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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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RENEX CORP.
(Name of Subject Company)
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RENEX CORP.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE, $.001 PER SHARE
INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS
(Title of Class of Securities)
759683 10 5
(CUSIP Number of Class of Securities)
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JAMES P. SHEA
PRESIDENT/CHIEF EXECUTIVE OFFICER
RENEX CORP.
201 ALHAMBRA CIRCLE, SUITE 800
CORAL GABLES, FLORIDA 33134
(305) 448-2044
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of person(s) filing statement)
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WITH A COPY TO:
BRYAN W. BAUMAN
WALLACE, BAUMAN, LEGON, FODIMAN & SHANNON, P. A.
1200 BRICKELL AVENUE, SUITE 1720
MIAMI, FLORIDA 33131
(305) 444-9991
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Renex Corp., a Florida corporation (the
"Company"). The address of the principal executive offices of the Company is 201
Alhambra Circle, Suite 800, Coral Gables, Florida 33134.
The title of the class of equity securities to which this Schedule 14D-9
relates is common stock, par value $.001 per share of the Company (the
"Shares"), including the associated preferred stock purchase rights (the
"Rights") issued pursuant to a Rights Agreement dated as of November 6, 1998
between the Company and Continental Stock Transfer and Trust Company, as Rights
Agent, as amended (the "Rights Agreement"). Unless the context indicates
otherwise, all references herein to the Shares shall include the associated
Rights.
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer disclosed in that certain
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed with the
U. S. Securities and Exchange Commission on December 30, 1999, by RC Acquisition
Corp., a Florida corporation (the "Purchaser") and a wholly owned subsidiary of
National Nephrology Associates, Inc., a Delaware corporation (the "Parent"), to
purchase all of the outstanding Shares at a price of $10.00 per Share net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated December 30, 1999 (the
"Offer to Purchase") and the related Letter of Transmittal (which together
constitute the "Offer"). The Offer to Purchase and the Letter of Transmittal are
attached to the Schedule 14D-1 as Exhibits.
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger, dated as of December 28, 1999 (the "Merger Agreement"), among Parent,
Purchaser and the Company. Pursuant to the Merger Agreement, following the
consummation of the Offer, upon the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company being the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is filed as Exhibit 1 hereto and
is incorporated herein by reference. The terms of the Merger Agreement are more
fully described in Item 3 below.
Based upon the information set forth in the Schedule 14D-1, the principal
executive offices of Purchaser and Parent are 511 Union Street, Suite 1800,
Nashville, Tennessee 37219. Purchaser is a wholly-owned subsidiary of Parent.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described herein or in Annex I hereto, which is incorporated
herein by this reference, as of the date hereof there are no material contracts,
agreements, arrangements or understandings, or any actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company, its
directors, executive officers or affiliates or (ii) Parent, Purchaser or their
respective executive officers, directors or affiliates.
ARRANGEMENTS WITH DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES OF THE COMPANY
Certain contracts, agreements arrangements and understandings between the
Company or its affiliates and certain of its directors, executive officers and
affiliates are described under the captions "Directors and Officers of the
Company -- Directors' Compensation" and "Executive Compensation -- Employment
Agreements" in the Company's Information Statement (the "Information
Statement"), which is attached hereto as Annex I and is incorporated herein by
reference.
The Company has employment agreements with the following officers: Milton
J. Wallace, Chairman, James P. Shea, President/CEO, Arthur G. Shapiro, Vice
Chairman/Director of Medical Affairs, Orestes L. Lugo, Senior Vice
President/CFO, Mignon Early, Vice President -- Operations and Patsy Anders, Vice
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President -- Business Development. The respective employment agreements between
the Company and Messrs. Shea, Lugo and Wallace and Dr. Shapiro grant such
individuals the right to terminate their respective employment agreements at any
time within eighteen months following a "change of control," and to receive an
amount equal to the greater of: (i) base salary due for the remainder of the
term of the employment agreement had it not been terminated plus three times the
bonus amount paid in the last 12 months or (ii) $500,000. Such "change of
control" severance is payable 100% in cash on the effective date of such
termination. Each individual would also continue to receive all of the employee
benefits to which he was receiving at the date of termination, including health
insurance, car allowance, cellular telephone and similar benefits for a period
of three years following termination. Such payment are also required if the
Company terminates such agreements following a change of control. In addition,
if any of Messrs. Shea, Lugo or Wallace or Dr. Shapiro are terminated without
cause during the term of their respective agreements, such officer will be
entitled to the same severance mentioned above for a change of control. If Ms.
Anders is terminated by the Company, or she terminates her employment agreement
within 180 days following a change of control, she will be entitled to severance
equal to the greater of (i) two times the remaining base salary which would have
been paid for the remainder of the term of her employment agreement or (ii) two
times the sum of one years' base salary and any and all bonuses paid to her in
the eighteen months prior to the effective date of termination. If Ms. Early is
terminated without cause following a change of control, she would be entitled to
one year's base salary. The consummation of the Offer would constitute a change
of control of the Company for purposes of the employment agreements.
The Company's outstanding options to purchase Shares provide that they
become immediately exercisable upon a change of control of the Company. See
"Executive Compensation" in Annex I hereto which contains a description of
options that have been granted by the Company. The consummation of the offer
would constitute a change of control of the Company for purposes of the options.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
In connection with the transactions contemplated by the Offer and the
Merger, the following agreements and arrangements were entered into: (a) the
Merger Agreement; (b) a Shareholder Agreement between the Purchaser and each
director and executive officer of the Company; (c) a Confidentiality Agreement
by the Parent in favor of the Company dated November 15, 1999 (the "Company
Confidentiality Agreement"); and (d) a Confidentiality Agreement by the Company
in favor of Parent dated December 21, 1999 (the "Parent Confidentiality
Agreement").
The Merger Agreement.
The following is a summary of certain portions of the Merger Agreement.
This summary does not purport to be complete and is qualified in its entirety by
reference to the complete text of the Merger Agreement, a copy of which is filed
as Exhibit 2 hereto and is incorporated herein by reference. Capitalized terms
not otherwise defined below shall have the meanings set forth in the Merger
Agreement.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions to the Offer, Purchaser will purchase all Shares validly
tendered and not withdrawn pursuant to the Offer. The Merger Agreement provides
that Parent and Purchaser have the right, in their sole discretion, to make any
change in the terms or conditions of the Offer, provided that no change may be
made to the Minimum Condition or which changes the form of consideration to be
paid or decreases the price per Share or the number of Shares sought in the
Offer or which imposes conditions to the Offer in addition to those set forth
under the caption "Certain Conditions to the Offer" below or which otherwise
materially and adversely affects the Company or the holders of the Shares.
The Merger. The Merger Agreement provides that, following the consummation
of the Offer and subject to the terms and conditions set forth therein, at the
Effective Time, Purchaser shall be merged with and into the Company and, as a
result of the Merger, the separate corporate existence of Purchaser shall cease,
and the Company shall continue as the Surviving Corporation as a direct
subsidiary of Parent.
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The respective obligations of Parent and Purchaser, on the one hand, and
the Company, on the other hand, to consummate the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions: (i) if required by the Florida Business Corporations Act ("FBCA"),
the Merger Agreement shall have been approved and adopted by the shareholders of
the Company in accordance with the FBCA; (ii) any applicable waiting period
under the Hart-Scott-Rodino Act (the "HSR Act") relating to the Merger shall
have expired or been terminated; (iii) no provision of any applicable law or
regulation and no judgment, injunction, statute, rule, regulation, stay, order
or decree enacted, entered, issued, promulgated or enforced by any court or
governmental authority shall prohibit or restrict the consummation of the
Merger; (iv) Parent and/or Purchaser shall have purchased at least a majority of
the Shares outstanding on a fully-diluted basis pursuant to, and in accordance
with, the Offer; and (v) all actions by or in respect of or filings with any
governmental authority required to permit the consummation of the Merger shall
have been obtained.
The obligations of Parent and Purchaser to consummate the Merger are
subject to the satisfaction of the following further conditions: (i) the Company
shall have performed in all material respects all obligations required under the
Merger Agreement to be performed by it at or prior to the Effective Time; and
(ii) Parent and Purchaser shall have received all documents they may reasonably
request relating to the existence of the Company and its Subsidiaries and the
authority of the Company for the Merger Agreement, all in form and substance
reasonably satisfactory to Parent and Purchaser.
At the Effective Time of the Merger, (i) each issued and outstanding Share
(other than Shares referred to in clause (ii) below or Shares for which
dissenters' rights have been perfected) shall be converted into the right to
receive $10.00 in cash or any higher price paid for each Share in the Offer,
without interest (the "Merger Consideration"), (ii) each Share held by the
Company or any subsidiary of the Company or owned by Parent, Purchaser or any
subsidiary of Parent or Purchaser immediately prior to the Effective Time shall
be canceled, and no payment shall be made with respect thereto and (iii) each
share of common stock of Purchaser outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares of common
stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
effective upon the deposit by Purchaser with Continental Stock Transfer and
Trust Company, which is acting as the Depositary (the "Depositary") of payment
for all Shares validly tendered and not withdrawn pursuant to the Offer and all
Options (as defined below under the caption "Options") and Warrants (as defined
below under the caption "Warrants" and payment of all severance which is due and
payable), Purchaser shall be entitled, subject to Section 14(f) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14f-1 promulgated thereunder, to designate the number of directors, rounded up
to the next whole number, on the Board that equals the product of (i) the total
number of directors on the Board (giving effect to the election of any
additional directors pursuant to this sentence) and (ii) the percentage that the
number of Shares owned by Parent and Purchaser (including Shares accepted for
payment) bears to the total number of Shares outstanding, and the Company shall
take all action necessary to cause Purchaser's designees to be elected or
appointed to the Board. The Company agreed to use its best efforts to cause
individuals designated by Purchaser to constitute the same percentage as such
individuals represent on the Board of (A) each committee of the Board (other
than any committee of the Board established to take action under the Merger
Agreement), (B) each board of directors of each subsidiary of the Company and
(C) each committee of each such board. Notwithstanding the foregoing, until such
time as Purchaser's Designees are elected or appointed to the Board, the Company
shall use its reasonable efforts to ensure that at least two of the members of
the Board and such boards and committees as of the date hereof who are not
employees of the Company shall remain members of the Board and such boards and
committees.
Following the election or appointment of Purchaser's designees and until
the Effective Time, the approval of a majority of the directors of the Company
then in office who were not designated by Purchaser (the "Continuing Directors")
shall be required to authorize any termination of the Merger Agreement by the
Company, any amendment of the Merger Agreement requiring action by the Board,
and any waiver of compliance with any of the agreements or conditions contained
therein for the benefit of the Company.
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Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by the FBCA in order to consummate the Merger, cause a meeting of
its shareholders to be duly called and held as soon as reasonably practicable
after (and with a record date after) the purchase of Shares pursuant to the
Offer for the purpose of voting on the approval and adoption of the Merger
Agreement and the Merger. The Merger Agreement provides that the Company will,
in connection with such meeting, promptly file with the Commission will use its
best efforts to have cleared by the Commission, and will mail to shareholders, a
proxy statement in connection with a meeting of the Company's shareholders to
vote upon the Merger Agreement and the transactions contemplated thereby. The
proxy statement shall include the recommendation of the Board that the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, are advisable and are fair to, and in the best interests of, the
shareholders of the Company, provided, that following receipt of an unsolicited
bona fide written Superior Proposal (as defined below under the caption "Other
Offers"), the Board may withdraw or modify its recommendation, but only to the
extent that the Board shall have concluded in good faith on the basis of advice
from outside counsel that such action is required in order to comply with its
fiduciary duties to the shareholders of the Company. If Purchaser acquires at
least a majority of the Shares, it will have sufficient voting power to approve
the Merger, even if no other shareholder votes in favor of the Merger.
Notwithstanding the foregoing, the Merger Agreement provides that in the
event that Purchaser acquires at least 80% of the Shares, pursuant to the Offer
or otherwise, the Company agrees, at the request of Parent and Purchaser, to
take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition and the
satisfaction or waiver of the conditions to the Merger, without a meeting of the
shareholders of the Company.
Dissenters' Rights. Notwithstanding any contrary provision of the Merger
Agreement, Shares outstanding immediately prior to the Effective Time and held
by a holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded dissenters' rights for such Shares in accordance
with the FBCA ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, but such Dissenting Shares shall be converted
into the right to receive such consideration as may be determined to be due to
holders of Dissenting Shares pursuant to the FCBA, unless and until such holder
fails to perfect or withdraws or otherwise loses such holder's right to
dissenters' rights. If after the Effective Time, if such holder fails to perfect
or withdraws or loses his right to dissenters' rights, such Shares shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration. Parent shall have the right to participate in
all negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands. Notwithstanding the
foregoing, if the Shares continue to be listed on NASDAQ as of the record date
set for the shareholders of the Company to vote on the Merger or, if Purchaser
and Parent own at least 80% of the outstanding Shares, at such time as the
record date would have been set, the Company represents and warrants that no
dissenters' rights, appraisal rights or similar rights will apply to the
transactions contemplated by this Agreement. The Company shall not take any
action prior to consummation of the Offer to delist the Shares from Nasdaq.
Options. Each option to purchase Shares outstanding immediately prior to
the Effective Time (collectively, "Options") shall, at or immediately prior to
the Effective Time, be canceled and shall cease to exist, and each holder of any
such Option, whether or not then vested or exercisable, shall be paid by the
Company promptly after the Effective Time for each such Option an amount,
subject to applicable withholding, determined by multiplying (i) the excess, if
any, of the Merger Consideration per Share over the applicable exercise price of
such Option as in effect immediately prior to the Effective Time by (ii) the
number of Shares such holder could have purchased (assuming full vesting of all
Options) had such holder exercised such Option in full immediately prior to the
Effective Time.
Warrants. Each outstanding warrant to purchase Shares (collectively,
"Warrants") shall, from and after the Effective Time, be canceled by virtue of
the consummation of the Merger and shall cease to exist, and each such Warrant
shall be converted into the right to receive from the Company an amount, subject
to applicable withholding, determined by multiplying (i) the excess, if any, of
the Merger Consideration per Share over the applicable exercise price of such
Warrant as in effect immediately prior to the Effective Time
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by (ii) the number of Shares such holder could have purchased had such holder
exercised such Warrant in full immediately prior to the Effective Time.
Severance. In the Merger Agreement, the Company has agreed that
simultaneously with the deposit by Purchaser with the Depository of payment for
all Shares, options and warrants, the Company will deposit with the Exchange
Agent, funds sufficient to pay (or pay directly to the intended recipients
thereof) certain severance payments to which the executive officers and
directors of the Company shall become entitled pursuant to their employment
agreements upon consummation of the Offer (to the extent such payments are due
and payable immediately after giving effect to waivers of notice referred to in
clause (ii) below upon a Change in Control as defined in such employment
agreements). The payment of severance is conditioned upon each such executive
officer or director (i) confirming in writing to Parent and Purchaser (in a form
reasonably satisfactory to Parent and Purchaser that termination of such
executive officer or director upon consummation of the Offer (whether by
resignation or by notice of termination by the Company) shall constitute
termination by the Company (and not by such executive officer or director) for
purposes of any non-competition, non-solicitation or other restrictive covenants
set forth in such executive officer's or director's employment agreement with
the Company and that such covenants shall apply to such executive officer or
director in accordance with the terms thereof from and after such termination
(ii) waiving any requirement under such employment agreement or otherwise that
notice be given prior to such termination by the Company and (iii) execution of
a general release in favor of the Company and its affiliates, releasing such
Persons from any and all claims against them other than (A) claims for benefits
and other rights to which such executive officer or director would be entitled
under his employment agreement with the Company (B) claims relating to payment,
in accordance with the Merger Agreement, of options, warrants or Shares
beneficially owned by such executive officer or director and (C) claims for
indemnification. From and after consummation of the Offer, Parent will cause the
Company and the Surviving Corporation to pay as and when due for all other
benefits to which such executive officers or directors are entitled in
accordance with the terms of their employment agreements, subject to the
continued compliance by such executive officers and directors with the
provisions of such employment agreements.
Conduct of Business Pending the Merger. In the Merger Agreement, the
Company has agreed that, except as expressly required by the Merger Agreement or
with the prior consent of Parent, from the date of the Merger Agreement until
the Effective Time, the Company and its Subsidiaries will conduct their business
in the ordinary course consistent with past practice and will use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date of
the Merger Agreement until the Effective Time, without the prior written consent
of Parent, the Company has agreed that it will not, and will cause its
Subsidiaries not to:
(a) adopt or propose any change in its articles of incorporation or
bylaws;
(b) except pursuant to existing agreements or arrangements disclosed
to Parent and Purchaser in the schedules to the Merger Agreement:
(i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(ii) sell, lease or otherwise dispose of a Subsidiary or assets or
securities, in one transaction or a series of related transactions, with
a book value in excess of $50,000 individually or $100,000 in the
aggregate;
(iii) make any investment, whether by purchase of stock or
securities, contributions to capital or any property transfer, other
than investments which mature in less than 30 days and are rated no
lower than A2/P2;
(iv) purchase for an amount in excess of $25,000 in the aggregate,
any property or assets of any other individual or entity other than
supplies or inventory purchased in the ordinary course consistent with
past practice;
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(v) waive, release, grant or transfer any rights of value material
to the Company and the Subsidiaries taken as a whole;
(vi) modify or change in any material respect (A) any existing
license, lease, contract or other document material to the Company and
the Subsidiaries, taken as a whole or (B) any existing contract or other
document with any laboratory, physician, physician group, hospital or
other healthcare provider;
(vii) incur, assume or prepay an amount of long-term or short-term
debt, including obligations in respect of capital leases;
(viii) assume, guarantee, endorse (other than endorsements of
negotiable instruments in the ordinary course of business) or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person (other than any
Subsidiary);
(ix) make any loans or advances to any other person or persons
(other than any Subsidiary) in excess of $25,000 in the aggregate; or
(x) excluding capital expenditures associated with dialysis
facilities under development, make or commit to make any capital
expenditures which, individually, is in excess of $10,000 or, in the
aggregate (including any and all capital expenditures made from and
after November 30, 1999), are in excess of $200,000; or
(c) (i) split, combine or reclassify any shares of its capital stock,
(ii) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, other than cash dividends and distributions by a
wholly-owned subsidiary of the Company to the Company or to another
wholly-owned subsidiary of the Company, (iii) issue, sell, deliver, grant,
pledge or encumber any shares of its capital stock or securities
convertible into or exchangeable or exercisable for, any shares of its
capital stock or the capital stock of any of its Subsidiaries (other than
the issuance of Shares upon the exercise of issued and outstanding Options
or Warrants), (iv) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any of its securities or any
securities of its Subsidiaries, or (v) amend any term of any outstanding
security of the Company or any of its Subsidiaries;
(d) adopt or amend any benefit plan or any similar plan or arrangement
for the benefit and welfare of any director, officer or employee, or
(except for normal increases in the ordinary course of business that are
consistent with past practices and that, in the aggregate, do not result in
a material increase in benefits or compensation expense to the Company)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Benefit Plan or
other existing plan or arrangement (including, without limitation, the
granting of stock options, stock appreciation rights, phantom stock rights
or any similar rights, the removal of existing restrictions in any benefit
plans or agreements or the acceleration of the vesting or exercisability of
any options to acquire capital stock of the Company or any of its
Subsidiaries);
(e) except as set forth in a Schedule to the Merger Agreement, revalue
in any material respect any of its assets, including, without limitation,
writing down the value of inventory in any material manner or writing off
of notes or accounts receivable in any material manner;
(f) pay, discharge or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the consolidated financial statements of
the Company or incurred since the most recent date thereof pursuant to an
agreement or transaction described in the Merger Agreement (including the
schedules hereto) or incurred in the ordinary course of business,
consistent with past practices;
(g) make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended tax
return, enter into any closing agreement, settle any tax
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claim or assessment, surrender any right to claim a tax refund, consent to
the extension or waiver of the limitations period applicable to any tax
claim or assessment, surrender any right to claim a tax refund, or take or
omit to take any other action if such action or omission would have the
effect of materially increasing the tax liability of the Company or any of
its Subsidiaries;
(h) take any action other than in the ordinary course of business and
consistent with past practices with respect to accounting policies or
procedures other than any change in accounting policies (that is not
material to the Company and its Subsidiaries taken as a whole) that is
required by regulations of the Commission;
(i) sell, transfer, mortgage, pledge, grant any security interest in,
or permit the imposition of any lien on, any asset or property of the
Company or any Subsidiary with a book value in excess of $50,000
individually or $100,000 in the aggregate, including, without limitation,
any real property owned by the Company or any of its Subsidiaries other
than in the ordinary course of business consistent with past practice;
(j) fail to maintain all insurance policies of the Company and its
Subsidiaries in full force and effect or fail to renew or replace with
equivalent coverage any such insurance policy which has expired;
(k) fail to operate, maintain, repair or otherwise preserve the real
property leased by the Company and its Subsidiaries substantially in
accordance with current practice and within the capital expenditure budget
of the Company previously disclosed to Parent and Purchaser;
(l) fail to comply with all applicable filing, payment and withholding
obligations under all applicable federal, state, local and foreign tax laws
or settle or compromise any material income tax liability;
(m) agree or commit to do any of the foregoing; or
(n) take or agree or commit to take any action that would make any
representation and warranty of the Company hereunder inaccurate in any
respect at, or as of any time prior to, the Effective Time.
Other Offers. The Merger Agreement provides that neither the Company nor
any of its Subsidiaries shall (whether directly or indirectly through advisors,
agents or other intermediaries), nor shall the Company or any of its
Subsidiaries authorize or permit any of its or their officers, directors,
employees, agents, investment bankers, financial advisors, attorneys,
accountants or other representatives or advisors (collectively,
"Representatives") to (i) directly or indirectly solicit, initiate or take any
action designed to facilitate the submission of inquiries, proposals or offers
which constitute or would reasonably be expected to lead to (A) any acquisition
or purchase of 10% or more of the consolidated assets of the Company and its
Subsidiaries or any equity securities of the Company or any of its Subsidiaries,
(B) any tender offer (including a self tender offer) or exchange offer other
than the Offer, that if consummated would result in any third party beneficially
owning any equity securities of the Company or any of its Subsidiaries, (C) any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
the Merger Agreement, or (D) any other transaction the consummation of which
would reasonably be expected to interfere with in a material way, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to materially dilute the benefits to Parent and Purchaser of the transactions
contemplated hereby (collectively, "Acquisition Proposals"), (ii) agree to,
endorse or recommend to its shareholders any Acquisition Proposal, (iii) enter
into or participate in any discussions or negotiations regarding any of the
foregoing, or furnish to any third party any information with respect to its
business, properties or assets or any of the foregoing, or otherwise cooperate
in any way with, or knowingly assist or participate in, facilitate or encourage,
any effort or attempt by any third party (other than Parent and Purchaser) to do
or seek any of the foregoing, or (iv) grant any waiver or release under any
standstill or similar agreement with respect to any class of equity securities
of the Company or any of its Subsidiaries; provided, however, that the foregoing
shall not prohibit the Company (either directly or indirectly through advisors,
agents or other intermediaries) from (W) furnishing information concerning the
Company and its businesses, properties or assets to a third party who has made
an unsolicited bona fide written Superior
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Proposal (as defined below), pursuant to an appropriate confidentiality letter
(which letter shall not be less favorable to the Company than the Company
Confidentiality Letter), (X) engaging in discussions or negotiations with such a
third party who has made an unsolicited bona fide written Superior Proposal, (Y)
following receipt of an unsolicited bona fide written Superior Proposal, taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
under the Exchange Act or otherwise making disclosure to its shareholders and/or
(Z) following receipt of an unsolicited bona fide written Superior Proposal,
failing to make or withdrawing or modifying its recommendation to the
shareholders that the transactions contemplated by the Merger Agreement,
including the Offer and the Merger, are advisable and are fair to, and in the
best interests of, the shareholders of the Company, but in each case referred to
in the foregoing clauses (W) through (Z) only to the extent that the Board shall
have concluded in good faith on the basis of advice from outside counsel that
such action by the Board is required in order to comply with the fiduciary
duties of the Board to the shareholders of the Company under applicable law;
provided, further, that (1) the Board and th e Company shall not take any of the
foregoing actions referred to in clauses (W) through (Y) until after reasonable
notice has been given to Parent and Purchaser with respect to such action, (2)
the Board and the Company shall not take any of the actions referred to in
clause (Z) unless (i) a Superior Proposal has been made and has not been
withdrawn, (ii) the Company provides Parent and Purchaser with at least 48 hours
prior notice of any meeting of the Board at which such Board is expected to
consider such Superior Proposal, and (iii) the Board does not withdraw, amend or
modify its unanimous recommendation in favor of the Offer or the Merger for at
least 72 hours after the Company provides Parent and Purchaser with the name of
the person making such Superior Proposal and a copy of such Superior Proposal
and (3) the Board shall continue to advise Parent and Purchaser as to the status
of any negotiations or discussions relating to any Acquisition Proposal after
taking such action. The term "Superior Proposal" means a bona fide proposal made
by a third party to acquire the Company pursuant to a tender or an exchange
offer for not less than a majority of the shares of capital stock of the
Company, a merger or the acquisition of all or substantially all of the
Company's assets that, in any case, the Board determines in its good faith
judgment (based on the advice of its financial advisor) to be more favorable
(including with respect to price) to the holders of Shares than the Merger;
provided, however, that any such proposal shall not be deemed to be a "Superior
Proposal" unless any financing required to consummate the transactions
contemplated by such proposal is either (i) in the possession of such third
party at the time such proposal is made, or (ii) committed on terms no less
favorable than those set forth in the Commitment Letter.
Board of Directors; Officers. The Merger Agreement provides that, promptly
upon the deposit with the Depositary of payment by Purchaser of all Shares
validly tendered and not withdrawn, as well as all options and Warrants and the
severance payments to executive officers and directors, Purchaser shall be
entitled to designate members of the Board, as further described above under the
caption "The Company's Board of Directors." After the time that Purchaser's
designees are elected to the Board and until the Effective Time, any amendment
or termination of the Merger Agreement and any exercise or waiver of the
Company's rights under the Merger Agreement shall also require the approval of a
majority of the Continuing Directors.
Under the Merger Agreement, the directors of Purchaser at the Effective
Time will be the initial directors of the Surviving Corporation, and the
officers of Purchaser at the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with applicable law.
Access to Information. From the date of the Merger Agreement until the
Effective Time, the Company will give Parent, Purchaser, their counsel,
financial advisors, accountants, auditors and other authorized representatives
full access to the offices, dialysis clinics, properties, books and records of
the Company and its Subsidiaries, will furnish to Parent, Purchaser, their
counsel, financial advisors, accountants, auditors and other authorized
representatives such financial, tax and operating data and other information as
such persons may reasonably request and will instruct the Company's employees,
counsel and financial advisors to cooperate with Parent and Purchaser in their
investigation of the business of the Company and its Subsidiaries including,
without limitation, in connection with Parent's and Purchaser's obtaining title
reports, surveys, environmental reports and similar reports or studies with
respect to properties owned or leased by the Company and its Subsidiaries, and
will exercise all reasonable efforts to obtain from landlords such estoppel
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<PAGE> 10
certificates as Parent and Purchaser may request; provided, however, that no
such investigation shall affect any representation or warranty given by the
Company to Parent or Purchaser under the Merger Agreement.
Director and Officer Indemnification. For six years after the Effective
Time, Parent will cause the Surviving Corporation to (i) indemnify and hold
harmless the present and former officers and directors of the Company in respect
of acts or omissions occurring prior to the Effective Time (including, without
limitation, matters related to the transactions contemplated by the Merger
Agreement), (ii) advance expenses in respect of such indemnification and (iii)
retain limitations on personal liability of directors for monetary damages, in
each case, to the fullest extent provided under the Company's articles of
incorporation and bylaws in effect on the date hereof; provided, however, that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. For six years after the Effective Time, Parent will
cause the Surviving Corporation to use its best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to and including the Effective Time covering each such person currently covered
by the Company's officers' and directors' liability insurance policy on terms
with respect to coverage and amount no less favorable than those of such policy
in effect on the date hereof, providedthat in satisfying its obligation under
this Section, Parent shall not be obligated to cause the Surviving Corporation
to pay premiums in excess of 150% of the amount per annum the Company paid in
its last full fiscal year (the "Maximum Premium"), which amount has been
disclosed to Parent; provided that if the premium exceeds the Maximum Premium,
the officers and directors covered by such insurance policy shall have the
opportunity, upon 30 days notice from the Surviving Corporation prior to renewal
of any such policy, to pay the difference between the Maximum Premium and the
actual premium.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties with respect to the Company, including, without
limitation, (i) the Company's organization, authority and capitalization, (ii)
that the Board has approved the Merger Agreement and the transactions
contemplated thereby, (iii) noncontravention, (iv) Subsidiaries, (v) material
liabilities, (vi) compliance with laws, (vii) finder's fees, (viii) the
inapplicability of certain restrictions, (ix) insider interests, (x) required
consents, approvals and governmental filings, (xi) the accuracy of the Company's
documents and reports filed with the Commission, the Company's financial
statements and information provided to Parent and Purchaser, (xii) the absence
of certain changes, (xiii) the absence of certain litigation, (xiv) the
Company's employee benefit plans and other employment matters, (xv) title to
property, (xvi) tax matters, (xvii) environmental matters, (xviii) intellectual
property matters, (xix) insurance matters, (xx) business relationships and
restrictive agreements, (xxi) material contracts and (xxii) Year 2000
compliance. The Merger Agreement also includes representations and warranties
with respect to (i) cash and cash equivalents, (ii) indebtedness and capitalized
lease obligations, (iii) due to third party obligations, (iv) inventory , (v)
fees and expenses and (vii) amending the Company's rights agreement.
