder who, for United States federal income tax
purposes, is a nonresident alien individual, a foreign corporation, a foreign
partnership or a foreign estate or trust.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
SUCH STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes (and also
may be a taxable transaction under applicable state, local and other income tax
laws). In general, for United States federal income tax purposes, a Stockholder
will recognize gain or loss in an amount equal to the difference between his or
her adjusted tax basis in the Shares sold pursuant to the Offer or converted
into cash in the Merger and the amount of cash received therefor. Gain or loss
must be determined separately for each block of Shares (i.e., Shares acquired at
the same cost in a single transaction) sold pursuant to the Offer or converted
into cash in the Merger. Such gain or loss will be capital gain or loss if the
Shares are held as a capital asset by the stockholder on the date of sale (in
the case of the Offer) or the Effective Time of the Merger (in the case of the
Merger). The receipt of cash for Shares pursuant to the exercise of appraisal
rights will generally be taxed in the same manner as described above. In
addition, the recently enacted Taxpayer Relief Act of 1997 could affect the
federal income tax consequences of the Offer and the Merger in that, among other
things, it reduces the maximum rate of federal income tax on capital gains of
individual taxpayers for capital assets held more than eighteen months.
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6. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements for continued inclusion in the Nasdaq
National Market (the top tier market of The Nasdaq Stock Market), which requires
that an issuer have at least 750,000 publicly held shares, held by at least 400
stockholders of round lots, with a market value of at least $5,000,000, and have
net tangible assets of at least $4,000,000. If these standards are not met, the
Shares might nevertheless continue to be included in The Nasdaq Stock Market
with quotations published in the Nasdaq "additional list" or in one of the
"local lists," but if the number of holders of round lots of the Shares were to
fall below 300, or if the number of publicly held Shares were to fall below
500,000 or the aggregate market value of such Shares was less than $1,000,000 or
there were not at least two registered and active market makers for the Shares,
the NASD's rules provide that the Shares would no longer be "qualified" for
Nasdaq reporting and Nasdaq would cease to provide any quotations. Shares held
directly or indirectly by directors, officers or beneficial owners of more than
10% of the Shares are not considered as being publicly held for this purpose.
According to the Company, as of September 30, 1997, there were approximately 159
holders of record of Shares and 6,937,427 Shares were outstanding. If, as a
result of the purchase of Shares pursuant to the Offer, the Shares no longer
meet the requirements of the NASD for continued inclusion in the Nasdaq National
Market of The Nasdaq Stock Market, the market for Shares could be adversely
affected.
In the event that the Shares no longer meet the requirements for quotation
through Nasdaq and the Shares are no longer included in The Nasdaq Stock Market,
it is possible that, prior to the Effective Time, the Shares would continue to
trade in the over-the-counter market and that price quotations would be reported
by other sources. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of Shares remaining at such time, the interests in maintaining a market
in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would, subject to Section
15(d) of the Exchange Act, substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the Company,
such as the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act, the requirement of furnishing a proxy or information statement
pursuant to Section 14(a) or (c) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, as amended, may be impaired or eliminated.
THE PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR DELISTING
OF THE SHARES FROM THE NASDAQ NATIONAL MARKET AND TERMINATION OF REGISTRATION OF
THE SHARES UNDER THE EXCHANGE ACT AS SOON AFTER THE COMPLETION OF THE OFFER AS
THE REQUIREMENTS FOR SUCH DELISTING AND/OR TERMINATION ARE MET. IF REGISTRATION
OF THE SHARES IS NOT TERMINATED PRIOR TO THE MERGER, THEN THE REGISTRATION OF
THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED FOLLOWING THE CONSUMMATION
OF THE MERGER.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing
9
<PAGE> 12
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would not longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. If registration of Shares under the Exchange Act were terminated,
the Shares would no longer be "margin securities."
7. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded in the
over-the-counter market and quoted on the Nasdaq National Market of The Nasdaq
Stock Market under the symbol "AHCC." The following table sets forth, for the
quarters indicated, the high and low sales prices per Share as reported on the
Nasdaq National Market. The prices set forth below are as reported in published
financial sources and do not include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
MARKET PRICE
-------------
HIGH LOW
----- ----
<S> <C> <C>
Fiscal Year Ended December 31, 1995:
First Quarter.............................................................. $23 1/2 $19 1/4
Second Quarter............................................................. $21 3/4 $17 3/8
Third Quarter.............................................................. $23 1/4 $17 1/4
Fourth Quarter............................................................. $23 1/4 $ 15
Fiscal Year Ended December 31, 1996:
First Quarter.............................................................. $28 7/8 $16 3/4
Second Quarter............................................................. $29 3/4 $25 1/4
Third Quarter.............................................................. $ 28 $20 1/2
Fourth Quarter............................................................. $ 26 $18 3/4
Fiscal Year Ending December 31, 1997:
First Quarter.............................................................. $ 28 $21 3/4
Second Quarter............................................................. $35 1/4 $ 24
Third Quarter (through September 29, 1997)................................. $ 41 $ 31
</TABLE>
On September 29, 1997, the last full trading day prior to the public
announcement of the commencement of the Offer, the closing price per Share as
reported on the Nasdaq National Market was $39.00. The Offer represents an
approximately 15% premium over the reported closing sale price per Share on
September 29, 1997. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE SHARES.
The Company has never paid any cash dividends on the Shares. The Merger
Agreement provides that, without the prior written consent of Parent, the
Company will not declare, set aside or pay any dividend on or make any other
distribution in respect any of its capital stock. See Section 12.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been furnished by the Company or been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources. Although neither Parent nor the Purchaser has any knowledge that
would indicate that the statements contained herein based upon such documents
are untrue, neither Parent, the Purchaser nor the Dealer Manager assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, the Purchaser or the Dealer Manager.
The Company is a Delaware corporation and its principal executive offices
are located at 1100 Shawnee Road, Lima, Ohio 45805.
The Company and its subsidiaries provide subacute medical services and
basic health care services to a variety of patients at its licensed nursing
centers (the "Centers"). The Company also provides institutional pharmacy
services. As of January 1, 1997, the Company began to operate outpatient
rehabilitation facilities. Subacute care is appropriate for patients who no
longer need hospital care but require extensive amounts of
10
<PAGE> 13
skilled nursing care, therapies and active physician involvement. The Company's
basic care services primarily consist of general and restorative nursing care
for geriatric or chronic care patients and, to a limited extent, assisted living
services for people who can no longer live independently. The Company operates
31 Centers, primarily in Florida and Ohio, with a total of 3,694 beds, all of
which have been developed or acquired by the Company since it was founded in
April 1985. Since 1988, the Company has increasingly emphasized the delivery of
subacute care. All Centers, except one, provide subacute services. The Company
also operates four institutional pharmacies in Ohio, Florida and Michigan that
serve approximately 27,000 beds, of which 3,460 are in the Centers.
Enrollment of managed care organizations, particularly those servicing the
elderly, has been increasing. In addition, the Health Care Financing
Administration has proposed to replace the current cost-based Medicare
reimbursement system for subacute services with a prospective or per diem rate
system. In response to these two market trends, the Company has introduced a
plan to improve operating margins through better cost control and increased
referrals from managed care.
Set forth below is certain selected consolidated financial information
excerpted from the information contained or incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "Company 10-K") and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (the "Company 10-Q"). More comprehensive financial
information is included or incorporated by reference in the Company 10-K and
Company 10-Q, and the reports and other documents filed by the Company with the
Commission. The following summary is qualified in its entirety by reference to
such reports and other documents and all of the financial information and notes
contained therein. Such reports and other documents may be examined at, and
copies obtained from, the offices of the Commission in the manner set forth
below.
11
<PAGE> 14
ARBOR HEALTH CARE COMPANY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Revenue
Subacute Care........................... $ 62,479 $ 53,806 $113,123 $100,945 $ 82,874
Basic Care.............................. 42,788 41,612 84,015 75,931 65,615
Pharmacy and Other...................... 14,562 9,699 21,639 15,282 10,302
-------- -------- -------- -------- --------
Total net revenues........................ 119,829 105,117 218,777 192,158 158,791
-------- -------- -------- -------- --------
Expenses
Operating............................... 93,990 83,433 171,170 151,922 126,249
General corporate....................... 5,508 4,693 9,680 8,992 7,353
Operating lease rental.................. 2,142 2,253 4,450 4,301 4,062
Net interest............................ 4,084 3,277 7,108 5,822 4,642
Depreciation & amortization............. 5,218 4,282 8,924 7,450 5,636
-------- -------- -------- -------- --------
Total expenses............................ 110,942 97,938 201,332 178,487 147,942
-------- -------- -------- -------- --------
Other expense (income)
Loss on disposal of property............ 244 183 766 248 231
Interest and sundry..................... (111) (98) (272) (332) (215)
-------- -------- -------- -------- --------
Total other expense (income).............. 133 85 494 (84) 16
-------- -------- -------- -------- --------
Income before income taxes................ 8,754 7,094 16,951 13,755 10,833
Income taxes.............................. 3,444 2,828 6,728 5,303 3,930
-------- -------- -------- -------- --------
Net income................................ $ 5,310 $ 4,266 $ 10,223 $ 8,452 $ 6,903
======== ======== ======== ======== ========
PER SHARE INFORMATION:
Net income per share...................... $0.76 $0.61 $1.47 $1.23 $1.01
Weighted average shares outstanding....... 7,006 6,979 6,969 6,881 6,842
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, --------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets........................................ $ 63,856 $ 58,218 $ 49,686
Total property and equipment................................ 139,958 135,836 116,984
Total other assets.......................................... 17,259 15,420 12,113
--------- -------- --------
$ 221,073 $209,474 $178,783
========= ======== ========
Total current liabilities................................... $ 45,975 $ 43,796 $ 45,479
Long-term obligations, less current maturities.............. 97,453 94,643 74,741
Deferred income taxes....................................... 5,882 5,019 2,935
Stockholders' equity........................................ 71,763 66,016 55,628
--------- -------- --------
$ 221,073 $209,474 $178,783
========= ======== ========
</TABLE>
The Company is subject to the informational and reporting requirements of
the Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their
12
<PAGE> 15
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection and copying at prescribed
rates at the following regional offices of the Commission: Seven World Trade
Center, 13th Floor, New York, New York 10048; and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of this material may also be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a World Wide Web site on the internet at
http://www.sec.gov that contains reports and certain other information regarding
registrants that file electronically with the Commission, including the Company.
Reports, proxy statements and other information concerning the Company should
also be on file at the Nasdaq National Market, 1735 K Street, N.W., Washington,
D.C. 20006.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
The Purchaser. The Purchaser is a newly incorporated Delaware corporation
organized in connection with the Offer and the Merger and has not carried on any
activities other than in connection with its formation and capitalization and
the transactions contemplated by the Offer and the Merger. The principal
executive offices of the Purchaser are located at 3000 Steeles Avenue East,
Markham, Ontario. The Purchaser is an indirect wholly owned subsidiary of
Parent. All of the outstanding capital stock of the Purchaser is owned by
Extendicare Health Services, Inc. ("EHSI"), a direct wholly owned subsidiary of
Extendicare Holdings, Inc. ("Holdings"), an indirect wholly owned subsidiary of
Parent. Parent is the beneficial owner of 1,126,991 Shares, representing
approximately 15.5% of the Shares outstanding on a fully diluted basis as of
September 26, 1997. The beneficial ownership of all but one of such Shares is by
virtue of the Stock Option (as defined in the Stockholder Agreement) granted by
the Selling Stockholders in the Stockholder Agreement. See Section 12.
Parent. Parent is a corporation organized under the laws of Canada and its
principal executive offices are located at 3000 Steeles Avenue East, Markham,
Ontario. Parent, together with its consolidated subsidiaries, operates nursing,
assisted living and retirement centers in North America with resident capacity
at September 1, 1997 of 27,536 in 274 facilities in the United States, Canada
and the United Kingdom. In addition, Parent manages four hospitals in Canada and
owns and operates one hospital in the United Kingdom with a total capacity of
770 beds. Parent provides a full range of long-term care services, including
skilled nursing care, and specialty services, such as subacute care and
rehabilitative therapy services and health care management and consulting in
Canada. In addition, Parent operates institutional pharmacies and provides
medical services and supplies to long-term care centers, hospitals and
individuals in the United States. Approximately 76% of Parent's total revenue
for the fiscal year ended December 31, 1996 was derived from operations in the
United States.
Parent's operations in the United States, Canada and the United Kingdom are
organized regionally and are conducted through wholly owned subsidiaries, whose
management are experienced and knowledgeable with respect to the country's
long-term health care environment.
Set forth below is certain selected historical consolidated financial
information relating to Parent and its subsidiaries excerpted or derived from
the audited financial statements presented in Parent's 1996 Annual Report on
Form 40-F filed with the Commission on May 7, 1997 (the "Parent 1996 Annual
Report") and in Parent's Quarterly Report on Form 6-K for the quarter ended June
30, 1997 filed with the Commission on August 13, 1997. More comprehensive
financial information is included in the Parent 1996 Annual Report and other
documents filed by Parent with the Commission. The financial information that
follows is qualified in its entirety by reference to such reports and other
documents, including the financial statements and related notes contained in the
Parent 1996 Annual Report, which are incorporated herein by reference.
13
<PAGE> 16
EXTENDICARE INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN CANADIAN CURRENCY, THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CANADIAN GAAP
Income Statement Data:
Revenue
Nursing and assisted living centres
United States...................... $ 373,752 $ 358,565 $ 721,143 $ 684,795 $ 643,143
Canada............................. 111,548 113,583 227,938 226,054 222,406
United Kingdom..................... 15,230 12,317 26,570 22,045 16,647
Medical specialty -- United States... 221,740 192,203 396,370 332,257 257,361
Home care services -- Canada......... 58,712 49,824 102,939 94,080 92,137
Other................................ 7,318 6,983 13,726 16,759 13,129
---------- ---------- ---------- ---------- ----------
788,300 733,475 1,488,686 1,375,990 1,244,823
---------- ---------- ---------- ---------- ----------
Expenses
Operating and administrative......... 680,399 638,235 1,289,502 1,202,429 1,095,182
Lease costs.......................... 8,251 8,240 16,305 16,053 15,400
Depreciation and amortization........ 26,477 23,586 48,148 42,126 38,590
Interest, net........................ 18,973 20,281 39,445 36,061 33,410
---------- ---------- ---------- ---------- ----------
734,100 690,342 1,393,400 1,296,669 1,182,582
---------- ---------- ---------- ---------- ----------
Earnings from operations............. $ 54,200 $ 43,133 $ 95,286 $ 79,321 $ 62,241
========== ========== ========== ========== ==========
Net earnings from health care........ $ 37,062 $ 35,570 $ 71,474 $ 60,436 $ 45,766
Earnings from life insurance......... 1,724 4,082 9,767 9,480 8,704
---------- ---------- ---------- ---------- ----------
Net earnings......................... $ 38,786 $ 39,652 $ 81,241 $ 69,916 $ 54,470
========== ========== ========== ========== ==========
Net earnings
Basic.............................. $ 0.51 $ 0.53 $ 1.06 $ 0.94 $ 0.73
Fully diluted...................... $ 0.51 $ 0.51 $ 1.02 $ 0.92 $ 0.73
Balance Sheet Data (at period end):
Assets
Cash and short-term investments...... $ 84,953 $ 89,425 $ 50,007 $ 37,853
Working capital...................... 100,988 90,297 24,084 14,703
Total health care assets............. 1,306,256 1,189,185 1,061,771 927,262
Investment in Crown Life, equity
basis.............................. 115,677 112,973 101,726 94,339
Total assets......................... 1,421,933 1,302,158 1,163,497 1,021,601
Non-current liabilities.............. 530,698 485,544 463,011 436,630
Shareholders' equity................. 501,000 458,612 332,058 273,021
UNITED STATES GAAP
Income Statement Data:
Net earnings from health care........ $ 70,297 $ 62,160 $ 44,667
Earnings from life insurance......... 3,216 22,515 25,219
---------- ---------- ----------
Net earnings......................... $ 73,513 $ 84,675 $ 69,886
========== ========== ==========
Earnings per Subordinate Voting Share
Primary............................ $ 0.95 $ 1.15 $ 0.96
Fully diluted...................... $ 0.94 $ 1.08 $ 0.94
</TABLE>
14
<PAGE> 17
Parent is subject to the informational and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions with
Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 8, except that Parent's subordinated voting shares are listed
on the NYSE, and reports, proxy statements and other information concerning
Parent should also be available for inspection at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.
None of Parent or the Purchaser, or, to the best knowledge of Parent or the
Purchaser, any of the persons listed in Schedule I hereto, or any associate or
majority-owned subsidiary of such persons, beneficially owns any equity security
of the Company, and neither Parent nor the Purchaser, nor, to the best knowledge
of Parent and the Purchaser, any of the other persons referred to above, or any
of the respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days.
Except as set forth in this Offer to Purchase, neither Parent nor the
Purchaser, nor, to the best of the knowledge of Parent and the Purchaser, any of
the persons listed in Schedule I hereto nor any associate or majority-owned
subsidiary of any of the foregoing, has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, neither Parent nor the Purchaser,
nor, to the best of the knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I hereto nor any associate or majority-owned
subsidiary of any of the foregoing has had any transactions with the Company, or
any of its executive officers, directors or affiliates that would require
reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or the Purchaser, or their
respective subsidiaries, or, to the best of the knowledge of Parent or the
Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or its executive officers, directors or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or other transfer of
a material amount of assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
Prior to September 9, 1997, members of Parent's management, together with
Bear Stearns, Parent's financial advisor, reviewed certain publicly-available
information regarding the Company. Based on this information, Parent directed
Bear Stearns to initiate contact with the Company and arrange a meeting to
discuss the possibility of a business combination or other transaction between
the Company and Parent.
On September 9, 1997, Pier C. Borra, the President and Chief Executive
Officer of the Company, Dennis R. Smith, Senior Vice President -- Finance of the
Company, Frederick B. Ladly, Deputy Chairman of the Board of Parent, Barry L.
Stephens, Senior Vice President, Finance of Parent, and representatives of Bear
Stearns met in New York, New York. The purpose of the meeting was to discuss
generally the possibility of a business combination or other transaction between
the Company and Parent and to discuss Parent's desire to review non-public
information about the Company.
On September 10, 1997, Parent entered into a confidentiality agreement with
Raymond James (the "Confidentiality Agreement"), pursuant to which Parent agreed
to treat confidentially information provided
15
<PAGE> 18
by or on behalf of the Company and to not solicit or employ certain employees of
the Company without the written consent of the Company for a period ending one
year after the conclusion of discussions governed by the Confidentiality
Agreement.
On September 11, 1997, Mr. Borra, Mr. Smith, Mr. Stephens and Richard
Bertrand, Vice President of Parent and Senior Vice-President of EHSI, met in
Chicago, Illinois for the purpose of reviewing Company materials to determine
whether a business combination was possible at Parent's proposed price of $45.00
per Share. On September 12, 1997, Mr. Ladly called Mr. Borra regarding Parent's
interest in submitting a written preliminary indication of interest to purchase
the Company and to conduct due diligence.
On September 15, 1997, Parent delivered to the Company a non-binding
expression of interest to acquire the Company for $45.00 per share, subject to
obtaining financing on acceptable terms to Parent, completion of due diligence,
approval of the Board of Directors of Parent and execution of a definitive
acquisition agreement. In addition, the Company and Parent entered into an
exclusivity agreement which provided that, until September 30, 1997, the Company
would not and would direct each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (i) subject to the
exercise by the Company Board of its fiduciary duties, encourage, solicit,
participate in or initiate discussions or negotiations with or provide any
information to any Person (as defined therein) other than Parent and its
representatives concerning any stock purchase, asset purchase, merger or similar
transaction involving the Company or substantially all of its business or assets
or (ii) encourage, solicit, participate in or initiate discussions or
negotiations with or provide any information to any Person other than Parent and
its representatives concerning any stock purchase, asset purchase or similar
transaction which would result in the disposition of a material portion of any
of the consolidated business or assets of the Company. The Company agreed to
reimburse Parent upon demand for all out-of-pocket expenses and costs incurred
by it with respect to its proposal during the term of the exclusivity agreement
in the event that the Company breached its covenants set forth therein.
On September 16 and September 17, 1997, at the request of Parent in
connection with its due diligence review of the Company, members of the
Company's management and the Company's financial advisor, Raymond James &
Associates, Inc. ("Raymond James"), made presentations to senior management of
Parent, Bear Stearns and NationsBank in Chicago, Illinois regarding the
business, strategies and prospects of the Company. In addition, the Company made
available to Parent and its advisors certain non-public information for review.
On September 19, 1997, Mr. Ladly telephoned Mr. Borra to indicate that
management of Parent had determined to proceed with further discussions
regarding the acquisition of the Company by Parent.
From September 19, 1997 through September 29, 1997, Parent and its
financial and other advisors continued their review of the business and
operations of the Company. In addition, Parent and its advisors and the Company
and its advisors engaged in negotiations concerning the terms of a possible
transaction, including the terms of a merger agreement and tender offer. In
addition, Parent expressed its desire that Mr. Borra and certain of his family
members and other related parties agree to tender their shares into a tender
offer commenced by Parent or any affiliate thereof in connection with a
transaction. Parent and Mr. Borra commenced negotiations concerning this subject
matter and the terms of a possible agreement.
On September 24, 1997, the Board of Directors of Parent held a special
meeting to review, with the advice and assistance of the Parent Board's
financial and legal advisors, the proposed acquisition of the Company. At such
meeting, Parent's management and its financial and legal advisors made
presentations to the Board concerning the proposed transaction, including the
proposed methods of financing, and the Board of Directors authorized management
to proceed with the negotiation of a definitive merger agreement and stockholder
agreement. That day, Mr. Ladly informed Mr. Borra that the Board of Directors of
Parent had given such authorization.
On September 27, 1997, the Board of Directors of the Company held a special
meeting to review, with the advice and assistance of the Company Board's
financial and legal advisors, the proposed transaction. At such meeting the
Company's management and legal advisors made presentations to the Company Board
concerning the status of the negotiations relating to the transaction and the
proposed stockholder agreement. Management also described the proposed terms of
Parent's financing arrangements. Parent's financial advisor,
16
<PAGE> 19
Raymond James, reviewed with the Board the public market valuation of companies
it deemed comparable, certain recent transactions in the long term care industry
it deemed comparable, a discounted cash flow analysis regarding the Company and
merger premiums involving public companies of comparable size during the past
year, and presented an analysis of the fairness of the proposed offer price.
Based on such analysis and its review of the proposed terms and Parent's
financing arrangements, it orally advised that, subject to the execution of
definitive agreements, it believed it would be in a position to deliver an
opinion that the proposed transaction was fair to shareholders of the Company
from a financial point of view. The Board of the Company then authorized
management to continue negotiating the terms of the transaction with Parent.
On September 29, 1997, the Board of Directors of each of Parent and the
Purchaser took the steps required to approve the Offer, the Merger and the
Merger Agreement and to authorize their respective officers to execute the
Merger Agreement and to take other actions in connection therewith.
At the September 29, 1997 meeting of the Board of Directors of Parent,
management reported on the conclusion of financing arrangements with NationsBank
N.A. and the terms of the commitment letter delivered by NationsBank N.A., the
terms of the Merger Agreement and of the proposed stockholder agreement.
Following the Board's review of the transaction, the Board unanimously approved
the proposed Merger Agreement and the transactions contemplated thereby and the
commitment letter from NationsBank N.A., and authorized the execution and
delivery of such agreements.
At the September 29, 1997 meeting of the Company Board, Raymond James
presented its analysis of the proposed consideration to be received by the
Company's stockholders and delivered its oral opinion to the Company Board
(which was subsequently confirmed by delivery of a written opinion dated
September 29, 1997), to the effect that, as of such date and based upon and
subject to certain matters stated in such opinion, the cash consideration of
$45.00 per Share to be received by holders of Shares in the Offer and in the
Merger was fair, from a financial point of view, to such holders. Following a
number of questions from, and discussions among, the directors of the Company
Board, the Company Board unanimously (i) approved the Merger Agreement and the
Transactions and authorized the execution and delivery of the terms of the
Merger Agreement by the officers of the Company, (ii) determined that the Offer
and the Merger were fair and in the best interests of the stockholders of the
Company, (iii) approved the submission of the Merger Agreement to stockholders
of the Company with the recommendation of the Board that the Merger Agreement be
approved by such stockholders, (iv) approved the terms of the Stockholder
Agreement to be entered into among the proposed parties thereto, and (v) amended
the Rights Plan (as defined in Section 11) to provide that the Purchaser, Parent
and their affiliates shall be an Exempt Person thereunder.
During the evening of September 29, 1997, representatives of the Company
and Parent completed their negotiations on all substantive terms of the Merger
Agreement, and thereafter (i) the Purchaser, Parent and the Company executed the
Merger Agreement and (ii) the Parent and the Selling Stockholders (as defined in
Section 11) executed the Stockholder Agreement. On September 30, 1997, before
the opening of trading, the Company and Parent jointly announced the
Transactions. On October 3, 1997, the Purchaser commenced the Offer.
11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
General. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. The purpose of the Merger is to acquire all
Shares not beneficially owned by the Purchaser following consummation of the
Offer.
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Company Board and
generally by the holders of the Company's outstanding voting securities. The
Company Board has approved the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such stockholders if the "short-form" merger procedure described
below is not available. Under the DGCL, the affirmative vote of holders of a
majority of the outstanding Shares (including any Shares owned by the Purchaser)
is generally required to approve the Merger. If the Purchaser acquires, through
the Offer or otherwise, voting power with respect to at least a majority of the
outstanding Shares (which would be the case
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if the Minimum Condition were satisfied and the Purchaser were to accept for
payment Shares tendered pursuant to the Offer, including the Shares subject to
the Stockholder Agreements sold pursuant to the Stockholder Agreements or
tendered by the Selling Stockholders pursuant to the Offer), it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. However, the DGCL also provides that if a parent
company owns at least 90% of each class of stock of a subsidiary, the parent
company can effect a short-form merger with that subsidiary without the action
of the other stockholders of the subsidiary. Accordingly, if, as a result of the
Offer or otherwise, the Purchaser acquires or controls the voting power of at
least 90% of the outstanding Shares, the Purchaser could, and intends to, effect
the Merger without prior notice to, or any action by, any other stockholder of
the Company.
Plans for the Company. In connection with the Offer, Parent and the
Purchaser have reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that they might
consider in the event that the Purchaser acquires control of the Company,
whether pursuant to the Merger Agreement or otherwise. In addition, if and to
the extent that the Purchaser acquires control of the Company or otherwise
obtains access to the books and records of the Company, Parent and the Purchaser
intend to conduct a detailed review of the Company and its assets, corporate
structure, dividend policy, capitalization, operations, properties, policies,
management and personnel and consider and determine what, if any, changes would
be desirable in light of the circumstances which then exist. Such strategies
also could include, among other things, changes in the Company's business,
corporate structure, Certificate of Incorporation, Bylaws, capitalization,
management or dividend policy.
Except as indicated in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Company Board or management.
The Merger. In general, under the DGCL and the Company's Certificate of
Incorporation, the Merger requires the approval of the Company Board and the
approval by the holders of a majority of all outstanding Shares.
Accordingly, if the Purchaser acquires more than a majority of the
outstanding Shares pursuant to the Offer, the Purchaser would have the voting
power to approve the Merger without the vote of any other stockholders and could
effect the Merger by so voting and by action of the Board of Directors of the
Purchaser and the Company Board (subject to the requirements of Section 203 of
the DGCL). This will be the case if the Minimum Condition is satisfied.
Further, the DGCL provides that if the parent corporation owns 90% or more
of each class of outstanding shares of a Delaware subsidiary, the Delaware
subsidiary may be the surviving corporation of a merger with its parent
corporation upon a majority vote of each corporation's entire board of
directors, without action or vote by the stockholders of either corporation (a
"Short-Form Merger"). Accordingly, if the Purchaser owns 90% or more of the
outstanding Shares after consummation of the Offer, a Short-Form Merger could be
effected by action of the Board of Directors of the Purchaser and the Company
Board without approval of the Company's stockholders (subject to the
requirements of Section 203 of the DGCL).
Neither Parent nor the Purchaser can give any assurance as to whether, as a
result of information hereafter obtained by either Parent or the Purchaser,
changes in general economic or market conditions or in the business of the
Company, or other presently unforeseen factors, the Merger will be submitted to
the Company's stockholders or whether the Merger will be delayed or abandoned.
Whether or not the Merger is consummated, Parent and the Purchaser reserve the
right to acquire additional Shares following the expiration of the Offer through
private purchases, market transactions, tender or exchange offers or otherwise
on terms and at prices that may be more or less favorable than those of the
Offer or, subject to any applicable legal restrictions, to dispose of any or all
Shares beneficially acquired by Parent and the Purchaser.
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12. THE MERGER AGREEMENT; STOCKHOLDER AGREEMENT.
The following is a summary of certain provisions of the Merger Agreement.
The summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
thereof, which is incorporated herein by reference and a copy of which has been
filed with the Commission as an exhibit to the Schedule 14D-1. The Merger
Agreement may be examined, and copies thereof may be obtained, as set forth in
Section 8.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered and not properly withdrawn pursuant to the Offer. The Merger Agreement
provides that, without the written consent of the Company, the Purchaser will
not decrease the Offer Price, decrease the number of Shares sought in the Offer,
amend or waive the Minimum Condition or amend any condition of the Offer in a
manner adverse to the holders of Shares. In the event that all of the conditions
of the Offer have not been satisfied or waived by the Initial Expiration Date,
October 31, 1997, the Purchaser shall have the right from time to time to extend
the expiration date. The Purchaser will, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares validly tendered and not properly withdrawn as soon as it is
legally permitted to do so under applicable law; provided, however, that if,
immediately prior to the Initial Expiration Date of the Offer (as it may be
extended pursuant to the preceding sentence or otherwise), the Shares validly
tendered and not properly withdrawn pursuant to the Offer equal less than 90% of
the outstanding Shares, the Purchaser may extend the Offer for a period not to
exceed 10 business days, notwithstanding that all conditions to the Offer are
satisfied as of such Initial Expiration Date of the Offer. The Purchaser is
obligated by the Merger Agreement to extend the Initial Expiration Date for a
period of the lesser of (i) 2 business days after the date that all such
approvals have been obtained and (ii) 35 days after such Initial Expiration
Date, if, and only if, the Company, Parent and the Purchaser have not obtained
the approvals of any Governmental Entity required by the Merger Agreement.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with Delaware law, as soon as practicable following the Effective Time, the
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will continue as the Surviving Corporation.
The respective obligations of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions, any and all of which may be
waived in whole or in part, to the extent permitted by applicable law: (i) the
Merger Agreement shall have been approved and adopted by the requisite vote of
the holders of Shares, if required by applicable law, in order to consummate the
Merger; (ii) no law, statute, rule, order, decree or regulation shall have been
enacted or promulgated by any government or any governmental entity of competent
jurisdiction which declares the Merger Agreement invalid or unenforceable in any
material respect or which prohibits the completion of the Offer or the
consummation of the Merger, and all governmental consents, orders and approvals
required for completion of the Offer or consummation of the merger shall have
been obtained and be in effect at the Effective Time; (iii) there shall be no
order or injunction of a court or other governmental entity of competent
jurisdiction in effect precluding consummation of the Offer or the Merger; (iv)
Parent, the Purchaser or their affiliates shall have purchased Shares pursuant
to the Offer and (v) the applicable waiting period under the HSR Act shall have
expired or been terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company or any wholly owned subsidiary
of the Company, any Shares owned by Parent or any wholly owned subsidiary of
Parent, or any Shares which are held by stockholders exercising dissenters'
rights, if any, under Delaware law) will be converted into the right to receive
the price per Share paid pursuant to the Offer (the "Merger Consideration"), and
(ii) each issued and outstanding share of capital stock of the Purchaser will be
converted into one share of common stock of the Surviving Corporation.
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The Company Board. The Merger Agreement provides that upon the purchase and
payment by Parent or the Purchaser of Shares representing at least a majority of
the outstanding Shares on a fully diluted basis, Parent shall be entitled to
designate such number of directors (rounded up to the next whole number) on the
Company Board such that the percentage of Parent's nominees on the Company Board
equal the percentage of outstanding Shares beneficially owned by Parent and its
affiliates. If requested by Parent, the Company shall cause such persons
designated by Parent to be elected to the Company Board, if necessary by
increasing the size of the Company Board. At such time, the Company shall also
cause persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (i) each
committee of the Company Board, (ii) each board of directors (or similar body)
of each subsidiary of the Company and (iii) each committee (or similar body) of
each such subsidiary board of directors.
The Merger Agreement further provides that, notwithstanding the provisions
of the foregoing paragraph, until the Effective Time of the Merger, the Company
Board shall have at least two directors who were neither officers of Parent nor
designees, stockholders or affiliates of Parent. From and after the time, if
any, that Parent's designees constitute a majority of the Company Board, the
affirmative vote of a majority of the directors then in office who are neither
officers of Parent nor designees, stockholders or affiliates of Parent shall be
required to (i) amend or terminate the Merger Agreement, (ii) extend the time
for performance of any of the obligations of Parent or the Purchaser hereunder,
(iii) waive any condition or any of the Company's rights under the Merger
Agreement or (iii) take any other action by the Company under the Merger
Agreement.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly call,
give notice of, convene and hold a special meeting of its stockholders (the
"Special Meeting") as promptly as practicable following the acceptance for
payment and purchase of Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the approval of the Merger and the
adoption of the Merger Agreement; (ii) prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and use its best efforts (a) to obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as hereafter
defined) and, after consultation with Parent, to respond promptly to any
comments made by the Commission with respect to the preliminary proxy or
information statement and cause a definitive proxy or information statement,
including any amendment or supplement thereto (the "Proxy Statement") to be
mailed to its stockholders, provided that no amendment or supplement to the
Proxy Statement will be made by the Company without consultation with Parent and
its counsel and (b) to obtain the necessary approvals of the Merger and the
Merger Agreement by its stockholders; and (iii) provide the recommendation of
the Company Board that stockholders of the Company vote in favor of the approval
of the Merger and the adoption of the Merger Agreement, subject to the fiduciary
obligations of the Company Board under applicable law as advised by independent
counsel. Parent has agreed that it will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of the Merger
Agreement. IF THE PURCHASER ACQUIRES AT LEAST A MAJORITY OF THE OUTSTANDING
SHARES, THE PURCHASER WILL HAVE SUFFICIENT VOTING POWER TO APPROVE THE MERGER,
EVEN IF NO OTHER STOCKHOLDERS VOTE IN FAVOR OF THE MERGER.
The Merger Agreement provides that in the event that Parent, the Purchaser
and any other subsidiaries of Parent acquire, in the aggregate, at least 90% of
the outstanding Shares pursuant to the Offer or otherwise, Parent, the Purchaser
and the Company will, at the request of Parent and subject to the terms of the
Merger Agreement, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without a
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
Options. Effective as of the Effective Time, the Company must cause each
outstanding employee or director stock option, which is exercisable for Shares
and granted under the Company's 1996 Stock Option Plan for Non-Employee
Directors, the Company's 1995 Stock Option Plan (as amended) and the Company's
First Amended and Restated Incentive Stock Option Plan dated November 26, 1991
(collectively, the "Company Option Plans"), whether or not then exercisable or
vested, to become fully exercisable and vested. Furthermore, the Company must
cause each such stock option that is then outstanding, exercisable and vested to
be cancelled and in consideration of such cancellation (except to the extent
that Parent or the Purchaser
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and the holder of any such stock option otherwise agree), cause the Company (or,
at Parent's option, the Purchaser) to pay to such holders of stock options an
amount in respect thereof equal to the product of (A) the excess, if any, of the
Offer Price over the exercise price of each such stock option and (B) the number
of Shares previously subject to the stock option immediately prior to its
cancellation (such payment to be net of withholding taxes).
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or agreed
to in writing by Parent, prior to the time the directors of the Purchaser
constitute a majority of the Company Board (the "Board Appointment Date"), (a)
the business of the Company and its subsidiaries will be conducted only in the
ordinary and usual course and, to the extent consistent therewith, each of the
Company and its subsidiaries will use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
suppliers, employees, creditors and business partners; (b) the Company will not,
directly or indirectly, amend or propose to amend its charter or by-laws or
similar organizational documents; (c) the Company will not, and will not permit
its subsidiaries to, (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock or that of its subsidiaries; (ii) redeem, purchase or otherwise acquire
directly or indirectly any shares of the capital stock of the Company or its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; (iii) authorize for issuance,
issue, sell, pledge, deliver or agree to commit to issue, sell, pledge or
deliver (whether through the issuance or granting of any options, warrants,
calls, subscriptions, stock appreciation rights or other rights or other
agreements) or otherwise encumber any shares of capital stock of any class of
the Company or of its subsidiaries or any securities convertible into or
exchangeable for shares of capital stock of any class of the Company or of its
subsidiaries (other than Shares issued upon the exercise of stock options
outstanding on the date thereof in accordance with the Company option plans as
in effect on the date thereof or Shares for which there are accrued payments on
the date thereof in accordance with the Company's Employee Stock Purchase Plan
as in effect on the date thereof) or (iv) split, combine or reclassify the
outstanding capital stock of the Company or of any of its subsidiaries or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares in the capital stock of the Company or of any of its
subsidiaries; (d) except for certain specified acquisitions, the Company will
not, and it will not permit any of its subsidiaries to, acquire or agree to
acquire (i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture, association
or other business organization or division thereof or (ii) any assets, outside
of the ordinary course of business, that individually is in excess of $5 million
or that in the aggregate are in excess of $10 million; (e) the Company will not,
and it will not permit any of its subsidiaries to, sell, lease, license,
mortgage or otherwise encumber or subject to any lien or otherwise dispose of
any assets of the Company or of its subsidiaries other than (i) sales and
dispositions of interests or rights with respect to property having an aggregate
fair market value on the date of the Merger Agreement of less than $5 million,
in each case only if in the ordinary course of business and consistent with past
practice, or (ii) encumbrances and liens that are incurred in the ordinary
course of business and consistent with past practice; (f) neither the Company
nor any of its subsidiaries will: (i) grant any increase in the compensation
payable or to become payable by the Company or any of its subsidiaries to any of
its executive officers or key employees, (ii) adopt any new, or amend or
otherwise increase, or accelerate the payment or vesting of the amounts payable
or to become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement or (iii) enter into any employment or severance agreement with or,
except in accordance with the existing written policies of the Company, grant
any severance or termination pay to any officer, director or employee of the
Company or any its subsidiaries; (g) neither the Company nor any of its
subsidiaries will: (i) modify, amend or terminate any of its or its
subsidiaries' material contracts or waive, release or assign any material rights
or claims, except in the ordinary course of business and consistent with past
practice, (ii) enter into any other agreements, commitments or contracts that
are material to the Company and its subsidiaries taken as a whole, other than in
the ordinary course of business and consistent with past practice, or (iii)
otherwise make any material change that is adverse to the Company (including by
way of termination) in (A) any existing agreement, commitment or arrangement
that is material to the Company and its subsidiaries taken as a whole
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or (B) the conduct of the business or operations of the Company and its
subsidiaries; (h) other than in connection with certain specified acquisitions,
neither the Company nor any of its subsidiaries will: (i) incur or assume any
long-term debt or, except in the ordinary course of business in amounts
consistent with past practice, incur or assume any short-term indebtedness; (ii)
incur or modify any material indebtedness or other liability; (iii) issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or of any of its subsidiaries; (iv) enter into any
"keep well" or other arrangement to maintain any financial condition of another
person; (v) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with past
practice; (vi) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned subsidiaries of the
Company) or (vii) enter into any material commitment or transaction (including,
but not limited to, any material capital expenditure or purchase or lease of
assets or real estate other than the purchase of products for inventory and
supplies in the ordinary course of business); (i) neither the Company nor any of
its subsidiaries will change any of the accounting methods used by it unless
required by GAAP; (j) neither the Company nor any of its subsidiaries will,
without the prior written consent of Parent, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company and its consolidated
subsidiaries; (k) neither the Company nor any of its subsidiaries will take, or
agree to commit to take, any action that would or is reasonably likely to result
in any of the conditions to the Offer set forth in Annex A of the Merger
Agreement or any of the conditions to the Merger set forth in Article VI of the
Merger Agreement not being satisfied, or would make any representation or
warranty of the Company contained in the Merger Agreement inaccurate in any
respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company to consummate the Offer or the
Merger in accordance with the terms of the Merger Agreement or materially delay
such consummation; (l) neither the Company nor any of its subsidiaries will make
any Tax election or settle or compromise any Tax liability or refund, except to
the extent already provided in the Company's filings with the Commission; (m)
neither the Company nor any of its subsidiaries will permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except in the ordinary course
of business and consistent with past practice; (n) neither the Company nor any
of its subsidiaries will adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the Merger)
and (o) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that neither the Company nor any of its subsidiaries or affiliates will (and the
Company will use its best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, any of its affiliates or representatives) concerning any
proposal or offer to acquire all or a substantial part of the business and
properties of the Company or any of its subsidiaries or any capital stock of the
Company or any of its subsidiaries, whether by merger, tender offer, exchange
offer, sale of assets or similar transactions involving the Company or any
subsidiary, division or operating or principal business unit of the Company (an
"Acquisition Proposal"), except that the Company and the Company Board may
furnish information concerning the Company and its subsidiaries to any
corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group concerning an Acquisition
Proposal if (i) such entity or group has, on an unsolicited basis, submitted a
bona fide written proposal to the Company Board relating to any such transaction
which the Company Board determines in good faith represents a superior
transaction to the Offer and the Merger and which is not conditioned upon
obtaining additional financing and (ii) in the opinion of the Company Board,
only after receipt of advice from independent legal counsel, the failure to
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provide such information or access or to engage in such discussions or
negotiations would cause the Company Board to violate its fiduciary duties to
the Company's stockholders under applicable law (an Acquisition Proposal which
satisfies the immediately foregoing clauses (i) and (ii) is referred to in the
Merger Agreement as a "Superior Proposal"). The Company has agreed to
immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
Company in connection with such proposal, discussion negotiation or inquiry) and
the identity of the party making such proposal or inquiry which it may receive
in respect of any such transaction.
The Company has agreed that neither the Company Board nor any committee
thereof will (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or the Purchaser, the approval or recommendation by the
Company Board or any such committee of the Offer, the Merger Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal, except that prior to the time of acceptance for payment of
Shares in the Offer, the Company Board may do any of the foregoing at any time
after (A) the Company Board determines, after receipt of advice from outside
legal counsel to the Company, that the failure to take such action would cause
the Company Board to violate its fiduciary duties to the Company's stockholders
under applicable law and (B) two business days following Parent's receipt of
written notice advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. Furthermore, the
Company may not enter into an agreement with respect to a Superior Proposal
unless the Company furnishes Parent with written notice not later than noon (New
York time) one day in advance of any date that it intends to enter into such
agreement and shall have caused its financial and legal advisors to negotiate
with Parent to make such adjustments in the terms and conditions of the Merger
Agreement as would enable the Company to proceed with the transactions
contemplated in the Merger Agreement on such adjusted terms. In addition, if the
Company proposes to enter into an agreement with respect to any Acquisition
Proposal, it must concurrently with entering into such agreement pay, or cause
to be paid, to Parent the Termination Fee described below under "-- Termination;
Fees."
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, (a) by mutual written consent of
Parent and the Company; (b) by either the Company or Parent (i) if the Offer
shall have expired without any Shares being purchased therein, provided, that
such right to terminate will not be available to any party whose failure to
fulfill any obligation under the Merger Agreement was the cause of, or resulted
in, the failure of Parent or the Purchaser to purchase the Shares prior to the
expiration of the Offer; (ii) if any governmental entity shall have issued an
order, decree or ruling or taken any other action (which order, decree, ruling
or other action the parties will use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and non-appealable; (c) by the Company
(i) if, prior to the purchase of the Shares pursuant to the Offer, Parent or the
Purchaser breaches or fails in any material respect to perform or comply with
any of its material covenants and agreements contained in the Merger Agreement
or breaches its representations and warranties in any material respect, (ii) in
connection with entering into a definitive agreement with respect to an
Acquisition Proposal if the Company has complied with all of the provisions
described above under "-- No Solicitation," including the notice provisions, and
the Company pays the Termination Fee described hereinafter, (iii) if Parent or
the Purchaser shall have terminated the Offer without Parent or the Purchaser,
as the case may be, purchasing any Shares pursuant thereto or (iv) if Parent,
the Purchaser or any of their affiliates fail to commence the Offer on or prior
to five business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate the Merger Agreement
pursuant to clause (iii) or (iv) if the Company is in material breach of the
Merger Agreement; (d) by Parent (i) if prior to the purchase of the Shares
pursuant to the Offer, the Company Board (A) withdraws, or modifies or changes
in a manner adverse to Parent or the Purchaser, its approval or recommendation
of the Offer, the Merger Agreement or the Merger, (B) approves or recommends an
Acquisition Proposal, (C) executes an agreement in principle (or similar
agreement) or definitive agreement providing for a tender offer or exchange
offer for any shares of capital stock of the Company, or a merger, consolidation
or other business combination with a person or entity other than Parent,
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<PAGE> 26
the Purchaser or their affiliates or (D) resolves to do any of the foregoing,
(ii) if Parent or the Purchaser terminates the Offer without Parent or the
Purchaser purchasing any Shares thereunder, provided that Parent or the
Purchaser may not terminate the Merger Agreement pursuant to this clause (ii) if
Parent or the Purchaser has failed to purchase the Shares in the Offer in
violation of the material terms thereof or (iii) if, due to an occurrence that
if occurring after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A to the Merger Agreement,
Parent, the Purchaser or any of their affiliates fail to commence the Offer on
or prior to the fifth business day following the date of the initial public
announcement of the Offer.
In accordance with the Merger Agreement, if (x) the Company terminates the
Merger Agreement pursuant to clause (c)(ii) of the immediately preceding
paragraph, (y) Parent terminates the Merger Agreement pursuant to clause (d)(i)
of the immediately preceding paragraph or (z) prior to the termination of the
Merger Agreement, an Acquisition Proposal is made and within 12 months of such
termination an Acquisition Proposal is consummated or the Company enters into an
agreement with respect to, or approves or recommends, an Acquisition Proposal,
then the Company has agreed to pay to Parent U.S. $10 million. In addition, if
the Offer is terminated pursuant to the Parent Adverse Change Condition (as
defined in Section 14), Parent will pay to the Company an amount equal to all
out-of-pocket fees and expenses of the Company incurred in connection with the
Merger Agreement and the Offer (including legal and investment banking fees and
expenses) to a maximum of U.S. $1 million.
Indemnification. Pursuant to the Merger Agreement, for six years after the
Effective Time, the Surviving Corporation (or any successor to the Surviving
Corporation) will indemnify, defend and hold harmless the present and former
officers and directors of the Company and its subsidiaries with respect to
matters occurring at or prior to the Effective Time to the full extent permitted
under Delaware law, the terms of the Company's charter, by-laws and
indemnification agreements, each as in effect as of the date of the Merger
Agreement.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization, capitalization,
authority, financial statements, need for consents or approvals, public filings,
conduct of business, employee benefit plans, intellectual property, employment
matters, excess parachute payments, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, vote required
to approve the Merger Agreement, undisclosed liabilities, information to be
contained in the Proxy Statement, finders fees, the opinion of its financial
advisor, and the absence of any material adverse change since December 31, 1996.
With respect to the Rights Agreement, dated as of November 14, 1996, by and
between the Company and Keybank, National Association, as Rights Agent (as
amended and supplemented from time to time, the "Rights Agreement"), pursuant to
which preferred stock purchase rights ("Rights") have been issued to holders of
the Company's Common Stock, the Company has represented and warranted to Parent
and the Purchaser that the Company Board has taken all necessary action so that
(i) the Rights will not be exercisable, trade separately or be otherwise
affected by the Offer, the Merger or the other transactions contemplated by the
Merger Agreement, (ii) none of Parent and its affiliates will be deemed to be an
"Acquiring Person" for purposes of the Rights Agreement and (iii) a
"Distribution Date" (as defined in the Rights Agreement) will not occur by
virtue of the Offer, the Merger or the other transactions contemplated by the
Merger Agreement. See Section 15.
Pursuant to the Merger Agreement, Parent and the Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals and information to be contained in the
Proxy Statement.
The Stockholder Agreement. The following is a summary of the material terms
of the Stockholder Agreement. This summary is not a complete description of the
terms and conditions of the Stockholder Agreement and is qualified in its
entirety by reference to the full text thereof, which is incorporated herein by
reference and a copy of which has been filed with the Commission as an exhibit
to the Schedule 14D-1. The Stockholder Agreement may be examined, and copies
thereof may be obtained, as set forth in Section 8.
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<PAGE> 27
Tender of Shares. In connection with the execution of the Merger Agreement,
Parent and the Purchaser entered into a Stockholder Agreement with the Selling
Stockholders. Upon the terms and subject to the conditions of such agreement,
each of the Selling Stockholders has agreed to validly tender (and not withdraw)
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer, the number of Shares owned
beneficially by such Selling Stockholder (or a total of 1,126,990 Shares,
representing approximately 15.5% of the outstanding Shares on a fully diluted
basis). The Selling Stockholders have also consented to the treatment of the
Company Options held by them as described under "The Merger Agreement --
Options" above.
Stock Option. In order to induce Parent and the Purchaser to enter into the
Merger Agreement, each of the Selling Stockholders has granted to Parent an
irrevocable option (a "Stock Option") to purchase such Selling Stockholder's
Shares (the "Option Shares") at an amount (the "Purchase Price") equal to the
Offer Price. Pursuant to the Stockholder Agreement, if the Merger Agreement is
terminated pursuant to Section 7.1(c)(ii) or 7.1(d)(i) thereof, the Stock
Options will become exercisable, in whole but not in part, upon the first to
occur of such event and remain exercisable in whole until the date which is 60
days after the date of the occurrence of such event (the "60 Day Period"), so
long as: (i) all waiting periods under the HSR Act required for the purchase of
the Option Shares upon such exercise, shall have expired or been waived, (ii)
all other applicable consents of any governmental entity required for the
purchase or sale of the Option Shares upon such exercise (if applicable) shall
have been granted or otherwise satisfied, and (iii) there shall not be in effect
any preliminary or final injunction or other order issued by any court or
governmental entity prohibiting the exercise of the Stock Options pursuant to
the Stockholder Agreement. The Stockholder Agreement provides that if (i) all
HSR Act waiting periods have not expired or been waived, (ii) all other
applicable consents of any governmental entity required for the purchase or sale
of the Option Shares (if applicable) shall not have been granted or otherwise
satisfied, or (iii) or there shall be in effect any such injunction or order, in
each case on the expiration of the 60 Day Period, the 60 Day Period shall be
extended until 5 business days after the later of (A) the date of expiration or
waiver of all HSR Act waiting periods, (B) the grant or other satisfaction of
such required consents, and (C) the date of removal or lifting of such
injunction or order; provided, however, that in no event will the Stock Option
be exercisable after December 31, 1997; provided, further, that the Stock Option
will terminate if any governmental entity issues an order, decree or ruling or
takes any other action (which order, decree, ruling or other action the parties
to the Stockholder Agreement will use their best efforts to lift), which
permanently restrains, enjoins or otherwise prohibits Parent' s exercise of the
Stock Option or the sale of the Option Shares to Parent by the Selling
Stockholders.
Make Whole. If Parent exercises the Stock Option, then, at Parent's
election: (i) Parent will, at or prior to the time of payment in connection with
any Superior Proposal, pay to the Stockholder a per Share amount (the
"Alternative Payment") equal to the consideration paid to all stockholders of
the Company in the Superior Proposal, less the Purchase Price per Share, plus
any additional amount as may be necessary so that the aggregate consideration,
after payment of all federal, state and local income taxes (the "Aggregate After
Tax Consideration") received by the Stockholder in connection with the
Alternative Payment is not less than the Aggregate After Tax Consideration that
would have been received by the Stockholder as if it had been paid the
consideration under the Superior Proposal) or (ii) prior to the Expiration Date,
the Effective Date or the consummation date for the Superior Proposal, Parent
shall rescind the exercise of the Stock Option and return the Stockholder's
Shares to the Stockholder and the Stockholder, upon receipt of such Shares,
shall repay the Purchase Price to the Parent and, provided that the Stockholder
tenders its Shares to the Superior Proposal or votes its Shares in favor of the
Superior Proposal, and the Stockholder actually receives the consideration paid
in connection with the Superior Proposal (the "Superior Proposal Payment"), then
at or prior to the time of the Superior Proposal Payment, Parent shall pay to
the Stockholder any additional amount as may be necessary so that the Aggregate
After Tax Consideration received by the Stockholder in connection with the
Superior Proposal is not less than the Aggregate After Tax Consideration it
would have received in connection with the Superior Proposal had Parent never
exercised the Stock Option.
Provisions Concerning the Shares. The Selling Stockholders have agreed that
during the period commencing on the date of the Stockholder Agreement and
continuing until the first to occur of the Effective
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<PAGE> 28
Time or the termination of the Merger Agreement in accordance with its terms,
and in any event until no later than December 31, 1997, at any meeting of the
Company's stockholders or in connection with any written consent of the
Company's stockholders, the Selling Stockholders will vote (or cause to be
voted) the Shares held of record or beneficially owned by each of such Selling
Stockholders: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and the Stockholder
Agreement and any actions required in furtherance thereof; and (ii) against any
Acquisition Proposal and against any action or agreement that would impede,
frustrate, prevent or nullify the Stockholder Agreement or result in a breach in
any respect of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or which would result in
any of the conditions to the Offer or the Merger not being fulfilled. In
addition, each of the Selling Stockholders has appointed, during the period
commencing on the date of the Stockholder Agreement and continuing until the
first to occur of the Effective Time or the termination of the Merger Agreement
in accordance with its terms, and in any event no later than December 31, 1997,
representatives of Parent as proxies to vote such Selling Stockholder's Shares
or grant a consent or approval in respect of such Shares in favor of the various
transactions contemplated by the Merger Agreement and against any Acquisition
Proposal and for no other purpose. Each of the Selling Stockholders has also
agreed not to transfer such Selling Stockholder's Shares and not to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal.
Other Covenants, Representations, Warranties. In connection with the
Stockholder Agreement, the Selling Stockholders made certain customary
representations and warranties, including with respect to (i) ownership of the
Shares, (ii) the Selling Stockholder's authority to enter into and perform its
or his obligations under the Stockholder Agreement, (iii) the absence of
conflicts and requisite governmental consents and approvals, and (iv) the
absence of encumbrances on and in respect of the Selling Stockholder's Shares.
Parent and the Purchaser have made certain representations and warranties with
respect to Parent and the Purchaser's authority to enter into the Stockholder
Agreement and the absence of conflicts and requisite governmental consents and
approvals.
In the Stockholder Agreement, Parent agreed that, in the event that within
three years following Parent's exercise of a Stock Option, Parent, the Purchaser
or any of their subsidiaries acquires any additional Shares from, or pursuant to
an offer made to all of the Company's stockholders, whether by merger,
consolidation, tender offer of other similar transaction, the price paid per
Share would be no less than the Purchase Price.
13. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
funds required to purchase all Shares validly tendered pursuant to the Offer,
consummate the Merger, refinance certain existing indebtedness of the Company
and of EHSI, pay the costs and expenses related to the Offer and the Merger and
to provide for ongoing general corporate purposes after completion of the Offer
and the Merger will be approximately $800 million. Parent and the Purchaser
intend to obtain such funds by means of proceeds from borrowings from the Credit
Facilities (as hereafter defined). The terms of the Credit Facilities have not
yet been finalized and are still being negotiated. Moreover, the documentation
evidencing the Credit Facilities has not yet been finalized. Accordingly, the
description below of the Credit Facilities is preliminary and necessarily
incomplete. In addition, the terms and provisions of the Credit Facilities, to
the extend described, are subject to change if the terms of the Offer and Merger
change. In any event, the ultimate financing instruments might contain certain
terms that are more or less onerous than those currently contemplated.
NationsBank, N.A. ("NationsBank") has delivered a bank commitment letter
(the "Bank Commitment Letter"), pursuant to which NationsBank has committed to
provide the Credit Facilities upon the terms and subject to the conditions set
forth in the Bank Commitment Letter, and NationsBanc Capital Markets, Inc.
("NCMI") has committed to form a syndicate of financial institutions reasonably
acceptable to EHSI (the "Lenders") for the Credit Facilities, upon the terms and
subject to the conditions of the Bank Commitment Letter.
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<PAGE> 29
The Bank Commitment Letter provides that the commitments of NationsBank and
NCMI will terminate unless a Credit Agreement (as hereafter defined) is closed
on or prior to December 31, 1997.
EHSI has agreed to pay certain fees to NationsBank and NCMI for their own
account and for the account of the Lenders payable as follows: (i) Letter of
Credit Fees due quarterly in arrears to be shared proportionately by the
Lenders, such fees to be equal to the applicable percentage margin in effect
from time to time for LIBOR loans under the Revolving Credit Facility (as
hereafter defined) on a per annum basis plus a facing fee of .125% per annum to
be paid to NationsBank, as fronting bank, for its own account and (ii) a
commitment fee of .375% per annum of the unused portion of the Revolving Credit
Facility accruing upon the closing of the Revolving Credit Facility and payable
thereafter quarterly in arrears, subject to certain performance pricing
step-downs.
The Credit Facilities will be provided pursuant to the terms and conditions
of a Credit Agreement to be entered into by EHSI and NationsBank and NCMI (the
"Credit Agreement").
Pursuant to the Bank Commitment Letter, the Credit Facilities (the "Credit
Facilities") are expected to consist of an aggregate principal amount of up to
$800,000,000 as follows: (i) a $200 million revolving credit facility (the
"Revolving Credit Facility") which will include a $50 million sublimit for the
issuance of standby and commercial letters of credit and (ii) a $600 million
term loan facility (the "Term Loan Facility") comprised of the following term
loan tranches: (x) $200 million tranche A term loan (the "Tranche A Term Loan"),
(y) $200 million tranche B term loan (the "Tranche B Term Loan") and (z) $200
million tranche C bridge loan (the "Tranche C Bridge Loan").
Concurrently with the consummation of the Offer and the Merger, NationsBank
(on behalf of the Lenders) shall receive a first priority perfected security
interest in all of the capital stock of EHSI, and each other domestic subsidiary
of Holdings and each of the direct and indirect domestic subsidiaries of EHSI
and 65% of the capital stock of each foreign subsidiary which is a direct
subsidiary of Holdings and EHSI or any of their domestic subsidiaries (other
than capital stock of Extendicare Holdings Limited), which capital stock shall
not be subject to any other lien or encumbrance. The foregoing security shall
ratably secure the Credit Facilities and any interest rate swap/foreign currency
swap or similar arrangements with a Lender (or an affiliate of a Lender) under
the Credit Facilities.
In addition to the amortization set forth in the Bank Commitment Letter,
the Credit Facilities will be prepaid by an amount equal to (a) 100% of the net
cash proceeds of all assets sales by Holdings, EHSI or any subsidiary of EHSI
(including stock of subsidiaries), subject to de minimis baskets and
reinvestment provisions to be agreed upon; (b) 100% of the net cash proceeds
from the issuance of any debt (excluding certain permitted debt) by Holdings,
EHSI or any subsidiary; and (c) 100% of the net cash proceeds from the issuance
of equity by Holdings, EHSI or any subsidiary. Prepayments shall be applied pro
rata to reduce the Tranche A Term Loan and the Tranche B Term Loan and within
each tranche pro rata with respect to each remaining installment of principal;
provided, however, that (i) with respect to clause (a) above, any prepayment
shall be applied pro rata across all facilities (with corresponding commitment
reduction in the case of prepayments applied to the Revolving Credit Facility)
and (ii) with respect to clause (b) above the net cash proceeds from certain
subordinated debt shall be applied first to the Tranche C Bridge Loan. Holders
of the Tranche B Term Loan may, so long as there is a principal balance
outstanding with respect to the Tranche A Term Loan, decline to accept any
mandatory prepayment described above and, under such circumstances, all amounts
that would otherwise be used to repay Tranche B Term Loan above shall be used to
prepay Tranche A Term Loan. In the event the Term Loan Facilities shall have
been completely repaid, the mandatory payments described above shall be applied
to permanently reduce the amount available under the Revolving Credit Facility.