In the Merger Agreement, Parent and Purchaser have made customary
representations and warranties, including, without limitation, relating to (i)
their respective corporate organization, (ii) their authority to execute,
deliver and perform the Merger Agreement, (iii) required consents, approvals and
governmental filings, (iv) accuracy of information provided to the Company and
of documents filed with the Commission in connection with the Offer, (v) absence
of certain litigation, (vi) financing, (vii) ownership of shares and (viii)
non-contravention.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of the Merger Agreement by the shareholders of the Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if (A) the Offer has not been
consummated by the date that is 90 days after the commencement of the
Offer, (B) Parent terminates the Offer in accordance with its terms without
purchasing any Shares pursuant to the Offer or (C) there shall be any law
or regulation of any governmental authority that makes consummation of the
Merger illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Parent or the Company from consummating the
Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable;
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provided that the right to terminate the Merger Agreement pursuant to this
Section shall not be available to any party whose failure to fulfill any of
its obligations under the Merger Agreement results in such failure to
consummate the Offer or the Merger, as the case may be;
(iii) by Parent, if the Board shall have (A) withdrawn or materially
modified its recommendation contained in this Schedule 14D-9 or its
recommendation to the shareholders that the transactions contemplated by
the Merger Agreement, including the Offer and the Merger, are advisable and
fair to, and in the best interests of, the shareholders of the Company, in
a manner adverse to Parent, (B) failed to make or reconfirm either of such
recommendations within two business days after a written request to do so
from Parent, (C) approved or recommended any Superior Proposal or (D) shall
have resolved to do any of the foregoing; or
(iv) by the Company, if the Board shall have withdrawn or materially
modified its recommendation contained in this Schedule 14D-9 or its
recommendation to the shareholders that the transactions contemplated by
the Merger Agreement, including the Offer and the Merger, are advisable and
fair to, and in the best interests of, the shareholders of the Company, if
there exists at such time a written Acquisition Proposal that constitutes a
Superior Proposal, provided that the right to terminate the Merger
Agreement pursuant to this Section shall not be available to the Company if
it has breached in any material respect any of its covenants and agreements
set forth in the Merger Agreement.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall, except as set forth therein, become void and have no effect,
without any liability on the part of any party thereto, except that termination
of the Merger Agreement shall be without prejudice to any rights any party may
have thereunder against any other party for wilful breach of the Merger
Agreement.
Termination Fee. If a Payment Event (as defined below) occurs, the Company
shall pay to Parent concurrently with such Payment Event a fee of $2,000,000.
"Payment Event" means (A) the termination of the Merger Agreement by Parent
pursuant to Section (iii) under the caption "Termination" above, (B) the
termination of the Merger Agreement by the Company pursuant to Section (iv)
under the caption "Termination" above; (C) the termination of the Merger
Agreement by Parent pursuant to Section (ii) under the caption "Termination"
above as a result of a material breach by the Company of any representation,
warranty, covenant or agreement set forth in the Merger Agreement; or (D) the
occurrence of any of the following events within 12 months of the termination of
the Merger Agreement pursuant to Section (ii) under the caption "Termination"
above, whereby shareholders of the Company receive, pursuant to such event,
cash, securities or other consideration having an aggregate value, when taken
together with the value of any securities of the Company or its Subsidiaries
otherwise held by the shareholders of the Company after such event, in excess of
$10.00 per Share: the Company is acquired by merger or otherwise by a third
party; a third party acquires more than 50% of the total assets of the Company
and its Subsidiaries, taken as a whole; a third party acquires more than 50% of
the outstanding Shares; or the Company adopts a plan of liquidation,
recapitalization or share repurchase relating to more than 50% of the
outstanding Shares or an extraordinary dividend relating to more than 50% of the
outstanding Shares or 50% of the assets of the Company and its Subsidiaries,
taken as a whole.
Liquidated Damages. In the event that (i) the Minimum Condition and all
other conditions to the Offer set forth below under the caption "Conditions to
the Offer" are satisfied, other than the condition set forth in paragraph (ix)
under the caption "Conditions to the Offer" providing that the Lenders shall
have provided the Required Amounts in accordance with the Commitment Letter,
(ii) the failure of the lenders to provide the Required Amounts (as defined in
the Merger Agreement) is due solely to the failure of one or more of the Buyer's
Risk Conditions (as defined below) to be satisfied in accordance with the terms
thereof set forth in the Commitment Letter and (iii) the Merger Agreement is
terminated pursuant to Section (ii)(A) or (ii)(B) under the caption
"Termination" above by Parent or the Company prior to consummation of the Offer
as a result of such condition in paragraph (ix) under the caption "Conditions to
the Offer" not having been satisfied, then, Parent shall pay to the Company
$2,000,000, as liquidated damages (the "Liquidated Damages") promptly upon such
termination of the Merger Agreement. In such event, payment of the Liquidated
Damages shall be the Company's sole and exclusive remedy and the Company shall
have no
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other remedy under the Merger Agreement or otherwise, whether for breach of
contract, in tort or otherwise resulting or arising from the Merger Agreement or
the transactions contemplated hereby.
Amendments. Any provision of the Merger Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Parent and
Purchaser or, in the case of a waiver, by the party against whom the waiver is
to be effective, provided that after the adoption of the Merger Agreement by the
shareholders of the Company, no such amendment or waiver shall, without the
further approval of such shareholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the articles of incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of the Merger Agreement if
such alteration or change would adversely affect the holders of any shares of
capital stock of the Company.
Conditions to the Offer. Notwithstanding any other provision of the Merger
Agreement or the Offer, Purchaser shall not be required to accept for payment,
purchase or pay for any Shares tendered pursuant to the Offer, may postpone the
acceptance for payment of and payment for any tendered Shares, and may terminate
or, subject to the terms of the Merger Agreement, amend the Offer, if
(a) the Minimum Condition is not satisfied;
(b) any waiting periods applicable to the Offer and the Merger and the
transactions contemplated by the Merger Agreement pursuant to the HSR Act
shall not have expired or been terminated;
(c) on or after the date of the Merger Agreement and prior to or at
the time of acceptance for payment of any such Shares in the Offer (whether
or not any Shares have theretofore been accepted for payment or paid for
pursuant to the Offer) any of the following conditions shall exist (each of
paragraphs (i) through (ix) providing a separate and independent condition
to Parent's and Merger Sub's obligations pursuant to the Offer):
(i) there shall be instituted or pending any action or proceeding
by any Governmental Authority or by any other person, domestic or
foreign, before any court or Governmental Authority (A) challenging or
seeking to make illegal, to delay materially or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, the
acceptance for payment of or payment for some of or all the Shares by
Purchaser or the consummation by the Company, Parent or Purchaser of the
Merger, or seeking to obtain material damages or imposing any material
adverse conditions in connection therewith, (B) seeking to restrain or
prohibit the Company's, Parent's or Purchaser's ownership or operation
(or that of their respective subsidiaries or affiliates) of all or any
material portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, or of Parent and its subsidiaries,
including, without limitation, Purchaser, taken as a whole, or to compel
the Company, Parent or any of their subsidiaries or affiliates,
including, without limitation, Purchaser, to dispose of or hold separate
all or any material portion of the business or assets of the Company and
the Subsidiaries, taken as a whole, or of Parent and its subsidiaries,
including, without limitation, Purchaser, taken as a whole, (C) seeking
to impose or confer limitations on the ability of Parent or any of its
subsidiaries or affiliates, including, without limitation, Purchaser,
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Parent or any of its subsidiaries or affiliates, including,
without limitation, Purchaser, on all matters properly presented to the
Company's shareholders, (D) seeking to require divestiture by Parent or
any of its subsidiaries or affiliates, including, without limitation,
Purchaser, of any Shares, or (E) that otherwise would reasonably be
expected to materially adversely affect the business, assets,
liabilities, condition (financial or otherwise), results of operations
or prospects of the Company and the Subsidiaries, or Parent and its
subsidiaries, including, without limitation, Purchaser, in each case
taken as a whole; or
(ii) there shall be any action taken, or any statute, rule,
regulation, judgment, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the Offer or the
Merger, by any court or Governmental Authority other than the
application of the waiting period
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provisions of the HSR Act to the Offer or the Merger, that is likely,
directly or indirectly, to result in any of the consequences referred to
in clauses (A) through (E) of paragraph (i) above; or
(iii) any change or worsening of any existing condition shall have
occurred in the business, assets, liabilities, condition (financial or
otherwise), results of operations or prospects of the Company and the
Subsidiaries taken as a whole that is or is likely to have a material
adverse effect; or
(iv) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger
Agreement; or
(v) (A) the representations and warranties of the Company relating
to cash and cash equivalents and indebtedness and capitalized lease
obligations or, any of the representations and warranties of the Company
set forth in the Merger Agreement qualified by materiality or material
adverse effect, shall not be true in any respect, or (B) any of the
other representations and warranties set forth in the Merger Agreement
shall not be true in any material respect, in the case of either clause
(A) or (B), when the applicable representation or warranty is made or at
any time prior to consummation of the Offer as if made at and as of such
time; or
(vi) the Merger Agreement shall have been terminated in accordance
with its terms; or
(vii) the Board shall have withdrawn or modified in a manner
adverse to Parent or Purchaser (including by amendment of this Schedule
14D-9) its approval or recommendation of the Offer or the Merger, or
failed to make or reconfirm its recommendation within two business days
after a written request to do so from Parent or Purchaser, or shall have
approved or recommended any other tender or exchange offer or other
Acquisition Proposal; or
(viii) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange, Inc., any other national securities exchange or NASDAQ
or any decline in either the Dow Jones Industrial Average or the
Standard & 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, (2) the declaration of a banking moratorium or any
mandatory suspension of payments in respect of banks in the United
States (3) the commencement of or escalation of a war, armed hostilities
or other international or national calamity directly or indirectly
involving the United States, or (4) in the case of any of the foregoing
existing on the date of the Merger Agreement, a material acceleration or
worsening thereof; or
(ix) the Required Amounts (as defined in the Merger Agreement)
shall not have been made available to Parent and Purchaser in accordance
with the terms and conditions of the Commitment Letter (as defined in
the Merger Agreement); or
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may be asserted by Parent or Merger Sub regardless of the circumstances
(including any action or omission by Parent or Merger Sub) giving rise to any
such condition and may be waived by Merger Sub or Parent, in whole or in part in
their sole discretion. The failure by Parent or Merger Sub at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each such right will be deemed an ongoing right which may be
asserted at any time and from time to time which, in the reasonable judgment of
Parent or Merger Sub in any such case, and regardless of the circumstances
giving rise to any such condition (including any action or omission by Parent or
Merger Sub), makes it inadvisable to proceed with such acceptance for payment,
purchase or payment.
THE SHAREHOLDERS AGREEMENT
In connection with the Merger Agreement, Purchaser and Parent have entered
into the Shareholders Agreement, with the executive officers and directors of
the Company pursuant to which each Shareholder has, among other things, (a)
agreed to tender (and not withdraw unless the Merger Agreement is terminated in
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accordance with its terms) all Shares and all Shares issuable upon exercise of
any Options or Warrants held by it ("Subject Shares") into the Offer, (b)
granted to Purchaser an irrevocable option (the "Purchase Option") to purchase
such Shareholder's Subject Shares at a price per Share equal to the Merger
Consideration which Purchase Option may be exercised in whole but not in part at
any time on or prior to the 30th day after termination of the Merger Agreement;
provided, that, in the event that the Merger Agreement is terminated by Parent
or the Company pursuant to Section (ii), (iii) or (iv) above under the caption
"Termination" at any time after the Company has received an Acquisition Proposal
from a third party (a "Competing Proposal"), the Purchase Option shall remain
exercisable until such Competing Proposal shall have been withdrawn or any
agreement with such third party with respect to such Competing Proposal shall
have been terminated, (c) agreed to cause the Subject Shares to be voted in
favor of the Merger during the term of the Merger Agreement and against any
Acquisition Proposal during the term of the Shareholders Agreement, and (d) has
irrevocably appointed Parent and any nominee thereof, its proxy, during the term
of the Shareholders Agreement, to take such voting actions.
\If, after purchasing the Subject Shares pursuant to the Purchase Option,
Purchaser has not acquired the remaining outstanding shares of Common Stock and
Purchaser receives any cash or noncash consideration in respect of the Subject
Shares in connection with a Third Party Business Combination (as defined below)
during the period commencing on the date on which the Company purchases any
Subject Shares pursuant to Option and ending on the first anniversary thereof,
Purchaser shall promptly pay over to the Shareholders (pro rata, based on their
holdings of Shares), as an addition to the Merger Consideration, one-half of the
excess, if any, of (i) such consideration over (ii) the aggregate Merger
Consideration paid for the Subject Shares which are sold by Purchaser pursuant
to the Shareholders Agreement. The term "Third Party Business Combination" means
the occurrence of any of the following events: (A) the Company, or more than 50%
of the outstanding shares of the Company's capital stock, is acquired by merger
or otherwise by any Third Party; or (B) a Third Party acquires all or
substantially all of the total assets of the Company and its subsidiaries, taken
as a whole; provided, however, that in no event will any transaction in which
shares of the Company's capital stock or any of its assets are sold or
transferred directly or indirectly in connection with or as a part of a sale or
other transaction involving sale, merger or other similar transaction of Parent
or any of its material assets or business constitute a Third Party Business
Combination, and in no event will a sale of any division, line of business or
similar unit of the Company and its subsidiaries constitute a Third Party
Business Combination.
In the event that the Company enters into a definitive agreement with a
third party with respect to a Third Party Business Combination (i) intended to
qualify as a "pooling of interests" for accounting purposes and (ii) pursuant to
which holders of Common Stock would be entitled to receive at least $13.00 per
share of Common Stock (a "Qualifying Third Party Business Combination"), then,
Purchaser agrees that, prior to termination of the definitive agreement with
respect to such Qualifying Third Party Business Combination, it shall not
exercise the Purchase Option to the extent that the exercise of the Purchase
Option by Purchaser would prevent such Qualifying Third Party Business
Combination from qualifying as a "pooling of interests" for accounting purposes
(or take any other action the sole purpose of which is to prevent consummation
of such a "pooling of interests" transaction); provided, however, that each
Shareholder that receives any cash or noncash consideration in respect of such
Shareholder's Subject Shares in connection with a Qualifying Third Party
Business Combination shall promptly pay over to Purchaser one-half of the excess
of such consideration over the Merger Consideration.
The Shareholders Agreement also prohibits each Shareholder from soliciting
additional Acquisition Proposals from third parties on behalf of the Company
from engaging in any discussions with third parties regarding any Acquisition
Proposal.
The Shareholders Agreement and all rights and obligations of the parties
thereunder terminate immediately upon the earlier of (i) the date on which the
Purchase Option is no longer exercisable or (ii) the Effective Time.
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THE COMPANY CONFIDENTIALITY LETTER
On November 15, 1999, Parent executed a confidentiality letter in favor of
the Company (the "Company Confidentiality Letter"). Pursuant to the Company
Confidentiality Letter, Parent has agreed, among other things, to keep
confidential certain nonpublic confidential or proprietary information of the
Company furnished to Parent and its representatives by or on behalf of the
Company, including notes, analyses, compilations, studies, interpretations or
other documents prepared by Parent and its representatives which contain,
reflect or are based upon such information ("Evaluation Material"), and to use
the Evaluation Material solely for the purpose of evaluating a possible
transaction with the Company. Parent has further agreed to maintain the
confidentiality of any discussions or negotiations with the Company and, upon
request, to redeliver or destroy all the Evaluation Material. Parent also agreed
that, without the prior written consent of the Company, Parent will not directly
or indirectly enter into any agreement, arrangement or understanding or any
discussions which might lead to an agreement, arrangement or understanding, with
any other person regarding a possible transaction involving the Company for a
period of three years from the date of the Company Confidentiality Letter. The
Company Confidentiality Letter further provides that, for a period of three
years from the date of the Company Confidentiality Letter, without the prior
written consent of the Board, neither Parent nor any of its affiliates or
representative, acting alone or as a part of a group, may acquire or offer to
agree to acquire, directly or indirectly, by purchase or otherwise, any voting
securities (or beneficial ownership thereof) of the Company, or otherwise seek
to influence or control, in any manner whatsoever, the management or policies of
the Company. For a period of two years from the date of the Confidentiality
Letter, neither Parent nor any of its affiliates will solicit to employ any of
the current officers or employees or independent contractors (including medical
directors) of the Company so long as they are employed by the Company, without
obtaining the prior written consent of the Company.
THE PARENT CONFIDENTIALITY LETTER
On December 21, 1999, the Company executed a confidentiality letter in
favor of Parent (the "Parent Confidentiality Letter"). Pursuant to the Parent
Confidentiality Letter, the Company has agreed, among other things, to keep
confidential certain non-public confidential information of Parent ("Parent
Evaluation Material") furnished to the Company and its representatives by or on
behalf of Parent, and to use the Parent Evaluation Material solely for the
purpose of evaluating a possible transaction with Parent. The Company has
further agreed to maintain the confidentiality of any discussions or
negotiations with Parent and, upon request, to redeliver back to Parent all of
the Parent Evaluation Material.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors of the Company (the "Board") has unanimously
approved the Merger Agreement, the Offer and the Merger and deemed them to be
advisable, and has determined that the Offer and the Merger are fair to, and in
the best interests of, the Company's shareholders, and unanimously recommends
that the Company's shareholders accept the Offer and tender their Shares in the
Offer.
A letter to the Company's shareholders communicating the Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herein as Exhibits 4 and 5 herein, respectively and are
incorporated herein by this reference.
(B) BACKGROUND; REASONS FOR THE BOARD'S RECOMMENDATION.
In October 1998, Dr. Jerome Tannenbaum, current Chairman of the Board and
Chief Executive Officer of the Parent telephoned Milton J. Wallace, Chairman of
the Board of the Company and scheduled a meeting for November 18, 1998. On
November 18, 1998, Mr. Wallace and Mr. Shea, President and Chief Executive
Officer met with Dr. Tannenbaum, Dr. Jeffrey Hymes, a current director,
President and Chief Medical Officer of Parent, Joseph Cashia, current Executive
Vice President and Chief Operating Officer of Parent, Kenneth Kencel, a current
director of Parent and Managing Director of Indosuez Capital ("Indosuez") and
Mr. Harrison at the Palace Hotel in New York to discuss potential business
opportunities between the
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Company and Parent. At that meeting, Parent inquired whether the Company would
be interested in selling to the Parent. Mr. Wallace advised Parent that he did
not believe the Company's Board would consider a proposal for the purchase of
the Company unless the offer was in the range of $10.00 to $14.00 per share.
During the first week of January 1999, Mr. Shea and Mr. Harrison continued
to discuss a potential transaction in a series of telephone conversations. In
discussions, Mr. Shea and Mr. Harrison determined that the Company's asking
price was significantly greater that the price that Parent was prepared to
offer.
During the last week of January 1999, Dr. Tannenbaum and Mr. Wallace had
several telephone conversations about a potential transaction between the
Company and the Parent. On February 10, 1999 while Mr. Wallace was in New York
on other business, he met with Dr. Tannenbaum and continued to discuss the
possibility of Parent acquiring the Company. At the end of March 1999, Dr.
Tannenbaum contacted Mr. Wallace and they scheduled a meeting in Coral Gables,
Florida. On April 7, 1999, Mr Wallace met with Dr. Tannenbaum at Mr. Wallace's
home in Coral Gables, Florida. They continued to discuss the possibility of
pursuing a friendly transaction between Parent and the Company.
During the months of May and June 1999, Mr. Wallace had several
conversations with Dr. Tannenbaum in which the parties discussed, in general
terms, Parent's continuing interest in the Company.
On May 25, 1999, Mr. Wallace and a representative of the Company's
financial advisor, Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated ("Prudential"), met with Dr. Tannenbaum, Mr. Kencel and
Steven Segal, a director of Parent, at the offices of Indosuez in New York. At
the meeting, Parent proposed the possibility of acquiring the Company at the
price of $6.00 per share and entering into shareholder "lock-up" agreements with
the directors and certain executive officers of the Company. The Company
declined to pursue a transaction at that price.
In September 1999, management and the Board of the Company began to
consider strategic alternatives to enhance shareholder value. The Board
discussed various alternatives, including the possible sale of the Company. The
Board instructed management to invite Prudential to make a presentation
regarding a possible sale of the Company, as well as other potential
opportunities which may be available to the Company. A Board meeting was
scheduled for November 8, 1999.
On November 4, 1999, Dr. Tannenbaum called Mr. Wallace to discuss the
Parent's continuing interest in acquiring the Company. Mr. Wallace informed Dr.
Tannenbaum that he would discuss Parent's continued interest in the Company with
its Board at its next scheduled meeting. On November 8, 1999, the Board held a
meeting. At that time, Prudential made a presentation as to the strategic
alternatives available to the Company, including a possible sale. Mr. Wallace
also informed the Board of Directors that he had recently received a renewed
indication of interest from Dr. Tannenbaum on behalf of Parent to acquire the
Company. The Board considered the presentation of Prudential, as well as the
comments of management regarding the Company and the industry and authorized
management of the Company and Prudential to pursue a sale of the Company. The
Board also authorized Prudential and management to contact Parent and advise
them of the Company's intent to proceed with a formal sale process and the
Company's interest in discussing a transaction.
During the second week of November, Prudential contacted Dr. Tannenbaum and
advised Dr. Tannenbaum that the Company had engaged Prudential to represent it
in a possible sale of the Company. Prudential stated that it was authorized to
proceed with a formal process, but that the Company would be prepared to
consider any offer that Parent had with regard to the acquisition of the Company
prior to the time Prudential proceeded with such process.
On November 12, 1999, Dr. Tannenbaum telephoned Mr.. Wallace to set up a
meeting for the following week. On November 15, 1999, Dr. Tannenbaum and other
Parent directors met with Mr. Wallace in Miami, Florida and the parties jointly
decided to continue discussions regarding a transaction. On November 15, 1999,
Parent executed the Company Confidentiality Agreement. The Company
Confidentiality Agreement contained certain limitations on Parent's ability to
pursue transactions involving the Company without the Company's consent. A copy
of the Confidentiality Agreement is attached hereto as Exhibit 2 and is
incorporated herein by this reference. Following the execution of the
Confidentiality Agreement, the Company provided Parent with certain confidential
information relating to the Company.
15
<PAGE> 17
On November 16, 1999, Leif Murphy, Executive Vice President and Chief
Financial Officer of Parent, Mr. Cashia and other representatives of the Parent,
as well as attorneys' from Baker, Donaldson, Bearman & Caldwell, counsel to
Parent ("BDBC") met with Mr. Shea, Orestes L. Lugo, the Company's Senior Vice
President/Chief Financial Officer and a representative of Prudential in Miami,
Florida to conduct due diligence.
On November 17, 1999, Dr. Tannenbaum telephoned Mr. Wallace in order to set
up a meeting in Nashville, Tennessee, with the Company, the Parent's Board of
Directors and representatives of Parent's lenders.
On November 18, 1999, Philip McSween of BDBC sent a letter to Mr. Lugo
detailing the Parent's request for additional due diligence materials with
respect to the Company.
Over the following week, the Company supplied Parent with additional
information regarding the Company's operations. On November 18, 1999, Prudential
advised Parent that the commencement of the formal sale process was emminent and
invited Parent to make a specific proposal for the acquisition of the Company.
On November 19, 1999, Parent delivered certain terms for discussion to
Prudential which contained a proposal to acquire all of the outstanding shares
of the Company's common stock for $10.00 per share. The term sheet was subject
to several conditions, including Parent's requirement to obtain financing for
the Offer. The term sheet was communicated to the Company on November 19, 1999.
After reviewing the proposal with Prudential, Mr. Shea advised Prudential that
there were several conditions set forth in the term sheet which were not
acceptable to the Company and to communicate such objections to Parent.
On December 2, 1999, Messrs. Shea and Lugo met with Edward Yun, a director
of Parent, Dr. Tannenbaum, Dr. Hymes and Messrs. Harrison, Murphy, Cashia, Segal
and Kencel and Parent's lenders in Nashville, Tennessee. During the course of
the meeting, Messrs. Shea and Lugo gave a presentation to Parent's
representatives regarding the Company's operations and financial condition.
On December 3, 1999, Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
to Parent ("KSFHH"), delivered a proposed agreement and plan of merger and a
proposed shareholder lock-up agreement (the "Proposed Agreements") to Prudential
and Wallace, Bauman, Legon, Fodiman & Shannon, P. A., counsel to the Company
("WBLFS"). WBLFS circulated drafts of the Proposed Agreements to the Company's
management. Over the next several days, the Company's management discussed the
Proposed Agreements with WBLFS, Prudential and Prudential's counsel. On December
6, 1999, WBLFS circulated it comments on the Proposed Agreements to the
Company's management, Prudential and Prudential's counsel. After additional
discussion, on December 8, 1999, WBLFS sent the Company's initial comments on
the Proposed Agreements to KSFHH.
On December 9, 1999, WBLFS received a supplemental letter from Christopher
Kelly of BDBC requesting additional due diligence materials. On December 11,
representatives of the Parent and Prudential had several telephone conversations
to discuss significant issues with respect to the proposed transaction. On
December 11, 1999, representatives of the Company, WBLFS, Prudential,
Prudential's counsel, KSFHH and Parent participated in a telephone conference
call to discuss the Proposed Agreements, the Company's comments and the initial
responses from Parent. On December 13, 1999, Messrs. Shea, Lugo and Wallace,
together with representatives of WBLFS, Prudential and Prudential's counsel met
with Dr. Tannenbaum, and Messrs. Yun, Segal, Kencel, Murphy and Cashia and
representatives of KSFHH and BDBC at the offices of WBLFS to discuss the
Proposed Agreements.
Over the next several days, Messrs. Shea and Lugo and WBLFS had several
telephone calls with Dr. Tannenbaum, Messrs. Cashia and Murphy and KSFHH to
discuss the Proposed Agreements. Thereafter, on December 16, 1999, KSFHH
delivered revised versions of the Proposed Agreements to WBLFS. WBLFS circulated
the revised drafts to the Company's management and Prudential. On December 18,
1999, Messrs Shea and Lugo of the Company, WBLFS, and Prudential held several
telephone conversations with Messrs. Yun, Segal, Kencel, Cashia and Murphy and
KSFHH in order to finalize certain terms of the
16
<PAGE> 18
Proposed Agreements. On December 18, 1999, WBLFS delivered a markup of the
Proposed Agreements to KSFHH.
During the period from December 16, 1999 through December 27, 1999, the
parties continued to negotiate the terms of the Proposed Agreements and the
Parent and its representatives completed their due diligence inquiry with
respect to the Company. Throughout November and December 1999, management
discussed the Proposed Agreement and the transaction informally with the
Company's Board. On December 27, 1999, Parent submitted final drafts of the
Proposed Agreements and the Company scheduled a Board of Directors meeting to
discuss the Proposed Agreements, the Offer and the Merger.
On December 27, 1999, the Board met to consider Parent's $10.00 per Share
cash offer, the Proposed Agreements, the transactions contemplated thereby and
available alternatives. At the meeting counsel advised the Board of its
fiduciary obligations and explained in detail the provisions of the Proposed
Agreements. Following counsel's presentation, Prudential made a presentation to
the Board regarding the Offer and delivered its opinion to the Board to the
effect that, as of the date of the opinion, the proposed consideration to be
received by the shareholders of the Company pursuant to the Offer was fair to
such shareholders from a financial point of view. The Company's Board
unanimously approved the Proposed Agreements and the contemplated transaction.
Following the Board meeting, early in the morning of December 28, 1999, the
Company, Purchaser and Parent signed the Merger Agreement. The transaction was
announced prior to the opening of the Nasdaq National Market on December 28,
1999. Concurrently with the execution of the Merger Agreement, each of the
Company's directors and executive officers executed a Shareholder Agreement with
the Purchaser and Parent.
REASONS FOR THE BOARD'S CONCLUSIONS.
In making its determination and recommendation to the Company's
stockholders with respect to the Offer, the Board of Directors considered a
number of factors. Such factors included, without limitation, the following:
(a) The Board's familiarity with, and information provided by
management, as to the financial condition, results of operations, business,
management, and prospects of the Company, as well as the risks in achieving
those prospects and objectives in the Company's industry, the nature of the
industry and the Company's position in its industry;
(b) The presentation by Prudential at the December 27, 1999 Board
meeting and the written opinion of Prudential that, as of that date, the
consideration to be received by the holders of the Shares was fair to such
holders from a financial point of view. The full text of the written
opinion of Prudential, dated December 27, 1999, which sets forth the
limitations on review undertaken, assumptions made and matters considered,
is attached hereto as Exhibit 6 and is incorporated by reference. The
opinion of Prudential referred to herein does not constitute a
recommendation as to whether or not any holder of Shares should tender such
Shares in connection with the Offer. All shareholders are urged to, and
should, read the opinion of Prudential carefully in its entirety.
(c) The terms and conditions of the Merger Agreement, including (A)
the proposed structure of the Offer and the Merger involving an immediate
cash tender offer followed by a merger for the same consideration and (B)
the fact that the Offer is subject to a minimum tender condition providing
that at least a majority of the outstanding Shares on a fully diluted basis
be tendered, which minimum tender condition cannot be waived by Purchaser
or Parent without the Company's consent;
(d) The advice of counsel concerning certain antitrust issues relating
to the Offer and the Merger;
(e) The relationship of the price to be received by the shareholders
in the Offer and the Merger to current and historical market prices for the
Shares. The Board concluded that, based on the past performance of the
price of the Shares, the competitive nature of the industry, the near-term
growth and profitability potential of the Company and the uncertainty of
future health care reform legislation, it was
17
<PAGE> 19
uncertain that a price of $10.00 per Share would be achieved in the near
future and that the Offer was thus an attractive opportunity for the
shareholders;
(f) The fact that the Merger Agreement allows the Company, in the
exercise of the fiduciary duties of the Board on the basis of advice of
counsel, to respond to unsolicited inquiries or expressions of interest by
participating in discussions with, or providing information to, third
parties in connection with an acquisition proposal which is a Superior
Proposal and the fact that the Merger Agreement further provides that the
Board may, in the exercise of its fiduciary duties on the basis of advice
of counsel, withdraw or amend its recommendation, accept a Superior
Proposal and may terminate the Merger Agreement and pay a termination fee
of $2,000,000;
(g) The fact that if Parent or Purchaser terminates the Merger
Agreement pursuant to its terms because of a withdrawal or amendment of the
Board's recommendation of the transactions contemplated by the Merger
Agreement, the Company will only be liable for $2.0 million; and
(h) The likelihood that the transaction would be consummated,
including the conditions to the Offer, the strength of the financing
available to the Parent and Purchaser, and the fact that, if the Parent is
unable to consummate the financing as a result of actions or omissions
within its reasonable control, Parent will pay to the Company $2.0 million
as liquidated damages; and
(i) A consideration of alternatives to the sale of the Company to the
Parent and Purchaser, including without limitation, continuing to operate
the Company as a public company and not engaging in any extraordinary
transaction.
The foregoing discussion addresses the material information and factors
considered by the Board in its consideration of the Offer. In view of the
variety of factors and the amount of information considered, the Board did not
find it practicable to provide specific assessments of, quantify, or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination to recommend that shareholders accept the Offer
was made after consideration of all of the factors taken as a whole. Individual
members of the Board may have given different weights to different factors.
ITEM 5. PERSONS, RETAINED, EMPLOYED OR TO BE COMPENSATED
Prudential is acting as financial advisor to the Company in connection with
the Offer and other matters arising in connection therewith. Pursuant to an
engagement letter dated November 19, 1997, as amended (the "Engagement Letter"),
the Company retained Vector Securities International, Inc., the predecessor to
Prudential Vector Healthcare Group, as its financial advisor with respect to
acquisitions, divestitures or other strategic alternatives related to the
Company. The Engagement Letter provided that the Company pay to Prudential a fee
equal to the sum of 5.0% of the first $20 million, 4.0% of the next $10 million,
3.0% of the next $10 million; 2.0% of the next $10 million and 1.0% of the
balance of the consideration received by the shareholders of the Company in the
Offer and Merger, subject to the consummation thereof. For purposes of the
foregoing, the Engagement Letter defines consideration as including, among other
things, cash received by shareholders from, and indebtedness that is repaid or
is assumed by, a purchaser of the Company. The Company also agreed to pay to
Prudential the sum of $350,000 in connection with the rendering of the fairness
opinion referred to in Item 4 and filed as Exhibit 6 hereto. The fee for the
fairness opinion will be credited against the fees otherwise payable to
Prudential. In addition, the Company has agreed to reimburse Prudential for its
reasonable out-of-pocket expenses (other than legal expenses associated with
this transaction not specifically related to the issuance of the fairness
opinion) and to indemnify Prudential against certain liabilities.
In the ordinary course of business, Prudential and its affiliates may
actively trade or hold the Company's Shares for its own account or for the
account of its customers and accordingly, may at any time hold a long or short
position in such Shares. Vector Securities International, Inc. served as the
Company's managing underwriter in its initial public offering in October 1997.
18
<PAGE> 20
Except as otherwise described herein, neither the Company nor any person
acting on its behalf has, or currently intends to, employ, retain or compensate
any person to make solicitations or recommendations to the holders of Shares
with respect to the Offer or the Merger
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the last 60 days by the Company or any executive officer,
director, affiliate or subsidiary of the Company.
(b) Each director and executive officer of the Company has entered into a
Shareholders' Agreement with the Purchaser whereby they have each agreed to
tender pursuant to the Offer all Shares owned of record by them. The form of the
Shareholders' Agreement is attached hereto as Exhibit 8.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Other than as set forth in Items 3, 4 or 6 of this Schedule 14D-9, no
negotiation is being undertaken or is underway by the Company in response to the
Offer which relates to or would result in (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) Other than as set forth in Items 3, 4 or 6 of this Schedule 14D-9,
there are no transactions, board resolutions, agreements in principle or a
signed contract in response to the Offer which relate to and would result in one
or more of the matters referred to in Item 7(a) of this Schedule 14D-9
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) In connection with the execution of the Merger Agreement, the Company's
Board of Directors authorized an amendment (the "Rights Amendment") to the
Rights Agreement. The Rights Amendment prevents Parent and Purchaser from
becoming an Acquiring Person or an Adverse Person (each as defined in the Rights
Agreement) so long as the Merger Agreement has not been terminated and prevents
a Stock Acquisition Date or Distribution Date (each as defined in the Rights
Agreement) from occurring, in each case as a result of the Offer or other
transactions contemplated by the Merger Agreement. A copy of the Rights
Amendment is filed as Exhibit 7 hereto and is incorporated herein by reference.
(b) As a Florida corporation, the Company is subject to Sections 607.0901
and 607.0902 of the Florida Business Corporations Act ("Florida Law"). Section
607.0901 of the Florida Law provides that certain "business combinations"
(defined to include mergers and consolidations) require the approval of the
holders of at least two-thirds of the voting shares of the corporation, other
than shares owned by an "interested shareholder," in order to effect such
business combination. An "interested shareholder" is defined as a beneficial
owner of 10% or more of the outstanding voting securities of the corporation.
Such two-thirds majority approval is not required where the business combination
is approved by a majority of the disinterested directors of the corporation.
Section 607.0902 of the Florida Law, the Control Share Statute, provides
that acquisitions of "control shares" of certain corporations, with certain
exceptions, have no voting rights unless such rights are granted pursuant to a
vote of the holders of a majority of the corporation's voting securities
(excluding all interested shares). The Control Share Statute is triggered by
acquisitions that, when added to all other shares which a person owns or has the
power to vote, would give that person certain thresholds of voting power,
beginning at 20% of the voting power of the corporation. The Control Share
Statute does not apply to limit the exercise of voting power in a control share
acquisition if the board of directors of the corporation approve the acquisition
of the control shares prior to such acquisition.
In accordance with the Merger Agreement and Sections 607.0901 and 607.0902,
at its meeting on December 28, 1999, the Board unanimously approved the Offer
and the Merger and determined to make the
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<PAGE> 21
restrictions of Sections 607.0901 and 607.0902 inapplicable to the Offer, the
Merger and any purchases of Shares by Purchaser following the acquisition of
Shares pursuant to the Offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated December 28, 1999 among
National Nephrology Associates, Inc., a Delaware
corporation, RC Acquisition Corp., a Florida corporation and
Renex Corp., a Florida corporation.
Exhibit 2 -- Confidentiality letter dated November 15, 1999 between
National Nephrology Associates, Inc,. and Renex Corp.
Exhibit 3 -- Confidentiality letter dated December 21, 1999 between
National Nephrology Associates, Inc,. and Renex Corp.
Exhibit 4 -- Form of Letter to Shareholders of Renex Corp. dated December
30, 1999
Exhibit 5 -- Form of Press Release issued by Renex Corp. and National
Nephrology Associates, Inc. on December 28, 1999
Exhibit 6 -- Opinion of Prudential Securities, Incorporated dated
December 27, 1999
Exhibit 7 -- Amendment dated as of December 28, 1999 to the Rights
Agreement, between Renex Corp, and Continental Stock
transfer and Trust Company, as Rights Agent
Exhibit 8 -- Shareholders Agreement between each of the Company's
executive officers and directors and National Nephrology
Associates, Inc., a Delaware corporation and RC Acquisition
Corp., a Florida corporation
</TABLE>
20
<PAGE> 22
SIGNATURE
After reasonable 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.
RENEX CORP., a Florida corporation
By: /s/ JAMES P. SHEA
------------------------------------
James P. Shea
President and Chief Executive
Officer
21
<PAGE> 23
ANNEX I
RENEX CORP.
201 ALHAMBRA CIRCLE, SUITE 800
CORAL GABLES, FLORIDA 33134
---------------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
---------------------------------
This Information Statement is being mailed on or about December , 1999 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on December 29, 1999. You are receiving this Information Statement in
connection with the possible election of persons designated by the Purchaser to
a majority of the seats on the Board of Directors of the Company (the "Board").
The Merger Agreement requires the Company, at the request of the Purchaser, to
take all action necessary to cause the Purchaser's designees (the "Purchaser
Designees") to be elected to the Board under the circumstances described
therein. This Information Statement is required by Section 14(f) of the Exchange
Act and Rule l4f-1 thereunder. See "Board of Directors -- Right to Designate
Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 30, 1999. The Offer is scheduled to expire at 12:00 midnight on January
28, 2000, New York City time unless otherwise extended, at which time, if all
conditions of the Offer have been satisfied or waived, the Purchaser has
informed the Company that it intends to purchase all Shares validly tendered
pursuant to the Offer and not withdrawn.
The information contained in this Information Statement concerning the
Purchaser and Parent has been furnished to the Company by Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 29, 1999, there were
6,926,901 Shares outstanding. The Board currently consists of 9 members
currently divided into three classes, which have three year terms that expire in
successive years. Each director holds office until such director's successor is
elected and qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, upon consummation of the Offer, the
Purchaser will be entitled to designate up to such number of directors (the
"Purchaser Designees") rounded up to the next whole number on the Board that
equals the product of (i) the total number of directors on the Board (giving
effect to the election of any additional directors pursuant to this sentence)
and (ii) the percentage that the number of shares owned by Parent and Purchaser
(including Shares accepted for payment) bears to the total number of
I-1
<PAGE> 24
Shares outstanding and the Company shall take all action necessary to cause
Purchaser's Designees to be so elected, including without limitation increasing
the number of directors and seeking and accepting resignations of incumbent
directors.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to stockholders together with
this Schedule 14D-9. The information on such Schedule I is incorporated herein
by reference.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a specified minimum number of Shares
pursuant to the Offer, which purchase cannot be earlier than January 28, 2000,
and that, upon assuming office, the Purchaser Designees will thereafter
constitute at least a majority of the Board. This step will be accomplished at a
meeting or by written consent of the Board providing that the size of the Board
will be increased and/or sufficient numbers of current directors will resign to
enable the Purchaser Designees to be elected to the Board. It is not currently
known which, if any, current directors of the Company will resign. The Purchaser
has informed the Company that each of the directors and executive officers
listed in Schedule I to the Offer to Purchase has consented to act as a
director, if so designated.
DIRECTORS AND OFFICERS OF THE COMPANY
The names of the current directors and executive officers, their ages as of
December 28, 1999 and certain other information about them are set forth below.
As indicated above, some of the current directors may resign effective
immediately following the purchase of the Shares by Purchaser pursuant to the
Offer.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Milton J. Wallace(1)................ 64 Chairman of the Board
Arthur G. Shapiro, M.D.(1).......... 60 Vice Chairman of the Board, Director of Medical Affairs
James P. Shea(1).................... 58 President, Chief Executive Officer, Director
Senior Vice President -- Finance, Chief Financial
Orestes L. Lugo..................... 41 Officer
Patsy L. Anders..................... 55 Vice President -- Business Development
Mignon B. Early..................... 36 Vice President -- Operations
Jeffery C. Finch.................... 38 Vice President
Eugene P. Conese, Sr.(2)............ 69 Director
C. David Finch, M.D................. 40 Director
John E. Hunt, Sr.(2)................ 81 Director
Charles J. Simons(2)(3)............. 81 Director
Mark D. Wallace(3).................. 31 Director, Secretary
Jeffrey H. Watson(3)................ 41 Director
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Audit Committee.
The Company's Board of Directors is divided into three classes. The members
of each class serve for staggered three year terms, including three Class I
directors (Charles J. Simons, Jeffrey H. Watson and Eugene P. Conese, Sr.),
three Class II directors (Mark D. Wallace, John E. Hunt, Sr. and James P. Shea)
and three Class III directors (Milton J. Wallace, Arthur G. Shapiro and C. David
Finch). Class I, II and III director terms expire upon the election of directors
at the annual meeting of shareholders to be held in 2000, 2001 and 2002,
respectively. Directors hold office until the expiration of their respective
terms and until their successors are elected, or until death, resignation or
removal. Each officer serves at the discretion of the Board of Directors,
subject to certain contractual rights described below.
Milton J. Wallace. Mr. Wallace is a co-founder of the Company and has been
Chairman of the Board of the Company since its inception in July 1993. Mr.
Wallace has been a practicing attorney in Miami for over
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<PAGE> 25
30 years, and is currently a shareholder in the law firm of Wallace, Bauman,
Legon, Fodiman & Shannon, P.A. He was a co-founder and a member of the Board of
Directors of Home Intensive Care, Inc., a provider of home infusion and dialysis
services, serving as Chairman of its Executive Committee from 1985 through July
1993 and Chairman of the Board from December 1989 until July 1993 when Home
Intensive Care, Inc. was acquired by W.R. Grace & Co. Mr. Wallace is Chairman of
the Board of Med/Waste, Inc., a provider of medical waste management services
and a director of Imperial Industries, Inc., a provider of construction
materials. He is a director of several private companies. Mr. Wallace is a
member of the Executive Committee. Mr. Wallace is the father of Mark D. Wallace,
a Director of the Company.
Arthur G. Shapiro, M.D. Dr. Shapiro is a co-founder of the Company and has
been Vice Chairman of the Company's Board and Director of Medical Affairs since
the Company's inception in July 1993. Dr. Shapiro has held an appointment to the
University of Miami School of Medicine as a professor of clinical obstetrics and
gynecology since January 1995. From 1985 until 1995, he was engaged in the
private practice of medicine. He is board certified in obstetrics and
gynecology, reproductive endocrinology and laser surgery. He is a Fellow in the
American College of Obstetrics and Gynecology and the American College of
Endocrinology. Dr. Shapiro was a co-founder of Home Intensive Care, Inc. and
served on its Board of Directors from 1985 until July 1993. Dr. Shapiro also
served as Home Intensive Care, Inc.'s Medical Director from 1990 until July
1993. He is a Director of Med/Waste, Inc. and several private companies. Dr.
Shapiro is Chairman of the Executive Committee.
James P. Shea. Mr. Shea has been President and Chief Executive Officer of
the Company since August 1993. From July 1992 until June 1993, he served as
Director General for Home Intensive Care, Inc.'s international division. From
1986 to 1990, he was Senior Vice President of Protocare, Inc., an infusion
therapy and respiratory care provider, which he helped establish. From 1985 to
1986, he was General Manager of the health care products division of The Norton
Company, a manufacturer of engineered materials. From 1983 to 1985, he was
President of the infusion division of National Medical Care, Inc., a kidney
dialysis and infusion therapy provider, which is now owned by Fresenius Medical
Care AG. Mr. Shea is a member of the Company's Executive Committee.
Orestes L. Lugo. Mr. Lugo has served as the Company's Senior Vice
President -- Finance and Chief Financial Officer since August 1995. From March
1994 until August 1995, he was Chief Financial Officer of PacifiCare of Florida,
a health maintenance organization and subsidiary of PacifiCare Health Systems,
Inc. From September 1993 until March 1994, he was Chief Financial Officer of
Supreme International, Inc., a clothing manufacturer. From July 1989 until
September 1993, Mr. Lugo served as Vice President of Finance for Home Intensive
Care, Inc. From 1980 to 1989, Mr. Lugo was employed by the public accounting
firm of Touche Ross, last as a senior manager. Mr. Lugo is a Certified Public
Accountant.
Patsy L. Anders. Ms. Anders has served as the Company's Vice
President -- Business Development since January 1996. From the Company's
inception in July 1993 through January 1996, she served as the Company's
Director of Business Development. From 1990 until July 1993, Ms. Anders was the
Physician Liaison for Quality Care Dialysis Centers, Inc., the wholly-owned
dialysis facility subsidiary of Home Intensive Care, Inc. From 1986 through
1990, Ms. Anders was Director of Physician Relations for Home Intensive Care,
Inc. In 1989, Ms. Anders founded Anders and Associates, a physician placement
firm specializing in the placement of nephrologists, and has served as its
President since its inception.
Mignon B. Early, RN, BSN. Ms. Early has been the Company's Vice
President -- Operations since January 1997. From July 1995 until January 1997,
she was the Company's Director of Training and Development. From January 1994
until July 1995, she served as a clinic administrator for the Company in the St.
Louis, Missouri region. From December 1990 until January 1994, Ms. Early was a
clinic administrator for Quality Care Dialysis Centers, Inc. Ms. Early is a
registered nurse.
Jeffery C. Finch. Mr. Finch has been a Vice President of the Company since
December 1995. From June 1990 until December 1995, Mr. Finch served as Chief
Executive Officer of Dialysis Facilities, Inc., a dialysis company which owned
three dialysis facilities purchased by the Company in December 1995, which Mr.
Finch co-founded in 1990. He is a principal of JCD Partnership, a real estate
and property management firm. Mr. Finch is the brother of C. David Finch, M.D.,
a Director of the Company.
I-3
<PAGE> 26
Eugene P. Conese, Sr. Since September 1997, Mr. Conese has been Chairman
of the Board of World Air Lease, Inc. and serves as consultant to General
Electric Company's Engine Services division. From 1987 until September 1997, he
served as Chairman of the Board of Directors and Chief Executive Officer of
Greenwich Air Services, Inc., a provider of repair and overhaul services for gas
turbine aircraft engines which he founded in 1977. Greenwich Air Services, Inc.
was acquired by General Electric Company in September 1997. Mr. Conese was the
founder of The Greenwich Company, Ltd. and served as its Chairman of the Board
and Chief Executive Officer from August 1980 until 1995, when it merged with
Greenwich Air Services, Inc. Mr. Conese is a Director of Trans World Airlines,
Inc., a member of the Board of Trustees of Iona College and of the Board of the
Conese Foundation and the Jackson Memorial Foundation. Mr. Conese is Chairman of
the Company's Compensation and Stock Option Committee.
C. David Finch, M.D. Dr. Finch has been a Director of the Company since
December 1995, when the Company acquired Dialysis Facilities, Inc., a dialysis
company he co-founded in 1990. He is a board certified nephrologist and
maintains a private practice of medicine in nephrology and hypertension in
Jackson, Mississippi. Dr. Finch serves as the Medical Director of the Company's
dialysis facilities in the Jackson, Mississippi area. He also serves as Director
of Dialysis at Vicksburg Medical Center and Parkview Regional Medical Center. He
is a principal in JCD Partnership, a real estate and property management firm,
and the brother of Jeffery C. Finch, a Vice President of the Company.
John E. Hunt, Sr. Since August 1983, Mr. Hunt has been Chairman of the
Board of Hunt Insurance Group, Inc., an insurance agency holding company. For
the previous 40 years, Mr. Hunt was President of John E. Hunt & Associates, a
Tallahassee and Miami, Florida insurance agency. For the past 13 years, he has
also been President of Insurance Consultants and Analysis, Inc., an insurance
consulting firm. Mr. Hunt serves as Chairman of the Board of Trustees of the
Florida Police Chiefs' Education and Research Foundation, Inc., and as a trustee
of Florida Southern College. Mr. Hunt was a Director of Home Intensive Care,
Inc. from 1985 until July 1993. Mr. Hunt is a member of the Compensation and
Stock Option Committee.
Charles J. Simons. Mr. Simons is the Vice Chairman of the Board of G. W.
Plastics, Inc., a plastics manufacturer, and is an independent management and
financial consultant. From 1940 to 1981, he was employed by Eastern Airlines,
last serving as Vice Chairman, Executive Vice President and as a Director. Mr.
Simons is a Director of Bessemer Trust of Florida, an investment management
firm; Med/Waste, Inc., and Viragen, Inc., a pharmaceutical company; and a number
of private companies. Mr. Simons is the Chairman of the Board of the Matthew
Thornton Health Plan. Mr. Simons is chairman of the Company's Audit Committee
and a member of the Compensation and Stock Option Committee.
Mark D. Wallace. Mr. Wallace has been Secretary of the Company since the
Company's inception in July 1993. Since July 1992, Mark Wallace has been a
practicing attorney and is currently a partner at the law firm of Stack,
Fernandez, Anderson, Harris & Wallace, P.A. Mr. Wallace is the son of Milton J.
Wallace, Chairman of the Board of the Company. Mr. Wallace is also a member of
the Audit Committee.
Jeffrey H. Watson. Mr. Watson has been Chairman of the Board and President
of J. Watson & Co., a government relations and business consulting firm since
December 1995. From June 1994 until December 1995, he was Vice President for
Government Relations of the Jefferson Group, an independent public affairs firm.
From January 1993 until June 1994, Mr. Watson served as Deputy Assistant for
Inter-Governmental Affairs for the Clinton Administration. From December 1991
through November 1992, Mr. Watson was employed by the election campaign for
President Clinton. From 1989 until November 1991, Mr. Watson served as Finance
Administrator for the City of Miami, Florida's Department of Development and
Housing Conservation. From 1986 until January 1989, he served as an
Administrative Assistant for the Mayor of Miami, Florida. From September 1985
through March 1986, he was a Managing Partner and Chief Financial Manager of J.
Howard Industries, a company involved in low-income housing redevelopment and
construction. Mr. Watson is a member of the Company's Audit Committee.
I-4
<PAGE> 27
BOARD MEETINGS, COMMITTEES AND COMPENSATION
Board Attendance: The Board of Directors met five (5) times in 1998. In
addition, the Board of Directors took action by unanimous written consent once
during 1998. Every director attended in excess of 75% of meetings of the Board
during 1998.
Executive Committee: The Executive Committee is composed of Dr. Shapiro as
Chairman and Messrs. Wallace and Shea. When the Board of Directors is not in
session, the Executive Committee possesses all of the powers of the Board, other
than certain powers reserved by Florida law to the Board. Although the Executive
Committee has broad powers, in practice it takes formal action in a specific
matter only when it would be impractical to call a meeting of the Board. The
Executive Committee met three (3) times during 1998. All members of the
Executive Committee attended 100% of such meetings
Compensation and Stock Option Committee: The Compensation and Stock Option
Committee, composed of Messrs. Conese, as Chairman, Hunt and Simons met five (5)
times during 1998. Every member attended in excess of 75% of such meetings. The
Compensation Committee reviews the Company's general compensation policies and
procedures; establishes salaries and benefit programs for the Chief Executive
Officer and other executive officers of the Company and its subsidiaries;
reviews, approves and establishes performance targets and awards under incentive
compensation plans for its executive officers; and reviews and approves
employment agreements. The Compensation and Stock Option Committee also
administers the Company's Employee Stock Option Plan and has the authority to
determine, among other things, to whom to grant options, the amount of options,
the terms of options and the exercise prices thereof.
Audit Committee: The Audit Committee is presently composed of Charles J.
Simons, as Chairman, Mark D. Wallace and Jeffrey Watson. Mark D. Wallace was
appointed to the Audit Committee on October 1, 1998. The Audit Committee met
four (4) times during 1998. Every member attended in excess of 75% of such
meetings while such directors were members of the Audit Committee. The principal
duties of the Audit Committee are to recommend the appointment of independent
auditors; meet with the Company's independent auditors to review the
arrangements for, and scope of, the audit by the independent auditors and the
fees related to such work; review the independence of the independent auditors;
consider the adequacy of the system of internal accounting controls; review and
monitor the Company's policies regarding conflicts of interest; and discuss with
management and the independent accountants the Company's annual financial
statements.
Directors' Compensation: Directors who are officers or employees of the
Company receive no additional compensation for their service as members of the
Board of Directors. Non-employee directors receive an annual retainer of $5,000;
$500 per board meeting attended; and $500 for each committee meeting attended.
Charles J. Simons receives annual compensation of $15,000 for service as
chairman of the Audit Committee. Directors are also reimbursed for expenses
which may be incurred by them in connection with the business and affairs of the
Company. Non-employee directors also receive annual grants of options under the
Directors Stock Option Plan ("Directors Plan") described below. See
"Compensation -- Directors Stock Option Plan."
Compensation Committee Interlocks and Insider Participation: None of the
members of the Board's Compensation and Stock Option Committee is, or has been,
an officer or employee of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
The Company's officers and directors are required to file Forms 3, 4 and 5
with the Securities and Exchange Commission in accordance with Section 16(a) of
the Securities and Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder. Based solely on a review of such reports
furnished to the Company as required by Rule 16(a)-3, no director or executive
officer failed to timely file such reports in 1998.
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<PAGE> 28
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by, and paid to, the
Company's President and Chief Executive Officer and each other executive officer
for the two years ended December 31, 1997 and 1998 who received compensation in
excess of $100,000 for any such periods (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARD
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS(#)
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James P. Shea......................................... 1998 $205,200 $190,000 $ 12,540 92,176
President and CEO................................... 1997 128,465 -- $ 8,630 33,334
Orestes L. Lugo....................................... 1998 $167,400 $124,000 $ 10,800 25,235
V.P. Finance and CFO................................ 1997 114,617 -- 7,110 26,667
Milton J. Wallace..................................... 1998 $ 73,077 $100,000 $ 7,940 54,255
Chairman of the Board............................... 1997 -- -- -- 1,667
Patsy L. Anders....................................... 1998 $ 97,200 $ 41,985 $ 8,004 8,000
V. P. Business Development.......................... 1997 70,769 8,600 5,400 20,000
Mignon B. Early....................................... 1998 $ 93,846 $ 38,000 $ -- 8,000
V. P. Operations.................................... 1997 77,580 12,000 -- 20,000
</TABLE>
- ---------------
(1) The Company provides its officers with certain non-cash group life and
health benefits generally available to all salaried employees. Such benefits
are not included in the above table pursuant to applicable Securities and
Exchange Commission rules. No Named Executive Officer received aggregate
personal benefits or perquisites that exceed the lesser of $50,000 or 10% of
his total annual salary and bonus for such year.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the CEO and each other Named Executive Officer named on the Summary
Compensation Table above, for the year ended December 31, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATE OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION
UNDERLYING EMPLOYEES OR BASE TERM($)(4)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) YEAR(3) ($/SHARE) DATE 5% 10%
- ---- ---------------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James P. Shea(2)................................. 16,176 5.0% $ 7.19 2/25/00 $12,000 $24,400
16,000 5.0 6.00 4/22/03 26,600 58,600
60,000 18.6 5.63 12/4/03 93,600 206,400
Orestes L. Lugo(2)............................... 13,235 4.1% $ 7.19 2/25/00 $ 9,800 $20,000
12,000 3.7 6.00 4/22/03 19,900 43,900
Milton J. Wallace(2)............................. 12,255 3.8% $ 7.19 2/25/00 $ 9,100 $18,500
12,000 3.7 6.00 4/22/03 19,900 43,900
30,000 9.3 5.63 12/4/03 46,800 103,200
Patsy L. Anders.................................. 8,000 2.5% $ 6.00 4/22/03 $13,300 $29,300
Mignon B. Early.................................. 8,000 2.5% $ 6.00 4/22/03 $13,300 $29,300
</TABLE>
- ---------------
(1) All such options were granted pursuant to the 1994 Employee Stock Option
Plan. Unless otherwise noted all Options vest over three years, with 25% of
such options vesting six months following the date of grant, 25% on the
first anniversary from the date of grant and 25% at the end of each
succeeding year from the grant date.
I-6
<PAGE> 29
(2) Options vest 100% immediately but are not exercisable for six months
following grant.
(3) Based on an aggregate of 321,931 options granted to employees in 1998,
including the Named Executive Officers.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain aggregated option information for
the CEO and each Named Executive Officer named in the Summary Compensation Table
for the year ended December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS(#) IN-THE-MONEY OPTIONS(2)
--------------------------- ---------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Shea.................................... 98,845 60,000 $62,600 $97,200
Orestes L. Lugo.................................. 71,903 -- 40,800 --
Milton J. Wallace................................ 45,091 30,000 39,700 48,600
Patsy L. Anders.................................. 29,500 18,500 24,400 10,600
Mignon B. Early.................................. 19,084 17,250 11,400 9,100
</TABLE>
- ---------------
(1) No options were exercised by the above Named Executive Officers during the
fiscal year ended December 31, 1998.
(2) The value of unexercised options represents the difference between the
exercise price of the options and the closing sales price of the Company's
Common Stock on December 31, 1998 of $7.25 as reported by NASDAQ/NMS.
EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into two year employment agreements with
James P. Shea, the Company's President and Chief Executive Officer, and Orestes
L. Lugo, Vice President - Finance and Chief Financial Officer. The terms of
these agreements were amended to five years for Mr. Shea and three years for Mr.
Lugo. In January 1998, the Company entered into a five year employment agreement
with Milton J. Wallace, the Company's Chairman of the Board. The employment
agreements initially provided for base salaries of $190,000, $155,000 and
$100,000 for Messrs. Shea, Lugo and Wallace, respectively. Mr. Wallace's base
salary commenced April 1998. Base salary for each officer is increased on each
anniversary date of each agreement during the term by a minimum of 6%. Each
officer receives an automobile allowance and certain other non-cash benefits,
including life, health and disability insurance. The employment agreements for
Messrs. Wallace and Shea are automatically renewed for five years at the end of
the initial term and each extended term, unless either party provides notice of
termination at least 180 days prior to the expiration of such term. Mr. Lugo's
employment agreement is automatically renewed for three years at the end of the
initial term and each extended term, unless either party provides notice of
termination at least 120 days prior to the expiration of such term.
Messrs. Shea, Lugo and Wallace are entitled to receive bonuses in each
fiscal year during the term of their agreements. Such agreements require the
Board of Directors to establish incentive bonus plans for each fiscal year which
would provide a means for each officer to earn a bonus upon the achievement of
established goals and criteria. The respective employment agreements grant to
each of Messrs. Shea, Lugo and Wallace the right to terminate his employment
agreement within eighteen months following a "change of control," and to receive
an amount equal to the greater of: (i) base salary due for the remainder of the
term of the agreement and three times the bonus amount paid in the last 12
months had it not been terminated; or (ii) $500,000. Such change of control
severance is payable 100% in cash on the effective date of such termination.
I-7
<PAGE> 30
If Messrs. Shea, Lugo or Wallace is terminated without cause during the term of
their respective agreements, such officer will be entitled to the same severance
mentioned above for a "change of control".
In April 1997, the Company entered into a two year employment agreement
with Patsy L. Anders, Vice President -- Business Development. The agreement
initially provided for a base salary of $90,000 per year. Base salary is
increased on the anniversary of each year during the term by a minimum of 6%.
Ms. Anders receives an automobile allowance and certain other non-cash benefits,
including life, health and disability insurance. Ms. Anders, upon the
achievement of established goals and criteria, is entitled to receive a bonus in
each fiscal year during the term of the agreement. Such agreement requires the
Board of Directors to establish an incentive bonus plan for each fiscal year.
Her employment agreement is automatically renewed for two years at the end of
the initial term and each extended term, unless either party provides written
notice of termination at least 120 days prior to the expiration of such term.
If Ms. Anders is terminated without cause prior to a "change of control,"
she will be entitled to severance equal to the greater of the remaining base
salary due under the agreement or one year's base salary. If Ms. Anders is
terminated without cause following a "change of control," she will be entitled
to severance equal to the greater of (i) two times the remaining base salary
which would have been paid for the remainder of the term of the agreement or
(ii) two times the sum of one year's base salary then in effect, and any and all
bonuses paid to Ms. Anders in the eighteen months prior to the effective date of
termination. Ms. Anders' employment agreement grants her the right to terminate
the agreement within 180 days following a "change of control," and entitles her
to the same severance as mentioned above under termination without a cause
following a "change of control." Such "change of control" severance is payable
50% in cash on the effective date of such termination, with the balance payable
over a twelve month period.
In March 1997, the Company entered into a three year employment agreement
with Mignon B. Early, Vice President -- Operations. The agreement initially
provided for a base salary of $80,000 and certain other non-cash benefits,
including life, health and disability insurance. Ms. Early is entitled to
receive a bonus in each fiscal year during the term of her agreement. Such
agreement requires the Board or Directors to establish an incentive bonus plan
for each fiscal year which would provide a means for her to earn a bonus up to
50% of her respective base salary upon the achievement of established goals and
criteria.
If Ms. Early is terminated without cause prior to a "change of control,"
she will be entitled to severance equal to the base salary accrued through the
effective date of termination and six months base salary. If Ms. Early is
terminated without cause following a "change of control," she will be entitled
to severance equal to all accrued base salary through the date of termination
and one year's base salary. In April 1998, Ms. Early's base annual salary was
increased to $100,000. In November 1999, Ms. Early's base annual salary was
increased to $118,000.
For the purposes of the employment agreements, "change of control" is
defined as: (i) the acquisition, other than from the Company directly, by any
person, entity or group, within the meaning of sec. 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership of
25% or more of the outstanding Common Stock; (ii) if the individuals who serve
on the Board as of the date of the employment agreement, no longer constitute a
majority of the members of the Board; provided, however, any person who becomes
a director subsequent to such date, who was elected to fill a vacancy by a
majority of the individuals then serving on the Board, shall be considered as if
a member prior to such date; (iii) approval by a majority of the voting stock of
the Company of a merger, reorganization or consolidation whereby the
shareholders of the Company immediately prior to such approval do not,
immediately after consummation of such reorganization, merger or consolidation
own more than 50% of the voting stock of the surviving entity; or (iv) a
liquidation or dissolution of the Company, or the sale of all or substantially
all of the Company's assets.