The Credit Facilities may be prepaid in whole or in part at any time
without penalty, subject to reimbursement of the Lenders' breakage and
redeployment costs in the case of prepayment of LIBOR borrowings.
The Credit Facilities shall bear interest at a rate per annum equal to, at
the option of EHSI, either (i) LIBOR or (ii) the Alternate Base Rate (defined as
the higher of (a) the NationsBank prime rate and
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<PAGE> 30
(b) the Federal Funds rate plus 1.5%), in each case plus the following
Applicable Margins (subject to certain performance pricing step-downs):
<TABLE>
<CAPTION>
LIBOR + BASE RATE +
------- -----------
<S> <C> <C>
Revolving Credit Facility.......................................... 1.75% 0.25%
Tranche A Term Loan................................................ 1.75% 0.25%
Tranche B Term Loan................................................ 2.00% 1.00%
Tranche C Bridge Loan.............................................. 2.00% 1.00%
</TABLE>
provided, that (A) the percentage margins for LIBOR loans and Alternate Base
Rate loans outstanding under the Revolving Credit Facility and the Tranche A
Term Loan will be subject to performance pricing adjustments, (B) there will be
a one tier pricing adjustment of .25% available for the LIBOR loans outstanding
under the Tranche B Loan upon EHSI obtaining a total leverage ratio to be agreed
upon and (C) if, during the 180 day period following the closing of the Credit
Facilities, any breakage costs, charges or fees are incurred with respect to
LIBOR loans on account of the syndication of the Credit Facilities, EHSI shall
immediately reimburse NationsBank for any such costs, charges or fees. Such
right of reimbursement to be in addition to and not in limitation of customary
cost and yield protection.
EHSI may select interest periods of 1, 2, 3 or 6 months for LIBOR loans,
subject to availability. A penalty rate shall apply on all loans in the event of
default at a rate per annum of 2% above the applicable interest rate.
The Revolving Credit Facility shall terminate and all amounts outstanding
thereunder shall be due and payable in full 6 years from the closing of the
Credit Facilities. The Tranche C Bridge Loan shall be due and payable in full
sixty days from the closing of the Credit Facilities. The Tranche A Term Loan
and the Tranche B Term Loan shall be subject to repayment according to the
schedule of amortization set forth below, with the final payment of all amounts
outstanding, plus accrued interests, being due 6 years from the closing of the
Tranche A Term Loan and 7 years from the closing of the Tranche B Term Loan.
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B
----------- --------------
<S> <C> <C>
Loan year 1.................................................... $25 million $2.0 million
Loan year 2.................................................... $30 million $2.0 million
Loan year 3.................................................... $30 million $2.0 million
Loan year 4.................................................... $35 million $2.0 million
Loan year 5.................................................... $40 million $2.0 million
Loan year 6.................................................... $40 million $2.0 million
Loan year 7.................................................... $ 0 million $188.0 million
</TABLE>
The Tranche B Term Loan and the Tranche C Bridge Loan will be available in
a single borrowing at the closing of the Credit Facilities. The Tranche A Term
Loan will be available in two advances. The first advance, to be made at the
closing of the Credit Facilities, will be in an amount equal to the committed
amount of the Tranche A Term Loan minus the sum of (i) the total cost (at $45
per share) of the shares of the Company that have not been tendered, and
therefore will not be purchased, at the closing of the Offer and (ii) $110
million, representing the indebtedness of the Company to be refinanced at the
time of the Merger (such sum being referred to as the "Holdback Amount"). The
second advance under the Tranche A Term Loan shall be in an amount not to exceed
the Holdback Amount and shall be available on the date of the Merger. The
commitment for any portion of the Tranche A Term Loan not advanced on the date
of such Merger will be cancelled.
Loans under the Revolving Credit Facility may be made, and Letters of
Credit may be issued subject to availability under the aggregate committed
amount for the Revolving Credit Facility.
The Credit Facilities will contain certain representations and warranties,
certain negative and affirmative financial covenants, certain conditions and
events of default which are customarily required for similar financings. Such
covenants will include restrictions and limitations on dividends and stock
redemptions and the redemption and/or prepayment of other debt, capital
expenditures, leases, incurrence of debt, liens,
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<PAGE> 31
investments, transactions with affiliates, acquisitions, mergers, consolidations
and asset sales. Furthermore, EHSI will be required to maintain compliance with
certain financial covenants such as minimum net worth, a maximum leverage ratio,
a maximum senior debt/EBITDAR ratio and a fixed charge coverage ratio.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole discretion (subject
to the provisions of the Merger Agreement), the Purchaser shall not be required
to accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate or amend the Offer as to any Shares not then paid for,
if (A) any applicable waiting period under the HSR Act has not expired or
terminated, (B) the Minimum Condition has not been satisfied, (C) the Company,
Parent and the Purchaser, as required, have not obtained all necessary material
consents, approvals, orders, authorizations, registrations, declarations,
permits or filings required to be obtained by it in connection with the Merger
Agreement and the transactions contemplated thereby or (D) at any time on or
after the date of the Merger Agreement and before the time of payment for any
such Shares, any of the following events shall occur or shall be determined by
the Purchaser to have occurred:
(i) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (as defined in the Merger Agreement)
against the Purchaser, Parent, the Company or any subsidiary of the Company
(a) seeking to prohibit or impose any material limitations on Parent's or
the Purchaser's ownership or operation (or that of any of their respective
subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or to compel Parent or the Purchaser or
their respective subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent and
their respective subsidiaries, in each case taken as a whole, (b)
challenging the acquisition by Parent or the Purchaser of any Shares under
the Offer, the Merger or pursuant to the Stockholder Agreements, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the other transactions contemplated by the
Merger Agreement (including the voting provisions thereunder), or seeking
to obtain from the Company, Parent or the Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(c) seeking to impose material limitations on the ability of the Purchaser,
or render the Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares pursuant to the Offer and the Merger, (d) seeking
to impose material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders or (e) which
otherwise is reasonably likely to have a material adverse affect on the
Company and its subsidiaries, taken as a whole;
(ii) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by
any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (a) through (d) of paragraph (i) above;
(iii) there shall have occurred (a) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
The Toronto Stock Exchange, the Montreal Exchange or in The Nasdaq Stock
Market, for a period in excess of 24 hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (b) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or Canada (whether or not mandatory), (c) a commencement of a war
directly or indirectly involving the United States or Canada, (d) any
limitation (whether or not mandatory) by any United States or Canadian
governmental authority on the extension of credit generally by banks or
other financial institutions, (e) any decline in either the Dow Jones
Industrial Average or the Standard &
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<PAGE> 32
Poor's Index of 500 Industrial Companies by an amount in excess of 20%
measured from the close of business on the date of the Merger Agreement,
(f) a change in general financial bank or capital market conditions which
materially or adversely affects the ability of financial institutions in
the United States or Canada to extend credit or syndicate loans or (g) in
the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof;
(iv) (a) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct in any material
respect as of the date of the Merger Agreement and as of consummation of
the Offer as though made on or as of such date, (b) the Company shall have
failed to comply with its covenants and agreements under the Merger
Agreement in all material respects or (c) there shall have occurred any
events or changes which have had or will have a material adverse effect on
the Company and its subsidiaries taken as a whole;
(v) (a) the Company Board shall have withdrawn, or modified or changed
in a manner adverse to Parent or the Purchaser (including by amendment of
the Schedule 14D-9) its approval or recommendation of the Offer, the Merger
Agreement or the Merger, or approved or recommended any Acquisition
Proposal, (b) the Company shall have entered into any agreement with
respect to any Superior Proposal in accordance with Section 5.5(b) of the
Merger Agreement or (c) the Company Board, upon request of the Purchaser,
shall fail to reaffirm its recommendation of the Offer, the Merger
Agreement or the Merger;
(vi) the Merger Agreement shall have terminated in accordance with its
terms; or
(vii) there shall have occurred after the date of the Merger Agreement
any material adverse change in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or prospects of
EHSI and its subsidiaries (taken as a whole) and NationsBank or NCMI shall
have declined to participate in the financing to be provided to EHSI as set
forth in the Bank Commitment Letter;
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by the Purchaser or Parent concerning
the events described in this Section 14 will be final and binding upon all
parties.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on a review of
publicly available filings by the Company with the Commission, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Merger or (ii) except as described
below, any notice to, filing with, approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign that would
be required for the acquisition or ownership of Shares by the Purchaser as
contemplated herein. The Purchaser currently intends to seek such approval and
provide such notices as are required by law. There can be no assurance that any
such approval or action, where needed, will be obtained or will be obtained
without substantial conditions or that adverse consequences might not result to
the business of the Company, the Purchaser or Parent or that certain parts of
the businesses of the Company, the Purchaser or Parent might not have to be
disposed of in the event that such approvals are not obtained or any other
actions were not taken. The Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 14.
Antitrust Compliance.Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless
30
<PAGE> 33
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the FTC and certain waiting
period requirements have been satisfied.
Parent, on behalf of the Purchaser, has made its required filings under the
HSR Act and the applicable waiting period under the HSR Act with respect to the
Offer is scheduled to expire at 11:59 p.m., New York City time, on Wednesday,
October 15, 1997, unless such waiting period is earlier terminated by the FTC
and the Antitrust Division or extended by a request from the FTC or the
Antitrust Division for additional information or documentary material prior to
the expiration of the waiting period. Pursuant to the HSR Act, Parent, on behalf
of the Purchaser, has requested early termination of the waiting period
applicable to the Offer. There can be no assurance, however, that such waiting
period will be terminated early. If either the FTC or the Antitrust Division
were to request additional information or documentary material from Parent, the
Purchaser or the Company with respect to the Offer, the waiting period with
respect to the Offer would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance with such request.
Thereafter, the waiting period may be extended only by court order. If the
acquisition of Shares is delayed pursuant to a request by the FTC or the
Antitrust Division for additional information or documentary material pursuant
to the HSR Act, the Offer must be extended pursuant to the Merger Agreement and,
in any event, the purchase of and payment for Shares will be deferred until 10
days after the request is substantially complied with, unless the extended
period expires on or before the date when the initial 15-day period would
otherwise have expired, or unless the waiting period is sooner terminated by the
FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such extension
of the waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4. It is a condition to the Offer
that the waiting period applicable under the HSR Act to the Offer expire or be
terminated. See Section 2 and Section 14.
No separate HSR Act waiting period requirements with respect to the
Stockholder Agreements will apply, so long as the 15-day waiting period expires
or is terminated. Thus, all Shares may be acquired pursuant to the Offer, the
Stockholder Agreements or both at the close of the 15-day waiting period or on
the tenth calendar day after the date of substantial compliance with a request
for additional information.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of Parent, the Purchaser,
the Company or their respective subsidiaries. Private parties and state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances. Based upon an examination of information
available to the Purchaser relating to the businesses in which Parent, the
Purchaser, the Company and their respective subsidiaries are engaged, the
Purchaser believes that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, what the
result would be. See Section 14 for certain conditions to the Offer, including
conditions with respect to litigation.
State Takeover Statutes. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. Since the Company
Board, at a special meeting held on September 29, 1997, approved the Merger
Agreement and the Stockholder Agreement and the transactions contemplated
thereby, Section 203 is inapplicable to Parent and the Purchaser in connection
with the Offer and the Merger.
31
<PAGE> 34
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a
Federal district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December, 1988, a Federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Except as otherwise described in this Offer to Purchase, the
Purchaser does not know whether any of these laws will, by their terms, apply to
the Offer and has not complied with any such laws. Should any person seek to
apply any state takeover law, the Purchaser will take such action as then
appears desirable, which may include challenging the validity or applicability
of any such statute in appropriate court proceedings. In the event it is
asserted that one or more state takeover laws is applicable to the Offer and the
Merger, and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchaser might be unable to accept for payment any
Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment any Shares tendered. See Section 14.
Ohio Control Bid Statute. Sections 1707.041, 1707.42, 1707.23 and 1707.26
of the Ohio Revised Code (collectively, the "Ohio Control Bid Statute") regulate
tender offers. The Ohio Control Bid Statute applies to the purchase of or offer
to purchase an equity security of a subject company from a resident of Ohio if,
after the purchase, the offeror would directly or indirectly be the beneficial
owner of more than ten percent (10%) of any class of issued and outstanding
equity securities of the Company (a "control bid"). A subject company includes
an issuer, such as the Company, that (i) either has its principal place of
business or principal executive offices located in Ohio or owns or controls
assets located in Ohio that have a fair market value of at least one million
dollars, and (ii) has more than one thousand beneficial or record equity
security holders who reside in Ohio. A subject company, however, need not be
incorporated in Ohio. Notwithstanding the definition of subject company
contained in the Ohio Control Bid Statute, the Ohio Division of Securities (the
"Ohio Division"), by rule or as adjudicatory proceeding, may make a
determination that an issuer does not constitute a subject company if
appropriate review of control bids involving the issuer is to be made by any
regulatory authority of another jurisdiction. The Ohio Division has not adopted
any rules under this provision.
The Ohio Control Bid Statute prohibits an offeror from making a control bid
for securities of a subject company pursuant to a tender offer until the offeror
has filed specified information with the Ohio Division. In addition, the offeror
is required to deliver a copy of such information to the subject company not
later than the offerer's filing with the Ohio Division and to send or deliver
such information and the material terms of the proposed offer to all offerees in
Ohio as soon as practicable after the offeror's filing with the Ohio Division.
32
<PAGE> 35
Within three calendar days of such filing, the Ohio Division may by order
summarily suspend the continuation of the control bid if it determines that the
offeror has not provided all of the specified information or that the control
bid materials provided to offerees do not provide full disclosure of all
material information concerning the control bid. If the Ohio Division summarily
suspends a control bid, it must schedule and hold a hearing within ten calendar
days of the date on which the suspension is imposed and must make its
determination within three calendar days after the hearing has been completed
but no later than sixteen calendar days after the date on which the suspension
is imposed. The Ohio Division may maintain its suspension of the continuation of
the control bid if, based upon the hearing, it determines that all of the
information required to be provided by the Ohio Control Bid Statute has not been
provided by the offeror, that the control bid materials provided to offerees do
not provide full disclosure of all material information concerning the control
bid, or that the control bid is in material violation of any provision of the
Ohio securities laws. If, after the hearing, the Ohio Division maintains the
suspension, the offeror has the right to correct the disclosure and other
deficiencies identified by the Ohio Division and to reinstitute the control bid
by filing new or amended information pursuant to the Ohio Control Bid Statute.
The Purchaser and Parent are not aware of any judicial decision with
respect to the constitutionality of the Ohio Control Bid Statute since its
amendment in April, 1990. Notwithstanding the holdings of TLX Acquisition, Tyson
Foods and Grand Metropolitan, described above, Parent and the Purchaser have
determined not to challenge the constitutionality of the Ohio Control Bid
Statute at this time. Parent and the Purchaser have submitted documents required
by the Ohio Control Bid Statute, including a copy of the Schedule 14D-1 relating
to the Offer, to the Ohio Division. If the Ohio Division takes action under the
Ohio Control Bid Statute, the Purchaser will take such action as then appears
desirable, which may include challenging the validity or applicability of such
statute in appropriate court proceedings. If the Ohio Division takes action
under the Ohio Control Bid Statute, and the Purchaser determines not to
challenge the validity or applicability of such statute, then the Purchaser may
not be obligated to accept for payment or pay for Shares tendered pursuant to
the Offer or may, among other things, terminate the Offer or amend the terms and
conditions of the Offer. See Section 14.
Appraisal Rights and Other Matters. No appraisal rights are available in
connection with the Offer and the Merger. The Commission has adopted Rule 13e-3
under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable to the
Merger. However, Rule 13e-3 would be inapplicable if (i) the Shares are
deregistered under the Exchange Act prior to the Merger or other business
combination or (ii) the Merger or other business combination is consummated
within one year after the purchase of the Shares pursuant to the Offer and the
amount paid per Share in the Merger or other business combination is at least
equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction.
Other Regulatory Approvals and Notices. The Purchaser is required to
furnish advance written notice of its purchase of the Shares to state health
regulatory agencies in certain of the states in which the Company does business.
Among other things, it will be necessary for the Purchaser to file notice of the
Transaction with the Florida Agency for Health Care Administration under
Florida's certificate of need ("CON") law and a request for exemption from CON
review with the Delaware Bureau of Health Policy. Also, notice of the
Transaction and submission of a provider application package is required by the
Florida Medicaid program, and a new licensure application may be required by the
Ohio Board of Pharmacy. Certain other states have requested a description of the
Transaction in order to determine whether relicensure or additional filings or
approvals are necessary. In addition, the West Virginia Health Care Authority
(the "Authority") views a transfer of stock ownership as a change of ownership
subject to CON review. The Purchaser intends to submit a written request for a
ruling of nonreviewability of the Transaction, along with financial and other
information to demonstrate that the Transaction is financially feasible. There
can be no assurance, however, that the Authority will conclude that the
Transaction is not subject to further review by the Authority, or that the
Purchaser will not be required to seek full CON review. In the event CON review
is required, there can be no assurance that such review will not delay the Offer
or that the Authority will approve the Transaction. The
33
<PAGE> 36
Company is subject to other healthcare licensure and CON laws, and rules and
regulations regarding change of ownership relating to the Medicare and Medicaid
programs. Certain of these laws, rules and regulations may require additional
notices to, filings with or consents or approvals of various federal, state and
local regulators. There can be no assurance that any such consents or approvals,
where needed, will be obtained or will be obtained prior to the Initial
Expiration Date, if at all. If such consents and approvals are not obtained in a
timely manner, the Purchaser may be obligated under the Merger Agreement to
extend the Offer past the Initial Expiration Date. If such consents and
approvals cannot be obtained, the Purchaser will have the right, in its sole
discretion, to terminate the Offer.
Rights Agreement. The Company is party to a Rights Agreement, pursuant to
which the Rights have been issued to holders of the Company's Common Stock. The
Rights become exercisable ten days after a public announcement that a person,
other than an "Exempt Person" (as defined in the Rights Agreement), has
acquired, or announces a tender or exchange offer which upon consummation
thereof would result in such person acquiring, beneficial ownership of 15% or
more of the Company's outstanding common stock. If a person acquires beneficial
ownership of 15% or more of the Company's common stock (an "Acquiring Person"),
each Right entitles the holder (other than the Acquiring Person) to purchase for
$100 common stock of the Company worth $200. The Rights are redeemable by the
Company Board at any time prior to the tenth day following the public
announcement of the existence of an Acquiring Person. The Rights Plan may be
amended, however, by the Company Board prior to the date a person becomes an
Acquiring Person. The Company Board has amended the Rights Agreement to provide
that Parent and the Purchaser are "Exempt Persons" under the Rights Agreement so
that (i) the Rights will not be exercisable, trade separately or be otherwise
affected by the Offer, the Merger or the other transactions contemplated by the
Merger Agreement, (ii) none of Parent and its affiliates will be deemed to be an
"Acquiring Person" for purposes of the Rights Agreement and (iii) a
"Distribution Date" (as defined in the Rights Agreement) will not occur by
virtue of the Offer, the Merger or the other transactions contemplated by the
Merger Agreement. In addition, the Company has agreed to take any action
reasonably requested by Parent to ensure and confirm that the Company, Parent
and their respective affiliates will not have any obligations in connection with
the Rights or the Rights Agreement in connection with the Offer, the Merger and
the other transactions contemplated by the Merger Agreement.
16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
Bear Stearns is acting as Dealer Manager in connection with the Offer and
is acting as financial advisor to Parent in connection with its effort to
acquire the Company. Parent has agreed to pay Bear Stearns for its services a
financial advisory fee of $2.35 million payable upon consummation of the
purchase by Parent or the Purchaser of more than 50% of the Shares. Parent has
also agreed to reimburse Bear Stearns (in its capacity as Dealer Manager and
financial advisor) for its reasonable out-of-pocket expenses, including the fees
and expenses of its legal counsel, incurred in connection with its engagement,
and to indemnify Bear Stearns and certain related persons against certain
liabilities and expenses in connection with its engagement, including certain
liabilities under the federal securities laws. Bear Stearns has rendered various
investment banking and other advisory services to Parent and its affiliates in
the past and is expected to continue to render such services, for which it may
receive customary compensation from Parent and its affiliates.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities law.
In addition, IBJ Schroder Bank & Trust Company has been retained as the
Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-
34
<PAGE> 37
of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering material to their customers.
17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT, THE PURCHASER OR THE COMPANY NOT CONTAINED
IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE
PURSUANT TO THE OFFER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PARENT, THE PURCHASER OR THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS
OFFER TO PURCHASE.
Parent and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), together with exhibits,
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. In addition, the Company has filed with the
Commission a Solicitation/Recommendation Statement on Schedule 14D-9 (including
exhibits) pursuant to Rule 14d-9 under the Exchange Act. Such statements and any
amendments thereto, including exhibits, may be inspected at, and copies may be
obtained from, the same places and in the same manner as set forth in Section 8
(except that they will not be available at the regional offices of the
Commission).
AHC ACQUISITION CORP.
OCTOBER 3, 1997
35
<PAGE> 38
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent.
Unless otherwise indicated, each person identified below is employed by
Parent. The principal address of Parent and, unless otherwise indicated below,
the current business address for each individual listed below is 3000 Steeles
Avenue East, Markham, Ontario, Canada L3R 9W2. Unless otherwise indicated, each
such person is a citizen of Canada. Each of the directors listed below held the
office or position last indicated as of five years ago.
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH EXTENDICARE INC. AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Richard Leslie Bertrand....... Senior Vice-President of Extendicare Health Services, Inc.
Vice-President since July 1995; Senior Vice-President, Finance and Chief
Financial Officer, Extendicare (Canada) Inc.; Executive of
Extendicare Inc. since November 1992
Derek Hedley Longworth
Buntain....................... President and Chief Executive Officer, Goodman & Company
Director (Bermuda) Limited (investment counsel) since March 1996;
prior to March 1996; Director and Vice-Chairman of Targa
International Corporation (international finance); prior to
March 1993, Director and Chairman of Pythonic Trading
Company Limited (export company)
Herbert Michael Burns......... Corporate Director; prior to May 1994, Chairman, Crown Life;
Director, Deputy Chairman prior to April 1992, President, Extendicare Inc.
Dr. Joy Durfee Calkin......... Executive of Extendicare Inc. since August 1997; prior
Director, President and Chief thereto, Vice- President (Academic) and Provost, Professor,
Executive Officer Faculty of Nursing, The University of Calgary
J. Wesley Carter.............. Executive of Extendicare Inc. since December 1994; President
Chief Operating Officer of Extendicare Health Services, Inc. since September 1997;
President and Chief Executive Officer of Extendicare
(Canada) Inc. since December 1994; prior thereto, Chairman,
Manley Insurance Brokers Inc.
Sir Graham Day................ Counsel to Stewart McKelvey Stirling Scales (barristers and
Director solicitors); prior to September 1993, Chairman, PowerGen plc
(electricity generation); prior to May 1993, Chairman,
Cadbury Schweppes plc (soft drinks and confections)
George Stephen Dembroski...... Vice-Chairman, RBC Dominion Securities Limited (investment
Director dealer)
Stephen F. Dineley............ Executive of Extendicare Inc. since September 1997; prior
Vice-President and Chief thereto, Partner, KPMG Chartered Accountants
Financial Officer
David Montgomery Dunlap....... Chairman, G.F. Thompson Co. Ltd. (manufacturing); prior to
Director October 1994, President, G.F. Thompson Co. Ltd.
Elaine Elizabeth Everson...... Vice-President and Controller of Extendicare (Canada) Inc.
Controller since April 1994; Executive of Extendicare Inc.
</TABLE>
I-1
<PAGE> 39
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH EXTENDICARE INC. AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
George Alfred Fierheller...... President, Four Halls Inc. (investment company) since
Director January 1997; prior thereto, Vice-Chairman, Rogers
Communications Inc. (national communications); prior to
April 1993, Chairman and Chief Executive Officer, Rogers
Cantel Mobile Communications Inc. (mobile communications)
Dr. Seth Brian Goldsmith...... Professor, School of Public Health and Health Sciences,
Director University of Massachusetts; Chief Executive Officer of the
United States Citizen Miami Jewish Home & Hospital for the Aged since September
1996
David John Hennigar........... Chairman of Extendicare Inc.; Chairman, National Sea
Director, Chairman Products Limited (seafood products) since May 1995 (prior
thereto, Vice Chairman); Chairman, Acadian Securities Inc.
(investment dealer) since July 1994; Chairman, Annapolis
Basin Group (real estate development and holding company);
prior to May 1994, Vice-Chairman, Crown Life (life
insurance); prior to December 1993, Atlantic Regional
Director, Burns Fry Limited (investment dealer)
Michael John Langtry Kirby.... Senator of the Parliament of Canada; prior to January 1995,
Director Vice- President, Goldfarb Consultants (market research)
Len G. Koroneos............... Executive of Extendicare Inc.
Vice-President and Treasurer
Frederick Bernard Ladly....... Prior to January 1996, President and CEO, Extendicare Inc.;
Director, Deputy Chairman Chairman, Extendicare (Canada) Inc. since December 1994;
Vice-Chairman, Crown Life since May 1994; prior to December
1994, President and CEO, Extendicare (Canada) Inc.
Alvin Gerald Libin............ President of Balmon Holdings Ltd., (investment company)
Director
James Thomas MacQuarrie,
Q.C........................... Senior Partner, Stewart McKelvey Stirling Scales (barristers
Director and solicitors)
Derril Gordon McLeod, Q.C..... Counsel, Pedersen, Norman, McLeod & Todd (barristers and
Director solicitors); Conflicts of Interest Commissioner,
Saskatchewan Legislative Assembly; Saskatchewan Information
and Privacy Commissioner; Chairman of Board of Ralph McKay
Industries Inc. and Empire Plow Co. Inc.; Member of Senate
University of Regina; prior to February 1993, Partner,
Pedersen, Norman, McLeod & Todd
Melvin A. Rhinelander......... Executive of Extendicare Inc. and Vice-President and
Senior Vice-President, Secretary of Extendicare (Canada) Inc.
Corporate Services and
Secretary
Margaret Lynne Smith.......... Executive of Extendicare Inc.
Assistant Secretary
Barry Lloyd Stephens.......... Executive of Extendicare Inc.
Senior Vice-President, Finance
</TABLE>
2. Directors and Executive Officers of the Purchaser. Set forth below is
the name, current business address, citizenship and the present principal
occupation or employment and material occupations, positions, offices or
employments for the past five years of each director/officer of the Purchaser.
Unless otherwise indicated, each person identified below is employed by the
Purchaser. The principal address of the Purchaser and, unless otherwise
indicated below, the current business address for each individual listed below
is 3000
I-2
<PAGE> 40
Steeles Avenue East, Markham, Ontario. Unless otherwise indicated, each such
person is a citizen of Canada. Each such person is a director of the Purchaser.
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH AHC ACQUISITION CORP. AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Dr. Joy Durfee Calkin......... President and Chief Executive Officer of Extendicare Inc.
Chairman since August 1997; prior thereto, Vice-President (Academic)
and Provost, Professor, Faculty of Nursing, The University
of Calgary
J. Wesley Carter.............. Chief Operating Officer of Extendicare Inc. since December
Chief Executive Officer 1994; President of Extendicare Health Services, Inc. since
September 1997; President and Chief Executive Officer of
Extendicare (Canada) Inc. since December 1994; prior
thereto, Chairman, Manley Insurance Brokers Inc.
Stephen F. Dineley............ Executive of Extendicare Inc. since September 1997; prior
Vice-President and Chief thereto, Partner, KPMG, Chartered Accountants
Financial Officer
Melvin A. Rhinelander......... Senior Vice-President, Corporate Services and Secretary of
Vice-President and Secretary Extendicare Inc. since September, 1997 (prior thereto,
Vice-President of Extendicare Inc.) and Secretary of
Extendicare (Canada) Inc.
Barry Lloyd Stephens.......... Executive of Extendicare Inc.
Vice-President
</TABLE>
I-3
<PAGE> 41
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each stockholder of the
Company or his broker-dealer, commercial bank, trust company or other nominee to
the Depositary as follows:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
Facsimile Transmission By Hand or
By Mail: Copy Numbers: Overnight Courier:
<S> <C> <C>
P.O. Box 84 (212) 858-2611 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Reorganization Dept.
Attn: Reorganization Dept. Securities Processing Window
SC-1
</TABLE>
(For Eligible Institutions Only)
Confirm by Telephone
(212) 858-2103
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC. LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call toll free 1-800-322-2885
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Call toll free 1-888-281-1220
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 3, 1997
BY
AHC ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, OCTOBER 31, 1997,
UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
Facsimile Transmission By Hand or
By Mail: Copy Numbers: Overnight Courier:
<S> <C> <C>
P.O. Box 84 (212) 858-2611 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Reorganization Dept.
Attn: Reorganization Dept. Securities Processing Window SC-1
</TABLE>
(For Eligible Institutions Only)
Confirm by Telephone
(212) 858-2103
(Call Collect)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THAT LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders if
certificates for Shares (as defined below) are to be forwarded herewith or if
delivery of shares is to be made by book-entry transfer to the Depositary's
account at the Depositary Trust Company ("DTC") or the Philadelphia Depositary
Trust Company ("PTDC") (each, a "Book-Entry Transfer-Facility" and collectively,
the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer
procedure described in Section 3 of the Offer to Purchase (as defined below).
Delivery of documents to a Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
Stockholders whose certificates are not immediately available or who cannot
deliver their certificates and all other documents required hereby to the
Depositary so that they are received prior to 12:00 Midnight, New York City
time, on October 31, 1997 (or if the Offer is extended as provided in the Offer
to Purchase, prior to the time specified in such extension) must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. Delivery
of documents to the Purchaser or Parent (as both are defined below) does not
constitute a delivery to the Depositary.
<PAGE> 2
[ ]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name(s) of Tendering Institution:
--------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [ ] DTC [ ] PDTC
Account Number Transaction Code Number
-------------------- --------------------
[ ]CHECK HERE IF THE CERTIFICATES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY PRIOR TO THE DATE
HEREOF AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------------
Window Ticket Number (if any)
------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------
Name of Institution that Guaranteed Delivery
--------------------------------
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------------------
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATES ENCLOSED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
TOTAL SHARES..................................
- ----------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 3
STOCKHOLDER'S AGREEMENT
Ladies and Gentlemen:
The undersigned hereby tenders to AHC Acquisition Corp., a Delaware
corporation (the "Purchaser"), the above-described shares of Common Stock, par
value $0.03 per share ("Shares"), of Arbor Health Care Company, a Delaware
corporation (the "Company"), at $45.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Purchaser's Offer
to Purchase dated October 3, 1997 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with the
Offer to Purchase, each as amended or supplemented from time to time, constitute
the "Offer").
Accordingly, the undersigned hereby deposits with you the above-described
certificates representing the Shares. Subject to, and effective upon, acceptance
for payment of and payment for the Shares validly tendered herewith in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Purchaser, all right, title and
interest in and to all Shares tendered hereby that are purchased pursuant to the
Offer (and any and all other distributions, rights, Shares or other securities
issued or issuable in respect thereof on or after September 30, 1997) and hereby
irrevocably constitutes and appoints the Depositary as the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
such other distributions, rights, Shares or other securities), with full power
of substitution and resubstitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver certificates for
such Shares (and any such other distributions, rights, Shares, or other
securities), together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser, (b) present
such certificates (and any such other distributions, rights, Shares or other
securities) for cancellation and transfer of such Shares on the Company's books,
and (c) receive all benefits (including all dividends or distributions resulting
from any stock split, combination or exchange of Shares) and otherwise exercise
all rights of beneficial ownership of such Shares (and all such other
distributions, rights, Shares or other securities), all in accordance with the
terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any other distributions, rights, Shares or other securities
issued or issuable in respect thereof on or after September 30, 1997) and that
the Purchaser will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, and
the same will not be subject to any adverse claim, when and to the extent the
same are purchased by the Purchaser. Upon request, the undersigned will execute
and deliver any additional documents deemed by the Depositary or the Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby.
The undersigned hereby irrevocably appoints Dr. Joy D. Calkin, Barry L.
Stephens or any other designee of the Purchaser, and each of them, the attorneys
and proxies of the undersigned, each with full power of substitution, to vote in
such manner as such attorney and proxy or his substitute shall in his sole
discretion deem proper, and otherwise to act (including pursuant to written
consent) with respect to all the Shares tendered hereby which have been accepted
for payment by the Purchaser prior to the time of such vote or other action
(whether at an annual, special, adjourned or postponed meeting or by means of
written consent in lieu of such meetings or otherwise) of the Company's
stockholders or otherwise and any and all other shares of capital stock or other
securities issued or issuable in respect of such Shares on or after September
30, 1997. This appointment is effective upon the purchase of such Shares by the
Purchaser as provided in the Offer to Purchase. This proxy is irrevocable and
coupled with an interest and is granted in consideration of the purchase of such
Shares. Such purchase shall revoke all prior proxies given by the undersigned at
any time with respect to such Shares (and such other distributions, rights,
Shares or other securities issued in respect thereof) and no subsequent proxies
will be given with respect thereto by the undersigned, and if given shall not be
valid.
The undersigned understands that the valid tender of Shares pursuant to one
of the procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute an agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, trustees
in bankruptcy and legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
<PAGE> 4
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of any Shares
purchased and/or return any certificates for Shares not tendered or not accepted
for payment in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price for any Shares purchased and return any certificates for Shares
not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that the boxes entitled "Special
Payment Instructions" and "Special Delivery Instructions" are both completed,
please issue the check for the purchase price of all Shares purchased and return
all certificates representing Shares not purchased or not tendered in the
name(s) of, and mail such check and certificates to, the person(s) so indicated.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please credit any Shares tendered hereby and delivered by
book-entry transfer, but which are not purchased, by crediting the account at
the Book-Entry Transfer Facility designated above. The undersigned recognizes
that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not purchase any of the Shares tendered hereby.
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Certificates evidencing Shares not tendered or not purchased are
to be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased
are to be returned by credit to an account at one of the Book-Entry Transfer
Facilities other than that designated above.
Issue [ ] check [ ] Certificate(s) to:
Name:
--------------------------------------------------------------
(Print)
Address:
--------------------------------------------------------------
--------------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
[ ] Credit Shares delivered by book-entry
transfer and not purchased to the account
set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
Account Number
-------------------------------------------------------------
===============================================================
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Certificates evidencing Shares not tendered or not purchased are
to be mailed to someone other than that shown under "Description of Shares
Tendered."
Mail [ ] check [ ] Certificate(s) to:
Name:
--------------------------------------------------------------
(Print)
Address:
--------------------------------------------------------------
--------------------------------------------------------------
(Include Zip Code)
---------------------------------------------------------------
<PAGE> 5
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
- --------------------------------------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by an officer of a corporation, trustee, executor,
administrator, guardian, attorney or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 5. For
information concerning signature guarantees, see Instruction 1.)
Dated: , 1997
--------------------------------------------------------------
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (Full Title):
- --------------------------------------------------------------------------------
(See Instructions)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURES
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(Please Print)
Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Dated: , 1997
-------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution which is a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing in the Security Transfer
Agents Medallion Program (each an "Eligible Institution"). No signature
guarantee is required on this Letter of Transmittal (a) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the reverse hereof, or (b) if such Shares are tendered for the
account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal (or a manually signed facsimile thereof)
is to be used if certificates are to be forwarded herewith. Except as
hereinafter provided, for a stockholder to tender Shares validly, certificates
for all physically tendered Shares, together with a properly completed and duly
executed Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to the
Depositary at one of the appropriate addresses set forth herein and must be
received by the Depositary on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). If stock certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date, such Shares may be tendered if all the
following conditions are met: (a) such tender is made by or through an Eligible
Institution; (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by the
Depositary on or prior to the Expiration Date; and (c) the certificates for all
physically delivered Shares, together with a properly completed and duly
executed Letter of Transmittal and any other documents required by this Letter
of Transmittal, are received by the Depositary within three days after the date
of the execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Depositary and must include a signature guaranteed
by an Eligible Institution and by otherwise complying with the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
The stockholder understands that tenders of Shares pursuant to any one of
the procedures described in "Procedure for Tendering Shares" -- Section 3 of the
Offer to Purchase and in the instructions hereto will constitute a binding
agreement between the stockholder and the Purchaser upon the terms and
conditions of the Offer.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND OTHER DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED OF THE DEPOSITARY. IF SENT BY MAIL, REGISTERED MAIL
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractions of Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal, waive any right to receive any notice of the
acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule and
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares evidenced by any
certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered." A new certificate
for the remainder of the Shares evidenced by your old certificate(s) will be
sent to you as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
names as written on the face of the certificate(s) without any change
whatsoever.
(b) If the Shares tendered are held of record by two or more joint holders,
all such holders must sign this Letter of Transmittal.
(c) If any Shares tendered are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required. If, however, payment is to be made to, or the certificates
for Shares not tendered or accepted for payment are to be issued to, a person
other than the registered holder(s), then the certificates transmitted hereby
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
<PAGE> 7
(e) If this Letter of Transmittal is signed by a person other than the
registered holder of the certificates tendered, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers required by Instruction 1 above
must be guaranteed by an Eligible Institution.
(f) If this Letter of Transmittal or any certificates or stock powers are
signed by officers of corporations, trustees, executors, administrators,
guardians, attorneys-in-fact or others acting in a fiduciary representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Purchaser of their authority so to act.
6. STOCK TRANSFER TAXES. The Tendering Stockholder will be responsible for
the payment of all stock transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. The amount of any stock transfer
taxes will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or certificate(s)
representing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered", the appropriate boxes in this Letter
of Transmittal must be completed. Stockholders delivering Shares tendered hereby
by book entry transfer may request that Shares not purchased be credited to such
account maintained at a Book-Entry Transfer Facility as such stockholder may
designate in the box entitled "Special Payment Instructions". If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated herein as
the account from which such Shares were delivered.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including timeless of receipt) and acceptance for payment of any tender of
Shares will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any determined by it to be not in
appropriate form or the acceptance of or payment for which may, in the opinion
of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender with respect to any particular Shares or any
particular stockholder, and the Purchaser's interpretations of the terms and
conditions of the Offer (including these instructions) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Purchaser shall
determine. None of the Purchaser, the Depositary or the Information Person or
any other person will be under duty to give notification of any defects or
irregularities in tenders, or incur any liability for failure to give such
notification. Tenders will not be deemed to have been validly made until all
defects and irregularities have been cured or waived.
9. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9. Failure to provide the information on the form may subject
the tendering stockholder to 31% federal income tax withholding on any amount
otherwise payable to the stockholder. The box in Part 2 of the form may be
checked if the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future. If the box in
Part 2 is checked and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% on all payments of the purchase price
thereafter until a TIN is provided to the Depositary.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be directed to the Information Person at the address set forth below or your
broker, dealer, commercial bank or trust company.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO
THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
<PAGE> 8
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with his correct taxpayer identification number on Substitute For W-9. If such a
stockholder is an individual, the taxpayer identification number is his Social
Security number. For businesses and other entities, the taxpayer identification
number is its Employer Identification Number. If the Depositary is not provided
with the correct taxpayer identification number, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service, and payments made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to federal income tax backup withholding. To prevent federal income tax
backup withholding on payments made to a stockholder with respect to Shares
purchased pursuant to the Offer, each stockholder is required to notify the
Depositary with his correct taxpayer identification number by completing the
form certifying that the taxpayer identification number provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a taxpayer
identification number) and that (1) the stockholder has not been notified by the
Internal Revenue Service that he is subject to federal income tax backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the stockholder that he is no longer
subject to federal income tax backup withholding.
Exempt stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these federal income tax backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, that stockholder must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-9 for
additional instructions.
If federal income tax backup withholding applies, the Depositary is
required to withhold 31% of the payments made to a stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to federal income tax backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund
generally may be obtained.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
number or Employer Identification Number of the registered holder of the Shares.
If the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 9
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT AND
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. TIN:________________
Social Security Number
or Employer
Identification Number
----------------------------------------------------------------------------------------------------
Department of the
Treasury, Internal Name (Please Print) PART 2
Revenue Service --------------------------------------------------------------- Awaiting [ ]
PAYOR'S REQUEST FOR TAXPAYER Address TIN
IDENTIFICATION NUMBER ---------------------------------------------------------------
("TIN") AND CERTIFICATION City State Zip Code
--------------------------------------------------------------------------------------------------
PART 3--CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: (1) the
number shown on this form is my correct taxpayer identification number (or a TIN has not been
issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in
the near future), (2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends or the IRS has notified me that I am no
longer subject to backup withholding, and (3) all other information provided on this form is true,
correct and complete.
--------------------------------------------------------------------------------------------------
SIGNATURE ________________________________________________________________ DATE: ________________
You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because of underreporting interest or dividends on your tax return.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE INFORMATION AGENT IS:
MACKENZIE PARTNERS, INC. LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call toll free 1-800-322-2885
THE DEALER MANAGER FOR THE OFFER IS:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(888) 281-1220
<PAGE> 1
EXHIBIT (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") representing shares of Common Stock, par value $0.03 per
share (the "Shares"), of Arbor Health Care Company, a Delaware corporation, are
not immediately available, (ii) or time will not permit all required documents
to reach IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"),
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase
(as defined below)) or (iii) if the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or mail or transmitted by telegram or
facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
By Hand or
By Mail: By Facsimile Transmission: Overnight Courier:
<S> <C> <C>
P.O. Box 84 (212) 858-2611 1 State Street
Bowling Green Station Confirm by Telephone: New York, New York 10004
New York, New York 10274-0084 (212) 858-2103 Attn: Reorganization Dept.
Attn: Reorganization Dept. Securities processing Window SC-1
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
1
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to AHC Acquisition Corp., a Delaware
corporation and an indirect wholly owned subsidiary of Extendicare Inc., a
Canadian corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 3, 1997 and the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"), receipt of which is hereby acknowledged,
____________ Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Certificate No(s). (if available):
-----------------------------------------------------------------
-----------------------------------------------------------------
Check ONE box if shares will be tendered by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
---------------------------------------------------
Dated: , 1997
------------------------------------------------------
Name(s) of Record Holder(s):
- -------------------------------------------------------------------
- -------------------------------------------------------------------
(Please Type or Print)
Address(es):
-------------------------------------------------------
- -------------------------------------------------------------------
(Zip Code)
Area Code and Telephone No(s):
- -------------------------------------------------------------------
Signature(s):
------------------------------------------------------
- -------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (b) guarantees delivery to the
Depositary, at one of its addresses set forth above, of certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
accounts at The Depository Trust Company or the Philadelphia Depository Trust
Company, in each case with delivery of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), and any other required
documents, within three New York Stock Exchange, Inc. trading days after the
date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm:
----------------------------------------------------
------------------------------------------------------------------
(Authorized Signature)
Address:
-------------- -------------------------------------------
------------------------------------------------------------------
(Zip Code)
Title:
-------------------------------------------------------------
Name:
--------------------------------------------------------------
(Please Print or Type)
Area Code and Telephone No.:
---------------------------------------
Dated: , 1997
-------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH LETTER OF TRANSMITTAL
2
<PAGE> 1
EXHIBIT (a)(4)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
AT
$45.00 NET PER SHARE IN CASH
BY
AHC ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
October 3, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by AHC Acquisition Corp., a Delaware corporation
(the "Purchaser") and an indirect wholly owned subsidiary of Extendicare Inc.
("Parent"), to act as Dealer Manager in connection with the Purchaser's offer to
purchase all outstanding shares of Common Stock, $0.03 par value (the "Shares"),
of Arbor Health Care Company, a Delaware corporation (the "Company"), at a
purchase price of $45.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Purchaser's Offer to Purchase
dated October 3, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer") enclosed herewith. The Offer is being made pursuant to
an Agreement and Plan of Merger dated as of September 29, 1997 (the "Merger
Agreement"), among Parent, the Purchaser and the Company. All capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to them
in the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. The Offer to Purchase dated October 3, 1997;
2. The Letter of Transmittal to be used by stockholders of the Company
accepting the Offer and tendering Shares pursuant thereto;
3. A letter that may be sent to your clients for whose account you
hold Shares in your name or in the name of your nominee, with space
provided for obtaining such client's instructions with regard to the Offer;
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
the certificates evidencing Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase);
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to the Depositary.
1
<PAGE> 2
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
FRIDAY, OCTOBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES
REPRESENTING AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS.
THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE
OFFER TO PURCHASE. SEE SECTION 14 OF THE OFFER TO PURCHASE.
The Company Board has unanimously approved the Offer and the Merger, has
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders, and recommends that stockholders
accept the Offer and tender their Shares.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, all Shares validly tendered on or prior to the Expiration Date and not
properly withdrawn (in accordance with the procedures set forth in Section 4),
promptly after the Expiration Date. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the Share Certificates or timely Book-Entry Confirmation of such Shares,
if such procedure is available, into the Depositary's account at the Book-Entry
Transfer Facilities pursuant to the procedures set forth in Section 3 of the
Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker, dealer or other person (other than the Dealer Manager, the Depositary
and the Information Agent, as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. You will be reimbursed upon request for
reasonable expenses incurred by you in forwarding the enclosed offering
materials to your customers.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from,
MacKenzie Partners, Inc., the Information Agent, at 156 Fifth Avenue, New York,
NY 10010, (800) 322-2885, or Bear, Stearns & Co., Inc., the Dealer Manager, at
245 Park Avenue, New York, NY 10167, (888) 281-1220.
Very truly yours,
Bear, Stearns & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR
ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT (a)(5)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
AT
$45.00 NET PER SHARE IN CASH
BY
AHC ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
October 3, 1997
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated October 3,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to an offer by AHC Acquisition Corp., a Delaware corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Extendicare Inc., a
Canadian corporation ("Parent"), to purchase shares of Common Stock, $0.03 par
value (the "Shares"), of Arbor Health Care Company, a Delaware corporation (the
"Company"), at a purchase price of $45.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer. Also
enclosed is the Letter to Stockholders of the Company from the President, Chief
Executive Officer and Chairman of the Board of the Company accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9. All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Offer to Purchase.
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF THE SHARES
HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER
OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE
MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT
BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $45.00 per Share, net to the seller in cash.
2. THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
3. The Offer is being made for all outstanding Shares.
1
<PAGE> 2
4. The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of September 29, 1997 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that the Purchaser
will be merged (the "Merger") with and into the Company after the
completion of the Offer and the satisfaction of certain conditions. As a
result of the Merger, each Share issued and outstanding immediately prior
to the Effective Time (as defined in the Merger Agreement) (other than
Shares then owned by the Company, Parent, the Purchaser, any other direct
or indirect subsidiary of Parent or by the stockholders of the Company, if
any, who dissent from the Merger and comply with all of the provisions of
the Delaware General Corporation Law concerning the right, if applicable,
of holders of Shares to seek appraisal of their Shares) will be converted
into the right to receive the price paid in the Offer in cash, without
interest.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date a number of
Shares representing at least a majority of the Shares outstanding on a
fully diluted basis.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, October 31, 1997, unless the Offer is extended
by the Purchaser. In all cases, payment for Shares purchased pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates or timely Book-Entry Confirmation of such Shares, if
such procedure is available, into the Depositary's account at the
Book-Entry Transfer Facilities pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of
Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. If
you authorize tender of your Shares, all such Shares will be tendered unless
otherwise specified below. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED PROMPTLY
TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. If the securities laws of any jurisdiction require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated October 3, 1997, of AHC Acquisition Corp., a Delaware corporation
and an indirect wholly owned subsidiary of Extendicare Inc., a Canadian
corporation, and the related Letter of Transmittal, relating to shares of Common
Stock, $0.03 par value (the "Shares"), of Arbor Health Care Company, a Delaware
corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned on the terms and conditions set forth in such Offer to Purchase and
the related Letter of Transmittal.
Number of Shares to be Tendered:* ______ Shares
<TABLE>
<CAPTION>
<S> <C>
SIGN HERE
-----------------------------------------------
Signature(s)
-----------------------------------------------
(Print Name(s))
-----------------------------------------------
(Print Address(es))
-----------------------------------------------
(Area Code and Telephone Number(s))
-----------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- -------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE> 1
EXHIBIT (a)(6)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
AT
$45.00 NET PER SHARE IN CASH
BY
AHC ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
EXTENDICARE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
October 3, 1997
To Participants in the Arbor Health Care Company 401(k) Plan
and the Arbor Health Care Company Employee Stock Purchase Plan:
Enclosed for your consideration is an Offer to Purchase dated October 3,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to an offer by AHC Acquisition Corp., a Delaware corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Extendicare Inc., a
Canadian corporation ("Parent"), to purchase shares of Common Stock, $0.03 par
value (the "Shares"), of Arbor Health Care Company, a Delaware corporation (the
"Company"), at a purchase price of $45.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer. All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Offer to Purchase.
THIS MATERIAL IS BEING SENT TO YOU AS A PARTICIPANT IN THE ARBOR HEALTH
CARE COMPANY 401(k) PLAN AND/OR THE ARBOR HEALTH CARE COMPANY EMPLOYEE STOCK
PURCHASE PLAN WHO HAS SHARES CREDITED TO YOUR ACCOUNT BUT NOT REGISTERED IN YOUR
NAME. WE ARE THE HOLDER OF RECORD OF ALL PLAN SHARES HELD BY US AS TRUSTEE OF
THE 401(k) PLAN OR CUSTODIAN OF THE STOCK PURCHASE PLAN (INCLUDING THE SHARES
CREDITED TO YOUR ACCOUNT(S)). A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO
TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us which are credited to your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $45.00 per Share, net to the seller in cash.
2. THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
3. The Offer is being made for all outstanding Shares.
1
<PAGE> 2
4. The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of September 29, 1997 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that the Purchaser
will be merged (the "Merger") with and into the Company after the
completion of the Offer and the satisfaction of certain conditions. As a
result of the Merger, each Share issued and outstanding immediately prior
to the Effective Time (as defined in the Merger Agreement) (other than
Shares then owned by the Company, Parent, the Purchaser, any other direct
or indirect subsidiary of Parent or by the stockholders of the Company, if
any, who dissent from the Merger and comply with all of the provisions of
the Delaware General Corporation Law concerning the right, if applicable,
of holders of Shares to seek appraisal of their Shares) will be converted
into the right to receive the price paid in the Offer in cash, without
interest.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date a number of
Shares representing at least a majority of the Shares outstanding on a
fully diluted basis.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, October 31, 1997, unless the Offer is extended
by the Purchaser. In all cases, payment for Shares purchased pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates or timely Book-Entry Confirmation of such Shares, if
such procedure is available, into the Depositary's account at the
Book-Entry Transfer Facilities pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of
Transmittal.
If you wish to have us tender any or all the Shares credited to your Plan
account(s), please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth below. An envelope to return your
instructions to us is enclosed. If you authorize tender of the Shares credited
to your Plan account(s), all such Shares will be tendered unless otherwise
specified below. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED PROMPTLY TO PERMIT
US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. If the securities laws of any jurisdiction require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ARBOR HEALTH CARE COMPANY
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated October 3, 1997, of AHC Acquisition Corp., a Delaware corporation
and an indirect wholly owned subsidiary of Extendicare Inc., a Canadian
corporation, and the related Letter of Transmittal, relating to shares of Common
Stock, $0.03 par value (the "Shares"), of Arbor Health Care Company, a Delaware
corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account(s) of
the undersigned on the terms and conditions set forth in such Offer to Purchase
and the related Letter of Transmittal.
NOTE: Shares in Plan accounts as to which we have not received instructions
will be tendered in the Offer in the same proportions as are Shares for
which instructions are received, are tendered.
Number of Shares to be Tendered:* ______ Shares
<TABLE>
<CAPTION>
<S> <C>
SIGN HERE
-----------------------------------------------
Signature
-----------------------------------------------
(Print Name)
-----------------------------------------------
(Print Address)
-----------------------------------------------
(Area Code and Telephone Number)
-----------------------------------------------
Social Security Number
</TABLE>
- -------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE> 1
EXHIBIT (a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
GIVE THE GIVE THE
FOR THIS TYPE OF SOCIAL SECURITY FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF-- ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's The individual 8. Sole proprietorship The owner(4)
account account
2. Two or more The actual owner of the 9. A valid trust, The legal entity (do
individuals account or, if combined estate, or pension not furnish the
(joint account) funds, the first trust identifying number of
individual on the the personal
account representative or
3. Husband and wife The actual owner of the trustee unless the
(joint account) account or, if joint legal entity itself is
funds, either person(1) not designated in the
4. Custodian account The minor(2) account title.)(5)
of a minor (Uniform 10. Corporate account The corporation
Gift to Minors Act) 11. Religious, The organization
5. Adult and minor The adult or, if the charitable or
(joint account) minor is the only educational
contributor, the organization
minor(1) account
6. Account in the name The ward, minor, or 12. Partnership account The partnership
of guardian or incompetent person(3) held in the name of
committee for a the business
designated ward, 13. Association, club The organization
minor, or or other tax-exempt
incompetent person organization
7. a. The usual The grantor-trustee(1) 14. A broker or The broker or nominee
revocable registered nominee
savings trust 15. Account with the The public entity
account (grantor Department of
is also trustee) Agriculture in the
b. So-called trust The actual owner(1) name of a public
account that is entity (such as a
not a legal or State or local
valid trust governmental,
under State law school district or
prison) that
receives
agricultural
program payments.
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number at an office of the Social
Security Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS or PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend and certain other payments to a payee
who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
<TABLE>
<S> <C>
EXHIBIT (a)(8)
NEWS RELEASE
FOR IMMEDIATE RELEASE
SEPTEMBER 30, 1997
</TABLE>
EXTENDICARE TO ACQUIRE ARBOR FOR US$45.00 PER SHARE
MARKHAM, ONTARIO and LIMA, OHIO -- Extendicare Inc. ("Extendicare") (TSE/ME
stock symbols: EXE, EXE.A; NYSE stock symbol: EXE.A) through its wholly owned
United States subsidiary Extendicare Health Services, Inc. (formerly United
Health, Inc.) and Arbor Health Care Company ("Arbor") today jointly announced
that they have signed a definitive agreement whereby Extendicare will acquire
Arbor (Nasdaq: AHCC), through a cash tender offer, for US$45.00 per share. The
transaction, which will be accounted for as a purchase, is valued at US$432
million, including the assumption of approximately US$107 million of Arbor debt.
Arbor has approximately 7.2 million fully diluted shares outstanding. The
transaction has been approved by the Boards of both companies, and is expected
to close in the fourth quarter of 1997.
Pier C. Borra, Chairman, President and Chief Executive Officer of Arbor has
entered into a stockholder agreement whereby he has agreed to tender and vote
his shares in favor of the transaction. Extendicare intends to commence a tender
offer for all of Arbor's shares on October 3, 1997.
The transaction will add Arbor's 31 nursing facilities with approximately 3,700
beds, four institutional pharmacies serving 27,000 beds, and ten comprehensive
outpatient rehabilitation facilities to Extendicare's 279 nursing facilities
with approximately 28,300 beds, creating one of the largest operators of
long-term care in North America. Annualized second quarter revenues of Arbor
amounted to US$241 million.
"We believe Arbor is a premier subacute care provider that will complement our
existing operations in both Florida and Ohio. We expect that this consolidation
will lead to greater efficiency in providing services, significant operating
synergies, and future margin improvements. We expect this transaction to be
non-dilutive to earnings in 1998 and accretive in 1999", said Dr. Joy D. Calkin,
President and Chief Executive Officer of Extendicare Inc.
Pier C. Borra, Chairman, President and Chief Executive Officer of Arbor stated,
"We are very pleased with this combination which provides Arbor shareholders
with a very attractive return. In addition, combining Extendicare's existing
operations with Arbor's high quality facilities, and market concentration will
allow the combination to continue Arbor's strategy of providing high quality
subacute services. We are excited to be part of a great organization that will
become an even stronger player in our industry."
Bank financing for the transaction, will be provided by NationsBank. Bear
Stearns & Co. Inc. is acting as advisor to Extendicare, and will act as
dealer-manager for the tender offer. Raymond James & Associates, Inc. is acting
as advisor to Arbor.
In its 30th year of operation, Extendicare operates long-term care facilities in
North America, with more than 34,000 employees in the United States, Canada and
the United Kingdom. The corporation also provides medical specialty services,
including subacute care and rehabilitative therapy services, institutional
pharmacy services, and other medical supplies and services in the United States;
and home care and rehabilitative therapy services in Canada. Extendicare
currently has an equity market value of US$1.2 billion.
<PAGE> 2
Extendicare management will host a breakfast in Boston on Wednesday, October 1
at 8:00 a.m. at the Boston Harbor Hotel (70 Rowes Wharf), and lunch on
Wednesday, October 1 at 12 noon in New York at the St. Regis Hotel (2 E. 55(th)
Street). Please call Elizabeth Serbek at Bear Stearns at 212-272-3582 to sign up
for any of these meetings.
Statements contained in this press release which are not historical facts are
forward-looking statements. In addition, the parties, through their senior
management, may from time to time make forward-looking public statements
concerning the matters described herein. Such forward-looking statements are
necessarily estimates reflecting the best judgment of the party making such
statements based upon current information and involve a number of risks and
uncertainties. Factors which could affect the accuracy of such forward-looking
statements include the possibility that Extendicare may be unable to realize
expected synergies. Forward-looking statements contained in this press release
or in other public statements of the parties should be considered in light of
those factors. There can be no assurance that such factors or other factors will
not affect the accuracy of such forward-looking statements.
For further information contact:
Barry L. Stephens
Senior Vice-President, Finance
Telephone: 905-470-5579
Fax: 905-470-4003
<PAGE> 1
EXHIBIT (b)
September 29, 1997
Extendicare Inc.
3000 Steeles Avenue East
Markham, Ontario L3R 9W2
Attention: Barry L. Stephens
RE: Acquisition Financing
---------------------
Ladies and Gentlemen:
You have advised us that Extendicare Health Services, Inc. (the "Borrower") has
formed an acquisition subsidiary (the "Acquisition Subsidiary") and that the
Acquisition Subsidiary intends to make an offer (the "Offer") to acquire an
existing public company that you have identified to us with a code name of
"Camelot" (hereafter "Camelot"). Hereinafter the acquisition of Camelot may be
referred to as the "Acquisition". The Acquisition will be structured as a tender
offer by the Acquisition Subsidiary for the shares of Camelot, followed by a
merger of the Acquisition Subsidiary into Camelot. You have advised us that up
to $800 million in senior debt financing will be required in order to effect the
Acquisition, to pay the costs and expenses related to the Acquisition, refinance
certain existing indebtedness and to provide for ongoing general corporate
purposes after completion of the Acquisition and that no external financing will
be required in connection with the Acquisition other than the financing
described herein and, if elected by the Borrower, the subordinated debt
financing described in the attached term sheet (the "Subordinated Debt").
In connection with the foregoing, NATIONSBANK, N.A. ("NATIONSBANK" or the
"AGENT") is pleased to advise you of its commitment to provide the full
principal amount of the Credit Facilities described in the term sheet attached
hereto as Annex I (the "Term Sheet"). NationsBanc Capital Markets, Inc. ("NCMI")
is pleased to advise you of its commitment, as Arranger and Syndication Agent
for the Credit Facilities, to form a syndicate of financial institutions (the
"Lenders") reasonably acceptable to you for the Credit Facilities. All
capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Term Sheet.
The commitments of NationsBank and NCMI hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NCMI in their sole discretion:
(a) each of the terms and conditions set forth herein;
<PAGE> 2
(b) each of the terms and conditions set forth in the Term Sheet;
(c) the absence of a material breach of any representation or
warranty of the Borrower set forth herein;
(d) execution of the fee letter dated the date hereof among the
Borrower, NationsBank and NCMI (the "Fee Letter") prior to or
concurrently with the acceptance by the Borrower of this letter;
(e) the negotiation, execution and delivery of definitive
documentation with respect to the Credit Facilities consistent
with the Term Sheet and otherwise satisfactory to NationsBank
and NCMI; and
(f) there not having occurred and being continuing since the date
hereof a material adverse change in the market for syndicated
bank credit facilities in the United States or Canada or a
material disruption of, or a material adverse change in,
financial, banking or capital market conditions in the United
States or Canada, in each case as determined by NationsBank and
NCMI in their sole discretion.