STOCK OPTION PLANS
Employee Plan
The Company maintains a 1994 Employee Stock Option Plan ("Employee Plan").
The Employee Plan is designed as an incentive program to cause employees to
increase their interest in the Company's
I-8
<PAGE> 31
performance and to attract and retain qualified personnel. Subject to certain
anti-dilution provisions, the Employee Plan consists of 1,000,000 shares of
Common Stock reserved for issuance upon the exercise of options which may be
granted, including 877,514 shares subject to outstanding options as of December
27, 1999.
The Employee Plan is administered by the Compensation and Stock Option
Committee. The Compensation and Stock Option Committee has the discretion, among
other things, as to whom to grant options, the amount of options, the terms of
options and the exercise prices. All employees of the Company are eligible to
receive options under the Employee Plan. Such employees are eligible to receive
either "incentive" or "nonqualified" stock options, subject to the limitations
of the Internal Revenue Code of 1986, as amended (the "Code"). The exercise
price of an incentive stock option may not be less than 100% of the market price
of the underlying Common Stock as of the date of grant. No option may be granted
which has a term longer than 10 years. Stock options may have vesting
requirements as established by the Compensation and Stock Option Committee, but,
except in the case of an employee's death or permanent disability, in no event
may the options be exercisable until six months after grant. All unvested
options under the Employee Plan become immediately vested in full upon a change
of control of the Company, as such term is defined in the Employee Plan.
Upon termination of an optionee's employment with the Company for any
reason, all options granted to such employee under the Employee Plan would
terminate immediately, except that the Compensation and Stock Option Committee
has the discretion to permit such holder to exercise vested options for a period
of 90 days after termination. Options granted under the Employee Plan may not be
transferred and are not exercisable except by the employee.
The Employee Plan provides for the automatic grant of "reload" options to
an employee, who pays all, or a portion of, an exercise price by delivery of
shares of Common Stock then owned by such employee. Reload options are granted
for each share of Common Stock so tendered. The exercise price of such reload
option is the then fair market value of the Common Stock. All other terms of the
reload options would be identical to the original options; provided, however,
that if the expiration date is less than one year, the expiration date is
extended to one year from the date of issuance of the reload options.
As of December 27, 1999, options to purchase a total of 877,514 shares of
Common Stock, with a weighted average exercise price of $5.89 have been granted
to executive officers and other employees of the Company. Each option granted
has a term of five years. Options granted to Messrs. Shea, Lugo and Wallace and
Dr. Shapiro are vested 100%. For all other officers and employees, options vest
25% at the end of six months and 25% on each anniversary of such grant until
100% are vested. Options are not exercisable until six months after the date of
grant.
Director Plan
The Company maintains a Director Stock Option Plan (the "Director Plan").
Subject to certain anti-dilution provisions in the Plan, there are 166,667
shares of Common Stock reserved for issuance upon the exercise of options which
may be granted pursuant to the Director Plan, including 54,548 shares subject to
outstanding options. All non-employee directors are eligible to receive grants
of options ("Eligible Director"). Each Eligible Director receives automatic,
non-discretionary grants of options based upon specific criteria set forth in
the Director Plan. Prior to October 1998, on April 27 of each year, each
Eligible Director received non-qualified options to purchase 834 shares of
Common Stock for service on the Board of Directors and additional options to
purchase 334 shares for service on each committee of the Board, other than the
Executive Committee, for which members would receive options to purchase 834
shares. Also, additional options to purchase 334 shares are granted to Eligible
Directors who serve as a chairman of each standing committee of the Board, other
than the chairman of the Executive Committee, who would receive options to
purchase 834 shares. In October 1998, the Board of Directors authorized an
amendment to the Director Plan providing for a special grant of options based on
the formula of annual grants on October 1, 1998. In addition, commencing April
27, 1999, annual option grants are double the amount of options granted in April
1998.
I-9
<PAGE> 32
The exercise price of each option granted under the Director Plan is equal
to the fair market value of the Common Stock on the date of grant as determined
in accordance with the provisions of the Director Plan. All options granted have
a term of five years, but, except in the case of an Eligible Director's death or
permanent disability, are not exercisable until six months after the date of
grant. No option is transferable by the Eligible Director, except by the laws of
descent and distribution. If the Eligible Director's membership on the Board
terminates, including by reason of death, such options are exercisable for the
lesser of the remaining term of such option, or one year.
The Director Plan provides for the automatic grant of "reload" options to
an Eligible Director, who pays all, or a portion of, an exercise price by
delivery of shares of Common Stock then owned by such Eligible Director. Reload
options are granted for each share of Common Stock so tendered. The exercise
price of such reload option is the then fair market value of the Common Stock.
All other terms of the reload options, including the expiration date, would be
identical to the original options, provided, however, that if the expiration
date is less than one year, the expiration date is extended to one year from the
date of issuance of the reload options.
As of December 27, 1999, options to purchase 54,548 shares of Common Stock,
with a weighted average exercise price of $5.86 per share, have been
automatically granted to Eligible Directors as a group and remain outstanding.
401(K) PLAN
In January 1997, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering the Company's employees. Pursuant
to the 401(k) Plan, eligible employees may elect to contribute to the 401(k)
Plan up to the lesser of 15% of their annual compensation or the statutorily
prescribed annual limit ($10,000 in 1998). The Company matches 25% of the
contributions of employees up to 4% of each employee's salary. All employees who
attain at least one year's service are eligible to participate in the 401(k)
Plan.
The Trustees of the 401(k) Plan, at the direction of each participant,
invest the assets of the 401(k) Plan in designated investment options. The
401(k) Plan is intended to qualify under Section 401 of the Code, so that
contributions to the 401(k) Plan, and income earned on the 401(k) Plan
contributions are not taxable until withdrawn. Matching contributions by the
Company are deductible when made.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee, and the Stock
Performance Graph included elsewhere in this Information Statement do not
constitute soliciting material and should not be deemed filed or incorporated by
reference into any other Company filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report in the Stock Performance Graph by reference therein.
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee (the "Compensation Committee") of the
Company's Board of Directors. The Compensation Committee is comprised entirely
of outside, non-employee directors, whose role is to review and approve salaries
and other compensation of the executive officers of the Company. The
Compensation Committee also reviews and approves various other Company
compensation policies and matters and administers the Company's Employee Stock
Option Plan, including the review and approval of stock option grants to the
executive officers of the Company.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The primary goal of the Compensation Committee is to establish a
relationship between executive compensation and the creation of shareholder
value, while motivating and retaining key employees. The Company's compensation
program for executives consists of two key components:
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<PAGE> 33
- Cash compensation, consisting of (a) a base salary and (b) annual
incentive compensation based principally on targeted profitability
of the Company; and
- Long-term incentive compensation through the periodic grant of stock
options. The grants are made based upon achieving certain
predetermined long term corporate goals.
In order to assist the Compensation Committee in its responsibility, the
Compensation Committee commissioned studies by an expert outside independent
consultant to provide surveys of companies in the same general business segment,
revenue and employee size, related to base salary, annual incentive cash
compensation payments and long-term incentive option grants. In this survey, the
Company's key executives were matched on a "best fit" basis to the key
executives of the surveyed companies. The Compensation Committee also reviewed
the recommendations of the outside consultant as part of its deliberation in
overall compensation matters.
The Company believes that this approach best serves the interests of the
Company and its shareholders. The base salary enables the Company to meet the
requirements of the highly competitive industry environment, while ensuring that
executive officers are compensated in a way that advances both the short and
long term interests of shareholders. Cash bonuses are intended to reward
executive officers for meeting or exceeding current year corporate performance
goals, as measured by financial results of the Company. Long-term incentives
consist of grants of stock options based on the current corporate long-term
goals as established by the Board of Directors.
BASE SALARY
The Compensation Committee is responsible for establishing base salaries
for the Company's executive officers, as well as changes in such salaries (other
than as required by contracts), based upon the recommendation of the Chief
Executive Officer. The Compensation Committee considers such factors as
competitive industry salaries; a subjective assessment of the nature of the
position; the contributions and experience of such officer and the length of the
officers' service with the Company.
PERFORMANCE-BASED CASH COMPENSATION
The Compensation Committee believes that a significant portion of the total
cash compensation for its executive officers should be based upon the Company's
achievement of specific performance criteria, and in particular the Company's
earnings. Annual cash bonuses are paid through a Management Incentive Bonus Plan
("MIBP") adopted by the Compensation Committee prior to the commencement of each
fiscal year. The purpose of the MIBP is to motivate and reward eligible
employees for good performance for the year by making a major portion of their
cash compensation dependent on overall corporate profitability.
Pursuant to the terms of the MIBP, the Compensation Committee establishes
an annual minimum corporate profit target, below which no bonus will be paid.
Using a predetermined formula, additional higher corporate profittiers are also
established. Upon the attainment of the minimum corporate profit target, each
eligible officer receives a cash bonus equal to a percentage of base salary. The
percentage of base salary earned increases as higher corporate profit tiers are
achieved. The maximum percentage of base salary that can be earned as a cash
bonus is established by the Compensation Committee for each executive officer,
with maximum bonuses ranging from 50% for vice presidents to 100% for the Chief
Executive Officer. The Compensation Committee awarded at or near the maximum
cash bonus available to each of the Company's executive officers based on the
MIBP adopted for the fiscal year ended 1998.
STOCK OPTIONS
Stock options are granted by the Company to aid in the hiring of new
employees and to reward key employees as a long-term incentive reward based upon
the Company's achieving certain current corporate long-term goals as established
by the Board of Directors. Stock options have value only if the price of the
Company's stock increases above the fair market value on the grant date and the
employee remains in the Company's employ until the stock options become
exercisable.
I-11
<PAGE> 34
The Company has a 1994 Employee Stock Option Plan (the "Employee Plan") for
executive officers and other employees. The Employee Plan is generally used for
making grants to executive officers and other employees as part of the Company's
performance review. Stock option grants may be made to executive officers upon
initial employment, upon promotion to a new, higher level position that entails
increased responsibility, in connection with the execution of a new employment
agreement or as further incentive to such executive officers. Annual stock
option grants for executives are a key element of a market competitive total
compensation package. In determining the number of stock options to be granted,
the Compensation Committee receives recommendations from the Chief Executive
Officer, as well as its outside independent consultants, and then reviews the
current option holdings of the executive officers; their positions and length of
service with the Company and subjective criteria on their contribution in
realizing certain current long-term goals of the Company. It then determines the
number of options to be granted based upon the principle of rewarding
performance and providing continuing incentives to contribute to stockholder
value. Using these guidelines, the Compensation Committee granted options in
1998 to all executive officers and certain supervisory employees in varying
amounts. Options generally vest over a three year period. Stock options under
the Employee Plan are granted at a price equal to the fair market value of the
common stock on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's basis for compensation of the Chief Executive
Officer is based on the philosophy discussed above. James P. Shea has been the
Company's President and Chief Executive Officer since August 1993. In
recognition of his service and commitment to the past and future success of the
Company and to secure his services for the future, the Company entered into an
employment agreement in April 1997 which provided for a base salary of $190,000
and minimum annual increases. The term of the employment agreement was extended
to five (5) years in recognition of the Company's performance. In establishing
the Chief Executive Officer's base salary, the Compensation Committee reviewed
salaries of the chief executive officers of comparable companies within its
industry, as well as other industries, and Mr. Shea's responsibilities within
the Company. Factors taken into consideration included a subjective evaluation
of Mr. Shea's performance, changes in the cost of living, competitors' size and
performance and the Company's achievements.
Mr. Shea's employment agreement provides for the right to earn annual cash
bonuses of up to 100% of his base salary in effect at the beginning of the
fiscal year. Such bonus awards are based upon incentive bonus criteria
established by the Compensation Committee in each fiscal year in its discretion.
Mr. Shea participated in the MIBP for the fiscal year ended 1998. Under the
MIBP, Mr. Shea's actual cash bonus for 1998 was $190,000, 100% of his base
salary in effect on January 1, 1998. Such cash bonus was the maximum cash bonus
permitted under his MIBP.
In 1998, the Compensation Committee awarded Mr. Shea options to purchase
92,176 shares of common stock. These options are vested 100% and become
exercisable six months following the respective dates of grant. All such options
expire at the end of five (5) years following the dates of grant, if not
exercised.
EXECUTIVE SEVERANCE PACKAGES
In response to the increase in merger and acquisition activities in recent
years within the industry and to provide the Company's executive officers with
further incentive to remain with the Company, the Compensation Committee in 1997
granted executive severance packages to the Company's executive officers,
including the Chief Executive Officer, protecting them in the event of a change
of control of the Company. These severance packages are contained in the
executive officers' respective employment agreements. The Compensation Committee
reviewed executive severance packages granted by those companies whose
compensation practices were examined in connection with determining executive
officer salaries as described above. The Compensation Committee then determined
to grant the executive officers severance packages in varying amounts depending
on their relative position with the Company. The severance packages for the
Chief Executive Officer and the Chief Financial Officer were increased as a
result of the extension of the terms of their respective employment agreements
and are described in "Summary Compensation" above.
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<PAGE> 35
IMPACT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly-held corporations for compensation in excess of $1,000,000
paid for any fiscal year to the Company's Chief Executive Officer and the four
(4) other most highly compensated officers. However, the statute exempts
qualifying performance-based compensation from the deduction limit if certain
requirements are met. The policy of the Compensation Committee is to structure
the compensation of the Company's executive officers to avoid the loss of the
deductibility of any compensation, even though Section 162(m) does not preclude
the payment of compensation in excess of $1,000,000. Notwithstanding, the
Compensation Committee reserves the authority to award non-deductible
compensation in circumstances as it deems appropriate. The Company believes that
Section 162(m) will not have any effect on the deductibility of the compensation
of any executive officer for 1998 or 1999.
Respectfully submitted,
Compensation Committee
Eugene P. Conese, Sr., Chairman
John E. Hunt, Sr.
Charles J. Simons
I-13
<PAGE> 36
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company's Common Stock from October 8, 1997 (the date that trading of the Common
Stock commenced on the NASDAQ National Market System) to December 31, 1998 with
(a) the Standard and Poors 500 Stock Index; and (b) a Peer Group Index. The
graph assumes that $100 was invested on October 8, 1997 in the Company's Common
Stock, the S&P 500 Index and the Peer Group Index and that all dividends were
reinvested. The Peer Group Index on the graph includes the Common Stock of Renal
Care Group, Inc. and Total Renal Care Holdings, Inc., which the Company believes
are the most comparable to the Company's operations within the dialysis
industry.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
RENEX CORPORATION STANDARD & POORS 500 PEER GROUP INDEX
----------------- -------------------- ----------------
<S> <C> <C> <C>
October 1997 100.00 100.00 100.00
1997 65.62 102.87 90.68
1998 90.62 132.27 107.33
</TABLE>
CERTAIN TRANSACTIONS
JCD Partnership, a real estate holding and property management firm, of
which C. David Finch, M.D., Jeffery Finch and Charles D. Finch, Sr. are the
principals, owns the real property and improvements at the Company's dialysis
facilities at Jackson, Mississippi and Delta, Louisiana. JCD Partnership leases
the properties to the Company pursuant to ten year leases, in which the Company
pays annual rent of $92,400 and $82,500, respectively. The Company paid $427,000
and $175,000 to JCD Partnership in connection with the leasehold improvements at
each facility.
C. David Finch, M.D. owed Dialysis Facilities, Inc. ("DFI") approximately
$85,000 at the time of the Company's acquisition of DFI evidenced by a note. The
note bears interest at the rate of 8% per annum and is payable upon demand by
the Company. As of December 31, 1997 and 1998, approximately $85,000 in
principal remained unpaid, together with accrued interest of $13,600 and $20,700
as of such dates, respectively.
Milton J. Wallace, Chairman of the Board of Directors of the Company, is a
shareholder of the law firm of Wallace, Bauman, Fodiman & Shannon, P.A. The law
firm serves as general counsel to the Company for which the firm received
$102,000 during 1998.
I-14
<PAGE> 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 27, 1999,
with respect to the beneficial ownership of the Company's Common Stock by: (i)
each person who is known by the Company to own more than 5% of such shares of
Common Stock; (ii) each Named Executive Officer; (iii) each of the Company's
directors; and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED
- --------------------------------------- --------------------- ------------------
<S> <C> <C>
Milton J. Wallace(4)....................................... 812,813 11.6%
Arthur G. Shapiro, M.D.(5)................................. 771,775 11.1
James P. Shea(6)........................................... 410,113 5.7
C. David Finch, M.D.(7).................................... 207,947 3.0
Orestes L. Lugo(8)......................................... 164,555 2.3
John E. Hunt, Sr.(9)....................................... 92,559 1.3
Charles J. Simons(10)...................................... 61,549 *
Patsy L. Anders(11)........................................ 62,817 *
Eugene P. Conese, Sr.(12).................................. 33,342 *
Mignon B. Early(13)........................................ 35,618 *
Mark D. Wallace(14)........................................ 19,674 *
Jeffrey H. Watson(15)...................................... 11,674 *
Forstmann Asset Management Corp.(16)....................... 366,189 5.3
William Anthony Forstmann(17).............................. 377,789 5.5
All executive officers and directors as group (13
persons)(18)............................................. 2,788,650 36.4%
</TABLE>
- ---------------
* Less than one percent
(1) Unless otherwise indicated, the address for each beneficial owner is c/o
the Company at 201 Alhambra Circle, Suite 800, Coral Gables, Florida 33134.
(2) Except as set forth herein, all securities are directly owned and the sole
investment and voting power are held by the person named. A person is
deemed to be the beneficial owner of securities that can be acquired by
such person within 60 days of December 27, 1999 upon the exercise of
options or warrants.
(3) Based upon 6,926,901 shares of Common Stock issued and outstanding. Each
beneficial owner's percentage is determined by assuming that all such
exercisable options or warrants that are held by such person (but not those
held by any other person) have been exercised.
(4) Mr. Wallace's address is 1200 Brickell Avenue, Suite 1720, Miami, Florida
33131. Except as set forth herein, all shares of Common Stock are owned
jointly by Mr. Wallace and his wife. Includes: (i) 12,000 shares of Common
Stock owned by Milton J. Wallace and his wife as custodian; (ii) 35,600
shares of Common Stock owned by Mr. Wallace's Individual Retirement
Account; (iii) 106,122 shares of Common Stock (including 8,655 of Common
Stock issuable upon exercise of warrants and Series B Warrants) owned by a
corporation, of which Mr. Wallace is an officer, director and controlling
stockholder, (iv) 88,091 shares of Common Stock issuable upon exercise of
stock options; and (v) 15,000 shares of Common Stock issuable upon exercise
of Series B Warrants owned by his Individual Retirement Account.
(5) Except as set forth herein, all shares of Common Stock are owned jointly by
Dr. Shapiro and his wife. Includes: (i) 17,234 shares of Common Stock owned
by Dr. Shapiro's Individual Retirement Account; (ii) 40,233 shares of
Common Stock issuable upon exercise of stock options; (iii)106,122 shares
of Common Stock (including 8,655 shares of Common Stock issuable upon
exercise of warrants and Series B Warrants) owned by a corporation, of
which Dr. Shapiro is an officer and director; (iv) 3,750 shares of Common
Stock issuable upon exercise of Series B Warrants; and (v) 3,750 shares of
Common Stock issuable upon exercise of Series B Warrants owned by Dr.
Shapiro's Individual Retirement Account.
(6) Except as set forth herein all shares of Common Stock and warrants are
owned jointly by Mr. Shea and his wife. Includes: (i) 225,513 shares of
Common Stock issuable upon exercise of stock options;
I-15
<PAGE> 38
(ii) 33,334 shares of Common Stock issuable upon exercise of warrants; and
(iii) 15,000 shares of Common Stock issuable upon exercise of Series B
Warrants.
(7) Includes 15,750 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes: (i) 116,904 shares of Common Stock issuable upon exercise of
stock options; (ii) 3,334 shares of Common Stock issuable upon exercise of
warrants; and (iii) 3,750 shares of Common Stock issuable upon exercise of
Series B Warrants.
(9) Includes: (i) 8,341 shares of Common Stock issuable upon exercise of stock
options; (ii) 6,667 shares of Common Stock issuable upon exercise of
warrants; (iii) 11,667 shares of Common Stock owned by Mr. Hunt's spouse;
(iv) 1,667 shares of Common Stock issuable upon exercise of warrants owned
by his spouse; and (v) 3,750 shares of Common Stock issuable upon exercise
of Series B Warrants. Mr. Hunt disclaims beneficial ownership of the shares
owned by his spouse.
(10) Includes: (i) 12,346 shares of Common Stock issuable upon exercise of stock
options; (ii) 1,667 shares of Common Stock issuable upon exercise of
warrants; and (iii) 7,500 shares of Common Stock issuable upon exercise of
Series B Warrants.
(11) Includes 49,000 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes: (i) 8,342 shares of Common Stock issuable upon exercise of stock
options; and (ii) 5,000 shares of Common Stock issuable upon exercise of
warrants.
(13) Includes 34,418 shares of Common Stock issuable upon exercise of stock
options.
(14) Includes 7,674 shares of Common Stock issuable upon exercise of stock
options.
(15) Includes 8,674 shares of Common Stock issuable upon exercise of stock
options.
(16) Forstmann Asset Management Corp.'s ("FAMC") address is 399 Park Avenue, New
York, NY 10020. Includes 366,189 shares owned by two pooled entities
managed by FAMC, to which FAMC is an investment advisor.
(17) Mr. Forstmann's address is 870 Fifth Avenue, Apt 11H, New York, NY 10021.
Mr. Forstmann is the sole shareholder of FAMC, an investment advisor. The
shares above include 11,600 shares beneficially owned by Mr. Forstmann and
366,189 shares beneficially owned by two pooled funds to which FAMC serves
a s investment advisor.
(18) Includes: (i) 624,286 shares of Common Stock issuable upon exercise of
options; (ii) 65,002 shares of Common Stock issuable upon exercise of
warrants; and (iii) 56,476 shares of Common Stock issuable upon exercise of
Series B Warrants.
I-16
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
dated as of
DECEMBER 28, 1999
among
NATIONAL NEPHROLOGY ASSOCIATES, INC.
RC ACQUISITION CORP.
and
RENEX CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE 1 THE OFFER.......................................................................................1
SECTION 1.01. The Offer..............................................................................1
SECTION 1.02. Company Action.........................................................................2
SECTION 1.03. Directors..............................................................................3
SECTION 1.04. Options and Warrants...................................................................4
SECTION 1.05. Severance..............................................................................4
SECTION 1.06. Funds for the Offer....................................................................5
ARTICLE 2 THE MERGER......................................................................................5
SECTION 2.01. The Merger.............................................................................5
SECTION 2.02. Conversion of Shares...................................................................6
SECTION 2.03. Surrender and Payment..................................................................6
SECTION 2.04. Dissenting Shares. ...................................................................7
SECTION 2.05. Stock Options and Warrants.............................................................8
ARTICLE 3 THE SURVIVING CORPORATION.......................................................................9
SECTION 3.01. Articles of Incorporation..............................................................9
SECTION 3.02. Bylaws.................................................................................9
SECTION 3.03. Directors and Officers.................................................................9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................10
SECTION 4.01. Corporate Existence and Power.........................................................10
SECTION 4.02. Corporate Authorization...............................................................10
SECTION 4.03. Consents, Approvals and Governmental Filings..........................................10
SECTION 4.04. Non-contravention.....................................................................11
SECTION 4.05. Capitalization........................................................................11
SECTION 4.06. Subsidiaries..........................................................................12
SECTION 4.07. SEC Filings...........................................................................13
SECTION 4.08. Financial Statements..................................................................13
SECTION 4.09. Disclosure Documents..................................................................14
SECTION 4.10. Absence of Certain Changes............................................................14
SECTION 4.11. No Undisclosed Material Liabilities...................................................17
SECTION 4.12. Litigation............................................................................17
SECTION 4.13. Taxes.................................................................................18
SECTION 4.14. ERISA.................................................................................20
SECTION 4.15. Compliance with Laws..................................................................22
SECTION 4.16. Licenses and Permits..................................................................24
SECTION 4.17. Patents, Trademarks, Etc..............................................................25
SECTION 4.18. Environmental Matters.................................................................25
SECTION 4.19. Finders' Fees.........................................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
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<S> <C> <C>
SECTION 4.20. Inapplicability of Certain Restrictions...............................................27
SECTION 4.21. Title, Etc............................................................................27
SECTION 4.22. Insurance.............................................................................29
SECTION 4.23. Material Agreements...................................................................29
SECTION 4.24. Insider Interests.....................................................................30
SECTION 4.25. Labor Matters.........................................................................30
SECTION 4.26. Business Relationships; No Restrictive Agreements.....................................30
SECTION 4.27. Year 2000 Compliance..................................................................30
SECTION 4.28. Cash and Cash Equivalents.............................................................32
SECTION 4.29. Due to Third Party Obligations........................................................32
SECTION 4.30. Indebtedness and Capitalized Lease Obligations........................................32
SECTION 4.31. Company Fees and Expenses.............................................................33
SECTION 4.32. Rights Agreement......................................................................33
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB............................................................................................33
SECTION 5.01. Corporate Existence and Power.........................................................33
SECTION 5.02. Corporate Authorization...............................................................33
SECTION 5.03. Consents, Approvals and Governmental Filings..........................................34
SECTION 5.04. Non-contravention.....................................................................34
SECTION 5.05. Disclosure Documents..................................................................34
SECTION 5.06. Litigation............................................................................35
SECTION 5.07. Financing.............................................................................35
SECTION 5.08. Ownership of Shares...................................................................35
ARTICLE 6 COVENANTS OF THE COMPANY.......................................................................35
SECTION 6.01. Conduct of the Company................................................................35
SECTION 6.02. Shareholder Meeting; Proxy Material...................................................38
SECTION 6.03. Access to Information.................................................................39
SECTION 6.04. Other Offers..........................................................................40
SECTION 6.05. Notices of Certain Events.............................................................42
SECTION 6.06. Shareholder Claims....................................................................43
SECTION 6.07. Resignation of Directors..............................................................43
SECTION 6.08. Certain Tax Elections.................................................................43
ARTICLE 7 COVENANTS OF PARENT AND MERGER SUB.............................................................43
SECTION 7.01. Confidentiality.......................................................................43
SECTION 7.02. Voting of Shares......................................................................44
SECTION 7.03. Director and Officer Indemnification..................................................44
ARTICLE 8 COVENANTS OF PARENT, MERGER SUB AND THE COMPANY................................................45
SECTION 8.01. Best Efforts..........................................................................45
SECTION 8.02. Certain Filings.......................................................................45
</TABLE>
ii
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 8.03. HSR Filings...........................................................................45
SECTION 8.04. Further Information...................................................................45
SECTION 8.05. Public Announcements..................................................................46
SECTION 8.06. Further Assurances....................................................................46
ARTICLE 9 CONDITIONS TO THE MERGER ......................................................................46
SECTION 9.01. Conditions to the Obligations of Each Party...........................................46
SECTION 9.02. Conditions to the Obligations of Parent and Merger Sub................................47
ARTICLE 10 TERMINATION....................................................................................47
SECTION 10.01. Termination..................................................................47
SECTION 10.02. Effect of Termination........................................................48
SECTION 10.03. Parent Financing; Liquidated Damages.........................................48
ARTICLE 11 MISCELLANEOUS..................................................................................49
SECTION 11.01. Notices......................................................................49
SECTION 11.02. Survival of Representations and Warranties...................................50
SECTION 11.03. Amendments; No Waivers.......................................................50
SECTION 11.04. Expenses.....................................................................50
SECTION 11.05. Successors and Assigns; Benefit..............................................50
SECTION 11.06. Governing Law; Submission to Jurisdiction....................................51
SECTION 11.07. Counterparts; Effectiveness..................................................51
SECTION 11.08. Entire Agreement.............................................................51
SECTION 11.09. Attorneys' Fees..............................................................51
ANNEX I CONDITIONS TO THE OFFER.......................................................................A-1
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Defined Terms
Acquisition Proposals...................................................................................40
Balance Sheet...........................................................................................13
Balance Sheet Date......................................................................................13
Benefit Plans...........................................................................................20
Board ................................................................................................1
certificate of merger....................................................................................5
COBRA ...............................................................................................21
Code ...............................................................................................19
Commitment Letter.......................................................................................35
Common Stock............................................................................................11
Company ................................................................................................1
Company 10-K............................................................................................13
Company Disclosure Documents............................................................................14
Company Proxy Statement.................................................................................14
Company Stockholder Meeting.............................................................................38
Company's Investment Banker.............................................................................27
Continuing Directors.....................................................................................4
Director Stock Options...................................................................................8
Directors Option Plan....................................................................................8
Disclosure Letter.......................................................................................10
Dissenting Shares........................................................................................7
DOL ...............................................................................................21
Effective Time...........................................................................................5
Employee Option Plan.....................................................................................8
Employee Stock Options...................................................................................8
ERISA ...............................................................................................20
ERISA Affiliate.........................................................................................20
Exchange Act.............................................................................................1
Exchange Agent...........................................................................................6
Florida Law..............................................................................................2
GAAP ...............................................................................................13
Government Programs.....................................................................................25
Governmental Authority..................................................................................10
HIPAA ...............................................................................................21
HSR Act ...............................................................................................11
indebtedness............................................................................................32
Initial Offer Period.....................................................................................2
Intellectual Property...................................................................................25
Legal Requirements......................................................................................26
Lenders ...............................................................................................35
Lien ...............................................................................................11
Material Adverse Effect.................................................................................10
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
material agreement......................................................................................29
Merger Agreement.......................................................................................A-1
Merger Consideration.....................................................................................6
Merger Sub...............................................................................................1
Minimum Condition........................................................................................2
Multiemployer Plan......................................................................................20
NMS ................................................................................................8
Occupational Safety and Health Law......................................................................27
Offer ................................................................................................1
Offer Documents..........................................................................................2
Options ................................................................................................8
Other Options............................................................................................8
Overpayments............................................................................................32
Parent ................................................................................................1
Payment Event...........................................................................................42
PBGC ...............................................................................................21
Person ................................................................................................7
Pre-Closing Tax Period..................................................................................18
Preferred Stock.........................................................................................11
Real Property Leases....................................................................................28
Representatives.........................................................................................40
Rights Agreement........................................................................................33
Rights Amendment........................................................................................33
Schedule ...............................................................................................10
Schedule 14D-9...........................................................................................3
SEC ................................................................................................2
SEC Documents...........................................................................................13
Shares ................................................................................................1
Subsidiary..............................................................................................12
Superior Proposal.......................................................................................41
Surviving Corporation....................................................................................5
Systems ...............................................................................................32
tax asset...............................................................................................18
Tax Returns.............................................................................................18
Termination Fee.........................................................................................42
Third Party.............................................................................................42
Warrants ................................................................................................8
Year 2000 compliant.....................................................................................30
</TABLE>
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 28, 1999
among National Nephrology Associates, Inc., a Delaware corporation ("PARENT"),
RC Acquisition Corp., a Florida corporation ("MERGER SUB"), and Renex Corp., a
Florida corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of the Company,
Merger Sub and Parent have determined that it is advisable and in the best
interests of their respective stockholders for Merger Sub to acquire the Company
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company, Merger Sub and Parent desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Merger Sub to make the Offer (as defined in Section 1.01) to purchase
all of the issued and outstanding shares of common stock, par value $.001 per
share, of the Company, upon the terms and subject to the conditions of this
Agreement, and the Board of Directors of the Company (the "BOARD") has
unanimously approved the Offer and recommended that the shareholders of the
Company accept the Offer; and
WHEREAS, concurrently with the execution of this Agreement,
certain shareholders of the Company have entered into a shareholders agreement
(the "SHAREHOLDERS AGREEMENT") pursuant to which such shareholders have agreed,
among other things, to tender their Shares to Merger Sub in accordance with the
Offer and, to the extent such Shares have not been purchased in the Offer, to
vote such Shares in favor of this Agreement and the Merger (as defined in
Section 2.01).