NationsBank will act as Agent for the Credit Facilities and NCMI will act as
Arranger and Syndication Agent for the Credit Facilities. No additional agents
will be appointed without the prior approval of NationsBank and NCMI.
Furthermore, the commitments of NationsBank and NCMI hereunder are based upon
the financial and other information regarding the Borrower, Camelot and their
respective subsidiaries previously provided to NationsBank and NCMI and are
subject to the condition, among others, that there shall not have occurred after
the date of such information, in the opinion of NationsBank and NCMI, any
material adverse change in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or prospects of the
Borrower and its subsidiaries or Camelot and its subsidiaries, in either case
taken as a whole. If the continuing review by NationsBank and NCMI of the
Borrower or Camelot discloses information relating to conditions or events not
previously disclosed to NationsBank and NCMI or relating to new information or
additional developments concerning conditions or events previously disclosed to
NationsBank and NCMI which NationsBank and NCMI in their sole discretion believe
could be reasonably likely to have a material adverse effect on the condition
(financial or otherwise), assets, properties, business, operations or prospects
of the Borrower or Camelot, NationsBank and NCMI may, in its sole discretion,
suggest alternative financing amounts or structures that ensure adequate
protection for the Lenders or decline to participate in the proposed financing.
You agree to actively assist NationsBank and NCMI in achieving a syndication of
the Credit Facilities that is satisfactory to NationsBank, NCMI and you. In the
event that such syndication cannot be achieved in a manner satisfactory to
NationsBank and NCMI under the structure outlined in the Term Sheet you agree to
cooperate with NationsBank and NCMI in developing an alternative structure that
will permit a satisfactory syndication of the Senior Credit Facilities.
Syndication of the Credit Facilities will be accomplished by a variety of means,
including direct contact during the syndication between senior management and
advisors of the Borrower and
2
<PAGE> 3
Camelot, and the proposed Lenders. To assist NationsBank and NCMI in the
syndication efforts, you hereby agree to (a) provide and cause your advisors to
provide NationsBank and NCMI and the other Lenders upon request with all
information reasonably deemed necessary by NationsBank and NCMI to complete
syndication, including but not limited to information and evaluations prepared
by the Borrower and Camelot and their advisors, or on their behalf, relating to
the Acquisition, (b) assist NationsBank and NCMI upon their reasonable request
in the preparation of an Information Memorandum to be used in connection with
the syndication of the Credit Facilities and (c) otherwise assist NationsBank
and NCMI in their syndication efforts, including by making available officers
and advisors of the Borrower and Camelot and their subsidiaries from time to
time to attend and make presentations regarding the business and prospects of
the Borrower and Camelot and their subsidiaries, as appropriate, at a meeting or
meetings of prospective Lenders. You further agree to refrain from engaging in
any additional financings for Camelot (except as described in this letter and
except, if elected by the Borrower, the Subordinated Debt) during such
syndication process unless otherwise agreed to by NationsBank and NCMI.
It is understood and agreed that NationsBank and NCMI, after consultation with
you, will manage and control all aspects of the syndication, including decisions
as to the selection of proposed Lenders and any titles offered to proposed
Lenders, when commitments will be accepted and the final allocations of the
commitments among the Lenders. It is understood that no Lender participating in
the Credit Facilities will receive compensation from you outside the terms
contained herein and in the Term Sheet in order to obtain its commitment. It is
also understood and agreed that the amount and distribution of the fees among
the Lenders will be at the sole discretion of NationsBank and NCMI and that any
syndication prior to execution of definitive documentation will reduce the
commitment of NationsBank.
You hereby represent, warrant and covenant that (i) to the best of your
knowledge all information, other than Projections (as defined below), which has
been or is hereafter made available to NationsBank and NCMI or the Lenders by
you or any of your representatives in connection with the transactions
contemplated hereby ("INFORMATION") is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading and (ii) all financial projections concerning
the Borrower and Camelot that have been or are hereafter made available to
NationsBank and NCMI or the Lenders by you or any of your representatives (the
"PROJECTIONS") have been or will be prepared in good faith based upon reasonable
assumptions. You agree to furnish us with such Information and Projections as we
may reasonably request and to supplement the Information and the Projections
from time to time until the closing of the Credit Facilities ("Closing") so that
the representation and warranty in the preceding sentence is correct on the such
date. In arranging and syndicating the Credit Facilities, NationsBank and NCMI
will be using and relying on the Information and the Projections without
independent verification thereof.
By executing this letter agreement, you agree to reimburse NationsBank and NCMI
from time to time on demand for all reasonable out-of-pocket fees and expenses
(including, but not limited to, the reasonable fees, disbursements and other
charges of Moore & Van Allen, PLLC, as counsel to NationsBank and the other
Lenders) incurred in connection with the Credit Facilities and the preparation
of the definitive documentation for the Credit Facilities and the other
transactions contemplated hereby.
3
<PAGE> 4
In the event that NationsBank or NCMI becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter contemplated
by this letter (other than any action, proceeding or investigation from or
arising out of the gross negligence or willful misconduct of NationsBank or
NCMI), the Borrower will reimburse NationsBank and NCMI for their reasonable
legal and other expenses (including the cost of any investigation and
preparation) as they are incurred by NationsBank or NCMI. The Borrower also
agrees to indemnify and hold harmless NationsBank, NCMI and their affiliates and
their respective directors, officers, employees and agents (the "Indemnified
Parties") from and against any and all losses, claims, damages and liabilities,
joint or several, related to or arising out of any matters contemplated by this
letter (including, without limitation, the Acquisition), unless and only to the
extent that it shall be finally judicially determined that such losses, claims,
damages or liabilities resulted primarily from the gross negligence or willful
misconduct of NationsBank or NCMI.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NCMI hereunder.
As described herein and in the Term Sheet, NCMI will act as Arranger and
Syndication Agent for the Credit Facilities. NationsBank reserves the right to
allocate, in whole or in part, to NCMI certain fees payable to NationsBank in
such manner as NationsBank and NCMI agree in their sole discretion. You
acknowledge and agree that NationsBank may share with any of its affiliates
(including specifically NCMI) any information relating to the Credit Facilities,
the Borrower, Camelot and their subsidiaries and affiliates.
This letter agreement may not be assigned by the Borrower without the prior
written consent of NationsBank and NCMI.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than noon, Eastern Daylight
Savings Time, on September 30, 1997. This letter agreement will become effective
upon your delivery to us of executed counterparts of this letter agreement and
the Fee Letter and, without limiting the more specific terms hereof and of the
Term Sheet, you agree upon acceptance of this commitment to pay the fees set
forth in the Term Sheet and in the Fee Letter. This commitment shall terminate
if not so accepted by you prior to that time. Following acceptance by you, this
commitment will terminate on December 31, 1997, unless the Credit Facilities are
closed by such time.
Except as required by applicable law, this letter and the Fee Letter and the
contents hereof and thereof shall not be disclosed by you to any third party
without the prior consent of NationsBank and NCMI, other than to Camelot in
connection with the Offer and to your attorneys, financial advisors and
accountants, in each case to the extent necessary in your reasonable judgment.
Without limiting the foregoing, in the event that you disclose the contents of
this letter in contravention of the preceding sentence, you shall be deemed to
have accepted the terms of this letter and the Fee Letter.
4
<PAGE> 5
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet and the Fee
Letter, embodies the entire agreement and understanding among NationsBank, NCMI
and the Borrower with respect to the specific matters set forth herein and
supersedes all prior agreements and understandings relating to the subject
matter hereof. No party has been authorized by NationsBank or NCMI to make any
oral or written statements inconsistent with this letter. THIS LETTER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Very truly yours,
NATIONSBANK, N.A.
By:_____________________________________
Title:__________________________________
NATIONSBANC CAPITAL MARKETS, INC.
By:_____________________________________
Title:__________________________________
ACCEPTED AND AGREED TO:
EXTENDICARE HEALTH SERVICES, INC.
By:________________________________
Title:_____________________________
Date:______________________________
5
<PAGE> 6
ANNEX I
EXTENDICARE HEALTH SERVICES, INC.
SUMMARY OF TERMS & CONDITIONS
================================================================================
BORROWER: Extendicare Health Services, Inc., a wholly owned subsidiary
of Extendicare Holdings, Inc. (the "Parent").
GUARANTORS: The Credit Facilities shall be guaranteed by the Parent and
all existing and hereafter acquired direct and indirect
domestic subsidiaries of the Parent and the Borrower. All
guarantees shall be guarantees of payment and not of
collection.
AGENT: NationsBank, N.A. (the "Agent" or "NationsBank") will act as
sole and exclusive administrative and collateral agent. As
such, NationsBank will negotiate with the Borrower, act as
the primary contact for the Borrower and perform all other
duties associated with the role of exclusive administrative
agent. No other agents or co-agents may be appointed without
the prior written consent of NationsBank and NCMI.
ARRANGER &
SYNDICATION AGENT: NationsBanc Capital Markets, Inc. ("NCMI").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NCMI, which institutions shall be
acceptable to the Borrower and the Agent (collectively, the
"Lenders").
CREDIT FACILITIES: An aggregate principal amount of up to $800 million will be
available under the conditions hereinafter set forth:
REVOLVING CREDIT FACILITY: $200 million revolving credit
facility, which will include a $50 million sublimit for the
issuance of standby and commercial letters of credit (each a
"Letter of Credit"). Letters of Credit will be issued by
NationsBank (in such capacity, the "Fronting Bank"), and
each Lender will purchase an irrevocable and unconditional
participation in each Letter of Credit.
TRANCHE A TERM LOAN FACILITY: $200 million term loan
facility.
TRANCHE B TERM LOAN FACILITY: $200 million term loan
facility.
1
<PAGE> 7
TRANCHE C BRIDGE LOAN FACILITY: $200 million bridge loan
facility.
Notwithstanding the foregoing, (i) the Agent reserves the
right prior to Closing, in its discretion, to reduce the
principal amount of the Tranche A Term Loan Facility and
make a corresponding increase in the principal amount of the
Tranche B Term Loan Facility (with corresponding changes to
the amortization schedule set forth below) and (ii) the
Borrower reserves the right, in its discretion, to elect not
to utilize the Tranche C Bridge Loan Facility and, in such
case, to either (A) cancel the commitment for the Tranche C
Bridge Loan Facility and, concurrent with the closing of the
Credit Facilities, issue $200 million in subordinated debt
on terms and conditions satisfactory to the Agent (the
"Subordinated Debt") or (B) notify the Agent at least twenty
days prior to the closing of the Credit Facilities that the
Borrower has elected not to issue the Subordinated Debt
(either concurrent with or after the closing of the Credit
Facilities) and request that the Agent allocate the $200
million from the Tranche C Bridge Loan Facility to the
Tranche A Term Loan Facility and the Tranche B Term Loan
Facility in such amounts as the Agent shall determine in its
discretion (with corresponding changes to the amortization
schedule set forth below).
PURPOSE: The proceeds of the Credit Facilities shall be used: (i) to
refinance the outstanding principal balance of certain
existing indebtedness of the Borrower and its subsidiaries
in an amount not to exceed $280 million; (ii) to finance the
purchase of shares of a target public company that you have
identified to us with a code name of "Camelot" (hereafter
referred to as "Camelot"), such shares to be acquired in
connection with a tender offer (the "Tender Offer") for the
shares of Camelot by an acquisition subsidiary to be formed
by the Borrower (the "Acquisition Subsidiary") and the
merger of the Acquisition Subsidiary into Camelot and the
total purchase price for all such shares not to exceed $325
million; (iii) to pay fees and expenses incurred in
connection with the acquisition of the shares of Camelot in
an amount not to exceed $30 million; (iv) to refinance the
outstanding principal balance of certain existing
indebtedness of Camelot in an amount not to exceed $110
million and (v) to provide for working capital and general
corporate purposes of the Borrower and its subsidiaries.
INTEREST RATES: The Revolving Credit Facility, Tranche A Term Loan
Facility, Tranche B Term Loan Facility and Tranche C
Bridge Loan Facility shall bear interest as set forth on
Addendum I hereto.
2
<PAGE> 8
MATURITY: The Revolving Credit Facility shall terminate and all
amounts outstanding thereunder shall be due and payable in
full six years from Closing. The Tranche C Bridge Loan
Facility shall be due and payable in full 60 days from
Closing.
The Tranche A Term Loan Facility and the Tranche B Term Loan
Facility shall be subject to repayment according to the
Scheduled Amortization, with the final payment of all
amounts outstanding, plus accrued interest, being due six
years from Closing for the Tranche A Term Loan Facility and
seven years from Closing for the Tranche B Loan Term
Facility.
AVAILABILITY/
SCHEDULED
AMORTIZATION: REVOLVING CREDIT FACILITY: Loans under the Revolving Credit
Facility ("Revolving Credit Loans", and together with the
Term Loans, the "Loans") may be made, and Letters of Credit
may be issued subject to availability under the aggregate
committed amount for the Revolving Credit Facility.
TERM AND BRIDGE LOAN FACILITIES: The loans made under the
Tranche B Term Loan Facility ("Tranche B Term Loans") and,
if elected by the Borrower, the Tranche C Bridge Loan
Facility (the "Tranche C Bridge Loans") will be available in
a single borrowing at Closing. The loans made under the
Tranche A Term Loan Facility ("Tranche A Term Loans") will
be available in two advances. The first advance, to be made
at Closing, will be in an amount equal to the committed
amount of the Tranche A Term Loan Facility minus the sum of
(i) the total cost (at $45 per share) of the shares of
Camelot that have not been tendered, and therefore will not
be purchased, at the closing of the Tender Offer and (ii)
$110 million, representing the indebtedness of Camelot to be
refinanced at the time of the merger of the Acquisition
Subsidiary into Camelot (such sum being referred to as the
"Holdback Amount"). The second advance under the Tranche A
Term Loan Facility shall be in an amount not to exceed the
Holdback Amount and shall be available on the date of the
merger of the Acquisition Subsidiary into Camelot. The
commitment for any portion of the Tranche A Term Loan
Facility not advanced on the date of such merger will be
canceled. The Tranche A Term Loan Facility and the Tranche B
Term Loan Facility will be subject to quarterly amortization
of principal, based upon the annual amounts shown below (the
Scheduled Amortization):
3
<PAGE> 9
Tranche A Tranche B
--------- ---------
Loan year 1 $25 million $2.0 million
Loan year 2 $30 million $2.0 million
Loan year 3 $30 million $2.0 million
Loan year 4 $35 million $2.0 million
Loan year 5 $40 million $2.0 million
Loan year 6 $40 million $2.0 million
Loan year 7 $0 $188 million
SECURITY: The Agent (on behalf of the Lenders) shall receive a first
priority perfected security interest in all of the capital
stock of the Borrower and each other subsidiary of the
Parent and each of the direct and indirect domestic
subsidiaries of the Borrower and 65% of the capital stock of
each direct foreign subsidiary of the Parent and the
Borrower or any of their domestic subsidiaries (other than
the capital stock of Extendicare Holdings Limited), which
capital stock shall not be subject to any other lien or
encumbrance.
The foregoing security shall ratably secure the Credit
Facilities and any interest rate swap/foreign currency swap
or similar agreements with a Lender (or an affiliate of a
Lender) under the Credit Facilities.
MANDATORY
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the amortization set forth above, the Credit
Facilities will be prepaid by an amount equal to (a) 100% of
the net cash proceeds of all asset sales by the Parent, the
Borrower or any subsidiary of the Borrower (including stock
of subsidiaries), subject to de minimus baskets and
reinvestment provisions to be agreed upon; (b) 100% of the
net cash proceeds from the issuance of any debt (excluding
certain permitted debt) by the Parent, the Borrower or any
subsidiary; and (c) 100% of the net cash proceeds from the
issuance of equity by the Parent, the Borrower or any
subsidiary. Prepayments shall be applied pro rata to reduce
the Tranche A Term Loans and the Tranche B Term Loans and
within each tranche pro rata with respect to each remaining
installment of principal; PROVIDED HOWEVER, that with
respect to clause (b) above the net cash proceeds from the
Subordinated Debt shall be applied first to the Tranche C
Bridge Loan Facility. No prepayment of the Revolving Credit
Facility will be required. Holders of the Tranche B Term
Loans may, so long as there is a principal balance
outstanding with respect to the Tranche A Term Loans,
decline to accept any mandatory prepayment described above
and, under such circumstances, all amounts that would
otherwise be used to prepay Tranche B
4
<PAGE> 10
Term Loans above shall be used to prepay Tranche A Term
Loans. In the event the Term Loan Facilities shall have been
completely repaid, the mandatory payments described above
shall be applied to permanently reduce the amount available
under the Revolving Credit Facility.
OPTIONAL
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Credit Facilities in whole or in
part at any time without penalty, subject to reimbursement
of the Lenders' breakage and redeployment costs in the case
of prepayment of LIBOR borrowings.
CONDITIONS
PRECEDENT
TO CLOSING: Usual and customary for financing transactions of this type
and for the particular financing transaction contemplated
hereby, including but not limited to the following:
(i) The negotiation, execution and delivery of
definitive documentation with respect to the
Credit Facilities satisfactory to NCMI, the Agent
and the Lenders. Such documentation shall contain
disclosure schedules in form and content
satisfactory to the Agent the Borrower shall be
able to satisfy all conditions for borrowing set
forth in such definitive documentation.
(ii) The Agent's satisfactory review and approval of
the Agreement and Plan of Merger (the "Merger
Agreement") by and among Steeles, Inc., the
Acquisition Subsidiary and Camelot and the related
Tender Offer documents executed in connection
therewith (the "Tender Offer Documents"), together
with all schedules and exhibits thereto, regarding
the acquisition by the Acquisition Subsidiary of
Camelot and the merger of the Acquisition
Subsidiary into Camelot, in each case at a per
share price for Camelot not to exceed $45. The
Merger Agreement and the Tender Offer Documents,
together with all schedules and exhibits thereto,
which have been approved by the Agent may be
referred to collectively as the "Purchase
Agreements".
(iii) The Acquisition Subsidiary shall have acquired at
least a majority of the shares of Camelot pursuant
to the terms of, and in compliance with all
conditions of, the Purchase Agreements (including
without limitation the accuracy of all
representations and warranties of Camelot at the
time
5
<PAGE> 11
of such purchase), and such acquisition of
Camelot shares shall have been made without
modification, amendment or waiver of any of the
terms or conditions set forth in the Purchase
Agreements (unless such modification, amendment
and/or waiver has been approved in writing by the
Agent).
(iv) The corporate capital and ownership structure
(including articles of incorporation and by-laws),
equityholder agreements of the Parent, the
Borrower and its subsidiaries, shall be
satisfactory to the Agent. Without limiting the
generality of the above, the Agent shall be
satisfied that the Borrower shall have received
the proceeds of a net capital contribution by the
Parent of at least $45 million in common equity.
(v) If the Borrower elects to terminate the commitment
for the Tranche C Bridge Loan Facility and close
on the Subordinated Debt (as more particularly
described in the paragraph titled "Credit
Facilities"), the Subordinated Debt shall have
been issued on terms and conditions acceptable to
the Agent and the proceeds thereof shall have been
used by the Borrower to purchase shares of Camelot
in connection with the closing of the
Tender Offer.
(vi) The Agent shall have received and, in each case,
approved a pro forma consolidated balance sheet of
the Borrower as of Closing giving effect to the
acquisition of Camelot and the financings and
other transactions contemplated hereby and
reflecting estimated purchase price accounting
adjustments, and such other information relating
to the acquisition of Camelot as the Agent may
require. The pro forma consolidated income
statement shall indicate a minimum EBITDA level of
$160,000,000.
(vii) There shall not have occurred a material adverse
change since December 31, 1996 in the business,
assets, operations, condition (financial or
otherwise) or prospects of the Borrower and its
subsidiaries or Camelot and its subsidiaries, in
either case taken as a whole, or in the facts and
information regarding such entities as represented
to date.
(viii) The Agent shall have been satisfied, acting
reasonably, with the environmental condition to
all material real
6
<PAGE> 12
properties owned or leased by the Borrower,
Camelot and their subsidiaries.
(ix) The Agent shall have received a satisfactory
opinion as to the solvency of the Borrower and the
Guarantors (after giving effect to the acquisition
of Camelot and the incurrence of indebtedness
related thereto) from an independent firm
acceptable to the Agent.
(x) The Agent shall have received (a) satisfactory
opinions of counsel to the Borrower and the
Guarantors (which shall cover, among other things,
authority, legality, validity, binding effect and
enforceability of the documents for the Credit
Facilities) and such resolutions, certificates and
other documents as the Agent shall reasonably
require and (b) satisfactory evidence that the
Agent (on behalf of the Lenders) holds a
perfected, first priority lien in all collateral
for the Credit Facilities, subject to no other
liens except for permitted liens to be determined.
(xi) Receipt of all governmental, equityholder and
third party consents (including Hart-Scott-Rodino
clearance and the consent, if necessary, of any
existing lenders, lessors and/or bondholders to
the extent that such indebtedness is to remain in
place after the closing of the Credit Facilities)
and approvals necessary or, in the opinion of the
Agent, desirable in connection with the
acquisition of Camelot and the related financings
and other transactions contemplated hereby and
expiration of all applicable waiting periods
without any action being taken by any authority
that could restrain, prevent or impose any
material adverse conditions on the Borrower or any
of its subsidiaries or Camelot or any of its
subsidiaries or such related financings or other
transactions contemplated hereby or that could
seek or threaten any of the foregoing, and no law
or regulation shall be applicable which in the
judgment of the Agent could have such effect.
(xii) The absence of any action, suit, investigation or
proceeding pending or threatened in any court or
before any arbitrator or governmental authority
that purports to affect the Borrower, Camelot or
any of their subsidiaries or the financings and
other transactions contemplated hereby, or that
could reasonably be expected to have a material
adverse effect on the Borrower and its
subsidiaries or Camelot and its subsidiaries, in
either case
7
<PAGE> 13
taken as a whole, or such financings or other
transactions contemplated hereby or on the ability
of the Borrower and the Guarantors to perform
their respective obligations under the documents
to be executed in connection with the Credit
Facilities.
(xiii) The Parent, the Borrower and its subsidiaries
shall be in compliance with all material existing
financial obligations (after giving effect to the
acquisition of Camelot). The Borrower shall
refinance at least $280 million in existing
indebtedness with loans made under the Credit
Facilities at Closing (or such lesser amount as
may be agreed to by the Agent in its discretion).
(xiv) The Borrower shall have paid to the Lenders and
the Agent all fees and expenses due and payable at
Closing.
REPRESENTATIONS &
WARRANTIES: Usual and customary for financing transactions of this type
and for the particular financing transaction contemplated
hereby, including but not limited to the following: (i)
corporate status; (ii) corporate power and
authority/enforceability; (iii) no violation of law or
contracts or organizational documents; (iv) no material
litigation; (v) correctness of specified financial
statements and no material adverse change; (vi) no required
governmental or third party approvals; (vii) use of
proceeds/compliance with margin regulations; (viii) status
under Investment Company Act; (ix) ERISA; (x) environmental
matters; (xi) perfected liens and security interests; and
(xiii) payment of taxes.
COVENANTS: Usual and customary for financing transactions of this type
and for the particular financing transaction contemplated
hereby, including but not limited to the following: (i)
delivery of financial statements and other reports; (ii)
delivery of compliance certificates: (iii) notices of
default, material litigation and material governmental and
environmental proceedings; (iv) compliance with laws; (v)
payment of taxes; (vi) maintenance of insurance; (vii)
limitation on liens; (viii) limitations on mergers,
consolidations and sales of assets; (ix) limitations on
incurrence of debt (which shall permit the issuance of the
Subordinated Debt if the Borrower elects to close on the
Tranche C Bridge Loan Facility); (x) limitation on dividends
(which limitation will provide that dividends may be paid if
the Total Leverage Ratio, as described below, is less than
2.5 to 1.0), (xi) limitations on stock redemptions and the
redemption and/or prepayment of other debt; (xii)
limitations on investments and acquisitions; (xiii)
8
<PAGE> 14
ERISA; (xiv) limitation on transactions with affiliates;
(xv) limitation on capital expenditures; (xvi) consummation
of the merger of the Acquisition Subsidiary into Camelot
within ninety days of Closing, with the price per share paid
for the remaining Camelot stock in connection with such
merger not to exceed $45 and with the existing funded debt
of Camelot being refinanced at the time of such merger with
the second advance under the Tranche A Term Loan Facility;
and (xvii) the execution by the Borrower within six months
of Closing of interest rate protection agreements
satisfactory to the Agent, which agreements provide coverage
for at least $275 million if the Subordinated Debt is not
outstanding and at least $75 million if the Subordinated
Debt is outstanding.
Financial covenants to be measured quarterly (on a rolling
four quarter basis, if applicable) and to include (without
limitation):
- Maintenance at all times of a minimum Net Worth, to be
increased by 50% of net income and 100% of net proceeds
from the issuance of equity,
- Maintenance on a rolling four quarter basis of a
maximum Senior Leverage Ratio (total senior adjusted
funded debt/EBITDAR), and
- Maintenance on a rolling four quarter basis of a
maximum Total Leverage Ratio (total adjusted funded
debt/EBITDAR),
- Maintenance on a rolling four quarter basis of a
minimum Fixed Charge Coverage Ratio (EBITDAR less
maintenance capital expenditures less cash
taxes)/(interest expense + scheduled principal
repayments + rents + dividends), and
Adjusted funded debt for purposes of the leverage
ratios will be defined as funded debt plus annual
operating rents multiplied by eight.
EVENTS OF DEFAULT: Usual and customary for financing transactions of this type
and for the particular financing transaction contemplated
hereby, including but not limited to the following: (i)
nonpayment of principal, interest, fees or other amounts;
(ii) violation of covenants; (iii) inaccuracy of
representations and warranties; (iv) cross-default to other
material agreements and indebtedness; (v) bankruptcy or
insolvency; (vi) material judgments; (vii) ERISA; (viii)
actual or asserted invalidity of any
9
<PAGE> 15
loan documents or security interests; or (ix) Change in
Control, which shall be deemed occur if (a) the Parent shall
fail to own directly 100% of the capital stock of the
Borrower, or (b) other than Scotia Investments Limited and
Kingfield Investments Limited (acting in concert under a
shareholders agreement), a person or any group, and any
affiliate of any such person shall beneficially own,
directly or indirectly, an amount of the outstanding capital
stock of Extendicare Inc. entitled to 35% or more of the
voting power of all the outstanding capital stock of
Extendicare Inc.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments to other
financial institutions approved by the Borrower and the
Agent, which approval shall not be unreasonably withheld.
Lenders will be permitted to sell participations with voting
rights limited to significant matters such as changes in
amount, rate, and maturity date. An assignment fee of $3,500
is payable by the Lender to the Agent upon any such
assignment occurring (including, but not limited to an
assignment by a Lender to another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the loan
agreement and other definitive credit documentation will
require the approval of Lenders holding loans and
commitments representing more than 50% of the aggregate
amount of loans and commitments under the Credit Facilities,
except that (a) the consent of all the Lenders affected
thereby shall be required with respect to (i) increases in
commitment amounts, (ii) reductions of principal, interest
or fees, (iii) extensions of final maturities, (iv) releases
of all or substantially all collateral and (v) releases of
all or substantially all guarantors and (b) the consent of
the Lenders holding at least 50% of the Tranche A Term Loan
Facility and at least 50% of the Tranche B Term Loan
Facility shall be required with respect to any amendment
that changes the allocation of any payment between the
Tranche A and Tranche B Term Loan Facilities.
INDEMNIFICATION: The Borrower shall indemnify the Lenders from and against
all losses, liabilities, claims, damages or expenses
relating to their loans, the Borrower's use of loan proceeds
or the commitments, including but not limited to reasonable
attorneys' fees and settlement costs. This indemnification
shall survive and continue for the benefit of the Lenders at
all times after the Borrower's acceptance of the Lenders'
commitment for the Credit Facilities, notwithstanding any
failure of the Credit Facilities to close.
10
<PAGE> 16
CLOSING: On or before December 31, 1997.
GOVERNING LAW: New York.
FEES/EXPENSES: As outlined in ADDENDUM I
OTHER: This term sheet is intended as an outline only and does not
purport to summarize all the conditions, covenants,
representations, warranties and other provisions which would
be contained in definitive legal documentation for the
Credit Facilities contemplated hereby. Each of the Borrower
and the Guarantors shall waive its right to a trial by jury.
11
<PAGE> 17
ADDENDUM I
FEES AND EXPENSES
COMMITMENT FEE: A per annum Commitment Fee (calculated on the basis of
actual number of days elapsed in a year of 360 days) on the
unused portion of the Revolving Credit Facility shall
commence to accrue on the closing of the Revolving Credit
Facility and shall be paid quarterly in arrears. The
Commitment Fee shall initially be equal to .375% and shall
be subject to adjustment as set forth in the pricing grid
below.
INTEREST RATES: The Revolving Credit Facility and Tranche A Term Loan
Facility shall bear interest at a rate equal to LIBOR plus
1.75% or the Alternate Base Rate (defined as the higher of
(i) the NationsBank prime rate and (ii) the Federal Funds
rate plus 1/2%) plus .25%, and the Tranche B Term Loan
Facility and the Tranche C Bridge Loan Facility shall bear
interest at a rate equal to LIBOR plus 2.0% or the
Alternative Base Rate plus 1.0%; provided, that (A) the
percentage margins for LIBOR loans and Alternate Base Rate
loans outstanding under the Revolving Credit Facility and
the Tranche A Term Loan Facility will be subject to
performance pricing adjustments as set forth in the pricing
grid below, (B) there will be a one tier pricing adjustment
of .25% available for the LIBOR loans outstanding under the
Tranche B Term Loan Facility upon the Borrower obtaining a
Total Leverage Ratio to be agreed upon, and (C) if, during
the 180 day period following the Closing, any breakage
costs, charges or fees are incurred with respect to LIBOR
loans on account of the syndication of the Credit
Facilities, the Borrower shall immediately reimburse the
Agent for any such costs, charges or fees. Such right of
reimbursement to be in addition to and not in limitation of
customary cost and yield protection.
The election of interest rates shall be made by the Borrower
and the Borrower may select interest periods of 1, 2, 3 or 6
months for LIBOR loans, subject to availability.
A penalty rate shall apply on all loans in the event of
default at a rate per annum of 2% above the applicable
interest rate.
PERFORMANCE
PRICING: The LIBOR and Alternate Base Rate margins for the Revolving
Credit Facility and the Tranche A Term Loan Facility will be
subject to performance pricing adjustments commencing with
the delivery of the June 30, 1998 financial statements,
based upon the Borrower's maximum Total Leverage Ratio, as
set forth below:
12
<PAGE> 18
<TABLE>
<CAPTION>
Applicable Applicable Applicable
Total Percentage for Percentage for Percentage for
Leverage LIBOR Alternate Base Commitment
Ratio Loans Loans Fee
----- ----- ----- ---
<S> <C> <C> <C>
Less than or equal
to 3.0 to 1.0 .75% 0% .25%
Less than or equal to
3.5 to 1.0 but
greater than 3.0 to 1.0 1.00% 0% .25%
Less than or equal to
4.0 to 1.0 but
greater than 3.5 to 1.0 1.25% .25% .3125%
Less than or equal to
to 4.5 to 1.0 but greater 1.50% .50% .3125%
than 4.0 to 1.0
Less than or equal 1.75% .75% .375%
to 5.0 to 1.0 but
greater than 4.5 to 1.0
Greater than 5.0 to 1.0 2.00% 1.0% .50%
</TABLE>
COST AND YIELD
PROTECTION: The usual for transactions and facilities of this type,
including, without limitation, in respect of prepayments,
changes in capital adequacy and capital requirements or
their interpretation, illegality, unavailability, reserves
without proration or offset.
LETTER OF
CREDIT FEES: The Borrower shall pay a per annum standby letter of credit
fee on the outstanding amount of all standby Letters of
Credit. The applicable standby letter of credit fee shall be
the percentage margin for LIBOR loans outstanding under the
Revolving Credit Facility. The standby letter of credit fee
shall be due quarterly in arrears and shared proportionately
by the Lenders.
In addition, the Borrower shall pay the Agent for its own
account a per annum facing fee of 1/8% on the outstanding
amount of all standby Letters of Credit. The standby letter
of credit facing fee shall be due quarterly in arrears.
EXPENSES: Borrower will pay all reasonable costs and expenses
associated with the preparation, due diligence,
administration, syndication and enforcement of all documents
executed in connection with the Credit Facilities, including
without limitation, the reasonable legal fees of the Agent's
counsel regardless of whether or not the Credit Facilities
are closed.
<PAGE> 1
EXHIBIT (c)(1)
--------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
EXTENDICARE INC.,
AHC ACQUISITION CORP.
and
ARBOR HEALTH CARE COMPANY
dated as of
September 29, 1997
--------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
ARTICLE I THE OFFER AND MERGER................................... 1
Section 1.1 The Offer.............................................. 1
Section 1.2 Company Actions........................................ 3
Section 1.3 SEC Documents.......................................... 4
Section 1.4 Directors.............................................. 6
Section 1.5 The Merger............................................. 7
Section 1.6 Effective Time......................................... 8
Section 1.7 Closing................................................ 8
Section 1.8 Stockholders' Meeting.................................. 8
Section 1.9 Merger Without Meeting of Stockholders................. 9
ARTICLE II CONVERSION OF SECURITIES............................... 10
Section 2.1 Conversion of Capital Stock............................ 10
Section 2.2 Exchange of Certificates............................... 11
Section 2.3 Dissenters' Rights..................................... 12
Section 2.4 Company Stock Plans.................................... 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY................................................ 14
Section 3.1 Organization........................................... 14
Section 3.2 Capitalization......................................... 15
Section 3.3 Authorization; Validity of Agreement;
Company Action......................................... 17
Section 3.4 Consents and Approvals; No Violations.................. 18
Section 3.5 SEC Reports and Financial Statements................... 19
Section 3.6 Absence of Certain Changes............................. 20
Section 3.7 No Undisclosed Liabilities............................. 21
Section 3.8 Litigation............................................. 22
Section 3.9 Information in Proxy Statement......................... 22
Section 3.10 No Default; Compliance with Applicable
Laws................................................... 22
Section 3.11 Intellectual Property.................................. 25
Section 3.12 Taxes.................................................. 25
Section 3.13 Opinion of Financial Adviser........................... 28
Section 3.14 Title to Properties.................................... 28
Section 3.15 Employee Benefit Plan.................................. 28
Section 3.16 Insurance.............................................. 30
Section 3.17 No Excess Parachute Payments........................... 30
Section 3.18 Environmental Matters.................................. 31
Section 3.19 Labor Matters.......................................... 33
Section 3.20 Finders and Investment Bankers......................... 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER...................................... 34
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.1 Organization........................................... 34
Section 4.2 Authorization; Validity of Agreement;
Necessary Action....................................... 35
Section 4.3 Consents and Approvals; No Violations.................. 35
Section 4.4 Information in Proxy Statement......................... 36
ARTICLE V COVENANTS.............................................. 36
Section 5.1 Interim Operations of the Company...................... 36
Section 5.2 Access; Confidentiality................................ 40
Section 5.3 Additional Agreements.................................. 41
Section 5.4 Consents and Approvals................................. 41
Section 5.5 No Solicitation........................................ 42
Section 5.6 Publicity.............................................. 44
Section 5.7 Notification of Certain Matters........................ 44
Section 5.8 Indemnification........................................ 45
ARTICLE VI CONDITIONS............................................. 46
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger...................................... 46
ARTICLE VII TERMINATION............................................ 47
Section 7.1 Termination............................................ 47
Section 7.2 Effect of Termination.................................. 49
ARTICLE VIII MISCELLANEOUS.......................................... 49
Section 8.1 Fees and Expenses...................................... 49
Section 8.2 Amendment and Modification............................. 50
Section 8.3 Nonsurvival of Representations and War-
ranties................................................ 50
Section 8.4 Notices................................................ 50
Section 8.5 Interpretation......................................... 51
Section 8.6 Counterparts........................................... 51
Section 8.7 Entire Agreement; No Third Party Benefi-
ciaries; Rights of Ownership........................... 51
Section 8.8 Severability........................................... 52
Section 8.9 Governing Law.......................................... 52
Section 8.10 Assignment............................................. 52
Section 8.11 Transfer and Similar Taxes............................. 52
ANNEX A Certain Conditions of the Offer........................A-1
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Index of Defined Terms
----------------------
Defined Term Section No.
- ------------ -----------
<S> <C>
Acquisition Proposal....................................................... 5.5(a)
Appointment Date........................................................... 5.1
Balance Sheet.............................................................. 3.14
By-laws.................................................................... 1.5
Certificate of Incorporation............................................... 1.5
Certificate of Merger...................................................... 1.6
Certificates............................................................... 2.2(b)
Closing.................................................................... 1.7
Closing Date............................................................... 1.7
Company.................................................................... Recitals
Company Agreements......................................................... 3.4
Company Benefit Plans...................................................... 3.6(vii)
Company Disclosure Schedule................................................ Art. III
Company Nursing Facilities................................................. 3.10(b)
Company Option Plans....................................................... 2.4
Company Options............................................................ 2.4
Company SEC Documents...................................................... 3.5
Confidentiality Agreement.................................................. 5.2
Current Company SEC Documents.............................................. 3.6
DGCL....................................................................... 1.2(a)
Director Option Plan....................................................... 2.4
Dissenting Stockholders.................................................... 2.1(c)
Effective Time............................................................. 1.6
Employee Stock Purchase Plan............................................... 3.2(a)
Environmental Law.......................................................... 3.18(ii)
ERISA...................................................................... 3.15
Exchange Act............................................................... 1.1
Excess parachute payments.................................................. 8.11
Fully diluted basis........................................................ 1.1
GAAP....................................................................... 3.5
Governmental Entity........................................................ 3.4
Hazardous Substance........................................................ 3.18(iii)
HSR Act.................................................................... 3.4
Indemnified Party.......................................................... 5.8
Intellectual Property Rights............................................... 3.1l
Liens...................................................................... 3.2(b)
Merger..................................................................... 1.5
Merger Consideration....................................................... 2.1(c)
Minimum Condition.......................................................... 1.1
Offer...................................................................... 1.1
Offer Documents............................................................ 1.3(a)
Offer Price................................................................ 1.1
Offer to Purchase.......................................................... 1.1
Parent..................................................................... Recitals
Paying Agent............................................................... 2.2(a)
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------
<S> <C>
Permits.................................................................... 3.10(b)
Plans...................................................................... 3.15
Primary Company Executives................................................. 3.17
Preferred Stock............................................................ 3.2
Proxy Statement............................................................ 1.8(a)(ii)
Purchaser.................................................................. Recitals
Raymond James.............................................................. 1.2(a)
Rights..................................................................... 3.2
Rights Agreement........................................................... 3.2
Schedule 14D-1............................................................. 1.3(a)
Schedule 14D-9............................................................. 1.3(a)
SEC........................................................................ 1.3(a)
Secretary of State......................................................... 1.6
Securities Act............................................................. 3.5
Shares..................................................................... 1.1
Special Meeting............................................................ 1.8(a)(i)
Stockholder Agreements..................................................... Recitals
Subsidiary................................................................. 3.1
Superior Proposal.......................................................... 5.5(a)
Surviving Corporation...................................................... 1.5
Taxes...................................................................... 3.12(b)(i)(A)
Tax Return................................................................. 3.12(b)(i)(B)
Termination Fee............................................................ 8.1
Transactions............................................................... 1.2(a)
Voting Debt................................................................ 3.2
1991 Option Plan........................................................... 2.4
1995 Option Plan........................................................... 2.4
</TABLE>
ii
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of September 29, 1997
(this "Agreement"), by and among Extendicare Inc., a corporation existing under
the laws of Canada ("PARENT"), AHC Acquisition Corp., a Delaware corporation and
an indirect wholly owned subsidiary of Parent (the "PURCHASER"), and Arbor
Health Care Company, a Delaware corporation (the "COMPANY").
WHEREAS, the Board of Directors of each of Parent, the
Purchaser and the Company has approved, and deems it advisable and in the best
interests of its respective stockholders to consummate, the acquisition of the
Company by Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to Parent and the Purchaser to enter into this Agreement,
certain stockholders of the Company have each entered into a Stockholder
Agreement, dated as of the date hereof (collectively, the "STOCKHOLDER
AGREEMENTS"), among Parent, the Purchaser and the stockholder named therein
providing, among other things, that each such stockholder will vote in favor of
the Merger (as defined in Section 1.5 hereof) and will grant a proxy to Parent
for that purpose;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 THE OFFER. As promptly as practicable (but in no
event later than five business days after the public announcement of the
execution hereof), the Purchaser shall commence (within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")) a tender offer (the "OFFER") for any and all of the outstanding shares of
Common Stock, par value $.03 per share (the "SHARES"), of the
<PAGE> 7
Company at a price of U.S.$45.00 per Share, net to the seller in cash (such
price, or such other price per Share as may be paid in the Offer, being referred
to herein as the "OFFER PRICE") and, subject to there being validly tendered and
not withdrawn prior to the expiration of the Offer, that number of Shares which
represents at least a majority of the Shares outstanding on a fully diluted
basis (the "MINIMUM CONDITION") and to the other conditions set forth in Annex A
hereto, shall consummate the Offer in accordance with its terms ("FULLY DILUTED
BASIS" means issued and outstanding Shares and Shares subject to issuance under
Company Option Plans (as defined in Section 2.4) and Shares subject to issuance
upon exercise of outstanding warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or securities convertible or
exchangeable for such capital stock).
The obligations of the Purchaser to commence the Offer and to
accept for payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not properly withdrawn shall be subject only to the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Offer shall be made by means of an offer to purchase (the "OFFER TO PURCHASE")
containing the terms set forth in this Agreement, the Minimum Condition and the
conditions set forth in Annex A hereto.
The Purchaser shall not amend or waive the Minimum Condition
and shall not decrease the Offer Price or decrease the number of Shares sought
or amend any other condition of the Offer in any manner adverse to the holders
of the Shares (other than with respect to insignificant changes or amendments
and subject to the penultimate sentence of this Section 1.1) without the written
consent of the Company (such consent to be authorized by the Board of Directors
of the Company (the "COMPANY BOARD") or a duly authorized committee thereof);
PROVIDED, HOWEVER, that if on the initial scheduled expiration date of the
Offer, which shall be 20 business days after the date the Offer is commenced,
all conditions to the Offer shall not have been satisfied or waived, the
Purchaser may, from time to time, in its sole discretion, extend the expiration
date; PROVIDED, HOWEVER, that the Purchaser shall, if the Company, Parent and
the Purchaser
2
<PAGE> 8
have not obtained the approvals of any Governmental Entity (as defined in
Section 3.4) as required under Section 5.4, extend the expiration date for a
period of the lesser of (i) 2 business days after the date that all such
approvals have been obtained and (ii) 35 days after such initial scheduled
expiration date. In addition, the Offer Price may be increased, and the Offer
may be extended to the extent required by law in connection with such increase
in each case without the consent of the Company. The Purchaser shall, on the
terms and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and pay for Shares validly tendered as soon as it is
permitted to do so under applicable law; PROVIDED, HOWEVER, that if, immediately
prior to the initial expiration date of the Offer (as it may be extended), the
Shares validly tendered and not withdrawn pursuant to the Offer equal less than
90% of the outstanding Shares, the Purchaser may extend the Offer for a period
not to exceed 10 business days, notwithstanding that all conditions to the Offer
are satisfied as of such initial expiration date of the Offer.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to
the Offer and represents that the Company Board, at a meeting duly called and
held, has (i) unanimously determined that each of this Agreement, the Offer and
the Merger (as defined in Section 1.5) are fair to and in the best interests of
the stockholders of the Company, (ii) received the opinion of Raymond James &
Associates, Inc. ("RAYMOND JAMES"), financial advisor to the Company, to the
effect that the Offer and the Merger are fair to the stockholders of the Company
from a financial point of view, (iii) approved this Agreement and the
Stockholder Agreements and the transactions contemplated hereby and thereby,
including the Offer and the Merger (collectively, the "TRANSACTIONS"), and such
approval constitutes approval of the Offer, this Agreement, the Stockholder
Agreements and the Transactions for purposes of Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), such that Section 203 of the
DGCL will not apply to the Transactions and (iv) resolved to recommend that the
stockholders of the Company accept the Offer, tender their Shares thereunder to
the Purchaser and approve and adopt this Agreement and the Merger; PROVIDED,
THAT such recommendation may be withdrawn,
3
<PAGE> 9
modified or amended if, in the opinion of the Company Board, only after receipt
of written advice from independent legal counsel, failure to withdraw, modify or
amend such recommendation would result in the Company Board violating its
fiduciary duties to the Company's stockholders under applicable law. The Company
represents that the actions set forth in this Section 1.2(a) and all other
actions it has taken in connection herewith and therewith are sufficient to
render the relevant provisions of such Section 203 of the DGCL inapplicable to
the Offer, the Merger and the Stockholders Agreements.
(b) In connection with the Offer, the Company will
promptly furnish or cause to be furnished to the Purchaser mailing labels,
security position listings and any available listing or computer file containing
the names and addresses of all recordholders of the Shares as of a recent date,
and shall furnish the Purchaser with such additional information (including, but
not limited to, updated lists of holders of the Shares and their addresses,
mailing labels and lists of security positions) and assistance as the Purchaser
or its agents may reasonably request in communicating the Offer to the record
and beneficial holders of the Shares.
Section 1.3 SEC DOCUMENTS.
(a) As soon as practicable on the date the Offer is
commenced, Parent and the Purchaser shall file with the United States Securities
and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "SCHEDULE 14D-1") (the Schedule 14D-1,
together with all amendments and supplements thereto and including the exhibits
thereto, including the Offer to Purchase, being collectively the "OFFER
DOCUMENTS"). Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including schedules,
annexes and the exhibits thereto, the "SCHEDULE 14D-9"), which shall, subject to
the fiduciary duties of the Company Board under applicable law and to the
provisions of this Agreement, contain the recommendation referred to in clause
(iv) of Section 1.2(a) hereof.
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(b) Parent and the Purchaser will take all steps
necessary to ensure that the Offer Documents, and the Company will take all
steps necessary to ensure that the Schedule 14D-9, will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not 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 were made, not misleading, except that Parent and the Purchaser
make no representation with respect to information furnished by the Company for
inclusion in the Offer Documents and the Company makes no representation with
respect to information furnished by Parent or the Purchaser for inclusion in the
Schedule 14D-9. The Company agrees that the information supplied in writing by
the Company for inclusion in the Offer Documents will not 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 were made, not misleading. Parent and the
Purchaser agree that the information supplied in writing by the Parent or the
Purchaser for inclusion in the Schedule 14D-9 will not 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 were made, not misleading. Each of Parent and
the Purchaser will take all steps necessary to cause the Offer Documents, and
the Company will take all steps necessary to cause the Schedule 14D-9, to be
filed with the SEC and to be disseminated to holders of the Shares, in each case
as and to the extent required by applicable federal securities laws. Each of
Parent and the Purchaser, on the one hand, and the Company, on the other hand,
will promptly correct any information provided by it for use in the Offer
Documents and the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Purchaser will take all
steps necessary to cause the Offer Documents, and the Company will take all
steps necessary to cause the Schedule 14D-9, as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable
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federal securities laws. The Company, on the one hand, and Parent and the
Purchaser on the other hand, and their respective counsel shall be given the
opportunity to review the Offer Documents and the Schedule 14D-9 before they are
filed with the SEC. In addition, each party hereto will provide the other
parties and their counsel in writing with any comments, whether written or oral,
which they may receive from time to time from the SEC or its staff with respect
to the Offer Documents or the Schedule 14D-9 promptly after the receipt of such
comments.
Section 1.4 DIRECTORS.
(a) Promptly upon the purchase of, and payment for,
any Shares by Parent or any of its subsidiaries which represents at least a
majority of the outstanding Shares (on a fully diluted basis, as defined in
Section 1.1), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board such that the
percentage of its designees on the Company Board (including persons previously
designated by Parent or its affiliates to the Company Board) shall equal the
percentage of the outstanding Shares beneficially owned by Parent and its
affiliates. In furtherance thereof, the Company shall, upon request of the
Parent, use its best efforts promptly to cause Parent's designees to be so
elected to the Company Board, and in furtherance thereof, to the extent
necessary, increase the size of the Company Board. At such time, the Company
shall also cause persons designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company Board of
(i) each committee of the Company Board, (ii) each board of directors (or
similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such board. Notwithstanding the foregoing, until the
Effective Time (as defined in Section 1.6 hereof), the Company shall use all
reasonable efforts to have at least two members of the Company Board who are
neither (i) officers of Parent or the Company, nor (ii) designees, stockholders
or affiliates of Parent. The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 1.4(a),
including mailing to stockholders the information required by such Section
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14(f) and Rule 14f-1 (or, at Parent's request, furnishing such information to
Parent for inclusion in the Offer Documents initially filed with the SEC and
distributed to the stockholders of the Company) as is necessary to enable
Parent's designees to be elected to the Company Board. Parent or the Purchaser
will supply the Company any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1. The provisions of this Section 1.4(a) are in addition to and shall
not limit any rights which the Purchaser, Parent or any of their affiliates may
have as a holder or beneficial owner of Shares as a matter of law with respect
to the election of directors or otherwise.
(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company Board, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company hereunder may be effected only by the action of a
majority of the directors of the Company then in office who were not officers of
Parent or designees, stockholders or affiliates of Parent, which action shall be
deemed to constitute the action of any committee specifically designated by the
Company Board to approve the actions and transactions contemplated hereby and
the full Company Board; PROVIDED, THAT if there shall be no such directors, such
actions may be effected by majority vote of the entire Company Board.
Section 1.5 THE MERGER. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section 1.6 hereof), the
Company and the Purchaser shall consummate a merger (the "MERGER") pursuant to
which (i) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (ii) the
Company shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "SURVIVING CORPORATION") and shall continue to be
governed by the laws of the State of Delaware, and (iii) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall
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continue unaffected by the Merger, except as set forth in this Section 1.5.
Pursuant to the Merger, (x) the Restated Certificate of
Incorporation of the Company (the "CERTIFICATE OF INCORPORATION"), as in effect
immediately prior to the Effective Time, shall be the initial certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (y) the Restated By-laws of
the Company (the "BY-LAWS"), as in effect immediately prior to the Effective
Time, shall be the initial By-laws of the Surviving Corporation until thereafter
amended as provided by law, by the Certificate of Incorporation or by such
By-laws. The Merger shall have the effects specified in the DGCL.
The directors and officers of the Purchaser at the Effective
Time shall be the initial directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and the By-laws.
Section 1.6 EFFECTIVE TIME. Parent, the Purchaser and the
Company will cause a Certificate of Merger, or, if applicable, a Certificate of
Ownership and Merger (as applicable, the "CERTIFICATE OF MERGER"), to be
executed and filed on the date of the Closing (as defined in Section 1.7) (or on
such other date as Parent and the Company may agree) with the Secretary of State
of the State of Delaware (the "SECRETARY OF STATE") as provided in the DGCL. The
Merger shall become effective on the date on which the Certificate of Merger has
been duly filed with the Secretary of State or at such later time as is agreed
upon by the parties and specified in the Certificate of Merger, and such
effective time is hereinafter referred to as the "EFFECTIVE TIME."
Section 1.7 CLOSING. The closing of the Merger (the
"CLOSING) shall take place at 9:00 a.m., local time, on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "CLOSING DATE), at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919
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Third Avenue, New York, New York, 10022 unless another date or place is agreed
to in writing by the parties hereto.
Section 1.8 STOCKHOLDERS' MEETING.
(a) If required by applicable law in
order to consummate the Merger, the Company, acting through the Company Board,
shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "SPECIAL MEETING"), as
promptly as practicable following the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the Offer, for the
purpose of considering and taking action upon the approval of the
Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use its best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy
Statement(as hereinafter defined) and, after consultation with Parent,
to respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement, including any amendment or supplement thereto
(the "PROXY STATEMENT") to be mailed to its stockholders, provided that
no amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel and (y) to
obtain the necessary approvals of the Merger and this Agreement by its
stockholders; and
(iii) subject to the fiduciary obligations of the
Company Board under applicable law as advised by independent counsel,
include in the Proxy Statement the recommendation of the Company Board
that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
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(b) Parent shall vote, or cause to be voted, all of
the Shares then owned by it, the Purchaser or any of its other subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of this
Agreement.
Section 1.9 MERGER WITHOUT MEETING OF STOCKHOLDERS.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser and
any other subsidiaries of Parent shall acquire in the aggregate at least 90% of
the outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties hereto shall, at the request of Parent
and subject to Article VI hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or any shares of capital stock of the Purchaser:
(a) PURCHASER CAPITAL STOCK. Each issued and
outstanding share of capital stock of the Purchaser shall be converted into
and become one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND
PURCHASER-OWNED STOCK. All Shares that are owned by the Company or any
wholly-owned subsidiary of the Company and any Shares owned by the Parent or any
wholly-owned subsidiary of the Parent shall be cancelled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF SHARES. Each issued and
outstanding Share (other than Shares to be cancelled in accordance with Section
2.1(b) and any Shares which are held by stockholders exercising appraisal rights
pursuant
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to Section 262 of the DGCL ("DISSENTING STOCKHOLDERS")) shall be converted into
the right to receive the Offer Price, payable to the holder thereof, without
interest (the "MERGER CONSIDERATION"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.2. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.2.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective
Time, Parent shall designate a bank or trust company to act as agent for the
holders of the Shares in connection with the Merger (the "PAYING AGENT")
to receive in trust the funds to which holders of the Shares shall become
entitled pursuant to Section 2.1(c). Parent shall, from time to time, make
available to the Paying Agent funds in amounts and at times necessary for the
payment of the Merger Consideration as provided herein. All interest earned on
such funds shall be paid to Parent.
(b) EXCHANGE PROCEDURES. As soon as rea-
sonably 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 (the "CERTIFICATES"),
whose Shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon receipt of the Certificates by the Paying Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. 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, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger
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Consideration for each Share formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration in cash as contemplated by
this Section 2.2. The right of any stockholder to receive the Merger
Consideration shall be subject to and reduced by any applicable withholding
obligation.
(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN
THE SHARES. At the Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers of
the Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of the Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
law. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article II.
(d) TERMINATION OF FUND; NO LIABILITY.
At any time following six months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to it any
funds (including any interest received with respect thereto) which had been made
available to the Paying Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) only as general creditors thereof with respect to the Merger Consideration
payable
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upon due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the
Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.3 DISSENTERS' RIGHTS. If any Dissenting Stockholder
shall be entitled to be paid the "fair value" of such holder's Shares, as
provided in Section 262 of the DGCL, the Company shall give the Parent notice
thereof and the Parent shall have the right to participate in all negotiations
and proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail to
perfect or shall have effectively withdrawn or lost the right to dissent, the
Shares held by such Dissenting Stockholder shall thereupon be treated as though
such Shares had been converted into the Merger Consideration pursuant to Section
2.1.
Section 2.4 COMPANY STOCK PLANS. The Company shall, effective
as of the Effective Time, (i) cause each outstanding employee or director stock
option to purchase Shares (the "COMPANY OPTIONS") granted under the Arbor Health
Care Company 1996 Stock Option Plan for Non-Employee Directors (the "DIRECTOR
OPTION PLAN") the Arbor Health Care Company 1995 Stock Option Plan, as amended
by Amendment No. 1 (the "1995 OPTION PLAN") and the First Amended and Restated
Incentive Stock Option Plan dated November 26, 1991 (the "1991 OPTION PLAN" and,
together with the Director Option Plan and the 1995 Option Plan, the "COMPANY
OPTION PLANS"), whether or not then exercisable or vested, to become fully
exercisable and vested, (ii) cause each Company Option that is then outstanding,
exercisable and vested to be cancelled and (iii) in consideration of such
cancellation, and except to the extent that Parent or the Purchaser and the
holder of any such Company Options otherwise agree, cause the Company (or, at
Parent's option, the Purchaser) to pay to such holders of Company Options an
amount in respect thereof equal to the product of (A) the excess, if any, of the
Offer Price over the exercise price of each such Company Option and (B) the
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<PAGE> 19
number of Shares previously subject to the Company Options immediately prior to
its cancellation (such payment to be net of withholding taxes). The Company
shall take all actions necessary to cause the Company's employees and directors
to consent, to the extent required, to the transactions contemplated by this
Section 2.4 no later than immediately prior to the time the Purchaser accepts
Shares for payment pursuant to the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the
Purchaser that all of the statements contained in this Article III are true and
correct as of the date of this Agreement (or, if made as of a specified date, as
of such date), and will be true and correct in all material respects as of the
Closing Date as though made on the Closing Date, except as set forth in the
schedule attached to this Agreement setting forth exceptions to the Company's
representations and warranties set forth herein (the "COMPANY DISCLOSURE
SCHEDULE"). The Company Disclosure Schedule will be arranged in sections
corresponding to the sections of this Agreement to be modified by such
disclosure schedule, provided that any disclosure made in any section of the
Company Disclosure Schedule shall be deemed incorporated in all other sections
thereof.
Section 3.1 ORGANIZATION. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole. As used in this Agreement, a
"SUBSIDIARY" of any entity shall mean all corporations or other entities in
which such entity owns a majority of the issued and outstanding capital stock or
equity or similar interests. As used in this Agreement, any reference to any
event, change or effect being mate-
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rial or having a material adverse effect on or with respect to any entity (or
group of entities taken as a whole) means such event, change or effect as is
materially adverse to (i) the consolidated financial condition, businesses,
prospects or results of operations of such entity (or, if used with respect
thereto, of such group of entities taken as a whole) or (ii) the ability of such
entity (or group) to consummate the Transactions. The Company and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not individually or in the aggregate have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Except as set
forth in Section 3.1 of the Company Disclosure Schedule, the Company does not
own (i) any equity interest in any corporation or other entity or (ii)
marketable securities where the Company's equity interest in any entity exceeds
five percent of the outstanding equity of such entity on the date hereof.
Section 3.2 CAPITALIZATION. (a) The authorized capital stock
of the Company consists of 20,000,000 Shares and 2,000,000 shares of preferred
stock, par value $.01 per share, including 10,000 shares of Series A Junior
Participating Cumulative Preferred Stock, par value $.01 per share
(collectively, the PREFERRED STOCK"). As of September 26, 1997, (i) 6,937,161
Shares are issued and outstanding, (ii) no Shares are issued and held in the
treasury of the Company, (iii) no shares of Preferred Stock are issued and
outstanding, (iv) 327,766 Shares are issuable pursuant to options granted under
the Company Option Plans and (v) 2,000 Shares are issuable pursuant to the Arbor
Health Care Company Employee Stock Purchase Plan (the "EMPLOYEE STOCK PURCHASE
PLAN"). All the outstanding shares of the Company's capital stock are, and all
Shares which may be issued pursuant to the exercise of outstanding Company
Options will be, when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("VOTING DEBT") of the Company
or any of its subsidiaries issued
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and outstanding. Except as set forth above, and except for the rights (the
"RIGHTS") issuable pursuant to the Rights Agreement dated as of November 14,
1996 (the "RIGHTS AGREEMENT"), between the Company and Keybank, National
Association, as rights agent (a true and complete copy of which has been
delivered to Parent), and the securities issuable upon the exercise of such
Rights, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of its subsidiaries, obligating the Company or any of its
subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of its subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment and
(iii) there are no outstanding contractual obligations of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any Shares, or the
capital stock of the Company, or any subsidiary or affiliate of the Company or
to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any subsidiary or any other entity.
(b) Section 3.2(b) of the Company Disclosure
Schedule lists each subsidiary of the Company and the ownership interest therein
of the Company. All of the outstanding shares of capital stock of each of the
Company's subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its subsidiaries
free and clear of all liens, charges, claims or encumbrances ("LIENS").
(c) 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 the capital stock of the Company or any of the
subsidiaries.