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE 1
THE OFFER
SECTION 1.01. THE OFFER. Provided that nothing shall have
occurred that had the Offer (as defined below) been commenced, would give rise
to a right to terminate the Offer pursuant to any of the conditions set forth in
Annex I hereto, Merger Sub shall, as promptly as practicable after the date
hereof, but in no event later than five Business Days (as defined in Rule
14d-1(c)(6) promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")) following the public announcement of the terms of this
Agreement, commence an offer (the "OFFER") to purchase all of the issued and
outstanding shares of common stock, par value $.001 per share (the "SHARES"), of
the Company at a price of Ten Dollars ($10) per Share, net to the seller in
cash. The Offer shall remain open for at least 20 Business Days (the
1
<PAGE> 8
"INITIAL OFFER PERIOD"), shall be subject to the condition that there shall have
been validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Parent and Merger Sub, 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 I hereto;
provided that if at the termination of the Initial Offer Period the Minimum
Condition has not been satisfied or any waiting period applicable to the Offer,
the Merger and the transactions contemplated by this Agreement pursuant to the
HSR Act shall not have expired or been terminated, the Offer shall remain open
for a minimum of an additional five (5) Business Days. It is agreed that the
conditions set forth in Annex I are for the sole benefit of Parent and Merger
Sub. Parent and Merger Sub expressly reserve the right, in their sole
discretion, to make any change in the terms or conditions of the Offer, PROVIDED
that no change may be made to the Minimum Condition or which changes the form of
consideration to be paid or decreases the price per Share or the number of
Shares sought in the Offer or which imposes conditions to the Offer in addition
to those set forth in Annex I or which otherwise materially and adversely
affects the Company or the holders of the Shares.
(b) As soon as practicable on the date of commencement of the
Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer which will contain the offer to purchase and form of the related
letter of transmittal (together with any supplements or amendments thereto,
collectively the "OFFER DOCUMENTS"). Each of Parent, Merger Sub and the Company
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect. Each of Parent and Merger Sub agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
SECTION 1.02. COMPANY ACTION. The Company hereby approves
of, and consents to, the Offer and represents and warrants that the Board, at a
meeting duly called and held, and upon unanimous vote of the directors of the
Company, has (i) unanimously determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable, and are
fair to and in the best interests of the Company's shareholders, (ii)
unanimously approved and adopted this Agreement and the transactions
contemplated hereby (and deemed them to be advisable), including the Offer and
the Merger, which approval satisfies in full the requirements of the Business
Corporation Act of the State of Florida (the "FLORIDA LAW") (including Sections
607.0901 and 607.0902 thereof) and the Articles of Incorporation and By-laws of
the Company with respect to the requisite approval of the Board, and (iii)
unanimously resolved to recommend acceptance of the Offer and approval and
adoption of this Agreement and the Merger by its shareholders, provided that
following receipt of an unsolicited bona fide written Superior Proposal (as
defined below), such recommendation may be withdrawn or modified, but only to
the extent that the Board of Directors of the Company shall have concluded in
good faith on the basis of advice from outside counsel that such action by the
Board of Directors is required in order to comply with the fiduciary duties of
the Board of
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Directors to the shareholders of the Company under applicable law. The Company
further represents that Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated (the "COMPANY'S INVESTMENT BANKER") has delivered to the
Board its opinion that the consideration to be paid in the Offer and the Merger
is fair to the holders of Shares from a financial point of view, and the Company
has provided a copy of such opinion to Parent. The Company will promptly furnish
Parent and Merger Sub with a list of its shareholders, mailing labels and any
available listing or computer file containing the names and addresses of all
record holders of Shares and lists of securities positions of Shares held in
stock depositories, in each case true and correct as of the most recent
practicable date, and will provide to Parent and Merger Sub such additional
information (including, without limitation, updated lists of shareholders,
mailing labels and lists of securities positions) and such other assistance as
Parent and Merger Sub may reasonably request in order to be able to communicate
the Offer to the record and beneficial holders of the Shares.
(a) As soon as practicable on the day that the Offer is
commenced the Company will file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "SCHEDULE 14D-9") which shall reflect the
recommendations of the Company's Board of Directors referred to above. The
Company, Parent and Merger Sub each agree promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false or misleading in any material respect. The Company agrees to
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 Shares, in each case as and to
the extent required by applicable federal securities laws. Parent, Merger Sub
and their counsel shall be given a reasonable opportunity to review and comment
on the Schedule 14D-9 prior to its being filed with the SEC.
SECTION 1.03. DIRECTORS. Effective upon the deposit by Merger
Sub with the Exchange Agent of payment for all Shares validly tendered and not
withdrawn pursuant to the Offer and all Options and Warrants in accordance with
Section 1.04 and payment of all severance payments in accordance with Section
1.05, Merger Sub shall be entitled to designate the number of directors, rounded
up to the next whole number, on the Company's Board of Directors that equals the
product of (i) the total number of directors on the Company's Board of Directors
(giving effect to the election of any additional directors pursuant to this
Section) and (ii) the percentage that the number of Shares owned by Parent and
Merger Sub (including Shares accepted for payment) bears to the total number of
Shares outstanding, and the Company shall take all action necessary to cause
Merger Sub's designees to be elected or appointed to the Company's Board of
Directors, including, without limitation, increasing the number of directors,
and seeking and accepting resignations of incumbent directors. At such time, the
Company will use its best efforts to cause individuals designated by Merger Sub
to constitute the same percentage as such individuals represent on the Company's
Board of Directors of (A) each committee of the Board (other than any committee
of the Board established to take action under this Agreement), (B) each board of
directors of each Subsidiary (as defined in Section 4.06) and (C) each committee
of each such board. Notwithstanding the foregoing, until the election or
appointment of Merger Sub's designees pursuant to this Section 1.03, the Company
shall use its reasonable efforts to ensure that at least two of the members of
the Board of Directors and such
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boards and committees as of the date hereof who are not employees of the Company
shall remain members of the Board of Directors and such boards and committees.
(a) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 1.03. Each of Parent and Merger Sub will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1 and the Company shall include such information in the Schedule 14D-9.
(b) Following the election or appointment of Merger Sub's
designees pursuant to this Section 1.03 and until the Effective Time, the
approval of a majority of the directors of the Company then in office who were
not designated by Merger Sub (the "CONTINUING DIRECTORS") shall be required to
authorize (and such authorization shall constitute the authorization of the
Board of Directors and no other action on the part of the Company, including any
action by any other director or the Company, shall be required to authorize) any
termination of this Agreement by the Company, any amendment of this Agreement
requiring action by the Board of Directors, and any waiver of compliance with
any of the agreements or conditions contained herein for the benefit of the
Company.
SECTION 1.04. OPTIONS AND WARRANTS. Simultaneously with the
deposit by Merger Sub with the Exchange Agent of payment for Shares validly
tendered and not withdrawn pursuant to the Offer, Parent and Merger Sub shall
deposit with the Exchange Agent the funds to which each holder of Options and
Warrants would be entitled in respect of such Options and Warrants in accordance
with Section 2.05 upon consummation of the Merger.
SECTION 1.05. SEVERANCE. Subject to the next sentence,
simultaneously with the deposit by Merger Sub with the Exchange Agent of payment
for all Shares, Options and Warrants, the Company shall (and Parent and Merger
Sub will cause the Company to) deposit with the Exchange Agent funds sufficient
to pay (or pay directly to the intended recipients thereof) the severance
payments listed on Schedule 4.14(h) to which executive offers and directors of
the Company shall become entitled pursuant to their employment agreements with
the Company upon consummation of the Offer (to the extent such payments are due
and payable immediately (after giving effect to the waivers of notice referred
to in clause (ii) below) upon a Change of Control, as defined in such employment
agreements). As a condition to the payment of such severance in accordance with
the preceding sentence, each such executive officer or director shall (i)
confirm in writing to Parent and Merger Sub (in a form reasonably satisfactory
to Parent and Merger Sub) that termination of such executive officer or director
upon consummation of the Offer (whether by resignation of such executive officer
or director or by notice of termination by the Company) shall constitute
termination by the Company (and not by such executive officer or director) for
purposes of any non-competition, non-solicitation or other
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restrictive covenants set forth in such executive officer's or director's
employment agreement with the Company and that such covenants shall apply to
such executive officer or director in accordance with the terms thereof from and
after such termination, (ii) waive any requirement under such employment
agreement or otherwise that notice be given prior to such termination by the
Company and (iii) execute a general release in favor of the Company and its
affiliates, in form and substance reasonably satisfactory to Parent, releasing
such Persons from any and all claims against them other than (A) claims for
benefits and other rights to which such executive officer or director would be
entitled under his employment agreement with the Company, (B) claims related to
payment in accordance with this Agreement of Options, Warrants or Shares
beneficially owned by such executive officer or director and (C) claims pursuant
to Section 7.03 of this Agreement. From and after consummation of the Offer,
Parent shall cause the Company and the Surviving Corporation (as defined below)
to pay as and when due for all other benefits to which such executive officers
or directors are entitled in accordance with the terms of their employment
agreements as in effect on the date hereof, subject to the continued compliance
by such executive officers and directors with the provisions of such employment
agreements.
SECTION 1.06. FUNDS FOR THE OFFER. Subject to the satisfaction
of the Minimum Condition and the other conditions to the Offer set forth in
Annex I hereto, Parent shall provide or cause to be provided to Merger Sub on a
timely basis the funds necessary to purchase all Shares that Merger Sub becomes
obligated to purchase pursuant to the Offer.
ARTICLE 2
THE MERGER
SECTION 2.01. THE MERGER. At the Effective Time (as
defined below), Merger Sub shall be merged with and into the Company in the
Merger in accordance with Florida Law and this Agreement, whereupon the separate
existence of Merger Sub shall cease, and the Company shall be the surviving
corporation (the "SURVIVING CORPORATION").
(a) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Sub will file articles of merger (or, if applicable, in the case of
proceedings under Section 607.1104 of Florida Law, articles of ownership and
merger, in which case references herein to the "articles of merger" shall refer
instead to the articles of ownership and merger) with the Secretary of State of
the State of Florida and make all other filings or recordings required by
Florida Law in connection with the Merger. The Merger shall become effective at
such time as the articles of merger are duly filed with the Secretary of State
of the State of Florida or at such later time as is specified in the articles of
merger (the "EFFECTIVE TIME").
(b) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and Merger Sub, all as provided under Florida Law.
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SECTION 2.02. CONVERSION OF SHARES. At the Effective Time:
(a) each Share held by the Company or any Subsidiary of the
Company as treasury stock or owned by Parent, Merger Sub or any
subsidiary of Parent or Merger Sub immediately prior to the Effective
Time shall be canceled, and no payment shall be made with respect
thereto;
(b) each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the
same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of common stock of the Surviving
Corporation; and
(c) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 2.02(a) or as
provided in Section 2.04 with respect to Shares as to which dissenters'
rights have been perfected, be converted into the right to receive Ten
Dollars ($10) in cash or any higher price paid for each Share in the
Offer, without interest (the "MERGER CONSIDERATION").
SECTION 2.03. SURRENDER AND PAYMENT. Promptly following
execution of this Agreement, Parent shall appoint a national bank or trust
company (or a subsidiary thereof) to act as exchange agent (the "EXCHANGE
AGENT") for the purpose of exchanging certificates representing Shares submitted
for payment pursuant to the Offer or the Merger. Parent shall make available, or
cause Merger Sub or the Surviving Corporation to make available, to the Exchange
Agent, as needed, the Merger Consideration to be paid in respect of the Shares.
Promptly after the Effective Time, Parent, Merger Sub or the Surviving
Corporation will send, or will cause the Exchange Agent to send, to each holder
of Shares at the Effective Time a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the certificates representing
Shares to the Exchange Agent).
(a) Each holder of Shares that have been converted into the
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be entitled
promptly upon such surrender to receive the Merger Consideration payable in
respect of such Shares. Until so surrendered, each such certificate shall, after
the Effective Time, represent for all purposes only the right to receive such
Merger Consideration.
(b) If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes
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required as a result of such payment to a Person other than the registered
holder of such Shares or establish to the reasonable satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(c) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article 2.
(d) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.03(a) that remains unclaimed by the
holders of Shares 180 days after the Effective Time shall be returned to the
Surviving Corporation, upon demand, and any such holder who has not exchanged
his Shares for the Merger Consideration in accordance with this Section prior to
that time shall thereafter look only to Parent and the Surviving Corporation for
payment of the Merger Consideration in respect of his Shares. Notwithstanding
the foregoing, none of the Exchange Agent, the Company, the Surviving
Corporation, Parent or Merger Sub shall be liable to any holder of Shares for
any amount paid to a public official pursuant to applicable abandoned property,
escheat or similar laws. Any amounts remaining unclaimed by holders of Shares
two years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto.
(e) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.03(a) to pay for Shares for which
dissenters' rights have been perfected shall be returned to the Surviving
Corporation, upon demand.
(f) If any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration.
SECTION 2.04. DISSENTING SHARES. Notwithstanding Section 2.02,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded dissenters' rights for such Shares in accordance with Florida Law
("DISSENTING SHARES") shall not be converted into a right to receive the Merger
Consideration, but such Dissenting Shares shall be converted into the right to
receive such consideration as may be determined to be due to holders of
Dissenting
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Shares pursuant to Florida Law, unless and until such holder fails to perfect or
withdraws or otherwise loses such holder's right to dissenters' rights. If after
the Effective Time such holder fails to perfect or withdraws or loses his right
to dissenters' rights, such Shares shall be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for dissenters' rights prior to the Effective Time, and
Parent shall have the right to participate in all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands. Notwithstanding the foregoing, if the Shares
continue to be listed on the Nasdaq National Market System ("NMS") as of the
record date set for the shareholders of the Company to vote on the Merger or, if
Merger Sub and Parent own at least 80% of the outstanding Shares, at such time
as the record date would have been set, the Company represents and warrants that
no dissenters' rights, appraisal rights or similar rights will apply to the
transactions contemplated by this Agreement. The Company shall not take any
action prior to consummation of the Offer to delist the Shares from the Nasdaq
NMS.
SECTION 2.05. STOCK OPTIONS AND WARRANTS. At or
immediately prior to the Effective Time, each outstanding stock option
(collectively, "EMPLOYEE STOCK OPTIONS") to purchase Shares granted under the
Company's 1994 Employee Stock Option Plan (the "EMPLOYEE OPTION PLAN"), each
outstanding stock option (collectively, "DIRECTOR STOCK OPTIONS") to purchase
Shares granted under the Company's Directors' Stock Option Plan (the "DIRECTORS
OPTION PLAN") and each other stock option to purchase Shares (collectively,
"OTHER OPTIONS" and, together with Employee Stock Options and Director Stock
Options, "OPTIONS") shall be canceled by virtue of the Merger, without
consideration except as provided in this Section 2.05(a), and shall cease to
exist. Each holder of any such Option, whether or not then vested or
exercisable, shall be paid by the Company promptly after the Effective Time for
each such Option an amount, subject to applicable withholding, determined by
multiplying (i) the excess, if any, of the Merger Consideration per Share over
the applicable exercise price of such Option as in effect immediately prior to
the Effective Time by (ii) the number of Shares such holder could have purchased
(assuming full vesting of all Options) had such holder exercised such Option in
full immediately prior to the Effective Time.
(a) From and after the Effective Time, each outstanding
warrant (collectively, "WARRANTS") to purchase Shares shall be canceled by
virtue of the consummation of the Merger, without consideration except as
provided in this Section 2.05(b), and shall cease to exist. At the Effective
Time, each Warrant shall be converted into the right to receive from the Company
an amount, subject to applicable withholding, determined by multiplying (i) the
excess, if any, of the Merger Consideration per Share over the applicable
exercise price of such Warrant as in effect immediately prior to the Effective
Time by (ii) the number of Shares such holder could have purchased had such
holder exercised such Warrant in full immediately prior to the Effective Time.
(b) The consideration due under this Section 2.05 (whether
payable upon consummation of the Offer or upon consummation of the Merger) shall
be payable without
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interest promptly after (a) verification by the Exchange Agent of the ownership
and terms of the particular Option or Warrant by reference to the Company's
records, and (b) delivery of a written instrument duly executed by the owner of
the applicable Option or Warrant, in a form provided by the Exchange Agent to
the Company prior to the consummation of the Offer and setting forth (i) the
aggregate number of Options or Warrants owned by that Person and their
respective issue dates and exercise prices, (ii) a representation by the Person
that he or she is the owner of all Options or Warrants described pursuant to
clause (i) and that none of those Options or Warrants has expired or ceased to
be exercisable (or would have expired or ceased to be exercisable, assuming such
Options or Warrants had fully vested), and (iii) a confirmation of, and consent
to, the cancellation of all of the Options or Warrants described pursuant to
clause (i).
(c) Prior to the Effective Time, the Company shall use its
best efforts to (i) obtain any required consents from holders of Options and
Warrants and (ii) make any amendments to the terms of the Employee Option Plan
or Directors Option Plan or any agreement or certificate evidencing Other
Options or Warrants that are necessary to give effect to the transactions
contemplated by Section 2.05(a) and 2.05(b). Notwithstanding any other provision
of this Section, payment may be withheld in respect of any Option or Warrant
until necessary consents are obtained.
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. ARTICLES OF INCORPORATION. The articles of
incorporation of Merger Sub in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation (except that the name of
the Surviving Corporation shall be Renex Corp. until amended in accordance with
applicable law).
SECTION 3.02. BYLAWS. The bylaws of Merger Sub in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.03. DIRECTORS AND OFFICERS. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (a) the directors of Merger Sub at the Effective
Time shall be the directors of the Surviving Corporation, and (b) the officers
of Merger Sub at the Effective Time shall be the officers of the Surviving
Corporation.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub
as of the date hereof that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Florida, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), business,
assets, results of operations or prospects of the Company and the Subsidiaries
(as defined in Section 4.06) taken as a whole or a material adverse effect on
the ability of the Company, on the one hand, or Parent and Merger Sub, on the
other, to consummate the transactions contemplated by this Agreement (a
"MATERIAL ADVERSE EFFECT"). Schedule 4.01 of the disclosure letter delivered by
the Company to Parent and Merger Sub prior to the execution of this Agreement
(the "DISCLOSURE LETTER") lists each jurisdiction in which the Company is, or is
required to be, duly qualified to do business. The Company has heretofore
delivered to Parent and Merger Sub true and complete copies of the Company's
articles of incorporation and bylaws as currently in effect. Any reference in
this Agreement to a "SCHEDULE" (other than the Schedule 14D-1, the Schedule
14D-9, Schedule 13E-3, Schedule 13D or Schedule 13G) means a Schedule to the
Disclosure Letter.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and, except for any required approval by the Company's
shareholders in connection with the consummation of the Merger, have been duly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by Parent and Merger Sub, constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
SECTION 4.03. CONSENTS, APPROVALS AND GOVERNMENTAL FILINGS. No
notices, reports or other filings are required to be made by the Company with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any public, governmental, or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality of the United States, any state thereof or any
foreign jurisdiction, including without limitation, any utility service provider
(whether or not public, quasi-public or private), which exercises jurisdiction
over any of Company's dialysis facilities (each a "GOVERNMENTAL AUTHORITY") in
connection with the execution and delivery of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, other than (a) the filing of articles of merger in
accordance with Florida Law; (b) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"); (c)
compliance with any applicable requirements of the Exchange Act; and (d) as set
forth on Schedule 4.03.
SECTION 4.04. NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (a) contravene or
conflict with the articles of incorporation or bylaws of the Company or any
Subsidiary, (b) assuming compliance with the matters referred to in Section
4.03, contravene or conflict with or constitute a violation of any provision of,
in each case in any material respect, any law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company or any Subsidiary, (c)
except as set forth on Schedule 4.04, constitute (with or without due notice or
lapse of time or both) a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or any
Subsidiary or to a loss of any benefit to which the Company or any Subsidiary is
entitled, or require any approval, notice or consent under any provision of any
material note, bond, mortgage, indenture, lease, agreement, contract or other
instrument or obligation binding upon the Company or any Subsidiary or any
material license, franchise, Permit or other similar authorization held by the
Company or any Subsidiary, or (d) result in the creation or imposition of any
Lien (as defined below) on any asset of the Company or any Subsidiary. For
purposes of this Agreement, "LIEN" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
SECTION 4.05. CAPITALIZATION. The authorized capital stock of
the Company consists of 30,000,000 shares of common stock, par value $.001 per
share (the "COMMON STOCK") and 5,000,000 shares of preferred stock, par value
$.01 per share (the "PREFERRED STOCK"), of which 200,000 shares of Preferred
Stock are designated as Series A Junior Participating Preferred Stock and are
reserved for issuance under the Company's Rights Agreement. As of December 27,
1999, there were outstanding 6,926,901 shares of Common Stock, no shares of
Preferred Stock, Employee Stock Options to purchase an aggregate of 877,514
Shares, Director Stock Options to purchase an aggregate of 54,548 Shares, and
Other Options to purchase an aggregate of 69,169 Shares (all such Options being
exercisable either before or as a result of the transactions contemplated by
this Agreement) and Warrants to purchase an aggregate of 634,952 Shares (all of
which Warrants were exercisable). All outstanding shares of capital stock of the
Company have been, and all Shares which may be issued pursuant to Options or
Warrants will be, when issued in accordance with the terms thereof, duly
authorized and validly issued, and fully paid and nonassessable. Except as set
forth in this Section or on Schedule 4.05, and except for changes since December
27, 1999 resulting from the exercise of Options or Warrants outstanding on such
date, there are not (i) any shares of capital stock or other equity securities
(as defined in Rule 3a11-1 under the Exchange Act) or voting securities of the
Company issued, reserved for issuance or outstanding, (ii) any securities,
options, warrants, calls, subscriptions, convertible securities or other rights
(including
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preemptive rights), agreements, understandings, arrangements, commitments or
undertakings of any character obligating the Company or any Subsidiary now or at
any time in the future to issue, deliver or sell, or cause to be issued,
delivered or sold, any capital stock, equity security, voting security or
interest of the Company or any Subsidiary or obligating the Company or any
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, subscription, convertible security or other right, agreement,
understanding, arrangement, commitment or undertaking, (iii) any rights,
commitments, agreements, arrangements, undertakings or obligations, contingent
or otherwise, of the Company or any Subsidiary to repurchase, redeem or
otherwise acquire any Shares or shares of capital stock or other equity
securities or voting securities or interests of the Company or any Subsidiary or
any securities of the types described in clauses (ii) and (iv) of this Section,
(iv) any outstanding bonds, debentures, notes or other indebtedness or
obligations or securities of the Company or any Subsidiary, the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) on any matters on which shareholders of the
Company may vote, (v) any obligations, contingent or otherwise, guaranteeing the
value of any of the Shares or the equity securities or capital stock of any
Subsidiary either now or at any time in the future, or (vi) any voting trusts,
proxies or other agreements or understandings to which the Company or any
Subsidiary is a party or is bound with respect to the voting of the Shares or
any capital stock or other equity security or interest of the Company or any
Subsidiary. Any share repurchase program previously approved by the Company has
been terminated. Except as set forth on Schedule 4.05, there are no outstanding
rights held or issued to any Person obligating the Company or any Subsidiary to
make a payment to such Person based on the value or the price of the Shares or
any of the shares of capital stock of any Subsidiary, and neither the Company
nor any Subsidiary has issued any stock appreciation rights, phantom stock
rights or any similar rights to any Person. Schedule 4.05 sets forth (A) with
respect to each outstanding Option, the name of the holder of such Option, the
date of grant of such Option, the number of Shares subject to such Option, the
number of Shares vested under such Option and the exercise price of such Option
and (B) with respect to each outstanding Warrant, the name of the holder of such
Warrant, the date of grant of such Warrant, the number of Shares subject to such
Warrant, the number of Shares vested under such Warrant and the exercise price
of such Warrant. Each Option and Warrant is evidenced by an option or warrant
agreement or certificate, each of which is in a form previously delivered by the
Company to Parent and Merger Sub.
SECTION 4.06. SUBSIDIARIES. Each Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, and, except as set forth on Schedule 4.06, is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect. Schedule 4.06 lists each
jurisdiction in which each Subsidiary is, or is required to be, duly qualified
to do business. For purposes of this Agreement, "SUBSIDIARY" means any
corporation or other entity of which securities or other ownership interests
having ordinary
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voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by the Company.
All Subsidiaries and their respective jurisdictions of incorporation are
identified in the Company's annual report on Form 10-K for the fiscal year ended
December 31, 1998 (the "COMPANY 10-K") or on Schedule 4.06. Except as set forth
on Schedule 4.06, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary, is owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests), except such limitations as may
be imposed by applicable securities laws.
(a) Except for interests in the Subsidiaries and except as set
forth in Schedule 4.06, neither the Company nor any Subsidiary owns, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, company, partnership, joint venture, business, trust or entity,
other than investments in marketable securities acquired in the ordinary course
of business, nor has the Company or any Subsidiary made any loan or advance to
any other entity.
SECTION 4.07. SEC FILINGS. The Company has delivered to Parent
and Merger Sub (i) the Company 10-K, (ii) its quarterly reports on Form 10-Q for
each of its fiscal quarters ended March 31, 1999, June 30, 1999 and September
30, 1999, (iii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the shareholders of the Company since
October 8, 1997 and (iv) all of its other reports, statements, schedules,
registration statements, forms, exhibits and other documents filed with the SEC
since October 8, 1997 (collectively, the "SEC DOCUMENTS"). Each of the SEC
Documents, when filed, and in the case of a registration statement or any
amendment thereto, as of the date such statement or amendment became effective,
complied with all applicable requirements of the Securities Act of 1933, as
amended, the Exchange Act and the rules and regulations of the SEC and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 4.08. FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in the SEC Documents fairly present in all material
respects, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto
and except as permitted by Form 10-Q under the Exchange Act with respect to the
unaudited consolidated interim financial statements), the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements). For purposes of this Agreement,
"BALANCE SHEET" means the consolidated balance sheet of the Company and its
consolidated subsidiaries as of December 31, 1998 set forth in the Company 10-K
and "BALANCE SHEET DATE" means December 31, 1998.
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SECTION 4.09. DISCLOSURE DOCUMENTS. Each document required to
be filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, the Schedule 14D-9, the proxy or information statement of
the Company containing information required by Regulation 14A under the Exchange
Act (the "COMPANY PROXY STATEMENT") and, if applicable, Rule 13e-3 and Schedule
13E-3 under the Exchange Act, if any, to be filed with the SEC in connection
with the Offer and/or the Merger, and any amendments or supplements thereto
will, when filed, comply with the applicable requirements of the Exchange Act
and the rules and regulations of the SEC, except that no representation or
warranty is made hereby with respect to any information supplied by Parent or
Merger Sub in writing expressly for inclusion in the Company Disclosure
Documents.
(a) At the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to shareholders of the Company, at the
time such shareholders vote on adoption of this Agreement and at the Effective
Time, the Company Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. At the
time of the filing of any Company Disclosure Document other than the Company
Proxy Statement and at the time of any distribution thereof, such Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 4.09(b)
will not apply to statements or omissions included in the Company Disclosure
Documents based upon and in conformity with information furnished to the Company
in writing by Parent or Merger Sub specifically for use therein.