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(d) None of the Company or its subsidiaries
is required to redeem, repurchase or otherwise acquire shares of capital
stock of the Company, or any of its subsidiaries.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY
ACTION. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Company of this Agreement, and
the consummation by it of the transactions contemplated hereby, have been duly
authorized by the Company Board and, except for obtaining the approval of its
stockholders as contemplated by Section 1.8 hereof, no other corporate action on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, subject to the approval of its stockholders as contemplated by
Section 1.8 hereof, and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser, is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The affirmative vote of the holders of a
majority of the outstanding Shares, voting together as a single class, are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(b) The Company Board has duly and validly approved
the transactions contemplated hereby for the purposes of Section 203 of the
DGCL. Accordingly, the provisions of Section 203 of the DGCL will not apply to
the transactions contemplated by this Agreement. No other state takeover statute
or similar statute or regulation applies or purports to apply to the Offer, the
Merger or the other transactions contemplated hereby.
(c) The Company Board has taken all necessary
action so that (i) the Rights will not be
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exercisable, trade separately, or be otherwise affected by the Offer, the Merger
or the other transactions contemplated hereby, (ii) none of Parent and its
affiliates will be deemed to be an "Acquiring Person" for purposes thereof and
(iii) a "Distribution Date" shall not occur by virtue of the Offer, the Merger
or the other transactions contemplated hereby. The Company will take any action
reasonably requested by Parent to ensure and confirm that the Company, Parent
and their respective affiliates will not have any obligations in connection with
the Rights or the Rights Agreement in connection with the Offer, the Merger and
the other transactions contemplated hereby.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
the notices, filings and consents set forth in Section 3.4 of the Company
Disclosure Schedule (including, if applicable, such notices, filings and
consents applicable to the Company and its subsidiaries as may be required under
any environmental, health or safety law or regulation, under federal and state
laws, rules and regulations applicable to health care providers reimbursed under
the federal Medicare and state Medicaid programs, under any certificate of need
law or regulation, or under any state licensure law or regulation) and the
filings, permits, orders, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), state securities or blue sky laws, and the DGCL, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or the By-laws
or similar organizational documents of the Company or of any of its
subsidiaries, (ii) require any notice to, filing with, or permit, order,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "GOVERNMENTAL ENTITY"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mort-
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gage, indenture, lease, Medicare or Medicaid provider agreement, license,
contract, agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (collectively, the "COMPANY AGREEMENTS") or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole. Section 3.4 of the Company Disclosure Schedule sets forth a
list of any notices, filings, consents and approvals required to be obtained
under the Company Agreements in connection with this Agreement prior to the
consummation of the transactions contemplated by this Agreement.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company
has filed with the SEC, and has heretofore made available to Parent, true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1995 under the Securities
Act of 1933, as amended (the "SECURITIES ACT") or the Exchange Act
(collectively, the "COMPANY SEC DOCUMENTS"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC. The financial statements of the Company included in the
Company SEC Documents have been prepared from, and are in accordance with, the
books and records of the Company and its consolidated subsidiaries, comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance
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with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position and
the consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated subsidiaries as of the
respective dates and for the respective periods indicated therein. None of the
subsidiaries of the Company is subject to the informational reporting
requirements of Section 13 of the Exchange Act.
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
the Company SEC Documents filed with the SEC since January 1, 1997 (the "CURRENT
COMPANY SEC DOCUMENTS") or in Section 3.6 of the Company's Disclosure Schedule,
since December 31, 1996:
(i) the Company and its subsidiaries have conducted their
respective businesses only in the ordinary and usual course;
(ii) neither the Company nor any of its subsidiaries has taken
any of the actions contemplated by Section 5.1 hereof other than in the
ordinary course of business and consistent with past practice;
(iii) there has not been any event, change, effect or
development which, individually or in the aggregate, has had or is, so
far as reasonably can be foreseen, likely to have, a material adverse
effect on the Company and its subsidiaries, taken as a whole (without
regard, however, to changes in conditions generally applicable to the
long-term and subacute care industry, institutional pharmacy and
outpatient therapy clinic business or general economic conditions);
(iv) there has not been any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any shares of the Company's capital stock;
(v) there has not been any split, combination or
reclassification of any of the Company's capital stock or any issuance
or the authorization of any
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issuance of any other securities in exchange or in substitution for
shares of the Company's capital stock;
(vi) there has not been (A) any granting by the Company or any
of its subsidiaries to any executive officer or other key employee of
the Company or any of its subsidiaries of any increase in compensation,
except in the ordinary course of business consistent with prior
practice or as required under employment agreements in effect as of
December 31, 1996, (B) any granting by the Company or any of its
subsidiaries to any such executive officer of any increase in severance
or termination pay, except as was required under any employment,
severance or termination agreements in effect as of December 31, 1996
or (C) any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such executive
officer or key employee;
(vii) there has not been any adoption or amendment in any
material respect by the Company or any of its subsidiaries of any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of the
Company or any of its subsidiaries (collectively, "COMPANY BENEFIT
PLANS").
(viii) there has not been any change in accounting methods,
principles or practices by the Company or any of its subsidiaries
materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in GAAP.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except (a) as
disclosed in the Current Company SEC Documents, including any exhibits to the
Current Company SEC Documents, and (b) for liabilities and obligations (x)
incurred in the ordinary course of business and consis-
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tent with past practice (y) pursuant to the terms of this Agreement or (z) as
set forth in Section 3.7 of the Company Disclosure Schedule, since January 1,
1997, neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that have had, or would be reasonably likely to have, a material
adverse effect on the Company and its subsidiaries, taken as a whole, or would
be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its subsidiaries (including the notes thereto).
Section 3.8 LITIGATION. Except as disclosed in the Current
Company SEC Documents or in Section 3.8 of the Company Disclosure Schedule,
there is no suit, claim, action, proceeding, including, without limitation,
arbitration proceedings or alternative dispute resolution proceedings, or
investigation pending before any Governmental Entity or, to the best knowledge
of the Company, threatened against the Company or any of its subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
Except as disclosed in the Current Company SEC Documents or in Section 3.8 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
is subject to any outstanding order, judgment, writ, injunction, rule or decree
of any Governmental Entity or arbitrator that, individually or in the aggregate,
could reasonably be expected to have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
Section 3.9 INFORMATION IN PROXY STATEMENT. The Proxy
Statement, if required by Section 1.8 hereof (or any amendment thereof or
supplement thereto), will, at the date mailed to Company stockholders and at the
time of the meeting of Company stockholders to be held in connection with
stockholder approval of the Merger, not 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, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions
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of the Exchange Act and the rules and regulations promul-
gated thereunder by the SEC.
Section 3.10 NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS. (a)
Except as disclosed in Section 3.10 of the Company's Disclosure Schedule, the
business of the Company and each of its subsidiaries is not being conducted in
default or violation of any term, condition or provision of (i) its respective
Certificate of Incorporation or By-laws, (ii) any Company Agreement or (iii) any
federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any of
its subsidiaries, excluding from the foregoing clauses (ii) and (iii), defaults
or violations which would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole. Except as
disclosed in Section 3.10 of the Company's Disclosure Schedule, as of the date
of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated an intention to conduct the same.
(b) Except as set forth in Section 3.10 of the Company
Disclosure Schedule, the Company and each of its subsidiaries possess all
certificates, franchises, licenses, permits, authorizations and approvals issued
to or granted by Governmental Entities (collectively, "PERMITS") necessary to
conduct their business as such business is currently conducted (including
certifications for participation or enrollment in the Medicare and Medicaid
programs for each of the nursing and subacute care facilities owned or operated
by the Company and/or any of its subsidiaries ("COMPANY NURSING FACILITIES"),
and current and valid provider contracts with the Medicare and Medicaid programs
for each Company Nursing Facility), except for such Permits, the lack of
possession of which would not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Except as set
forth in Section 3.10 of the Company Disclosure Schedule, (i) all such Permits
are validly held by the Company or its subsidiaries, and the Company and each of
its subsidiaries have complied in all re-
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spects with all terms and conditions thereof (and in particular, the Company
Nursing Facilities are in substantial compliance with the terms and conditions
of participation of the Medicare and Medicaid programs), except for such
instances where the failure to validly hold such Permits or the failure to have
complied with such Permits has not, and is not reasonably expected to have, a
material adverse effect on the Company and its subsidiaries, taken as a whole,
(ii) none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the Transactions, other than such Permits, the
suspension, modification or nonrenewal of which, in the aggregate, have not had
and would not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole and (iii) neither the Company nor
any of its subsidiaries has received any written warning, notice, notice of
violation or probable violation, survey report, statement of deficiencies,
notice of revocation, or other written communication from or on behalf of any
Governmental Entity that remains unresolved or which has resulted in any
restriction on the permissible operations of the Company or any of its
subsidiaries, alleging (A) any violation of any such Permit or of any law, rule,
regulation or provider agreement or (B) that the Company or any of its
subsidiaries requires any Permit required for its business, as such business is
currently conducted, that is not currently held by it, which violation or
failure to hold a Permit would have a material adverse effect on the Company and
its subsidiaries, taken as a whole. The Company has delivered to Parent true and
complete copies of the most recent survey reports, statements of deficiencies
and plans of correction filed with any Governmental Entity with respect to the
operations of any Company Nursing Facility. The Company and each of its
subsidiaries have filed all required cost reports with respect to Medicaid and
Medicare. The Company has delivered to Parent all such cost reports, audits and
schedules prepared or issued by, or filed with, any Governmental Entity or
private payor with respect to the operations of each Company Nursing Facility
for the last twelve (12) months and each such report is complete and accurate in
all material respects. Section 3.10 of the Company Disclosure Schedule sets
forth the status of any open cost reporting periods, pending reimbursement
appeals, and reimbursement payment rates for the last
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twelve (12) months with respect to any Governmental Entity or other third party
payor. There is no outstanding claim, and the Company does not know of any basis
for any claims against the Company or any of its subsidiaries by any third party
payors. Neither the Company, nor any of its subsidiaries, have received any
notices that Medicare or Medicaid has any claim or claims against any of them
which could result in consolidated net offsets against future reimbursements in
excess of that provided for in the consolidated financial statements of the
Company. Neither the Company, nor any of its subsidiaries, nor, to the best
knowledge of the Company or its subsidiaries, any person who provides
professional services for or on behalf of the Company and/or any of its
subsidiaries, has engaged in any activities which are prohibited under federal
Medicare or federal and state Medicaid statutes, as amended, or the regulations
promulgated pursuant thereto, or related state or local statutes or regulations,
and, to the knowledge of the Company, no investigations or other adverse actions
are being taken by Medicare and/or Medicaid, and all schedules and/or reports
have been filed with Medicare and Medicaid.
Section 3.11 INTELLECTUAL PROPERTY. The Company and its
subsidiaries own, or are licensed or otherwise have the rights to use, all
patents, trademarks, trade names, copyrights, technology, trade secrets,
know-how and processes (collectively, "INTELLECTUAL PROPERTY RIGHTS") material
to or necessary for the conduct of their respective businesses, as presently
conducted. No claims are pending by any person against the Company or any of its
subsidiaries as to the use of any Intellectual Property Rights and, to the
Company's best knowledge, the use by the Company or any of its subsidiaries of
all Intellectual Property Rights does not infringe on the rights of any person.
To the Company's best knowledge, no third person is infringing on the
Intellectual Property Rights of the Company or any of its subsidiaries.
Section 3.12 TAXES. (a) The Company and each of its
subsidiaries have timely filed (or have had timely filed on their behalf) all
Tax Returns (as hereinafter defined) required by applicable law to be filed by
any of them on or prior to or as of the Effective Time of the Merger. All such
Tax Returns are, or will be at the time
25
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of filing, true, complete and correct in all material re-
spects.
(b) The Company and each of its subsidiaries have paid (or
have had paid on their behalf) or, where payment is not yet due, have
established in accordance with GAAP (or have had established on their behalf and
for their sole benefit and recourse) an adequate accrual for the payment of all
Taxes due with respect to any period ending on or prior to the date hereof. The
Company and each of its subsidiaries have complied in all respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and have, within the time and manner prescribed by law, withheld and
paid over to the proper governmental authorities all amounts required to be so
withheld and paid over under applicable laws.
(c) No deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any of its subsidiaries. There are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company or any of its subsidiaries, and no power of attorney granted
by either the Company or any of its subsidiaries with respect to any Taxes is
currently in force.
(d) There are no Liens for Taxes upon the assets of the
Company or any of its subsidiaries except Liens for Taxes not yet due.
(e) There are no United States Federal, state, local or
foreign audits or other administrative proceedings or court proceedings
presently pending with regard to any Taxes or Tax Returns of the Company or any
of its subsidiaries.
(f) Except as set forth in Section 3.12 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any agreement or arrangement (written or oral) providing for the allocation
or sharing of Taxes.
(g) Neither the Company nor any of its subsidiaries has made
any change in accounting methods, received a ruling from any taxing authority
or signed an
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agreement with any taxing authority likely to have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(h) All transactions that could give rise to an understatement
of the Federal income tax liability of the Company or any of its subsidiaries
within the meaning of Section 6662(d) of the Code are adequately disclosed on
Tax Returns in accordance with Section 6662(d)(2)(B) of the Code if there is or
was no substantial authority for the treatment giving rise to such
understatement.
(i) Except as disclosed in Section 3.12 of the Company
Disclosure Schedule, no excess loss accounts or deferred intercompany gains as
defined in the consolidated return regulations promulgated under the Code (the
"Treasury Regulations") exist with respect to the Company or the subsidiaries.
(j) The Federal income tax net operating loss carryovers
available to the Company and its subsidiaries, and their expiration dates, are
set forth in Section 3.12 of the Company Disclosure Schedule. Except as set
forth in Section 3.12 of the Company Disclosure Schedule, as of the date of this
Agreement, the net operating loss and credit carryovers are not subject to
limitations imposed by Sections 382, 383 or 384 of the Code (or any predecessor
thereto) or otherwise (including Sections 1.1502-21 and 1502-22 of the Treasury
Regulations).
(k) Neither the Company nor any of its subsidiaries has filed
a consent to application of Section 341 of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any of its subsidiaries.
(l) The Company is a corporation within the
meaning of Section 7701(a)(3) of the Code.
(m) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "TAXES" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, real or personal
property,
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sales, withholding, social security, occupation, use, service,
service use, license, net worth, payroll, franchise, transfer
and recording taxes, fees and charges, imposed by the Internal
Revenue Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county,
local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)),
whether computed shall include any interest, fines, penalties
or additional amounts attributable to, or imposed upon, or
with respect to, any such amounts.
(B) "TAX RETURNS" shall mean any report, return
document, declaration or other information or filing required
to be supplied to any taxing authority or jurisdiction
(foreign or domestic) with respect to Taxes, including,
without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of
time in which to file any such report, return, document,
declaration or other information.
Section 3.13 OPINION OF FINANCIAL ADVISER. The Company Board
has received the opinion of Raymond James, dated the date of this Agreement,
that, as of such date, the Offer Price and the Merger Consideration are fair
from a financial point of view to the Company's stockholders, a signed copy of
which opinion has been delivered to Parent.
Section 3.14 TITLE TO PROPERTIES. The Company and its
subsidiaries have good, valid and marketable title to the properties and assets
reflected on the most recent consolidated balance sheet included in the Current
Company SEC Documents (the "BALANCE SHEET") (other than properties and assets
disposed of in the ordinary course of business since the date of the Balance
Sheet), and all such properties and assets are free and clear of any Liens,
except as described in the Current Company SEC Documents and the financial
statements included therein or in Section 3.14 of the Company Disclosure
Schedule and other than Liens for current taxes not yet due and other Liens or
title imperfections that do not have, and are
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not reasonably likely to have, a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Section 3.15 EMPLOYEE BENEFIT PLAN. (a) The Company and
each of its subsidiaries have complied, and currently are in compliance, in all
material respects with the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") the Code and all other
applicable laws with respect to each compensation or benefit plan, agreement,
policy, practice, program or arrangement (whether or not subject to ERISA)
maintained by the Company or any of its subsidiaries for the benefit of any
employee, former employee, independent contractor or director of the Company and
its subsidiaries (including, without limitation, any employment agreements or
any pension, savings, profit-sharing, bonus, medical, insurance, disability,
severance, equity-based or deferred compensation plans) (collectively, the
"PLANS"). The Company has provided or made available a current, accurate
and complete copy of each Plan to Parent and, to the extent applicable to the
Plans, (A) copies of any funding instruments, (B) summary plan descriptions
(C) Forms 5500 for the last three years and (D) IRS determination letters.
(b) Each of the Plans that is intended to
qualify under Section 401(a) of the Code, does so qualify, is exempt from
taxation pursuant to Section 501(a) of the Code and has received a favorable
determination letter from the IRS.
(c) Neither the Company nor any of its
subsidiaries has maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a "multiemployer
plan" (as defined in Section 3(37) of ERISA) and a defined benefit plan (as
defined in Section 3(35) of ERISA)).
(d) No Plan, other than a Plan which is
an employee pension benefit plan (within the meaning of Section 3(2)(A) of
ERISA), provides benefits, including, without limitation, death, health or
medical benefits (whether or not insured), with respect to current or former
employees of the Company beyond their retirement
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or other termination of service with the Company (other than (A) coverage
mandated by applicable law, (B) deferred compensation benefits accrued as
liabilities on the books of the Company, or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary)).
(e) Except as set forth in Section 3.15 of the
Company Disclosure Schedule, neither the Company nor its subsidiaries has
incurred any withdrawal liability with respect to any Plan that is a
multiemployer plan.
(f) No reportable event (within the meaning of
Section 4043 of ERISA) or prohibited transaction (within the meaning of Section
4975 of the Code or Section 406 of ERISA) has occurred with respect to any Plan
that could have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(g) There are no pending or, to the knowledge of
the Company, threatened actions, claims or lawsuits by any individuals or
entities with respect to any Plan (other than for routine benefit claims) that
could have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(h) Except as set forth in Section 3.15 of the
Company Disclosure Schedule, no payments or benefits (nor acceleration of
vesting or exercisability of any benefits) under any Plan are triggered (in
whole or in part) as a result of the transactions contemplated by this
Agreement.
(i) No Plan provides for any stock option that is
exercisable into the stock of any of the subsidiaries of the Company.
Section 3.16 INSURANCE. The Company maintains, and has
maintained, without interruption, during the past three years, policies or
binders of insurance covering such risks, and events, including personal injury,
property damage and general liability, in amounts the Company reasonably
believes adequate for its business and operations.
Section 3.17 NO EXCESS PARACHUTE PAYMENTS. Other than
payments that may be made to the persons
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listed in Section 3.17 of the Company Disclosure Schedule (the "PRIMARY COMPANY
EXECUTIVES"), any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the Transactions (whether alone
or in combination with a qualifying termination of employment) by any employee,
officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code). Set forth in Section 3.17 of the
Company Disclosure Schedule is (i) the estimated maximum amount that could be
paid to each Primary Company Executive as a result of the Transactions under all
employment, severance and termination agreements, other compensation
arrangements and Company Benefit Plans currently in effect (together with a
qualifying termination of employment); and (ii) the "base amount" (as such term
is defined in Section 280G(b)(3) of the Code) for each Primary Company Executive
calculated as of the date of this Agreement.
Section 3.18 ENVIRONMENTAL MATTERS. (i) Except as disclosed in
the Current Company SEC Documents or as set forth in Section 3.18 of the Company
Disclosure Schedule, (A) the Company and each of its subsidiaries have conducted
their respective businesses in compliance with all applicable Environmental Laws
(as hereinafter defined) and are currently in compliance with all such laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted, (B) none of the properties currently or formerly owned or
operated by the Company or any of its subsidiaries contains any Hazardous
Substance (as hereinafter defined) in amounts exceeding the levels permitted by
applicable Environmental Laws, (C) neither the Company nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any Governmental Entity or third party indicating that the
Company or any of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, including, without limitation, liability relating
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to sites not owned or operated by the Company or any of its subsidiaries, (D)
there are no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings, pending or threatened, against the
Company or any of its subsidiaries relating to any violation of or liability
under, or alleged violation of or liability under, any Environmental Law, (E)
all reports that are required to be filed by the Company or any of its
subsidiaries concerning the release of any Hazardous Substance or the threatened
or actual violation of any Environmental Law have been so filed, (F) no
Hazardous Substance has been disposed of, released or transported in violation
of or under circumstances that could create liability under any applicable
Environmental Law from any properties owned by the Company or any of its
subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries, (G) neither the Company, any of its
subsidiaries nor any of their respective properties are subject to any material
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (A) through (G) that, singly or in the aggregate, would
not reasonably be expected to have a material adverse effect on the Company and
its subsidiaries, taken as a whole, and (H) the Company has provided Parent with
each environmental audit, test or analysis performed within the last three years
of any property currently or formerly owned or operated by the Company or any of
its subsidiaries (x) which involves any condition of environmental impairment
which would give rise to a material adverse effect on the Company and its
subsidiaries, taken as a whole and (y) of which the Company has knowledge.
(ii) As used herein, "ENVIRONMENTAL LAW" means any United States
Federal, territorial, state, local or foreign law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, legal
doctrine, order, judgment, decree, injunction, requirement or agreement with any
governmental entity relating to (x) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply,
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surface land, subsurface land, plant and animal life or any other natural
resource) or to human health or safety or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
"Environmental Law" includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(iii) As used herein, "HAZARDOUS SUBSTANCE" means any substance
presently or hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive, or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any government authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated byphenyls.
Section 3.19 LABOR MATTERS. Except as set forth in Section
3.19 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending
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or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries relating to its business, except for any such proceeding which
would not have a material adverse effect on the Company and its subsidiaries,
taken as a whole. To the knowledge of the executive officers of the Company,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its subsidiaries.
Section 3.20 FINDERS AND INVESTMENT BANKERS. Neither the
Company nor any of its officers or directors has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Raymond James (the fees
of which will be paid by the Company), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the Transactions, except for
fees payable to Raymond James. The Company has provided Parent with a true and
correct copy of the fee letter between the Company and Raymond James.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company
that all of the statements contained in this Article IV are true and correct as
of the date of this Agreement (or, if made as of a specified date, as of such
date), and will be true and correct in all material respects as of the Closing
Date as though made on the Closing Date.
Section 4.1 ORGANIZATION. Each of Parent and the Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of Canada and Delaware, respectively, and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power,
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authority, and governmental approvals would not have a material adverse effect
on Parent and its subsidiaries, taken as a whole. Parent and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, in the aggregate, have a material adverse effect on
Parent and its subsidiaries, taken as a whole.
Section 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY
ACTION. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions. The
execution, delivery and performance by Parent and the Purchaser of this
Agreement, and the consummation of the Merger and of the Transactions, have been
duly authorized by the Board of Directors of Parent and the Board of Directors
of the Purchaser and by Parent as the sole stockholder of the Purchaser and no
other corporate action on the part of Parent and the Purchaser is necessary to
authorize the execution and delivery by Parent and the Purchaser of this
Agreement and the consummation of the Transactions. This Agreement has been duly
executed and delivered by each of the Parent and the Purchaser and, assuming due
and valid authorization, execution and delivery hereof by the Company, is a
valid and binding obligation of each of Parent and the Purchaser, as the case
may be, enforceable against each of them in accordance with its respective terms
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
state securities or blue sky laws and the DGCL, neither the execution, delivery
or performance of this Agreement by Parent or the Purchaser nor the consummation
by Parent or the Purchaser of the Transactions nor compliance by Parent or the
Purchaser with any of the provi-
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sions hereof will (i) conflict with or result in any breach of any provision of
the articles of incorporation or by-laws of Parent or the certificate of
incorporation or by-laws of the Purchaser, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity with
respect to the business carried on by Parent or its subsidiaries as of the date
hereof, (iii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent, or any of its
subsidiaries or the Purchaser is a party or by which any of them or any of their
respective properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, excluding from the foregoing
clauses (ii),(iii) and (iv) such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on Parent,
its subsidiaries and the Purchaser taken as a whole.
Section 4.4 INFORMATION IN PROXY STATEMENT. None of the
information supplied by Parent or the Purchaser specifically for inclusion or
incorporation by reference in the Proxy Statement, if required by Section 1.8
hereof, will, at the date mailed to Company stockholders and at the time of the
meeting of Company stockholders to be held in connection with Company
stockholder approval of 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.
ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure Schedule
or
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(iii) as agreed in writing by Parent, after the date hereof, and prior to the
time the directors of the Purchaser have been elected to, and shall constitute a
majority of, the Company Board pursuant to Section 1.4 hereof (the "APPOINTMENT
DATE"):
(a) the business of the Company and its subsidiaries
shall be conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its subsidiaries shall use its
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;
(b) the Company shall not, directly or indirectly,
amend or propose to amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(c) the Company shall not, and it shall not permit
any of its subsidiaries to: (i)(A) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to the
Company's capital stock or that of its subsidiaries, or (B) redeem, purchase or
otherwise acquire directly or indirectly any shares of the capital stock of the
Company or of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities; (ii)
authorize for issuance, issue, sell, pledge, deliver or agree to commit to
issue, sell, pledge or deliver (whether through the issuance or granting of any
options, warrants, calls, subscriptions, stock appreciation rights or other
rights or other agreements) or otherwise encumber any shares of capital stock of
any class of the Company or of its subsidiaries or any securities convertible
into or exchangeable for shares of capital stock of any class of the Company or
of its subsidiaries other than Shares issued upon the exercise of Company
Options outstanding on the date hereof in accordance with the Company Option
Plans as in effect on the date hereof or Shares for which there are accrued
payments through September 30, 1997 in accordance with the Employee Stock
Purchase Plan as in effect on the date hereof; or (iii) split, combine or
reclassify the outstanding capital stock of the Company or of any of its
subsidiaries or authorize the issuance of any other securities in respect of, in
lieu of or in substitution
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for shares in the capital stock of the Company or of any of its subsidiaries;
(d) except for those acquisitions specifically set
forth and described in Section 5.1(d) of the Company Disclosure Schedule, the
Company shall not, and it shall not permit any of its subsidiaries to, acquire
or agree to acquire (i) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or (ii) any
assets, outside of the ordinary course of business, that individually is in
excess of $5 million or in the aggregate in excess of $10 million;
(e) the Company shall not, and it shall not permit
any of its subsidiaries to, sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any assets of the Company or of
its subsidiaries other than (i) sales and dispositions of interests or rights
with respect to property having an aggregate fair market value on the date of
this Agreement of less than $5 million, in each case only if in the ordinary
course of business and consistent with past practice or (ii) encumbrances and
Liens that are incurred in the ordinary course of business and consistent with
past practice;
(f) neither the Company nor any of its
subsidiaries shall: (i) grant any increase in the compensation payable or to
become payable by the Company or any of its subsidiaries to any of its executive
officers or key employees or (ii)(A) adopt any new, or (B) amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement, including without limitation, the Company Option Plans; or (iii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or any its
subsidiaries;
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(g) neither the Company nor any of its subsidiaries
shall: (i) modify, amend or terminate any of its or its subsidiaries' material
contracts or waive, release or assign any material rights or claims, except in
the ordinary course of business and consistent with past practice (ii) enter
into any other agreements, commitments or contracts that are material to the
Company and its subsidiaries taken as a whole, other than in the ordinary course
of business and consistent with past practice, or otherwise make any material
change that is adverse to the Company (including by way of termination) in (A)
any existing agreement, commitment or arrangement that is material to the
Company and its subsidiaries taken as a whole or (B) the conduct of the business
or operations of the Company and its subsidiaries;
(h) neither the Company nor any of its
subsidiaries shall: (i) incur or assume any long-term debt, or except in the
ordinary course of business in amounts consistent with past practice, incur or
assume any short-term indebtedness; (ii) incur or modify any material
indebtedness or other liability; (iii) issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or of any
of its subsidiaries; (iv) enter into any "keep well" or other arrangement to
maintain any financial condition of another person; (v) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of business and consistent with past practice; (vi) make any
loans, advances or capital contributions to, or investments in, any other person
(other than to wholly owned subsidiaries of the Company); or (vii) enter into
any material commitment or transaction (including, but not limited to, any
material capital expenditure or purchase or lease of assets or real estate other
than the purchase of products for inventory and supplies in the ordinary course
of business); PROVIDED that this Section 5.1(h) shall not prevent the financings
of the acquisitions described in Section 5.1(d) of the Company Disclosure
Schedule;
(i) neither the Company nor any of its subsidiaries
shall change any of the accounting methods used by it unless required by GAAP;
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(j) neither the Company nor any of its
subsidiaries shall, without the prior written consent of Parent, pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, in the ordinary
course of business and consistent with past practice, of claims, liabilities or
obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
consolidated subsidiaries;
(k) neither the Company nor any of its
subsidiaries will take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Offer set forth in
Annex A or any of the conditions to the Merger set forth in Article VI not being
satisfied, or would make any representation or warranty of the Company contained
herein inaccurate in any respect at, or as of any time prior to, the Effective
Time, or that would materially impair the ability of the Company to consummate
the Offer or the Merger in accordance with the terms hereof or materially delay
such consummation;
(l) neither the Company nor any of its
subsidiaries shall make any Tax election or settle or compromise any Tax
liability or refund, except to the extent already provided in the Current
Company SEC Documents;
(m) neither the Company nor any of its
subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated without notice
to Parent, except in the ordinary course of business and consistent with past
practice;
(n) neither the Company nor any of its
subsidiaries will adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger); and
(o) neither the Company nor any of its
subsidiaries will enter into an agreement, contract,
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commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
Section 5.2 ACCESS; CONFIDENTIALITY. Upon reasonable notice,
the Company shall (and shall cause each of its subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access, during normal business hours
during the period prior to the Appointment Date, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its subsidiaries to) furnish promptly to the Parent (a)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. After the Appointment
Date the Company shall provide Parent and such persons as Parent shall designate
with all such information, at such time as Parent shall request. Unless
otherwise required by law and until the Appointment Date, Parent will hold any
such information which is non-public in confidence in accordance with the
provisions of a letter agreement dated September 10, 1997 between the Company
and the Parent (the "CONFIDENTIALITY AGREEMENT"). The parties agree that the
access and assistance to be provided pursuant to this Section 5.2 shall not be
such as to unreasonably interfere with the operation of the Company's business.
Section 5.3 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the Company and
Parent shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
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Section 5.4 CONSENTS AND APPROVALS. (a) Each of the Company,
Parent and the Purchaser will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
this Agreement and the Transactions (which actions shall include, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their subsidiaries
in connection with this Agreement and the Transactions. Each of the Company,
Parent and the Purchaser will, and will cause its subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by Parent, the Purchaser, the Company or any of their
subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any
Governmental Entity in connection with antitrust matters.