(b) The information with respect to the Company or any
Subsidiary that the Company furnishes to Parent or Merger Sub in writing
specifically for use in the Offer Documents will not, at the time of the filing
thereof, at the time of any distribution thereof and at the time of the
consummation of the Offer, 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 made therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. Except as set forth
in Schedule 4.10, since the Balance Sheet Date the Company and the Subsidiaries
have conducted their business in the ordinary course consistent with past
practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had or reasonably would be expected to
have, individually or in the aggregate, a Material Adverse Effect;
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<PAGE> 21
(b) (i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of the Company's or any of its
Subsidiaries' capital stock other than on capital stock of wholly-owned
Subsidiaries of the Company, (ii) any adjustment, split, combination,
reclassification, repurchase or redemption of any of the shares of
capital stock of the Company or any of its Subsidiaries, or (iii) any
issuance or authorization of the issuance of any other securities in
respect of, or in lieu of or in substitution for shares of the capital
stock of the Company or any of its Subsidiaries or any other security
thereof or any rights, warrants or options to acquire any such shares
or other securities (other than the issuance of Shares upon the
exercise of the Options and Warrants described in Sections 2.05(a) and
(b) hereof and issued and outstanding as of the date hereof);
(c) any amendment of any term of any outstanding security of
the Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or
any Subsidiary of any indebtedness, including obligations in respect of
capital leases, other than under credit facilities existing on the
Balance Sheet Date in the ordinary course of business and in amounts
and on terms consistent with past practice;
(e) any creation or assumption by the Company or any
Subsidiary of any Lien on any material asset;
(f) any making of any loan, advance or capital contribution to
or investment in any Person, other than loans, advances or capital
contributions to or investments (i) in wholly-owned Subsidiaries made
in the ordinary course of business consistent with past practice or
(ii) not exceeding $25,000, in the aggregate;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the
Company or any Subsidiary which, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any Subsidiary relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any Subsidiary of any
contract or other right, in either case, material to the Company and
the Subsidiaries taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past
practice and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by the Company or any Subsidiary, except for any such change
required by reason of a concurrent change in GAAP;
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(j) except as set forth on Schedule 4.10(j), any (i) grant of
any severance or termination pay to any director, officer or employee
of the Company or any Subsidiary, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to
any such existing agreement) with any director, officer or employee of
the Company or any Subsidiary, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment
agreements, (iv) increase in compensation, bonus or other benefits
payable to directors, officers or, other than in the ordinary course of
business consistent with past practice, employees of the Company or any
Subsidiary, (v) any other amendment of any Benefit Plan or (vi)
acceleration of the vesting or exercisability of any options to acquire
capital stock of the Company or any Subsidiary;
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any
Subsidiary, which employees were not subject to a collective bargaining
agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any
employees of the Company or any Subsidiary;
(l) any cancellation of any leases, licenses, sublicenses,
franchises, certifications, permits or agreements to which the Company
or any Subsidiary is a party, or any notification to the Company or any
Subsidiary that any party to any such arrangements intends to cancel or
not renew such arrangements beyond its expiration date as in effect on
the date hereof, which cancellation or notification, individually or in
the aggregate, has had or reasonably would be expected to have a
Material Adverse Effect;
(m) any amendment of the Company or any Subsidiary's articles
of incorporation or bylaws or similar governing documents;
(n) any material tax election made or any material tax
position taken (unless required by law) or any change in the Company's
fiscal year;
(o) any failure to maintain all insurance policies in full
force and effect or any failure to renew or replace with equivalent
coverage any insurance policy which has expired;
(p) any failure to comply with any applicable filing, payment
and withholding obligations under applicable federal, state, local and
foreign tax laws or any settlement or compromise of any material income
tax liability;
(q) excluding capital expenditures associated with dialysis
facilities currently under development (which facilities are set forth
on Schedule 4.10(q)), any capital expenditure in excess of $100,000,
individually, or $2,000,000 in the aggregate through
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November 30, 1999, or any acquisition of assets or property or
securities or other acquisitions or commitments in excess of $1,000,000
individually or $2,000,000 in the aggregate or any acquisition or
agreement to acquire any material assets or property;
(r) any sale, transfer, mortgage, pledge, grant of any
security interest in, or imposition of any Lien or other encumbrance
on, any asset or property of the Company or any of its Subsidiaries
with a book value in excess of $50,000 individually or $100,000 in the
aggregate;
(s) any acceleration of receivables, delay in payables or
liquidation of inventory, except in the ordinary course of business
consistent with past practice;
(t) (i) any payment, discharge or satisfaction of any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction thereof in the ordinary course of business consistent with
past practice and in accordance with the terms thereof, (ii) any
modification, amendment or termination of any material contract or
agreement to which the Company or any of its Subsidiaries is a party,
(iii) any release or waiver of any material rights or claims, or (iv)
the entering into any agreements to modify in any manner, any
confidentiality, standstill or similar agreements to which the Company
or any of its Subsidiaries is a party; or
(u) any agreement, commitment or authorization to take any of
the foregoing actions.
SECTION 4.11. NO UNDISCLOSED MATERIAL LIABILITIES. Except as
set forth on Schedule 4.11, there are no liabilities of the Company or any
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which would reasonably be expected to result
in such a liability, other than:
(a) liabilities disclosed or provided for in the Balance
Sheet;
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date which would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(c) liabilities disclosed or provided for in the SEC Documents
filed after the Balance Sheet Date and prior to the date hereof; and
(d) liabilities under this Agreement.
SECTION 4.12. LITIGATION. Except as set forth in Schedule
4.12, (i) there is no action, suit, investigation or proceeding pending before
any court or arbitrator or any
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Governmental Authority against, or, to the knowledge of the Company, threatened
against or affecting, the Company or any Subsidiary or any of their respective
properties or which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the Offer or the Merger or any of the other transactions
contemplated hereby and (ii) neither the Company nor any Subsidiary is subject
to any outstanding order, writ, judgment, injunction or decree of any court or
Governmental Authority.
SECTION 4.13. TAXES. Except as set forth in Schedule 4.13(a),
all tax returns, statements, reports and forms (including estimated tax returns
and reports and information returns and reports) required to be filed with any
taxing authority with respect to any tax period (or portion thereof) ending on
or before the Effective Time (a "PRE-CLOSING TAX PERIOD") by or on behalf of the
Company or any Subsidiary (collectively, "TAX RETURNS"), were filed when due
(including any applicable extension periods) in accordance with all applicable
laws. All such Tax Returns are true, correct and complete.
(a) The Company and each Subsidiary has paid, or made
provision for the payment of, all Taxes, as defined below, that have or may
become due for all Pre-Closing Tax Periods, including, without limitation, all
Taxes reflected on the Tax Returns referred to in this Section 4.13, or in any
assessment, proposed assessment, or notice, either formal or informal, received
by the Company, the Subsidiaries or any affiliated party with respect to any of
them, except such Taxes, if any, as are set forth in Schedule 4.13(b) that are
being contested in good faith and as to which adequate reserves have been
provided. For purposes of this Section 4.13 "Tax" or "Taxes" means (i) any and
all taxes (whether federal, state, local or foreign), including, without
limitation, income, gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or property taxes, together with any interest, penalties or additions to
tax imposed with respect thereto and (ii) any obligations under any agreements
or arrangements with respect to any Tax or Taxes described in clause (i) above.
(b) The charges, accruals and reserves for Taxes with respect
to the Company and any Subsidiary for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Tax Return has yet been filed) reflected on
the books of the Company and its Subsidiaries (excluding any provision for
deferred income taxes) are adequate to cover such Taxes.
(c) Except as set forth in Schedule 4.13(d), there is no claim
(including under any indemnification or tax-sharing agreement), audit, action,
suit, proceeding, or investigation now pending or threatened against or in
respect of any Tax or "tax asset" of the Company or any Subsidiary. For purposes
of this Section 4.13, the term "TAX ASSET" shall include any net operating loss,
net capital loss, investment tax credit, foreign tax credit, charitable
deduction or any other credit or tax attribute which could reduce Taxes.
(d) There are no Liens for Taxes upon the assets of the
Company or its Subsidiaries except for Liens for current Taxes not yet due.
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(e) Neither the Company nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the "CODE") during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) Except as set forth in Schedule 4.13(g), the federal and
state income Tax Returns of the Company or any Subsidiary have never been
audited by the Internal Revenue Service or relevant state tax authorities.
Except as described in Schedule 4.13(g), neither the Company nor any Subsidiary
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes.
(g) No property of the Company or any Subsidiary (i) is
subject to a tax benefit transfer lease subject to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code or (iii) secures any
debt the interest on which is exempt from tax under Section 103 of the Code.
(h) Except as set forth on Schedule 4.13(i), there is no
agreement, plan, arrangement or other contract covering any employee or
independent contractor or former employee or former independent contractor of
the Company or any Subsidiary that could give rise to the payment of any amount
that could not be deductible pursuant to Section 280G of the Code.
(i) The Company and each Subsidiary (i) has complied with all
applicable legal requirements relating to information reporting with respect to
payments made to third parties and the withholding of and payment of withheld
Taxes, (ii) has timely withheld from employee wages and other payments and paid
over to the proper Governmental Authorities all amounts required to be so
withheld and paid over for all periods under all applicable legal requirements
and (iii) has duly collected and remitted any sales, value-added and similar
Taxes required to be collected and remitted.
(j) Neither the Company nor any Subsidiary has or is required
to make any adjustment under Section 481(a) of the Code or any comparable
provision of state, local or foreign law.
(k) Except as set forth in Schedule 4.13(l), neither the
Company nor any Subsidiary has in effect any material tax election for federal
income tax purposes.
(l) No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets held or acquired or
to be acquired by the Company or any of the Subsidiaries.
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(m) There is no existing tax sharing agreement that may or
will require that any payment be made by or to the Company or any of the
Subsidiaries on or after the Effective Time.
(n) Except as set forth on Schedule 4.13(o), neither the
Company nor any of the Subsidiaries, owns an interest in any (i) domestic
international sales corporation, (ii) foreign sales corporation, (iii)
controlled foreign corporation, or (iv) passive foreign investment company.
(o) Neither the Company nor any of the Subsidiaries was a
party to any deferred intercompany transaction that will be restored (pursuant
to the Section 1502 regulations) and will result in income or loss to the
Company or its Subsidiaries due to the contemplated transaction.
(p) During the previous two years neither the Company nor any
Subsidiary has engaged in any exchange under which the gain realized on such
exchange was not recognized due to Section 1031 of the Code.
(q) Except as set forth on Schedule 4.13(r), none of the
property owned or used by the Company or any Subsidiary is subject to a lease
other than a "true" lease for federal income tax purposes.
SECTION 4.14. ERISA. Except for the Renex Corp. Welfare
Benefit Plan and the Renex Corp. 401(k) Plan or as set forth on Schedule
4.14(a), neither the Company nor any Subsidiary (i) maintains or contributes to
or has any obligation with respect to, and none of the employees of the Company
or any Subsidiary is covered by, any employment agreement or consulting
agreement, or any bonus, deferred compensation, severance pay, pension,
profit-sharing, retirement, insurance, stock purchase, stock option or other
fringe benefit plan, arrangement or practice, written or otherwise, or any other
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security act of 1974, as amended ("ERISA"), whether formal or informal
(collectively, the "BENEFIT PLANS"). None of the Benefit Plans is (i) a
"multiemployer plan," as defined in Section 3(37) of ERISA, (a "MULTIEMPLOYER
PLAN"), and neither the Company nor any Subsidiary has been requested to
contribute to a Multiemployer Plan in the five calendar years preceding this
year, (ii) subject to Title IV of ERISA, and neither the Company nor any
Subsidiary has contributed to any such plan in the five calendar years preceding
this year, or (iii) a funded welfare benefit plan, as defined in Section 419 of
the Code (whether or not a trust described in Section 501(c)(9) of the Code has
been established in connection with any funded welfare plan). Neither the
Company nor any Subsidiary has any agreement or commitment to create any
additional Benefit Plan or to modify or change any existing Benefit Plan, except
as may be required by any collective bargaining agreement or applicable law.
Except as set forth on Schedule 4.14(a), the Company and the Subsidiaries do not
have any other ERISA Affiliates. For these purposes, "ERISA AFFILIATE" means any
entity which is under common control with the Company or any Subsidiary within
the meaning of
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Section 414(b),(c),(m), or (o) of the Code. For purposes of (b) through (i) of
this Section 4.14, the term "Benefit Plan" shall not include any Multiemployer
Plan.
(a) With respect to each Benefit Plan, the Company has
heretofore delivered or caused to be delivered to Parent true, correct and
complete copies of (i) all documents which comprise the most current version of
each such Benefit Plan, including any related trust agreements, insurance
contracts or other funding or investment agreements and any amendments thereto,
and (ii) with respect to each Benefit Plan that is an "employee benefit plan,"
as defined in Section 3(3) of ERISA, (A) the two most recent Annual Reports
(Form 5500 Series) and accompanying schedules for each of the Benefit Plans for
which such a report is required, (B) the most current summary plan description
(and any summary of material modifications), and (C) all material communications
with any Governmental Authority, including, without limitation, the Internal
Revenue Service, the United States Department of Labor (the "DOL"), and the
Pension Benefit Guaranty Corporation (the "PBGC"). Since the date of the
documents delivered, there has not been any material change in the assets or
liabilities of any of the Benefit Plans or any change in their terms and
operations which could reasonably be expected to affect or alter the tax status
or materially affect the cost of maintaining such Plan, and none of the Benefit
Plans has been or will be amended prior to the Effective Time. Each of the
Benefit Plans can be amended, modified or terminated by the Company or a
Subsidiary within a period of 30 days, without payment of any additional
compensation or amount or the additional vesting or acceleration of any such
benefits, except to the extent that such vesting is required under the Code upon
the complete or partial termination of any Benefit Plan intended to be qualified
within the meaning of Section 401(a) of the Code.
(b) The Company and each Subsidiary has performed and complied
in all material respects with all of its obligations under and with respect to
the Benefit Plans and each of the Benefit Plans has, at all times, in form and
operation complied with its terms, and, where applicable, the requirements of
the Code, ERISA and all other applicable laws. .
(c) There are no unpaid contributions due prior to the date
hereof with respect to any Benefit Plan that are required to have been made
under its terms and provisions, any related insurance contract or any applicable
law, and there are no unfunded benefit obligations that have not been accounted
for by reserves, or otherwise properly footnoted on the Balance Sheet of the
Company and the Subsidiaries in accordance with generally accepted accounting
principles. Except for the ordinary operation of the Benefit Plans, (i) no
assets of the Company or any Subsidiary are allocated or held in a trust or
similar funding vehicle and (ii) there are no reserves assets, surpluses or
prepaid premiums with respect to any Benefit Plan which is a "welfare plan", as
defined in Section 3(1) of ERISA.
(d) All group health plans covering employees of the Company
or any Subsidiary have been operated in compliance with the requirements of
Section 4980B of the Code (and any predecessor provisions) and Part 6 of Title I
of ERISA ("COBRA"), the provisions of ERISA and the Code enacted by the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA"), and any
applicable similar state law. Except as set forth
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on Schedule 4.14(e), neither the Company nor any Subsidiary has any obligation
to provide health benefits or other non-pension benefits to retired or other
former employees, except as specifically required by COBRA, HIPAA or any
applicable similar state law.
(e) Neither the Company, any Subsidiary, nor any other
"disqualified person" or "party in interest," as defined in Section 4975 of the
Code and Section 3(14) of ERISA, respectively, has engaged in any "prohibited
transaction," as defined in Section 4975 of the Code or Section 406 of ERISA,
with respect to any Benefit Plan nor have there been any fiduciary violations
under ERISA which could subject the Company or any Subsidiary (or any officer,
director or employee thereof) to any penalty or tax under Section 502(i) of
ERISA or Sec tions 4971 and 4975 of the Code.
(f) With respect to any Benefit Plan, (i) no filing,
application or other matter is pending with the Internal Revenue Service, the
PBGC the DOL or any other Governmental Authority, (ii) there is no action, suit
or claim pending (nor, to the knowledge of the Company, any basis for such a
claim), other than routine claims for benefits, and (iii) there are no
outstanding liabilities for taxes, penalties or fees.
(g) Except as set forth on Schedule 4.14(h), the execution and
delivery of this Agreement nor the consummation of any or all of the
contemplated transactions will (i) entitle any current or former employee of the
Company or any Subsidiary to severance pay, unemployment compensation or any
similar payment, (ii) accelerate the time of payment or vesting or increase the
amount of any compensation due to any such employee or former employee, or (iii)
directly or indirectly result in any payment made or to be made to or on behalf
of any person to constitute a "parachute payment" within the meaning of Section
280G of the Code.
SECTION 4.15. COMPLIANCE WITH LAWS. Except as set forth in
Section 4.15 of the Disclosure Letter:
(a) neither the Company nor any Subsidiary is in material
violation of, or has since January 1, 1997 violated in any material
respect, and to the knowledge of the Company none is under
investigation with respect to or has been threatened to be charged with
or given notice of any material violation of, any applicable law, rule,
regulation, judgment, injunction, order or decree. The business of the
Company and the Subsidiaries is being conducted and the properties and
assets of the Company and the Subsidiaries are currently owned and
operated in substantial compliance with all applicable laws,
ordinances, regulations, orders, judgments, injunctions, awards and
decrees of any Governmental Authority or court, tribunal or arbitrator.
(b) neither the Company and the Subsidiaries, nor to the
knowledge of the Company, any other Person acting for or on behalf of
the Company or any Subsidiary, has directly or indirectly (i) made to,
or received from, any Person, private or public, any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other
payment,
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regardless of form, whether in money, property or services (A) to
obtain favorable treatment in securing business, (B) to pay for
favorable treatment for business secured, or (C) to obtain special
concessions or for special concessions already obtained or (ii)
established or maintained any fund or asset that has not been recorded
in the books and records of the Company;
(c) the Company and the Subsidiaries are in compliance in all
material respects with all applicable federal, state and local laws,
regulations, and administration orders and with all rules and orders of
any foreign, federal, state or local government and any other
governmental agency, department or authority, relating to the Company
or the Subsidiaries, including, without limitation, 42 U.S.C.
ss.1395nn, as amended (Stark), 42 U.S.C. ss.1320a-7b, as amended (the
Medicare/Medicaid Kickback Law); 31 U.S.C. ss.3729, (the False Claims
Act); 42 U.S.C. ss.1320a-7b as amended by the Health Insurance
Portability and Accountability Act of 1996, 42 U.S.C. ss.300gg, ET SEq.
(the Civil Monetary Penalties and Assessment Act), or similar provision
of any other federal, state or local laws relating to kickbacks,
illegal referrals, illegal billings or the like, and applicable
regulations relating to health care, the health care industry, the
provision of health care services, third-party reimbursements, public
health and safety, and wrongful death and medical malpractice. The
Company and the Subsidiaries have not received any notice that, or have
not been advised that, or otherwise do not have any knowledge that, the
Company and the Subsidiaries are not in compliance with any such
statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws. The Company and the Subsidiaries have no reason to
anticipate that any existing circumstances are likely to result in
violation of the foregoing;
(d) (i) neither the Company's or any Subsidiary's rights nor,
to the knowledge of the Company, the right of any officer, director or
medical director of the Company or any Subsidiary to receive
reimbursements pursuant to any Government Program or Private Program
(as hereinafter defined) has been terminated or otherwise adversely
affected as a result of any investigation or action, whether by any
federal or state governmental regulatory authority or other Third
Party, (ii) neither the Company or any Subsidiary, nor, to the
knowledge of the Company or any Subsidiary, any officer, director or
medical director of the Company or any Subsidiary has, during the past
three (3) years, been the subject of any inspection, investigation,
survey, audit, monitoring, or other form of review by any governmental
regulatory entity, professional review organization, accrediting
organization or certifying agency for the purpose of any alleged
improper activity on the part of such individual with respect to their
operations other than in the ordinary course of business, nor has the
Company or any Subsidiary received any notice of deficiency in
connection with their operations, (iii) there are no outstanding
deficiencies or work orders of any Governmental Authority having
jurisdiction over the Company or any Subsidiary or other third-party
requiring conformity to any applicable agreement, statute, regulation,
ordinance, or bylaws, including, but not limited to, the Government
Programs and Private Programs, and (iv) the Company and its
Subsidiaries have not received any notice of any claim, requirement, or
demand of any licensing or
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certifying agency or other Third Party supervising or having authority
over the Company or its Subsidiaries or its operations to rework or
redesign any part thereof or to provide additional furniture, fixtures,
equipment, appliances, or inventory so as to conform to or comply with
any existing law, code, rule, regulation, or standard, and (v) to the
knowledge of the Company and each subsidiary, each medical director of
the Company and each Subsidiary has all licenses necessary to perform
the duties of medical director. Attached as part of Schedule 4.15 are
copies of all reports, correspondence, and notices relating to any
matter described or referenced therein;
(e) neither the Company or the Subsidiaries nor any officer,
director or managing employee as that term is defined in 42 C.F.R.
Section 1001.1001(a)(1), nor to the Company's knowledge, the other
employees or agents of the Company or the Subsidiaries have engaged in
any activities which are prohibited under criminal law, or are cause
for civil penalties or mandatory or permissive exclusion from Medicare
or Medicaid, or any other state health care program or federal health
care program under Sections 1320a-7, 1320-7a, 1320a-7a, 1320a-7b or
1395nn of Title 42 of the United States Code or Section 3729 of Title
31 of the United States Code, or the regulations promulgated pursuant
to such statutes or regulations or related state or local statues or
which are prohibited by any private accrediting organization from which
the Company or the Subsidiaries seeks accreditation or by generally
recognized professional standards of care or conduct.
SECTION 4.16. LICENSES AND PERMITS. For purposes hereof,
"PERMITS" shall mean all approvals, consents, licenses (including Certificates
of Occupancy, Certificates of Need, Medicare and Medicaid provider contracts),
permits, entitlements, provider numbers, waivers or other authorizations issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Authority or pursuant to any Legal Requirement, required in
connection with the ownership, planning, development, construction, use,
operation and/or maintenance of the dialysis clinics and the dialysis businesses
owned by the Company or its Subsidiaries, and all amendments, modifications,
supplements, general conditions and addenda thereto.
(a) The Company and each Subsidiary have (in good standing)
all requisite Permits to operate their dialysis facilities. Schedule 4.16(b)
sets forth a description of all material Permits (i) required in order to
operate the dialysis facilities for their intended use and (ii) owned or
possessed by or for the facilities. The Company has delivered to, or otherwise
made available for inspection by, Parent copies of all of the Permits that are
now in effect, each of which the Company and each Subsidiary owns, possesses or
has the legal right to use, free and clear of all encumbrances. The Company and
each Subsidiary are not in default under or in violation of any Permit, and they
have not received any notice of any default or any other claim or proceeding
relating to any Permit.
(b) To the knowledge of the Company, no material violation,
default, order, or deficiency exists with respect to (i) any certifications
relating to participation in and
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reimbursement under Titles XVII and XIX of the Social Security Act; (ii) any
certifications relating to participation and reimbursement under similar
federal, state or local reimbursement or governmental programs for which the
Company and each Subsidiary are eligible (collectively, (i) and (ii) are
referred to as the "GOVERNMENT PROGRAMS"); and (iii) any certifications relating
to participation in and reimbursement under any private non-governmental
programs (the "Private Programs"). The Company and the Subsidiaries have not
received any notice of any action pending or recommended by any state or federal
agencies having jurisdiction over such items, either to revoke, withdraw, or
suspend any Permit, license, right or authorization, or to terminate the
participation of the Company or the Subsidiaries in any Government Program or
Private Program. To the Company's knowledge, no event has occurred which, with
the giving of notice, the passage of time, or both, would constitute grounds for
a violation, order or deficiency with respect to any of the items referenced
above or to revoke, withdraw, or suspend any such license, or to terminate or
modify the participation of the Company or the Subsidiaries in any Government
Program or Private Program. Except as set forth on Schedule 4.16(c), to the
Company's knowledge, there has been no decision of any other party not to renew
any acute provider or third-party payer agreement to which the Company or the
Subsidiaries is a party. Except as listed on Schedule 4.16(c), no consent or
approval or prior filing with, notice to, or any action by any governmental body
or agency or any other third-party is required in connection with any such
Permit, license, right or authorization, or Government or Private Program, by
reason of the consummation of the transactions contemplated by this Agreement.
SECTION 4.17. PATENTS, TRADEMARKS, ETC. Schedule 4.17
identifies all registered trademarks, service marks, copyrights and patents
owned or licensed by the Company and its Subsidiaries as of the date hereof. The
Company and its Subsidiaries own, or are licensed or otherwise have adequate
right to use, all patents, patent rights, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights, copyrights,
know-how, technology, trade secrets and other proprietary information which are
material to the conduct of the business of the Company and its Subsidiaries
(collectively, the "INTELLECTUAL PROPERTY"). Except as set forth on Schedule
4.17, no claims have been asserted by any Person, and neither the Company nor
any of its Subsidiaries has asserted a claim against any Person, with respect to
any of the Intellectual Property owned or used by the Company or any of its
Subsidiaries or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto to which the Company or any of its
Subsidiaries is a party, nor, to the Company's knowledge, are any such claims
threatened.
SECTION 4.18. ENVIRONMENTAL MATTERS. The following definitions
shall apply to this section:
(i) "ENVIRONMENTAL CLAIMS" shall mean all notices of
violation, liens, claims, demands, suits, or causes of action
for any damage, including, without limitation, costs of
compliance or remediation, personal injury, property damage,
lost use of property or consequential damages, arising
directly or indirectly out of Environmental Conditions or
Environmental Laws. By way of example only, Environmental
Claims include (i) violations of or obligations under any
contract
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related to Environmental Laws or Environmental Conditions,
(ii) actual or threatened damages to natural resources, (iii)
claims for nuisance or its statutory equivalent, (iv) claims
for the recovery of response costs, or administrative or
judicial orders directing the performance of investigations,
responses or remedial actions under any Environmental Laws,
(v) requirements to implement "corrective action" pursuant to
any order or permit issued pursuant to Environmental Laws,
(vi) fines, penalties or liens of any kind against property
related to Environmental Laws or Environmental Conditions, and
(vii) with regard to any present or former employees, claims
relating to exposure to or injury from Environmental
Conditions.
(ii) "ENVIRONMENTAL CONDITIONS" shall mean the state
of the environment, including natural resources, soil, surface
water, ground water, or ambient air, relating to or arising
out of the use, storage, treatment, transportation, release,
disposal, dumping or threatened release of Hazardous
Substances.
(iii) "ENVIRONMENTAL LAWS" shall mean all applicable
federal, state, district, local and foreign laws, all rules or
regulations promulgated thereunder, and all orders, consent
orders, judgments, notices, permits or demand letters issued
to or entered into by the Company or any of its Subsidiaries
pursuant thereto ("LEGAL REQUIREMENTS"), relating to pollution
or protection of the environment (e.g., ambient air, surface
water, ground water, or soil). Environmental Laws shall
include, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended,
the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water
Act, as amended, the Safe Drinking Water Act, as amended, the
Clean Air Act, as amended, the Atomic Energy Act of 1954, as
amended, Occupational Safety and Health Laws, and all
analogous laws, rules, regulations or ordinances promulgated
or issued by any federal, state or other Governmental
Authority.
(iv) "ENVIRONMENTAL REPORTS" shall mean any and all
written analyses, audits, assessments, summaries or
explanations, in the possession or control of the Company or
any subsidiary, of (a) any Environmental Conditions in, on or
about the Properties (as defined below) of, or any property or
facility formerly owned, leased or operated by, the Company or
any of its subsidiaries or (b) the Company's or any such
Subsidiary's compliance with Environmental Laws.
(v) "HAZARDOUS SUBSTANCES" shall mean all pollutants,
contaminants, chemicals, wastes, and any other carcinogenic,
ignitable, corrosive, reactive, toxic or otherwise hazardous
substances or materials subject to regulation, control or
remediation under Environmental Laws, including but not
limited to petroleum,
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urea formaldehyde, flammable, explosive and radioactive
materials, PCBs, pesticides, herbicides, asbestos, sludge,
slag, acids, metals, and solvents.
(vi) "OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean
any Legal Requirement designed to provide safe and healthful
working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide
safe and healthful working conditions.
(a) Except as set forth in Schedule 4.18, (i) the Company and
each of its Subsidiaries possess all permits or licenses required for their
operation under the Environmental Laws and are currently in material compliance
with all applicable Environmental Laws, including, without limitation, all
permits or licenses required thereunder for their operations; (ii) neither the
Company nor any of its Subsidiaries has received any written notice that the
Company or any such Subsidiary is not in compliance with, or is in material
violation of, any such Environmental Laws; and (iii) there are no Environmental
Claims pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries and neither the Company nor its subsidiary
has any material liability under the Environmental Laws. In addition, true and
correct copies of the Environmental Reports have been made available to
Purchaser, and a list of all such Environmental Reports is set forth in Schedule
4.18.
SECTION 4.19. FINDERS' FEES. Except for the Company's
Investment Banker a copy of whose engagement agreement has been provided to
Parent and Merger Sub, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf, of
the Company or any Subsidiary who might be entitled to any fee or commission
from Parent, Merger Sub or any of their affiliates or the Company upon
consummation of the transactions contemplated by this Agreement or any
alternative transaction.
SECTION 4.20. INAPPLICABILITY OF CERTAIN RESTRICTIONS.
Assuming that Parent and Merger Sub's representation set forth in Section 5.08
is true and correct, the Board has taken all such action as may be required so
that neither Sections 607.0901 or 607.0902 of the Florida Law nor Article
THIRTEENTH of the Company's Articles of Incorporation in any way restricts or
applies to the acquisition of Shares pursuant to the Offer, the acquisition of
Shares by Merger Sub and its affiliates subsequent to the acquisition of Shares
pursuant to the Offer, the consummation of the Merger or the other transactions
contemplated hereby. The adoption of this Agreement by the affirmative vote of
the holders of Shares entitling such holders to exercise at least a majority of
the voting power of the Shares is the only vote of holders of any class or
series of the capital stock of the Company required to adopt this Agreement, or
to approve the Merger or any of the other transactions contemplated hereby and
no higher or additional vote is required pursuant to of the Company's articles
of incorporation or otherwise.
SECTION 4.21. TITLE, ETC. Neither the Company nor any of its
Subsidiaries owns any real property. The Company or such Subsidiary, as the
case may be, has,
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with respect to personal property, good and valid title to all of the properties
and assets which are material to the business, operation or financial condition
of the Company or such Subsidiary and reflected in the latest financial
statements included in the SEC Documents as being owned by the Company and the
Subsidiaries or acquired after the date thereof free and clear of all Liens
whatsoever, except for (i) any Liens reflected in the most recent financial
statements included in the SEC Documents filed prior to the date hereof or
disclosed in the notes thereto; (ii) any Liens which do not materially detract
from the fair market value (free of such Liens) of the property or assets
subject thereto or materially interfere with the current use by the Company and
the Subsidiaries of the property or assets subject thereto or affected thereby;
(iii) any Liens for taxes not delinquent or which are being contested in good
faith, PROVIDED that adequate reserves for the same have been established on the
most recent financial statements included in the SEC Documents to the extent
required by GAAP applied on a consistent basis; (iv) any inchoate mechanic's and
materialmen's Liens for construction in progress; (v) any workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business, so long as such liens have not been filed; (vi) any Liens of the
type referred to in clause (v) above that have been filed, so long as such liens
do not aggregate in excess of $50,000; and (vii) operating or capital leases
with respect to personal property entered into in the ordinary course of the
Company's business consistent with past practice.
(a) The Company or any Subsidiary, as the case may be, is the
lessee of all property material to the business of the Company and the
Subsidiaries and reflected as leased in the latest financial statements included
in the SEC Documents (or on the books and records of the Company as of the date
thereof) or acquired after the date thereof (except for leases that have expired
by their terms) and is in possession of the properties purported to be leased
thereunder. Schedule 4.21 sets forth a list of all of the leases and subleases
(the "REAL PROPERTY LEASES") under which, as of the date hereof, the Company or
any of the Subsidiaries has the right to occupy space. Except as set forth in
Schedule 4.21, all Real Property Leases and material leases pursuant to which
the Company or any Subsidiary leases personal property from others are valid,
binding and enforceable in accordance with their terms; there are no existing
defaults, or any condition or event known to the Company or any Subsidiary which
with the giving of notice or lapse of time would constitute a default by the
Company or any Subsidiary thereunder and, to the knowledge of the Company, no
uncured default or event or condition on the part of any landlord exists under
any Real Property Lease which with the giving of notice or the lapse of time
would constitute a default thereunder.
(b) All of the land, buildings, structures and other
improvements occupied by the Company and the Subsidiaries in the conduct of
their business are included in the Real Property Leases.
(c) Except as set forth in Schedule 4.21, neither the Company
nor any Subsidiary owns or holds, nor is obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell, lease or dispose of any Real Property or any Real Property Lease or any
portion thereof or interest therein, other than options to extend the existing
terms of the Real Property leases as set forth in the respective Real Property
Leases.