Section 5.5 NO SOLICITATION. (a) Neither the Company nor any
of its subsidiaries or affiliates shall (and the Company shall use its best
efforts to cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any proposal or offer to
acquire all or a substantial part of the business and properties of the Company
or any of its subsidiaries or any capital stock of the Company or any of its
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subsidiaries, whether by merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or similar transactions
involving the Company or any subsidiary, division or operating or principal
business unit of the Company (collectively, an "ACQUISITION PROPOSAL").
Notwithstanding the foregoing, the Company may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal (x) if such entity or group has on
an unsolicited basis submitted a bona fide written proposal to the Company Board
relating to any such transaction which the Company Board determines in good
faith represents a superior transaction to the Offer and the Merger and which is
not conditioned upon obtaining additional financing and (y) if, in the opinion
of the Company Board, only after receipt of advice from independent legal
counsel to the Company, the failure to provide such information or access or to
engage in such discussions or negotiations would cause the Company Board to
violate its fiduciary duties to the Company's stockholders under applicable law
(an Acquisition Proposal which satisfies clauses (x) and (y) being referred to
herein as a "SUPERIOR PROPOSAL"). The Company will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by the Company in connection with such
proposal, discussion negotiation, or inquiry) and the identity of the party
making such proposal or inquiry which it may receive in respect of any such
transaction.
(b) Except as set forth herein, neither
the Company Board nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or the Purchaser,
the approval or recommendation by the Company Board or any such committee of the
Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or (iii) enter into any agreement
with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior
to the time of acceptance for payment of Shares in the Offer, the Company Board
may (subject to the terms of this and the following sentence) withdraw or modify
its approval or recommendation of the
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Offer, this Agreement or the Merger, approve or recommend a Superior Proposal,
or enter into an agreement with respect to a Superior Proposal, in each case at
any time after the second business day following Parent's receipt of written
notice advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; PROVIDED that the Company
Board shall have determined, only after receipt of advice from outside legal
counsel to the Company, that the failure to take such action would cause the
Company Board to violate its fiduciary duties to the Company's stockholders
under applicable law; PROVIDED FURTHER that the Company shall not enter into an
agreement with respect to a Superior Proposal unless the Company shall have
furnished Parent with written notice not later than noon (New York time) one day
in advance of any date that it intends to enter into such agreement and shall
have caused its financial and legal advisors to negotiate with Parent to make
such adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein on such
adjusted terms. In addition, if the Company proposes to enter into an agreement
with respect to any Acquisition Proposal, it shall concurrently with entering
into such agreement pay, or cause to be paid, to Parent the Termination Fee (as
defined in Section 8.1) subject to the provisions of Section 8.1.
Section 5.6 PUBLICITY. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 5.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation
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or warranty 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 the Company, Parent or the Purchaser, as the case may be, 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 5.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 5.8 INDEMNIFICATION. For six years after the Effective
Time, Parent shall cause the Surviving Corporation (or any successor to the
Surviving Corporation) to indemnify, defend and hold harmless the present and
former officers and directors of the Company and its subsidiaries (each an
"INDEMNIFIED PARTY") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel and judgments,
fines, losses, claims, liabilities and amounts paid in settlement (provided that
any such settlement is effected with the written consent of the Parent or the
Surviving Corporation)) arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted under Delaware law,
subject to the terms of the Company's Certificate of Incorporation, By-laws and
indemnification agreements, all as in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit; PROVIDED THAT, in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; PROVIDED FURTHER, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware law, the Certificate of Incorporation, the By-Laws or
such agreements, as the case may be, shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party and; PROVIDED FURTHER,
that nothing herein shall impair any rights or obligations of any present or
former directors or officers of the Company.
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ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) STOCKHOLDER APPROVAL. This Agreement
shall have been approved and adopted by the requisite vote of the stockholders
of the Company, if required by applicable law and the Certificate of
Incorporation, in order to consummate the Merger;
(b) STATUTES; CONSENTS. No law, statute,
rule, order, decree or regulation shall have been enacted or promulgated by any
Governmental Entity of competent jurisdiction which declares this Agreement
invalid or unenforceable in any material respect or which prohibits completion
of the Offer or consummation of the Merger, and all governmental consents,
orders and approvals (including, without limitation, those identified in Section
5.4(a) of the Schedule attached to this Agreement) required for the completion
of the Offer or consummation of the Merger and the other transactions
contemplated hereby shall have been obtained and shall be in effect at the
Effective Time;
(c) INJUNCTIONS. There shall be no order
or injunction of any Governmental Entity in effect precluding, restraining,
enjoining or prohibiting completion of the Offer or consummation of the Merger;
(d) PURCHASE OF SHARES IN OFFER. Parent, the
Purchaser or their affiliates shall have purchased Shares pursuant to the Offer;
and
(e) HSR APPROVAL. The applicable waiting period
under the HSR Act shall have expired or been terminated.
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ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. This Agreement may be terminated and
the Merger contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) By the mutual written consent of the
Board of Directors of Parent and the Company Board.
(b) By either of the Board of Directors
of Parent or the Company Board:
(i) if the Offer shall have expired without any
Shares being purchased therein; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(b)(i) 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
Parent or the Purchaser, as the case may be, to purchase the Shares
pursuant to the Offer on or prior to the date on which the Offer shall
have expired; or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their reasonable
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the Transactions and such order, decree, ruling
or other action shall have become final and non-appealable.
(c) By the Company Board:
(i) if, prior to the purchase of the Shares pursuant
to the Offer, Parent or the Purchaser breaches or fails in any material
respect to perform or comply with any of its material covenants and
agreements contained herein or breaches its representations and
warranties in any material respect; or
(ii) in connection with entering into a
definitive agreement in accordance with Section
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5.5(b), provided it has complied with all provisions thereof, including
the notice provisions therein, and that it makes simultaneous payment
of the Termination Fee; or
(iii) if Parent or the Purchaser shall have
terminated the Offer without Parent or the Purchaser, as the case may
be, purchasing any Shares pursuant thereto; provided that the Company
may not terminate this Agreement pursuant to this Section 7.1(c)(iii)
if the Company is in material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to the
fifth business day following the date of the initial public
announcement of the Offer; provided, that the Company may not terminate
this Agreement pursuant to this Section 7.1(c)(iv) if the Company is in
material breach of this Agreement.
(d) By the Board of Directors of the
Parent or the Board of Directors of the Purchaser:
(i) if prior to the purchase of the Shares pursuant
to the Offer, the Company Board (A) shall have withdrawn, or modified
or changed in a manner adverse to Parent or the Purchaser, its approval
or recommendation of the Offer, this Agreement or the Merger, or (B)
shall have approved or recommended an Acquisition Proposal, or (C)
shall have executed an agreement in principle (or similar agreement) or
definitive agreement providing for a tender offer or exchange offer for
any shares of capital stock of the Company, or a merger, consolidation
or other business combination with a person or entity other than
Parent, the Purchaser or their affiliates (or the Company Board
resolves to do any of the foregoing); or
(ii) if Parent or the Purchaser shall have terminated
the Offer without Parent or the Purchaser purchasing any Shares
thereunder, PROVIDED that Parent or the Purchaser may not terminate
this Agreement pursuant to this Section 7.1(d)(ii) if Parent or the
Purchaser has failed to purchase the
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Shares in the Offer in violation of the material terms thereof; or
(iii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A hereto, Parent, the
Purchaser, or any of their affiliates shall have failed to commence the
Offer on or prior to the fifth business day following the date of the
initial public announcement of the Offer.
Section 7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 7.1, written notice thereof
by the terminating party shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, the Company, their respective stockholders and
affiliates, or the respective officers and directors thereof, except as set
forth in Section 8.1 and pursuant to the Confidentiality Agreement; PROVIDED,
HOWEVER, that nothing herein shall relieve any party from liability for fraud or
for any material breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. All costs and expenses incurred
in connection with this Agreement and the consummation of the Transactions shall
be paid by the party incurring such expenses. Notwithstanding the foregoing, if
(x) this Agreement is terminated pursuant to Section 7.1(c)(ii) or 7.1(d)(i)
hereof or (y) prior to the termination of this Agreement an Acquisition Proposal
shall have been made and within 12 months of such termination an Acquisition
Proposal shall have been consummated or the Company shall have entered into an
agreement with respect to, or shall have approved or recommended, an Acquisition
Proposal, then the Company shall pay to Parent (concurrently with such
termination, in the case of clause (x) above, and not later than the
consummation of such later Acquisition Proposal, in the case of clause
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<PAGE> 55
(y) above) an amount equal to U.S.$10 million (the "TERMINATION FEE"). In
addition, if the Offer is terminated pursuant to paragraph (g) of Annex A
hereto, Parent will pay to the Company an amount equal to all out-of-pocket fees
and expenses of the Company incurred in connection with this Agreement and the
Offer (including legal and investment banking fees and expenses) to a maximum of
U.S. $1 million.
Section 8.2 AMENDMENT AND MODIFICATION. Subject to
applicable law, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto (which
in the case of the Company shall include approvals as contemplated in Section
1.4(b)), at any time prior to the Closing Date with respect to any of the terms
contained herein; PROVIDED, HOWEVER, that after the approval of this Agreement
by the stockholders of the Company, no such amendment, modification or
supplement shall reduce the amount, or change the form, of the Merger
Consideration.
Section 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 8.4 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Extendicare Inc.
3000 Steeles Avenue East
Suite 700
Markham, Ontario
L3R 9W2
50
<PAGE> 56
Attention: Joy D. Calkin
Telephone: (905) 470-4000
Facsimile: (905) 470-4003
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Milton G. Strom
Telephone No.: (212) 735-2300
Telecopy No.: (212) 735-3618
(b) if to the Company, to:
Arbor Health Care Company
1100 Shawnee Road
Box 840
Lima, Ohio 45802
Attention: Pier C. Borra
Telephone: (419) 227-3000
Facsimile: (419) 227-3499
with a copy to:
Shumaker, Loop & Kendrick, LLP
Barnett Plaza - Suite 2800
101 East Kennedy Boulevard
Tampa, Florida 33602
Attention: Gregory C. Yadley
Telephone No.: (813) 229-7600
Telecopy No.: (813) 229-1660
Section 8.5 INTERPRETATION. When a reference is made in this
Agreement to Sections, 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". As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 promulgated under
the Exchange Act.
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<PAGE> 57
Section 8.6 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES;
RIGHTS OF OWNERSHIP. This Agreement and the Confidentiality Agreement (including
the documents and the instruments referred to herein and therein): (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 5.8 and Schedule
3.15 hereto, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 8.8 SEVERABILITY. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.10 ASSIGNMENT. Neither this Agree-
ment nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
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(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that the Purchaser may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to Parent or to
any direct or indirect wholly owned subsidiary of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
Section 8.11 TRANSFER AND SIMILAR TAXES. Notwithstanding any
other provision of this Agreement to the contrary, each of the Company's
stockholders shall be responsible for the payment of any sales, use, privilege,
transfer, documentary, gains, stamp, duties, recording and similar Taxes and
fees (including any penalties, interest and additions to such fees), except for
taxes relating to "EXCESS PARACHUTE PAYMENTS" with respect to persons referred
to in Schedule 3.17 of the Company Disclosure Schedule, incurred in connection
with such stockholder's sale of Shares to the Purchaser pursuant to this
Agreement and for the accurate filing of all necessary Tax Returns and other
documentation with respect to any transfer Tax.
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<PAGE> 59
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
EXTENDICARE INC.
By:/s/ Barry L. Stephens
----------------------------------
Name: Barry L. Stephens
Title: Senior Vice President,
Finance
AHC ACQUISITION CORP.
By:/s/ Stephen F. Dineley
----------------------------------
Name: Stephen F. Dineley
Title: Vice President & Chief
Financial Officer
ARBOR HEALTH CARE COMPANY
By:/s/ PIER C. BORRA
----------------------------------
Name: Pier. C. Borra
Title: Chairman, President
and Chief Executive
Officer
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<PAGE> 60
ANNEX A
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of) the
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of this Agreement), the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to the Purchaser's obligation to pay for or return tendered Shares promptly
after termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate or amend the Offer as to any
Shares not then paid for, if (i) any applicable waiting period under the HSR Act
has not expired or terminated, (ii) the Minimum Condition has not been
satisfied, (iii) the Company, the Parent and the Purchaser, as required, have
not obtained all necessary material consents, approvals, orders, authorizations,
registrations, declarations, permits or filings required to be obtained by it in
connection with this Agreement and the transactions contemplated hereby or (iv)
at any time on or after the date of the Merger Agreement and before the time of
payment for any such Shares, any of the following events shall occur or shall be
determined by the Purchaser to have occurred:
(a) there shall be threatened or pending any
suit, action or proceeding by any Governmental Entity against the Purchaser,
Parent, the Company or any subsidiary of the Company (i) seeking to prohibit or
impose any material limitations on Parent's or the Purchaser's ownership or
operation (or that of any of their respective subsidiaries or affiliates) of all
or a material portion of their or the Company's businesses or assets, or to
compel Parent or the Purchaser or their respective subsidiaries and affiliates
to dispose of or hold separate any material portion of the business or assets of
the Company or Parent and their respective subsidiaries, in each case taken as a
whole, (ii) challenging the acquisition by Parent or the Purchaser of any Shares
under the Offer, the Merger or pursuant to the Stockholder Agreements, seeking
to restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other Transactions (including the voting
provisions thereunder), or seeking to obtain from the Company, Parent or the
A-1
<PAGE> 61
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as a whole, (iii) seeking to impose material limitations on
the ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer and
the Merger, (iv) seeking to impose material limitations on the ability of the
Purchaser or Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's stockholders, or (v) which
otherwise is reasonably likely to have a material adverse affect on the Company
and its subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange, The Toronto Stock Exchange or in the Nasdaq Stock Market,
for a period in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges not
related to market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or Canada
(whether or not mandatory), (iii) a commencement of a war directly or indirectly
involving the United States or Canada, (iv) any limitation (whether or not
mandatory) by any United States or Canadian governmental authority on the
extension of credit generally by banks or other financial institutions, (v) a
change in general financial, bank or capital market conditions which materially
adversely affects the ability of financial institutions in the United States or
Canada to extend credit or syndicate loans or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
A-2
<PAGE> 62
(d) (i) the representations and warranties of
the Company set forth in this Agreement shall not be true and correct in any
material respect as of the date of this Agreement and as of consummation of the
Offer as though made on or as of such date, (ii) the Company shall have failed
to comply with its covenants and agreements under this Agreement in all material
respects or (iii) there shall have occurred any events or changes which have had
or will have a material adverse effect on the Company and its subsidiaries taken
as a whole;
(e) (i) the Company Board shall have with-
drawn, or modified or changed in a manner adverse to Parent or the Purchaser
(including by amendment of the Schedule 14D-9) its approval or recommendation
of the Offer, this Agreement, or the Merger, or approved or recommended any
Acquisition Proposal, (ii) the Company shall have entered into any agreement
with respect to any Superior Proposal in accordance with Section 5.5(b) of this
Agreement or (iii) the Company Board, upon request of the Purchaser, shall fail
to reaffirm its recommendation of the Offer, this Agreement or the Merger;
(f) this Agreement shall have terminated in
accordance with its terms; or
(g) there shall have occurred after the date
hereof any material adverse change in the business, assets, liabilities (actual
or contingent), operations, condition, financial or otherwise) or prospects of
Extendicare Health Services, Inc., an indirect wholly owned subsidiary of Parent
("EHSI"), and its subsidiaries, taken as a whole, and Nationsbank, N.A. or
Nationsbanc Capital Markets, Inc. shall have declined to participate in the
financing to be provided to EHSI as set forth in their letter to Parent dated
September 29, 1997.
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent
and the Purchaser and may be waived by Parent or the Purchaser, in whole or in
part at any time and from time
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<PAGE> 63
to time in the sole discretion of Parent or the Purchaser. The failure by Parent
or the Purchaser at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
A-4
<PAGE> 1
EXHIBIT (c)(2)
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of September 29, 1997, among Extendicare
Inc., a corporation existing under the laws of Canada ("Parent"), AHC
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Extendicare Inc.(the "Purchaser"), and Pier C. Borra, Renee A. Borra, Pier C.
Borra and Renee A. Borra as joint tenants, Borra Family Foundation, Renee A.
Borra, Trustee and Pier C. Borra, Jr. (each, a "Stockholder" and collectively,
the "Stockholders").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and Arbor Health Care Company, a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of Merger
(as such agreement may hereafter be amended from time to time, the "Merger
Agreement"), pursuant to which Purchaser will be merged with and into the
Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, the Purchaser shall commence
a cash tender offer (the "Offer") to purchase at a price of $45.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially owned
by the Stockholders; and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined
<PAGE> 2
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meaning of Section 13(d)(3) of
the Exchange Act.
(b) "Company Common Stock" shall mean at any time the
Common Stock, $.03 par value, of the Company.
(c) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
(d) Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
2. TENDER OF SHARES.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, each Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Company Common Stock set forth opposite such Stockholder's name on Schedule I
hereto (the "Existing Shares", and together with any shares acquired by such
Stockholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of Company Options or by means of
purchase, dividend, distribution or otherwise, the "Shares"), all of which are
Beneficially Owned by such Stockholder. Each Stockholder hereby acknowledges and
agrees that Parent's and the Purchaser's obligation to accept for payment and
pay for the Shares in the Offer, including the Shares Beneficially Owned by such
Stockholder, is subject to the terms and conditions of the Offer.
(b) The transfer by each Stockholder of the Shares to
Purchaser in the Offer shall pass to and unconditionally vest in the Purchaser
good and valid title to the Shares, free and clear of all Liens.
2
<PAGE> 3
(c) Each Stockholder hereby permits Parent and the Purchaser
to publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) his identity and ownership of
the Company Common Stock and the nature of his commitments, arrangements and
understandings under this Agreement.
3. OPTIONS.
(a) EXERCISE OF STOCK OPTION. In order to induce Parent and
the Purchaser to enter into the Merger Agreement, each Stockholder hereby grants
to Parent an irrevocable option (a "Stock Option") to purchase such
Stockholder's Shares (the "Option Shares") at an amount (the "Purchase Price")
equal to the Offer Price. If the Merger Agreement is terminated pursuant to
Section 7.1(c)(ii) or 7.1(d)(i), each Stock Option shall, in any such case,
become exercisable, in whole but not in part, upon the first to occur of any
such event and remain exercisable in whole until the date which is 60 days after
the date of the occurrence of such event (the "60 Day Period"), so long as: (i)
all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), required for the purchase of the Option Shares
upon such exercise shall have expired or been waived; (ii) all other applicable
consents of any Governmental Entity required for the purchase or sale of the
Option Shares upon such exercise (if applicable) shall have been granted or
otherwise satisfied; and (iii) there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Stock Option pursuant to this Agreement; provided that if (i)
all HSR Act waiting periods shall not have expired or been waived, (ii) all
other applicable consents of any Governmental Entity required for the purchase
or sale of the Option Shares (if applicable) shall not have been granted or
otherwise satisfied, or (iii) there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until 5 business days after the later of (A) the date of
expiration or waiver of all HSR Act waiting periods, (B) the grant or other
satisfaction of such required consents, and (C) the date of removal or lifting
of such injunction or order; provided, however, that in no event shall the Stock
Option be exercisable after December 31, 1997; provided, further, that the Stock
Option shall terminate if any Governmental Entity shall issue an order, decree
or ruling or take any
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<PAGE> 4
other action (which order, decree, ruling or other action the parties hereto
shall use their best efforts to lift), which permanently restrains, enjoins or
otherwise prohibits Parent's exercise of the Stock Option or the sale of the
Option Shares to Parent by the Stockholder. In the event that Parent wishes to
exercise a Stock Option, Parent shall send a written notice (the "Notice") to
the Stockholder identifying the place and date (not less than two nor more than
10 business days from the date of the Notice) for the closing of such purchase.
(b) MAKE WHOLE. If, pursuant to Section 3(a), Parent exercises
the Option, then, at Parent's election: (i) Parent will, at or prior to the time
of payment in connection with any Superior Proposal, pay (the "Alternative
Payment") to the Stockholder a per Share amount equal to the consideration paid
to all stockholders of the Company in the Superior Proposal, less the Purchase
Price per Share, plus any additional amount as may be necessary so that the
aggregate consideration, after payment of all federal, state and local income
taxes (the "Aggregate After Tax Consideration") received by the Stockholder in
connection with the Alternative Payment is not less than the Aggregate After Tax
Consideration that would have been received by the Stockholder as if it had been
paid the consideration under the Superior Proposal; or (ii) prior to the end of
the tender period, the effective date of the merger or the consummation date for
the Superior Proposal, Parent shall rescind the exercise of the Option and
return the Stockholder's Shares to the Stockholder and the Stockholder, upon
receipt of such Shares, shall repay the Purchase Price to the Parent and,
provided that the Stockholder tenders its Shares to the Superior Proposal or
votes its Shares in favor of the Superior Proposal, and the Stockholder actually
receives the consideration paid in connection with the Superior Proposal (the
"Superior Proposal Payment"), then at or prior to the time of the Superior
Proposal Payment, Parent shall pay to the Stockholder any additional amount as
may be necessary so that the Aggregate After Tax Consideration received by the
Stockholder in connection with the Superior Proposal is not less than the
Aggregate After Tax Consideration it would have received in connection with the
Superior Proposal had Parent never exercised the Option.
4. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Each Stockholder shall,
during the period commencing on the date hereof and con-
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<PAGE> 5
tinuing until the first to occur of the Effective Time or the termination of the
Merger Agreement in accordance with its terms, and in any event until no later
then December 31, 1997, at any meeting of the holders of Company Common Stock,
however called, or in connection with any written consent of the holders of
Company Common Stock, vote (or cause to be voted) the Shares (if any) then held
of record or Beneficially Owned by such Stockholder, (i) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof; and (ii) against any Acquisition Proposal and against any
action or agreement that would impede, frustrate, prevent or nullify this
Agreement, or result in a breach in any respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Merger
Agreement or which would result in any of the conditions set forth in Annex A to
the Merger Agreement or set forth in Article VI of the Merger Agreement not
being fulfilled.
(b) NO INCONSISTENT ARRANGEMENTS. Each Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Merger Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Company Options or any
interest therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Company
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Company Options, (iv)
deposit such Shares or Company Options into a voting trust or enter into a
voting agreement or arrangement with respect to such Shares or Company Options,
or (v) take any other action that would in any way restrict, limit or interfere
with the performance of its obligations hereunder or the transactions
contemplated hereby or by the Merger Agreement. Notwithstanding anything
contained in this Section to the contrary, the Stockholder shall have the right
to transfer ownership of Shares to members of his or her immediate family or to
a trust created by the Stockholder, provided that any and all transferees and
trustees of any such trusts first agree in writing to hold such Shares so
transferred subject to this Agreement.
5
<PAGE> 6
\
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF
PROXY.
(i) Each Stockholder, during the period commencing on the date
hereof and continuing until the first to occur of the Effective Time or the
termination of the Merger Agreement in accordance with its terms, and in any
event until no later then December 31, 1997, at any meeting of the holders of
Company Common Stock, hereby irrevocably grants to, and appoints, Parent and Joy
Calkin and Barry Stephens, or either of them, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such
office of Parent, and each of them individually, such Stockholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Stockholder, to vote such Stockholder's Shares, or grant a
consent or approval in respect of the Shares in favor of the various
transactions contemplated by the Merger Agreement (the "Transactions") and
against any Acquisition Proposal, and for no other purpose.
(ii) Each Stockholder represents that any proxies heretofore
given in respect of such Stockholder's Shares are not irrevocable, and that any
such proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms that
the irrevocable proxy set forth in this Section 4(c) is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of such Stockholder under this
Agreement. Each Stockholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law.
(d) NO SOLICITATION. Each Stockholder hereby
agrees, in its or his capacity as a stockholder of the Company, that neither
such Stockholder nor any of its Subsidiaries or affiliates shall (and such
Stockholder shall use its best efforts to cause its officers, directors,
employees, representatives and agents, including,
6
<PAGE> 7
but not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any Acquisition Proposal.
Each Stockholder will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Each Stockholder will immediately communicate to Parent
the terms of any proposal, discussion, negotiation or inquiry such Stockholder,
in its or his capacity as a stockholder of the Company, receives (and will
disclose any written materials received by such Stockholder, in its or his
capacity as a stockholder of the Company, in connection with such proposal,
discussion, negotiation or inquiry) and the identity of the party making such
proposal or inquiry which it may receive in respect of any such transaction.
(e) COMPANY OPTIONS. If the Stockholder holds Company Options
to acquire shares of Company Common Stock, it shall, if requested by the
Company, consent to the cancellation or substitution of its Company Options in
accordance with the terms of the Merger Agreement and shall execute all
appropriate documentation in connection with such cancellation or substitution.
(f) BEST REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby.
(g) WAIVER OF APPRAISAL RIGHTS. Each Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that it or
he may have.
(h) ACQUISITION OF REMAINING SHARES. Parent agrees
that, in the event that within three years following Parent's exercise of the
Stock Option, Parent, the
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<PAGE> 8
Purchaser or any of their Subsidiaries acquires any additional shares of Company
Common Stock from, or pursuant to an offer made to all of the Company's
stockholders, whether by merger, consolidation, tender offer or other similar
transaction, the price paid per share of Company Common Stock shall be no less
than the Purchase Price.
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
Each Stockholder hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SHARES. Such Stockholder is the record and
Beneficial Owner of the Existing Shares, as set forth on Schedule I opposite
such Stockholder's name. On the date hereof, the Existing Shares constitute all
of the Shares owned of record or Beneficially Owned by such Stockholder. Such
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2, 3 and 4 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party including, without limitation,
any voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by such Stockholder and constitutes a valid and binding agreement of
such Stockholder, enforceable against such Stockholder in accordance with its
terms. There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which such Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act
and the Exchange Act, (i) no filing with, and no permit, authorization, consent
or approval of, any Governmental Entity for the execution of this Agreement by
8
<PAGE> 9
such Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by such Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby or compliance by such Stockholder with any of
the provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or by
which such Stockholder or any of its properties or assets may be bound, or (C)
violate any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to such Stockholder or any of its properties or assets.
(d) NO LIENS. Except as permitted by this Agreement, the
Existing 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, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such Encumbrances or proxies arising
hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) RELIANCE BY PARENT. The Stockholder understands and
acknowledges that Parent is entering into, and causing Purchaser to enter into,
the Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER. Each of Parent and the Purchaser hereby represents and warrants to
the Stockholder as follows:
9
<PAGE> 10
(a) POWER; BINDING AGREEMENT. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms.
(b) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby and (ii) none
of the execution and delivery of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby or compliance by each of Parent and the
Purchaser with any of the provisions hereof shall (A) conflict with or result in
any breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
either of Parent or the Purchaser is a party or by which either of Parent or the
Purchaser or any of their properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
7. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
10
<PAGE> 11
8. STOP TRANSFER. Each Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. TERMINATION. Except as provided in Section
3 hereof, the covenants, agreements and proxy shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise, including, without limitation, a Stockholder's
heirs, guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties, provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent of its obligations hereunder
if such assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execu-
11
<PAGE> 12
tion and delivery of a written agreement executed by the parties hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the
Stockholders: c/o Arbor Health Care Company
1100 Shawnee Road
Box 840
Lima, Ohio 45802
Attention: Pier C. Borra
Telephone: (419) 227-3000
Facsimile: (4190 227-3499
Copy to: Shumaker, Loop & Kendrick, LLP
Barnett Plaza, Suite 2800
101 East Kennedy Blvd.
Tampa, Florida 33602
Attention: Gregory C. Yadley
Telephone No.: (813) 229-7600
Facsimile: (813) 229-1660
If to Parent or
the Purchaser: Extendicare Inc.
3000 Steeles Avenue East
Suite 700
Markham, Ontario
L3R 9W2
Attention: Joy D. Calkin
Telephone: (905) 470-4000
Facsimile: (905) 470-4003
Copy to: Skadden, Arps, Slate,
Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Milton G. Strom
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<PAGE> 13
Telephone No.: (212) 735-2300
Telecopy No.: (212) 735-2000
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.
(f) SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party
13
<PAGE> 14
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware and the
United States District Court for the Southern District of New York in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein). Each party hereto hereby waives any right to a trial by jury
in connection with any such action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used
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.
(n) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder
have caused this Agreement to be duly executed as of the day and year first
above written.
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<PAGE> 15
EXTENDICARE INC.
By:/s/ Barry L. Stephens
------------------------------------
Name: Barry L. Stephens
Title: Senior Vice Presi-
dent, Finance
AHC ACQUISITION CORP.
By:/s/ Stephen F. Dineley
------------------------------------
Name: Stephen F. Dineley
Title: Vice President &
Chief Financial
Officer
By:/s/ Pier C. Borra, Jr.
------------------------------------
Name: Pier C. Borra, Jr.
By:/s/ Renee A. Borra
------------------------------------
Name: Renee A. Borra
By:/s/ Pier C. Borra And
------------------------------------
Renee A. Borra
------------------------------------
Name: Pier C. Borra and
Renee A. Borra, as
joint tenants
By:/s/ Renee A. Borra
------------------------------------
Name: Renee A. Borra,
Title: Trustee
By:/s/ Pier C. Borra
------------------------------------
Name: Pier C. Borra
15
<PAGE> 16
Borra Family Foundation
By: /s/ Renee A. Borra
------------------------------------
Name: Renee A. Borra
President
16
<PAGE> 17
Schedule I
<TABLE>
<CAPTION>
Number of Shares
and Company Options
Name Of Stockholder Beneficially Owned
- --------------------------------------- ----------------------------
Shares Options
------ -------
<S> <C> <C>
Pier C. Borra 101,666 50,000
Renee A. Borra 100,000 --
Pier C. Borra and Renee A 820,658 --
Borra, as joint tenants
Borra Family Foundation 38,000 --
Renee A. Borra, Trustee 33,333 --
Pier C. Borra, Jr 33,333 --
--------- ---------
1,126,990 50,000
========= =========
</TABLE>
17