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SECTION 4.22. INSURANCE. The Company and the Subsidiaries are
covered by valid and currently effective insurance policies issued in favor of
the Company and/or such Subsidiaries, which in the Company's judgment is
sufficient for the operations and assets of the Company and its Subsidiaries,
taken as a whole. All such policies are in full force and effect, all premiums
due thereon have been paid and the Company has complied with the provisions of
such policies. Except as set forth in Schedule 4.22, neither the Company nor any
Subsidiary has been advised of any defense to coverage in connection with any
claim to coverage asserted or noticed by the Company or any Subsidiary under or
in connection with any of its extant insurance policies. Neither the Company nor
any Subsidiary has received any written notice from or on behalf of any
insurance carrier issuing policies or binders relating to or covering the
Company and the Subsidiaries that there will be a cancellation or non-renewal of
existing policies or binders, or that alteration of any equipment or any
improvements to real estate occupied by or leased to or by the Company or the
Subsidiaries, purchase of additional equipment, or material modification of any
of the methods of doing business, will be required. Schedule 4.22 identifies all
property, general liability and casualty insurance policies which currently
insure the Company or any Subsidiary.
SECTION 4.23. MATERIAL AGREEMENTS. Except as set forth in
Schedule 4.23, and except for this Agreement, neither the Company nor any
Subsidiary is a party to, or bound by, any material agreement of any kind to be
performed in whole or in part after the Effective Time. Solely for the purpose
of this Section 4.23, the term "MATERIAL AGREEMENT" shall mean any agreement,
contract, instrument or document (including any amendment to any of the
foregoing) (i) described in paragraphs (b)(4), (b)(9) or (b)(10) of Item 601 of
Regulation S-K of the SEC, (ii) with any director, officer or affiliate of the
Company, (iii) evidencing, governing or relating to indebtedness for borrowed
money, (iv) restricting or limiting the incurrence of indebtedness for borrowed
money or the creation of any Liens, or providing for any financial covenant, (v)
entered into outside of the ordinary course of business of the Company or the
Subsidiaries, (vi) that in any way purports to restrict the business activity of
the Company or any Subsidiary or any of their affiliates or to limit the freedom
of the Company or any Subsidiary or any of their affiliates to engage in any
line of business or to compete with any Person or in any geographic area; (vii)
with medical directors or with respect to the provision of acute dialysis
services; (viii) which constitutes one of the ten largest contracts between or
among the Company or any of its Subsidiaries and any health maintenance
organization, physician provider organization or any other discounted fee for
service payor for dialysis services, which contracts cover in the aggregate more
than 50% of the total patients of the Company with private insurance; (ix) for
the purchase or sale of supplies used in the Company's business under which the
Company and its Subsidiaries purchased or sold supplies for an aggregate
purchase or sale price, as the case may be, in excess of $100,000 during the
last 12 months or (x) with any laboratory, physician, physician group, hospital
or other healthcare provider which is material to the operation of any of the
Company's clinics individually. Except as set forth in Schedule 4.23, to the
best knowledge of the Company, there is no breach or default and there are no
facts which with notice or the passage of time would constitute a breach or
default under, or give rise to any right of termination, amendment, cancellation
or acceleration under, whether as a result of the
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consummation of the transactions contemplated hereby or otherwise, any
obligation to be performed by any party to a material agreement to which the
Company or any Subsidiary is a party.
SECTION 4.24. INSIDER INTERESTS. Except as set forth in the
SEC Documents filed prior to the date hereof or in Schedule 4.14(h), Schedule
4.24 sets forth all contracts and agreements of the Company or any Subsidiary
with and other obligations of the Company or any Subsidiary to any officer,
director, employee or affiliate of the Company or any Subsidiary (including any
employment, consulting agreement or medical director services agreement). Except
as set forth in Schedule 4.24, no officer, director, or affiliate (excluding
physicians who serve as medical directors of the Company) of the Company or any
Subsidiary and, to the knowledge of the Company, no entity controlled by or
affiliated with such officer, director or affiliate and no relative or spouse
who resides with any such officer, director or affiliate (i) owns, directly or
indirectly, any material interest in any Person that is, or is engaged in
business as, a competitor, lessor, lessee, customer or supplier of the Company
or any Subsidiary or (ii) owns, in whole or in part, any tangible or intangible
property that the Company or any Subsidiary uses in the conduct of the business
of the Company or any such Subsidiary. To the knowledge of the Company, each
physician who serves as a medical director of the Company is in compliance with
all obligations under such physician's medical director services agreement.
SECTION 4.25. LABOR MATTERS. None of the employees of the
Company or any Subsidiary are covered by a collective bargaining agreement.
Neither the Company nor any Subsidiary knows of any activity or proceedings of
any labor union (or representatives thereof) to organize any unorganized
employees employed by the Company or any Subsidiary, nor of any strikes,
slowdowns, work stoppages, lockouts or threats thereof, by or with respect to
any of the employees of the Company or any Subsidiary. Except as set forth in
Schedule 4.25, neither the Company nor any Subsidiary has received any notice of
any claim, or has knowledge of any facts which, in the reasonable judgment of
the Company, are likely to give rise to any claim, that it has not complied in
any material respect with any laws relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination or employment safety.
SECTION 4.26. BUSINESS RELATIONSHIPS; NO RESTRICTIVE
AGREEMENTS. Except as set forth on Schedule 4.26, the Company and the
Subsidiaries are not parties to or bound by any agreement, contract, policy,
license, document, instrument, arrangement or commitment that limits the freedom
of the Company or any Subsidiary to compete in any line of business or with any
Person or in any geographic area or which would so limit the freedom of the
Company or any Subsidiary or affiliate after the Effective Time.
SECTION 4.27. YEAR 2000 COMPLIANCE. To the Company's
knowledge, all of the Systems (as defined below) are "YEAR 2000 COMPLIANT",
which means that the Systems will function correctly, in the following manner,
when dealing with dates/times and date/time related data prior to, during and
after the calendar year 2000:
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(i) the Systems shall, when processing date/time data
from, into, in and between the 20th and 21st centuries, and
the years 1999 and 2000, and performing leap year
calculations, accurately process in all material respects such
date/time data (including, without limitation, inputting,
outputting, extracting, displaying, calculating, comparing,
sorting and sequencing such data), and shall not, as a result
of the processing of such data, (A) create any material
logical or mathematical error or inconsistency, (B) material
malfunction or (C) cease to function; and
(ii) the Systems shall accurately process in all
material respects the date/time data exchanged with the
information technology systems of all Company vendors and
suppliers, provided that the information technology systems of
such Company vendors and suppliers properly exchange date/time
data with the Systems.
(a) The Company has made diligent inquiry of all suppliers and
vendors (the "MATERIAL SUPPLIERS AND VENDORS") which are material to the
operation or financial condition of the Company's and the Subsidiaries' business
and, to the Company's knowledge, based upon the representations of such Material
Suppliers and Vendors, except as set forth on Schedule 4.28(b) or in the SEC
Documents, expects that each Material Supplier and Vendor will be Year 2000
compliant prior to January 1, 2000.
(b) The Company has provided to Parent and Merger Sub:
(i) copies of all correspondence and statements
relating to the Year 2000 compliance of its business which
have been made by or on behalf of the Company or any
Subsidiary to suppliers, vendors, auditors, investors or other
third parties;
(ii) copies of reports all (including draft reports)
prepared by or on behalf of the Company or any Subsidiary or
any of their affiliates relating to the Year 2000 compliance
of its business, and any deficiencies or required remediation;
(iii) copies of all proposals (including draft
proposals) whether prepared by the Company or any Subsidiary
or by third parties, concerning Year 2000 remediation of its
business; and
(iv) copies of all correspondence, statements and
reports (including draft reports) sent or received by the
Company with respect to the Year 2000 compliance of its
business suppliers (including the Material Suppliers and
Vendors).
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(c) As used herein, the term "SYSTEMS" means all of the
following which are used by the Company or any Subsidiary:
(i) all computer systems, hardware, equipment and
peripherals and all computer software and files; and
(ii) all process controls, environmental controls and
any other systems which employ, store or process date/time
information in electronic form.
SECTION 4.28. CASH AND CASH EQUIVALENTS. The Company has cash
and cash equivalents on hand of at least $9,000,000.
SECTION 4.29. DUE TO THIRD PARTY OBLIGATIONS. The Summary of
Overpayments dated November 30, 1999, previously provided by the Company to
Parent sets forth a detailed listing of all overpayments made by any
governmental or private payer to the Company and its Subsidiaries (the
"OVERPAYMENTS") as of November 30, 1999. There has been no material increase in
the amount of the Overpayments since November 30, 1999. Substantially all
commercial and/or managed care payer overpayment amounts are attributable to the
Company's practice of billing such payers the gross amount of the Company's
charges instead of the net amount of the Company's charges (gross less
applicable contractual adjustments). The Company has offered to repay or have
recouped all Overpayments from governmental payers. No demand for repayment of
any such Overpayment has been made to the Company or its Subsidiaries and
neither the Company nor any Subsidiary has taken any action, either overtly or
covertly, to conceal such Overpayment from any payer.
SECTION 4.30. INDEBTEDNESS AND CAPITALIZED LEASE OBLIGATIONS.
The Company and its Subsidiaries do not have in excess of $1,800,000 of
indebtedness (excluding the amount of any "due to third party" account
reflecting overpayments set forth on the Company's balance sheet). Schedule 4.30
contains a list of (i) all material loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its Subsidiaries is outstanding or may be
incurred and (ii) the respective principal amounts currently outstanding
thereunder. Except as set forth in Schedule 4.30, all such indebtedness is
prepayable and terminable at any time without penalty, subject to the notice
provisions of the agreements governing such indebtedness (which, except as set
forth in Schedule 4.30, shall not require a notice period of more than five
days). For purposes of this Section 4.30, "INDEBTEDNESS" shall mean, with
respect to any Person, without duplication, (i) all obligations of such Person
for borrowed money, or with respect to deposits or advances of any kind to such
Person, (ii) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such Person upon which
interest charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property
purchased by such Person, (v) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of such Person's business), (vi) all capitalized
lease
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obligations of such Person, (vii) all obligations of others secured by any lien
or other encumbrance on property or assets owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (viii) all
obligations of such Person under interest rate or currency swap transactions
(valued at the termination value thereof), (ix) all letters of credit issued for
the account of such Person, (x) all obligations of such Person to purchase
securities (or other property) which arises out of or in connection with the
sale of the same or substantially similar securities or property, and (xi) all
guarantees and arrangements having the economic effect of a guarantee of such
Person of any indebtedness of any other Person. Schedule 4.30 also sets forth a
complete and accurate list of all the letters of credit issued to any Person on
behalf of the Company or any of its Subsidiaries.
SECTION 4.31. COMPANY FEES AND EXPENSES. The fees and expenses
of the Company and its Subsidiaries in connection with this Agreement and the
transactions contemplated hereby (including without limitation fees and expenses
of attorneys, accountants, financial advisors and other outside professionals
and consultants) shall not exceed $2,500,000 in the aggregate.
SECTION 4.32. RIGHTS AGREEMENT. The Company has executed an
amendment to the Rights Agreement (the "RIGHTS AGREEMENT"), dated November 6,
1998, between the Company and Continental Stock Transfer and Trust Company, as
Rights Agent (the "RIGHTS AMENDMENT") having the effects described in the
subsequent sentences of this Section 4.33. The Company represents that the
Rights Amendment is sufficient to render the Rights (as defined in the Rights
Agreement) inoperative with respect to any acquisition of shares of Company
Common Stock by Parent, Merger Sub or any of their affiliates pursuant to this
Agreement and for so long as this Agreement remains in effect. The Company
represents that as a result of the Rights Amendment, the Rights will not be
exercisable upon or at any time after consummation of the Offer and for so long
as this Agreement remains in effect by reason of the transactions contemplated
hereby.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub represents and warrants to the
Company as of the date hereof that:
SECTION 5.01. CORPORATE EXISTENCE AND POWER. Each of Parent
and Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 5.02. CORPORATE AUTHORIZATION. The execution, delivery
and performance by each of Parent and Merger Sub of this Agreement and the
consummation by each
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of Parent and Merger Sub of the transactions contemplated hereby are within the
corporate powers of Parent and Merger Sub and have been duly authorized by all
necessary corporate and stockholder action. This Agreement has been duly and
validly executed and delivered by each of Parent and Merger Sub and, assuming
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding agreement of Parent and Merger Sub, enforceable against Parent
and Merger Sub in accordance with its terms.
SECTION 5.03. CONSENTS, APPROVALS AND GOVERNMENTAL FILINGS. No
notices, reports or other filings are required to be made by Parent and/or
Merger Sub with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent and/or Merger Sub from, any
Governmental Authority in connection with the execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by each of Parent and
Merger Sub of the transactions contemplated hereby, other than (a) the filing of
articles of merger in accordance with Florida Law; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any applicable
requirements of the Exchange Act and (d) compliance with applicable law relating
to change of ownership notifications.
SECTION 5.04. NON-CONTRAVENTION. The execution, delivery and
performance by each of Parent and Merger Sub of this Agreement and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby do not and will not (a) contravene or conflict with the certificate of
incorporation or bylaws or similar documents of Parent or Merger Sub, (b)
assuming compliance with the matters referred to in Section 5.03, contravene or
conflict in any material respect with any provision of law, regulation,
judgment, order or decree binding upon Parent or Merger Sub, or (c) constitute
(with or without due notice or lapse of time or both) a default under or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of Parent or Merger Sub, or require any approval, notice or consent
under, any material agreement, contract or other instrument or obligation
binding upon Parent or Merger Sub.
SECTION 5.05. DISCLOSURE DOCUMENTS. The information with
respect to Parent, its subsidiaries and/or Merger Sub that Parent or Merger Sub
furnishes to the Company in writing specifically for use in any Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading (i) in the case of the Company Proxy Statement at the time the
Company Proxy Statement or any amendment or supplement thereto is first mailed
to shareholders of the Company, at the time the shareholders vote on adoption of
this Agreement and at the Effective Time, and (ii) in the case of any Company
Disclosure Document other than the Company Proxy Statement, at the time of the
filing thereof and at the time of any distribution thereof.
(a) The Offer Documents, when filed, will comply as to form in
all material respects with the applicable requirements of the Exchange Act and
will not at the time of the filing thereof, at the time of any distribution
thereof or at the time of consummation of the Offer, contain any untrue
statement of a material fact or omit to state any material fact necessary to
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make the statements made therein, in the light of the circumstances under which
they were made, not misleading, provided, that this representation and warranty
will not apply to statements or omissions in the Offer Documents based upon and
in conformity with information furnished to Parent or Merger Sub in writing by
the Company specifically for use therein.
SECTION 5.06. LITIGATION. No action, suit, investigation or
proceeding is pending against, or, to the knowledge of Parent or Merger Sub,
threatened against or affecting, Parent or Merger Sub or any of its properties
before any court or arbitrator or any Governmental Authority, which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Offer or the Merger or any of the other transactions contemplated hereby.
SECTION 5.07. FINANCING. Parent has delivered to the Company a
copy of a commitment letter dated December 27, 1999 from Lehman Commercial Paper
Inc., Lehman Brothers Inc. and Credit Agricole Indosuez (the "LENDERS") pursuant
to which the Lenders have committed, subject to the terms and conditions set
forth therein, to enter into one or more credit agreements providing for loans
to the Parent of up to $175,000,000, in the aggregate (the "COMMITMENT LETTER").
For purposes of this Agreement, "REQUIRED AMOUNTS" shall mean the aggregate
funds committed for use in connection with the transactions contemplated by this
Agreement pursuant to the Commitment Letter referred to in this Section 5.07.
SECTION 5.08. OWNERSHIP OF SHARES. As of the date hereof,
Parent and Merger Sub beneficially own no Shares.
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. CONDUCT OF THE COMPANY. Except as expressly
required by this Agreement or with the prior consent of Parent, from the date
hereof until the Effective Time, the Company and the Subsidiaries shall conduct
their business in the ordinary course consistent with past practice and shall
use their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the prior
written consent of Parent, the Company will not, and will cause the Subsidiaries
not to:
(a) adopt or propose any change in its articles of
incorporation or bylaws;
(b) except pursuant to existing agreements or arrangements
disclosed to Parent and Merger Sub in the Schedules to this Agreement:
(i) acquire (by merger, consolidation or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof;
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(ii) sell, lease or otherwise dispose of a Subsidiary
or assets or securities, in one transaction or a series of
related transactions, with a book value in excess of $50,000
individually or $100,000 in the aggregate;
(iii) make any investment, whether by purchase of
stock or securities, contributions to capital or any property
transfer, other than investments which mature in less than 30
days and are rated no lower than A2/P2;
(iv) purchase for an amount in excess of $25,000 in
the aggregate, any property or assets of any other individual
or entity other than supplies or inventory purchased in the
ordinary course consistent with past practice;
(v) waive, release, grant or transfer any rights of
value material to the Company and the Subsidiaries taken as a
whole;
(vi) modify or change in any material respect (A) any
existing license, lease, contract or other document material
to the Company and the Subsidiaries, taken as a whole or (B)
any existing contract or other document with any laboratory,
physician, physician group, hospital or other healthcare
provider ;
(vii) incur, assume or prepay an amount of long-term
or short-term debt, including obligations in respect of
capital leases;
(viii) assume, guarantee, endorse (other than
endorsements of negotiable instruments in the ordinary course
of business) or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person (other than any Subsidiary);
(ix) make any loans or advances to any other Person
or Persons (other than any Subsidiary) in excess of $25,000 in
the aggregate; or
(x) excluding the capital expenditures associated
with dialysis facilities under development (which facilities
are set forth on Schedule 4.10(q)), make or commit to make any
capital expenditures which, individually, is in excess of
$10,000 or, in the aggregate (including any and all capital
expenditures made from and after November 30, 1999), are in
excess of $200,000; or
(c) (i) split, combine or reclassify any shares of its capital
stock, (ii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, other than cash dividends and
distributions by a wholly-owned Subsidiary of the Company to the
Company or to another wholly-owned Subsidiary, (iii) issue, sell,
deliver, grant, pledge or encumber any shares of its capital stock or
securities convertible into or exchangeable or exercisable for,
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any shares of its capital stock or the capital stock of any of the
Subsidiaries (other than the issuance of Shares upon the exercise of
Options or Warrants described in Section 4.05), (iv) redeem, repurchase
or otherwise acquire or offer to redeem, repurchase, or otherwise
acquire any of its securities or any securities of the Subsidiaries, or
(v) amend any term of any outstanding security of the Company or any
Subsidiary;
(d) adopt or amend any Benefit Plan or any similar plan or
arrangement for the benefit and welfare of any director, officer or
employee, or (except for normal increases in the ordinary course of
business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company) increase in any manner the
compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any Benefit Plan or other existing plan
or arrangement (including, without limitation, the granting of stock
options, stock appreciation rights, phantom stock rights or any similar
rights, the removal of existing restrictions in any benefit plans or
agreements or the acceleration of the vesting or exercisability of any
options to acquire capital stock of the Company or any Subsidiary);
(e) except as set forth on Schedule 6.01(e), revalue in any
material respect any of its assets, including, without limitation,
writing down the value of inventory in any material manner or writing
off of notes or accounts receivable in any material manner;
(f) pay, discharge or satisfy any material claims, liabilities
or obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practices, of liabilities reflected or reserved against in the
consolidated financial statements of the Company or incurred since the
most recent date thereof pursuant to an agreement or transaction
described in this Agreement (including the schedules hereto) or
incurred in the ordinary course of business, consistent with past
practices;
(g) make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, file
any amended Tax Return, enter into any closing agreement, settle any
Tax claim or assessment, surrender any right to claim a Tax refund,
consent to the extension or waiver of the limitations period applicable
to any Tax claim or assessment, surrender any right to claim a Tax
refund, or take or omit to take any other action if such action or
omission would have the effect of materially increasing the Tax
liability of the Company or any of its Subsidiaries;
(h) take any action other than in the ordinary course of
business and consistent with past practices with respect to accounting
policies or procedures other than any change in accounting policies
(that is not material to the Company and the Subsidiaries taken as a
whole) that is required by regulations of the SEC;
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(i) sell, transfer, mortgage, pledge, grant any security
interest in, or permit the imposition of any Lien on, any asset or
property of the Company or any Subsidiary with a book value in excess
of $50,000 individually or $100,000 in the aggregate, including,
without limitation, any real property owned by the Company or any
Subsidiary other than in the ordinary course of business consistent
with past practice;
(j) fail to maintain all insurance policies of the Company and
the Subsidiaries in full force and effect or fail to renew or replace
with equivalent coverage any such insurance policy which has expired;
(k) fail to operate, maintain, repair or otherwise preserve
the real property leased by the Company and the Subsidiaries
substantially in accordance with current practice and within the
capital expenditure budget of the Company previously disclosed to
Parent and Merger Sub;
(l) fail to comply with all applicable filing, payment and
withholding obligations under all applicable federal, state, local and
foreign tax laws or settle or compromise any material income tax
liability;
(m) agree or commit to do any of the foregoing; or
(n) take or agree or commit to take any action that would make
any represen tation and warranty of the Company hereunder inaccurate in
any respect at, or as of any time prior to, the Effective Time.
SECTION 6.02. SHAREHOLDER MEETING; PROXY MATERIAL. (a) The
Company shall cause a meeting of its shareholders (the "COMPANY SHAREHOLDER
MEETING") to be duly called and held as soon as reasonably practicable after
(and with a record date after) the purchase of Shares pursuant to the Offer for
the purpose of voting on the approval and adoption of this Agreement and the
Merger. In connection with such meeting, the Company (i) will promptly prepare
and file with the SEC, will use its best efforts to have cleared by the SEC and
will thereafter mail to its shareholders as promptly as practicable the Company
Proxy Statement and all other proxy materials for such meeting, (ii) will use
its best efforts to obtain the necessary approvals by its shareholders of this
Agreement and the transactions contemplated hereby, and (iii) will otherwise
comply with all legal requirements applicable to such meeting. The Board of
Directors of the Company shall, subject to Section 6.04(c), recommend approval
and adoption of this Agreement and the Merger by the Company's shareholders and
the Company shall include in the Company Proxy Statement such recommendation and
the determination of the Board of Directors of the Company that the transactions
contemplated hereby, including the Offer and the Merger, are advisable and are
fair to, and in the best interests of, the shareholders of the Company.
Notwithstanding the foregoing, following receipt of an unsolicited bona fide
written Superior Proposal, the Board of Directors may withdraw or modify its
recommendation, but only to the extent that the Board of Directors of the
Company shall have concluded in good faith on the basis of advice from outside
counsel that such action by the Board of Directors is required in
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order to comply with the fiduciary duties of the Board of Directors to the
shareholders of the Company under applicable law. Without limiting the Company's
obligations under this Section 6.02, the Company will promptly furnish Parent
and Merger Sub with a list of the Company's shareholders, mailing labels and any
available listing or computer file containing the names and addresses of all
record holders of Shares and lists of securities positions of Shares held in
stock depositories, in each case true and correct as of the record date for the
Company Shareholder Meeting, and will provide to Parent and Merger Sub such
additional information (including, without limitation, updated lists of
shareholders, mailing labels and lists of securities positions) and such other
assistance as Parent or Merger Sub may reasonably request in order to enable
Parent and Merger Sub to solicit proxies from the Company's shareholders.
(b) Following the consummation of the Offer, the Company shall
promptly prepare and file any other filings required under the Exchange Act or
any other federal or state securities or corporate laws relating to the Merger
and the transactions contemplated herein. The Company shall promptly notify
Parent and Merger Sub of the receipt by it of any comments from the SEC or its
Staff and of any request of the SEC for amendments or supplements to the Company
Proxy Statement or by the SEC or any other governmental officials with respect
to any other filings or for additional information and will supply Parent and
Merger Sub with copies of all correspondence between it and its representatives,
on the one hand, and the SEC or the members of its Staff or any other
governmental officials, on the other hand, with respect to the Company Proxy
Statement, the Merger or any other filings in connection herewith or therewith.
If at any time prior to the time of approval of this Agreement by the Company's
shareholders there shall occur any event that should be set forth in an
amendment or supplement to the Company Proxy Statement, the Company shall
promptly prepare and mail to its shareholders such amendment or supplement. The
Company shall not mail the Company Proxy Statement or, except as required by the
Exchange Act or the rules and regulations promulgated thereunder, any amendment
or supplement thereto, to the Company's shareholders unless the Company has
first obtained the consent of Parent and Merger Sub to such mailing.
(c) Notwithstanding the foregoing, in the event that Merger
Sub shall acquire at least eighty percent (80%) of the outstanding Shares
pursuant to the Offer or otherwise, the Company agrees, at the request of Parent
and Merger Sub, to take all necessary and appropriate action to cause the Merger
to become effective, in accordance with Section 607.1104 of Florida Law, as soon
as reasonably practicable after such acquisition and the satisfaction or waiver
of the conditions of Article 9 hereof, without a meeting of the shareholders of
the Company.
SECTION 6.03. ACCESS TO INFORMATION. From the date hereof
until the Effective Time, the Company will give Parent, Merger Sub, their
counsel, financial advisors, accountants, auditors and other authorized
representatives full access to the offices, dialysis clinics, properties, books
and records of the Company (including, without limitation, the workpapers of the
Company's outside accountants) and the Subsidiaries (and permit Parent and
Merger Sub to make copies thereof), will furnish to Parent, Merger Sub, their
counsel, financial advisors, accountants, auditors and other authorized
representatives such financial, tax and operating data and other information as
such Persons may reasonably request and will instruct
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the Company's employees, counsel and financial advisors to cooperate with Parent
and Merger Sub in their investigation of the business of the Company and the
Subsidiaries including, without limitation, in connection with Parent's and
Merger Sub's obtaining title reports, surveys, environmental reports and similar
reports or studies with respect to properties owned or leased by the Company and
the Subsidiaries, and will exercise all reasonable efforts to obtain from
landlords such estoppel certificates as Parent and Merger Sub may request;
PROVIDED, HOWEVER, that no investigation pursuant to this Section shall affect
any representation or warranty given by the Company to Parent or Merger Sub
hereunder.
SECTION 6.04. OTHER OFFERS. Neither the Company nor any of its
Subsidiaries shall (whether directly or indirectly through advisors, agents or
other intermediaries), nor shall the Company or any of the Subsidiaries
authorize or permit any of its or their officers, directors, employees, agents,
investment bankers, financial advisors, attorneys, accountants or other
representatives or advisors (collectively, "REPRESENTATIVES") to (i) directly or
indirectly solicit, initiate or take any action designed to facilitate the
submission of inquiries, proposals or offers which constitute or would
reasonably be expected to lead to (A) any acquisition or purchase of 10% or more
of the consolidated assets of the Company and its Subsidiaries or any equity
securities of the Company or any of its Subsidiaries, (B) any tender offer
(including a self tender offer) or exchange offer other than the Offer, that if
consummated would result in any Third Party (as defined below) beneficially
owning any equity securities of the Company or any of the Subsidiaries, (C) any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of the Subsidiaries, other than the transactions contemplated by
this Agreement, or (D) any other transaction the consummation of which would
reasonably be expected to interfere with in a material way, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to materially dilute the benefits to Parent and Merger Sub of the transactions
contemplated hereby (collectively, "ACQUISITION PROPOSALS"), (ii) agree to,
endorse or recommend to its shareholders any Acquisition Proposal, (iii) enter
into or participate in any discussions or negotiations regarding any of the
foregoing, or furnish to any Third Party any information with respect to its
business, properties or assets or any of the foregoing, or otherwise cooperate
in any way with, or knowingly assist or participate in, facilitate or encourage,
any effort or attempt by any Third Party (other than Parent and Merger Sub) to
do or seek any of the foregoing, or (iv) grant any waiver or release under any
standstill or similar agreement with respect to any class of equity securities
of the Company or any of its Subsidiaries; provided, however, that the foregoing
shall not prohibit the Company (either directly or indirectly through advisors,
agents or other intermediaries) from (W) furnishing information concerning the
Company and its businesses, properties or assets to a Third Party who has made
an unsolicited bona fide written Superior Proposal (as defined below), pursuant
to an appropriate confidentiality letter (which letter shall not be less
favorable to the Company than the confidentiality letter referred to in Section
11.08 hereof, and a copy of which shall be provided for informational purposes
only to Parent and Merger Sub), (X) engaging in discussions or negotiations with
such a Third Party who has made an unsolicited bona fide written Superior
Proposal, (Y) following receipt of an unsolicited bona fide written Superior
Proposal, taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) under the Exchange Act
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or otherwise making disclosure to its shareholders and/or (Z) following receipt
of an unsolicited bona fide written Superior Proposal, failing to make or
withdrawing or modifying its recommendation referred to in Section 1.02(b)
and/or Section 6.02, but in each case referred to in the foregoing clauses (W)
through (Z) only to the extent that the Board of Directors of the Company shall
have concluded in good faith on the basis of advice from outside counsel that
such action by the Board of Directors is required in order to comply with the
fiduciary duties of the Board of Directors to the shareholders of the Company
under applicable law; provided, further, that (1) the Board of Directors and the
Company shall not take any of the foregoing actions referred to in clauses (W)
through (Y) until after reasonable notice has been given to Parent and Merger
Sub with respect to such action, (2) the Board of Directors and the Company
shall not take any of the actions referred to in clause (Z) unless (i) a
Superior Proposal has been made and has not been withdrawn, (ii) the Company
provides Parent and Merger Sub with at least 48 hours prior notice of any
meeting of the Company's Board of Directors at which such Board of Directors is
expected to consider such Superior Proposal, and (iii) the Company's Board of
Directors does not withdraw, amend or modify its unanimous recommendation in
favor of the Offer or the Merger for at least 72 hours after the Company
provides Parent and Merger Sub with the name of the Person making such Superior
Proposal and a copy of such Superior Proposal and (3) the Board of Directors
shall continue to advise Parent and Merger Sub, on a reasonably current basis,
as to the status of any negotiations or discussions relating to any Acquisition
Proposal after taking such action. As used herein, the term "SUPERIOR PROPOSAL"
means a bona fide proposal made by a Third Party to acquire the Company pursuant
to a tender or an exchange offer for not less than a majority of the shares of
capital stock of the Company, a merger or the acquisition of all or
substantially all of the Company's assets that, in any case, the Board of
Directors determines in its good faith judgment (based on the advice of its
financial advisor) to be more favorable (including with respect to price) to the
holders of Shares than the Merger; provided, however, that any such proposal
shall not be deemed to be a "Superior Proposal" unless any financing required to
consummate the transactions contemplated by such proposal is either (i) in the
possession of such Third Party at the time such proposal is made, or (ii)
committed on terms no less favorable than those set forth in the Commitment
Letter.
(a) The Company shall promptly notify Parent and Merger Sub
after receipt of any Acquisition Proposal or any request for nonpublic
information relating to the Company by any Third Party or any other
correspondence with any Third Party in connection with an Acquisition Proposal
or for access to the offices, dialysis clinics, properties, books or records of
the Company that informs the Company's Board of Directors that such Third Party
is considering making, or has made, an Acquisition Proposal. Such notice to
Parent and Merger Sub shall be made orally and in writing and shall indicate in
reasonable detail the terms and conditions of such proposal, inquiry or contact
and the identity of the offeror, and shall include copies of any written
inquiries, proposals, agreements or other correspondence relating to any
Acquisition Proposal.
(b) The Company shall immediately cease and cause its
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and shall use its best efforts to
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cause any such parties in possession of confidential information about the
Company that was furnished by or on behalf of the Company to return or destroy
all such information in the possession of any such party or in the possession of
any agent or advisor of any such party. As used in this Agreement, the term
"THIRD PARTY" means any person, corporation, entity or "group," as described in
Section 13(d)(3) of the Exchange Act, other than Parent, Merger Sub or any of
their affiliates (as such term is defined in Rule 12b-2 promulgated under the
Exchange Act).
(c) If a Payment Event (as hereinafter defined) occurs, the
Company shall pay to Parent, concurrently with such Payment Event, a fee of Two
Million Dollars ($2,000,000) (a "TERMINATION FEE"); provided that the Company
shall in no event be obligated to pay more than one Termination Fee. Such fee
shall be paid by wire transfer of immediately available funds to an account
designated by Parent.
"PAYMENT EVENT" means (i) the termination of this Agreement by
Parent pursuant to Section 10.01(c), (ii) the termination of this Agreement by
the Company pursuant to Section 10.01(d); (iii) the termination of this
Agreement by Parent pursuant to Section 10.01(b) as a result of a material
breach by the Company of any representation, warranty, covenant or agreement set
forth in this Agreement; or (iv) the occurrence of any of the following events
within 12 months of the termination of this Agreement pursuant to Section
10.01(b) whereby shareholders of the Company receive, pursuant to such event,
cash, securities or other consideration having an aggregate value, when taken
together with the value of any securities of the Company or its Subsidiaries
otherwise held by the shareholders of the Company after such event, in excess of
Ten Dollars ($10) per Share: the Company is acquired by merger or otherwise by a
Third Party; a Third Party acquires more than 50% of the total assets of the
Company and its Subsidiaries, taken as a whole; a Third Party acquires more than
50% of the outstanding Shares; or the Company adopts a plan of liquidation,
recapitalization or share repurchase relating to more than 50% of the
outstanding Shares or an extraordinary dividend relating to more than 50% of the
outstanding Shares or 50% of the assets of the Company and its Subsidiaries,
taken as a whole.
(d) This Section 6.04 shall survive any termination of this
Agreement, however caused.
SECTION 6.05. NOTICES OF CERTAIN EVENTS. The Company shall
promptly notify Parent and Merger Sub of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from, any Governmental
Authority in connection with the transactions contemplated by this Agreement;
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(c) any investigation of the Company or any of its
Subsidiaries by any Governmental Authority;
(d) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company or any Subsidiary which, if pending
on the date of this Agreement, would have been required to have been disclosed
pursuant to Section 4.12 or which relate to the consummation of the transactions
contemplated by this Agreement; and
(e) any change or event (i) having or which could reasonably
be expected to have a Material Adverse Effect; or (ii) impairing the ability of
the Company to consummate the transactions contemplated hereby.
SECTION 6.06. SHAREHOLDER CLAIMS. The Company shall not settle
or compromise any claim brought by any present, former or purported holder of
any securities of the Company in connection with the Offer or the Merger prior
to the Effective Time without the prior written consent of Parent and shall
notify Parent promptly upon receipt of all written demands for dissenters'
rights.
SECTION 6.07. RESIGNATION OF DIRECTORS. At the closing of the
Merger, the Company shall deliver to Parent evidence satisfactory to Parent of
the resignation of all Continuing Directors, effective at the Effective Time.
SECTION 6.08. CERTAIN TAX ELECTIONS. The Company will make any
election reasonably requested by Parent with respect to any interest in a
"passive financial investment company" acquired by the Company or any Subsidiary
during the year ending December 31, 1999.
ARTICLE 7
COVENANTS OF PARENT AND MERGER SUB
Each of Parent and Merger Sub agrees that:
SECTION 7.01. CONFIDENTIALITY. Prior to the Effective Time and
after any termination of this Agreement Parent and Merger Sub will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Company and the Subsidiaries furnished to Parent and Merger Sub
in connection with the transactions contemplated by this Agreement, including,
without limitation, the shareholder lists furnished by the Company pursuant to
Section 1.02, except to the extent that such information can be shown to have
been (a) previously known on a nonconfidential basis by Parent or Merger Sub (b)
in the public domain through no fault of Parent or Merger Sub or (c) later
lawfully
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acquired by Parent or Merger Sub from sources other than the Company (provided
that such sources are not known by Parent or Merger Sub to be under any
obligation of confidentiality to the Company with respect to such information);
provided, however, that Parent and Merger Sub may disclose such information to
their respective stockholders, officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement and to potential lenders in connection with
obtaining financing for the transactions contemplated by this Agreement so long
as such Persons are informed by Parent and Merger Sub of the confidential nature
of such information and agree to treat such information confidentially. Parent's
and Merger Sub's obligation to hold any such information in confidence shall be
satisfied if it exercises the same care with respect to such information as it
would take to preserve the confidentiality of its own similar information, it
being understood that Parent and Merger Sub shall remain responsible for breach
of any such agreement. If this Agreement is terminated, Parent and Merger Sub
will, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
destroy or deliver to the Company, upon request, all documents and other
materials, and all copies thereof, obtained by Parent, Merger Sub or on their
behalf from the Company in connection with this Agreement that are subject to
such confidence.
SECTION 7.02. VOTING OF SHARES. Each of Parent and Merger Sub
agrees to vote all Shares beneficially owned by it in favor of adoption of this
Agreement at the Company Shareholder Meeting.
SECTION 7.03. DIRECTOR AND OFFICER INDEMNIFICATION. For six
years after the Effective Time, Parent will cause the Surviving Corporation to
(i) indemnify and hold harmless the present and former officers and directors of
the Company in respect of acts or omissions occurring prior to the Effective
Time (including, without limitation, matters related to the transactions
contemplated by this Agreement), (ii) advance expenses in respect of such
indemnification and (iii) retain limitations on personal liability of directors
for monetary damages, in each case, to the fullest extent provided under the
Company's articles of incorporation and bylaws in effect on the date hereof;
provided, however, that such indemnification shall be subject to any limitation
imposed from time to time under applicable law. For six years after the
Effective Time, Parent will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect of
acts or omissions occurring prior to and including the Effective Time covering
each such Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date hereof, PROVIDED that
in satisfying its obligation under this Section, Parent shall not be obligated
to cause the Surviving Corporation to pay premiums in excess of 150% of the
amount per annum the Company paid in its last full fiscal year (the "Maximum
Premium"), which amount has been disclosed to Parent; provided that if the
premium exceeds the Maximum Premium, the officers and directors covered by such
insurance policy shall have the opportunity, upon 30 days notice from the
Surviving Corporation prior to renewal of any such policy, to pay the difference
between the Maximum Premium and the actual premium.
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ARTICLE 8
COVENANTS OF PARENT, MERGER SUB AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best 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 the transactions contemplated by this Agreement, subject to the terms
of this Agreement, and shall use their respective reasonable best efforts to
satisfy the conditions to the transactions contemplated hereby.
SECTION 8.02. CERTAIN FILINGS. The Company, on one hand, and
Parent and Merger Sub, on the other hand, shall cooperate with one another (a)
in connection with the preparation of the Company Disclosure Documents and the
Offer Documents, (b) in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Company Disclosure Documents or the Offer
Documents and seeking timely to obtain any such actions, consents, approvals or
waivers.
SECTION 8.03. HSR FILINGS. The Company and Parent will file,
or cause to be filed, as promptly as possible after the date hereof, with the
United States Federal Trade Commission and the Antitrust Division of the United
States Department of Justice pursuant to the HSR Act the notification required
by the HSR Act, including all requisite documents, materials and information
therefor, and request early termination of the waiting period under the HSR Act.
Each of the Company and Parent shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. The Company and Parent shall each keep the other apprised of the status
of any inquiries or requests for additional information made by any Governmental
Authority and shall comply promptly with any such inquiry or request.
SECTION 8.04. FURTHER INFORMATION. The Company, on one hand,
and Parent and Merger Sub, on the other hand, shall give prompt written notice
to the other of (a) any representation or warranty made by the Company, Parent
or Merger Sub, respectively, contained in this Agreement becoming untrue or
inaccurate in any material respect or (b) the failure by the Company, Parent or
Merger Sub, respectively, to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied under this
Agreement and shall notify the other promptly upon becoming aware of any event
or circumstance which it believes is reasonably likely to give rise to a failure
of any condition to the Offer set forth in Annex I; provided, however, that no
such notification shall affect the representations, warranties,
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<PAGE> 52
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
SECTION 8.05. PUBLIC ANNOUNCEMENTS. Parent and the Company
will consult with each other before issuing any press release or making any
public statement with respect to this Agreement and the transactions
contemplated hereby and, except as may be required by applicable law or any
listing agreement with any national securities exchange or the rules applicable
to the Nasdaq Stock Market, will not issue any such press release or make any
such public statement prior to such consultation.
SECTION 8.06. FURTHER ASSURANCES. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of the Company or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of the Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) if required by Florida Law, this Agreement shall have been
approved and adopted by the shareholders of the Company in accordance
with Florida Law;
(b) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no
judgment, injunction, statute, rule, regulation, stay, order or decree
enacted, entered, issued, promulgated or enforced by any court or
Governmental Authority shall prohibit or restrict the consummation of
the Merger;
(d) Parent and/or Merger Sub shall have purchased at least a
majority of the Shares outstanding on a fully diluted basis pursuant to
and in accordance with the Offer; and
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<PAGE> 53
(e) all actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the
Merger shall have been obtained.
SECTION 9.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND
MERGER SUB. The obligations of Parent and Merger Sub to consummate the Merger
are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or
prior to the Effective Time; and
(b) Parent and Merger Sub shall have received all documents
they may reasonably request relating to the existence of the Company
and the Subsidiaries and the authority of the Company for this
Agreement, all in form and substance reasonably satisfactory to Parent
and Merger Sub.
ARTICLE 10
TERMINATION
SECTION 10.01. TERMINATION. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if (i) the Offer has not
been consummated by the date that is 90 days after the commencement of
the Offer, (ii) Parent terminates the Offer in accordance with its
terms without purchasing any Shares pursuant to the Offer or (iii)
there shall be any law or regulation of any Governmental Authority that
makes consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining Parent or the
Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable;
provided that the right to terminate this Agreement pursuant to this
Section 10.01(b) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement results in such
failure to consummate the Offer or the Merger, as the case may be;
(c) by Parent, if the Board of Directors of the Company shall
have (i) withdrawn or materially modified its recommendation referred
to in Section 1.02(b) and/or Section 6.02 in a manner adverse to
Parent, (ii) failed to make or reconfirm either of such recommendations
within two Business Days after a written request to do so from Parent,
(iii) approved or recommended any Superior Proposal or (iv) shall have
resolved to do any of the foregoing; or
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<PAGE> 54
(d) by the Company, if the Board of Directors of the Company
shall have withdrawn or materially modified its recommendation referred
to in Section 1.02(b) and/or Section 6.02 if there exists at such time
a written Acquisition Proposal that constitutes a Superior Proposal,
provided that the right to terminate this Agreement pursuant to this
Section 10.01(d) shall not be available to the Company if it has
breached in any material respect any of its covenants and agreements
(including without limitation Section 6.04) set forth in this
Agreement.
The party desiring to terminate this Agreement pursuant to
clauses 10.01(b), 10.01(c) or 10.01(d) shall give written notice of such
termination to the other party in accordance with Section 11.01.
SECTION 10.02. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and of no
effect with no liability on the part of any party hereto except as set forth
herein, and except that, subject to Section 10.03 below, termination of this
Agreement shall be without prejudice to any rights any party may have hereunder
against any other party for wilful breach of this Agreement. The agreements
contained in Sections 6.04, 7.01, 10.02, 10.03, 11.04 and 11.06 shall survive
the termination hereof.
SECTION 10.03. PARENT FINANCING; LIQUIDATED DAMAGES. In the
event that (i) the Minimum Condition and all other conditions to the Offer set
forth in Annex I are satisfied, other than the condition set forth in paragraph
(ix) of Annex I providing that the Lenders shall have provided the Required
Amounts in accordance with the Commitment Letter, (ii) the failure of the
Lenders to provide the Required Amounts is due solely to the failure of one or
more of the Buyer's Risk Conditions (as defined below) to be satisfied in
accordance with the terms thereof set forth in the Commitment Letter and (iii)
this Agreement is terminated pursuant to Section 10.01(b)(i) or (ii) by Parent
or the Company prior to consummation of the Offer as a result of such condition
in paragraph (ix) of Annex I not having been satisfied, then, Parent shall pay
to the Company Two Million Dollars ($2,000,000) as liquidated damages (the
"LIQUIDATED DAMAGES") promptly upon such termination of this Agreement. In such
event, payment of the Liquidated Damages shall be the Company's sole and
exclusive remedy and the Company shall have no other remedy under this Agreement
or otherwise, whether for breach of contract, in tort or otherwise resulting or
arising from this Agreement or the transactions contemplated hereby. "BUYER'S
RISK CONDITIONS" shall mean the conditions to the obligations of the Lenders to
provide the Required Amounts set forth in those paragraphs of the Commitment
Letter listed on Schedule 10.03.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) (except as otherwise set forth herein) and shall be given,
if to Parent or Merger Sub, to:
National Nephrology Associates, Inc.
511 Union Street, Suite 1800
Nashville, TN 37219
Attention: Dr. Jerome S. Tannenbaum,
Chairman and Chief Executive Officer
Telecopy: (615) 259-0693
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen C. Koval, Esq.
Telecopy: (212) 836-8689
if to the Company, to:
Renex Corp.
201 Alhambra Circle, Suite 800
Coral Gables, FL 33134
Attention: _______________________
Telecopy: _______________________
with a copy to:
Wallace, Bauman, Legon, Fodiman & Shannon, P.A.
1200 Brickell Avenue, Suite 1720
Miami, Florida 33131
Attention: Bryan W. Bauman, Esq.
Telecopy: (305) 444-9937
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be
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effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section.
SECTION 11.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
represen tations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time except for the representations, warranties and agreements set
forth in Sections 2.03, 6.04, 7.01, 7.03 and 8.06 and Article 11.
SECTION 11.03. AMENDMENTS; NO WAIVERS. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and Merger Sub or in the case of a waiver, by
the party against whom the waiver is to be effective, provided that after the
adoption of this Agreement by the shareholders of the Company, no such amendment
or waiver shall, without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of capital stock of the Company, (ii) any term of the articles of
incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 11.04. EXPENSES. Except as provided in Section 6.04,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense. Notwithstanding anything in this
Agreement to the contrary, it is understood that following consummation of the
Offer and Merger Sub's designation of a majority of the Board in accordance with
Section 1.03, any use of cash or cash equivalents by the Company causing cash
and cash equivalents on hand to be less than $9,000,000 will not constitute a
breach of the representation contained in Section 4.28 herein.
SECTION 11.05. SUCCESSORS AND ASSIGNS; BENEFIT. The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto except that
Merger Sub may transfer or assign, in whole or from time to time in part, to one
or more of its affiliates (as such term is defined in Rule 12b-2 under the
Exchange Act), the right to purchase Shares pursuant to the Offer, but any such
transfer or assignment will not relieve Merger Sub of its obligations under the
Offer or prejudice the rights of tendering shareholders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer. Nothing
in this Agreement, expressed or implied, shall confer on any Person other
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than the parties hereto, and their respective successors and assigns, any
rights, benefits, remedies, obligations, or liabilities under or by reason of
this Agreement.
SECTION 11.06. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement shall be construed in accordance with and governed by the law of the
State of Delaware, without giving effect to the principles of conflicts of laws
thereof. Each party hereto hereby (a) irrevocably and unconditionally submits in
any legal action or proceeding relating to this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the general jurisdiction
of the state and federal courts in the State of New York or Florida, and
appellate courts thereof, and (b) consents that any action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same.
SECTION 11.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 11.08. ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter of
this Agreement and supersedes all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter of this
Agreement, including the confidentiality letter by Parent in favor of the
Company dated November 15, 1999 any other confidentiality letters executed by
Parent in favor of the Company.
SECTION 11.09. ATTORNEYS' FEES. In connection with any
controversy or dispute arising out of this Agreement or the transactions
contemplated thereby, the prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection with such controversy or
dispute from the non-prevailing party.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
THE COMPANY:
RENEX CORP.
By: /s/ JAMES P. SHEA
---------------------------------------
Name: James P. Shea
Title: President and Chief
Executive Officer
PARENT:
NATIONAL NEPHROLOGY ASSOCIATES, INC.
By: /s/ JEROME S. TANNENBAUM
---------------------------------------
Name: Jerome S. Tannenbaum
Title: Chairman and Chief
Executive Officer
MERGER SUB:
RC ACQUISITION CORP.
By: /s/ DR. JEROME S. TANNENBAUM
---------------------------------------
Name: Dr. Jerome S. Tannenbaum
Title: Chairman and Chief
Executive Officer
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ANNEX I
CONDITIONS TO THE OFFER
The capitalized terms used herein have the meanings set forth
in the Agreement and Plan of Merger to which this Annex I is attached (the
"Merger Agreement").
Notwithstanding any other provision of the Merger Agreement or
the Offer, Merger Sub shall not be required to accept for payment, purchase or
pay for any Shares tendered pursuant to the Offer, may postpone the acceptance
for payment of and payment for any tendered Shares, and may terminate or,
subject to the terms of the Merger Agreement, amend the Offer, if
(a) the Minimum Condition is not satisfied;
(b) any waiting periods applicable to the Offer and the Merger
and the transactions contemplated by the Merger Agreement pursuant to the HSR
Act shall not have expired or been terminated;
(c) on or after the date of the Merger Agreement and prior to
or at the time of acceptance for payment of any such Shares in the Offer
(whether or not any Shares have theretofore been accepted for payment or paid
for pursuant to the Offer) any of the following conditions shall have occurred
or exist (each of paragraphs (i) through (ix) providing a separate and
independent condition to Parent's and Merger Sub's obligations pursuant to the
Offer):
(i) there shall be instituted or pending any action
or proceeding by any Governmental Authority or by any other
Person, domestic or foreign, before any court or Governmental
Authority (A) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or
prohibit the making of the Offer, the acceptance for payment
of or payment for some of or all the Shares by Merger Sub or
the consummation by the Company, Parent or Merger Sub of the
Merger, or seeking to obtain material damages or imposing any
material adverse conditions in connection therewith, (B)
seeking to restrain or prohibit the Company's, Parent's or
Merger Sub's ownership or operation (or that of their
respective subsidiaries or affiliates) of all or any material
portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, or of Parent and its
subsidiaries, including, without limitation, Merger Sub, taken
as a whole, or to compel the Company, Parent or any of their
subsidiaries or affiliates, including, without limitation,
Merger Sub, to dispose of or hold separate all or any material
portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, or of Parent and its
subsidiaries, including, without limitation, Merger Sub, taken
as a whole, (C) seeking to impose or confer limitations on the
ability of Parent or any of its subsidiaries or affiliates,
including, without limitation, Merger Sub, effectively to
exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or
owned by Parent or any of its subsidiaries or affiliates,
including, without limitation, Merger Sub, on all matters
properly presented to the
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<PAGE> 60
Company's shareholders, (D) seeking to require divestiture by
Parent or any of its subsidiaries or affiliates, including,
without limitation, Merger Sub, of any Shares, or (E) that
otherwise would reasonably be expected to materially adversely
affect the business, assets, liabilities, condition (financial
or otherwise), results of operations or prospects of the
Company and the Subsidiaries, or Parent and its subsidiaries,
including, without limitation, Merger Sub, in each case taken
as a whole; or
(ii) there shall be any action taken, or any statute,
rule, regulation, judgment, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer or the Merger, by any court or
Governmental Authority other than the application of the
waiting period provisions of the HSR Act to the Offer or the
Merger, that is likely, directly or indirectly, to result in
any of the consequences referred to in clauses (A) through (E)
of paragraph (i) above; or
(iii) any change or worsening of any existing
condition shall have occurred in the business, assets,
liabilities, condition (financial or otherwise), results of
operations or prospects of the Company and the Subsidiaries
taken as a whole that is or is likely to have a Material
Adverse Effect; or
(iv) the Company shall have breached or failed to
perform in any material respect any of its covenants or
agreements under the Merger Agreement; or
(v) (A) the representations and warranties of the
Company set forth in Sections 4.28, 4.30 or 4.31 or any of the
representations and warranties of the Company set forth in the
Merger Agreement qualified by materiality or Material Adverse
Effect shall not be true in any respect, or (B) any of the
other representations and warranties set forth in the Merger
Agreement shall not be true in any material respect, in the
case of either clause (A) or (B), when the applicable
representation or warranty is made or at any time prior to
consummation of the Offer as if made at and as of such time;
or
(vi) the Merger Agreement shall have been terminated
in accordance with its terms; or
(vii) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to Parent or
Merger Sub (including by amendment of the Schedule 14D-9) its
approval or recommendation of the Offer or the Merger, or
failed to make or reconfirm its recommendation within two
Business Days after a written request to do so from Parent or
Merger Sub, or shall have approved or recommended any other
tender or exchange offer or other Acquisition Proposal; or
(viii) there shall have occurred (1) any general
suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, Inc., any other
national securities exchange or the Nasdaq Stock Market or any
decline in either the Dow Jones Industrial Average or the
Standard & Poor's Index of 500 Industrial Companies by
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an amount in excess of 20% measured from the close of business
on the date of the Merger Agreement, (2) the declaration of a
banking moratorium or any mandatory suspension of payments in
respect of banks in the United States (3) the commencement of
or escalation of a war, armed hostilities or other
international or national calamity directly or indirectly
involving the United States, or (4) in the case of any of the
foregoing existing on the date of the Merger Agreement, a
material acceleration or worsening thereof; or
(ix) the Required Amounts (as defined in the Merger
Agreement) shall not have been made available to Parent and
Merger Sub in accordance with the terms and conditions of the
Commitment Letter.
The foregoing conditions are for the sole benefit of Parent
and Merger Sub and may be asserted by Parent or Merger Sub regardless of the
circumstances (including any action or omission by Parent or Merger Sub) giving
rise to any such condition and may be waived by Merger Sub or Parent, in whole
or in part in their sole discretion. The failure by Parent or Merger Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each such right will be deemed an ongoing right which may be
asserted at any time and from time to time which, in the reasonable judgment of
Parent or Merger Sub in any such case, and regardless of the circumstances
giving rise to any such condition (including any action or omission by Parent or
Merger Sub), makes it inadvisable to proceed with such acceptance for payment,
purchase or payment.
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Schedule 10.03
BUYER'S RISK CONDITIONS
Capitalized terms used but not defined herein shall have the
meanings given thereto in the Commitment Letter.
The conditions to the obligations of the Lenders to provide
the Credit Facilities pursuant to and in accordance with the Commitment Letter
set forth on this Schedule 10.03 shall constitute "Buyer's Risk Conditions."
1. The following clauses of the eighth (8th) paragraph of the
Commitment Letter:
(i) Clause (a); provided, that the failure of this
condition to be satisfied shall constitute failure of
a Buyer's Risk Condition solely to the extent that
the material adverse condition or material adverse
change referred to therein is a material adverse
condition or material adverse change in the Borrower
and its subsidiaries, taken as a whole;
(ii) Clause (b); provided, that the failure of this
condition to be satisfied shall constitute failure of
a Buyer's Risk Condition solely to the extent that
the information or other matter referred to therein
is information or other matters relating to the
Borrower;
(iii) Clause (d);
(iv) Clause (e); and
(v) Clause (f); provided, that the failure of this
condition to be satisfied shall not constitute
failure of a Buyer's Risk Condition if it results
principally from the acts or omissions of the Target
or any subsidiary thereof or any misrepresentation or
omission in information provided to the Borrower by
the Target or any subsidiary thereof;
2. The following paragraphs of Section V of EXHIBIT A to the Commitment
Letter:
(i) Paragraph (a);
(ii) Paragraph (b) (first sentence);
(iii) Paragraph (b) (second sentence); provided, that the
failure of this condition to be satisfied shall not
constitute failure of a Buyer's Risk Condition to the
extent that such failure is due to changes in the
capital structure of the Target or any subsidiary
thereof;
<PAGE> 63
(iv) Paragraph (i);
(v) Paragraph (k); provided, that the failure of this
condition to be satisfied shall not constitute
failure of a Buyer's Risk Condition if the Target has
breached in any respect its representations and
warranties set forth in Section 4.28 or 4.30 of the
Merger Agreement;
(vi) Paragraph (l);
(vii) Paragraph (o);
(viii) Paragraph (q); provided, that the failure of this
condition to be satisfied shall not constitute
failure of a Buyer's Risk Condition if the Target has
breached in any respect its representations and
warranties set forth in Section 4.28 or 4.30 of the
Merger Agreement; and
(ix) Paragraph (r); provided, that the failure of this
condition to be satisfied shall not constitute
failure of a Buyer's Risk Condition if the Target has
breached in any respect its representations and
warranties set forth in Section 4.31 of the Merger
Agreement.
2
<PAGE> 1
EXHIBIT 2
December 28, 1999
Board of Directors
Renex Corp
201 Alhambra Circle, Suite 800
Coral Gables, Florida 33134
Gentlemen:
In connection with National Nephrology Associates, Inc.'s ("NNA")
consideration of a possible negotiated transaction with Renex Corp. (the
"Company"), NNA understands the Company is prepared to make available to NNA
certain information concerning the business, financial position, operations,
assets and liabilities of the Company. As a condition to such information being
furnished to NNA and its employees or affiliates (as such term is defined under
the Securities Exchange Act of 1934, as amended (the "1934 Act")), agents or
advisors (including, without limitation, attorneys, accountants, consultants,
financing sources and financial advisors) (collectively, "Representatives"), NNA
agrees to treat any information concerning the Company (whether prepared by the
Company, its advisors or otherwise and irrespective of the form of
communication) which is furnished to NNA or to its Representatives now or in the
future by or on behalf of the Company (herein collectively referred to as the
"Evaluation Material") in accordance with the provisions of this letter
agreement, and to take or abstain from taking certain other actions hereinafter
set forth.
The term "Evaluation Material" also shall be deemed to include
all reproductions, summaries, notes, analyses, compilations, studies,
interpretations or other documents prepared by NNA or its Representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to NNA or its Representatives pursuant hereto ("Derivative Material").
The term "Evaluation Material" does not include information which (i) is or
becomes generally available to the public other than as a result of a disclosure
by NNA or its Representatives, or (ii) as shown by written records, was lawfully
within NNA's possession prior to it being furnished to NNA by or on behalf of
the Company, provided that the source of such information was not known by NNA
to be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any other party with
respect to such information.
NNA hereby agrees that all Evaluation Material furnished or
disclosed to NNA by the Company shall remain the property of the Company (unless
otherwise agreed in writing), that the Company is only loaning the Evaluation
Material to NNA, that NNA has not received and will not receive any rights or
claims with respect to the Evaluation Material, that the Evaluation Material
will be kept confidential, and that NNA and its Representatives will not use,
duplicate, disclose, or permit the use, duplication or disclosure of any of the
Evaluation Material in any manner whatsoever, other than for the sole purpose of
evaluating a possible negotiated transaction between NNA and the Company;
provided, that (i) NNA may make any disclosure of such information to which the
Company gives its prior written consent and (ii) any of such information may be
disclosed to NNA's Representatives who need to know such information for the
sole purpose of evaluating a possible negotiated transaction with the Company.
NNA further agrees that all Derivative Material shall become and remain the
property of the Company immediately upon its creation. NNA agrees to inform each
its Representatives of the confidential nature of the Evaluation Material prior
to delivery to such Representative and that, by receiving such materials, such
Representative will be deemed to have agreed to be bound by this letter
agreement. In any event, NNA shall be responsible for any breach of this letter
agreement by any of its Representatives, and NNA agrees, at its sole expense, to
take all reasonable measures (including, without limitation, court
<PAGE> 2
Renex Corp.
December 28, 1999
Page 2
proceedings) to restrain its Representatives from prohibited or unauthorized
disclosure or use of the Evaluation Material.
NNA and its Representatives will not disclose to any other person
the fact that the Evaluation Material has been made available to NNA, that
discussions or negotiations are taking place concerning a possible transaction
involving the Company, or any of the terms, conditions or other facts with
respect thereto (including the status thereof), provided that NNA may make such
disclosure if NNA has received the written opinion of outside counsel that such
disclosure must be made by NNA in order that NNA not commit a violation of law.
The term "person" as used in this letter agreement shall be broadly interpreted
to include the media and any individual, corporation, partnership, group, or
other entity.
In the event that NNA or any of its Representatives are requested
or required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, NNA shall provide
the Company, with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this letter agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
Company, NNA or any of its Representatives are nonetheless, in the written
opinion of NNA's outside counsel, legally compelled to disclose Evaluation
Material to any tribunal, NNA or its Representatives may, without liability
hereunder, disclose to such tribunal only that portion of the Evaluation
Material which such counsel advises NNA is legally required to be disclosed.
If NNA decides that it does not wish to proceed with a
transaction with the Company, it will promptly inform the Company of that
decision. In that case, or at any time upon the request of the Company for any
reason, NNA will promptly deliver to the Company or certify destruction of all
Evaluation Material (and all copies thereof) furnished to NNA or its
Representatives by or on behalf of the Company, and all other Evaluation
Material (including all Derivative Material) prepared by NNA or its
Representatives shall be destroyed, and no copy thereof shall be retained.
Notwithstanding the return or destruction of the Evaluation Material, NNA and
its Representatives will continue to be bound by the obligations of
confidentiality and other obligations hereunder.
NNA agrees that neither the Company, nor any of its
Representatives shall be deemed to have made any representation or warranty,
express or implied, as to the accuracy or completeness of the Evaluation
Material, and neither the Company, nor any of its Representatives shall have any
liability to NNA or to any of NNA's Representatives relating to or resulting
from the use of the Evaluation Material or any errors therein or omissions
therefrom.
NNA understands and agrees that no contract or agreement
providing for any transaction involving the Company shall be deemed to exist
with NNA unless and until a final definitive agreement has been executed and
delivered. NNA also agrees that unless and until a final definitive agreement
regarding a transaction between NNA and the Company has been executed and
delivered, neither NNA or the Company will be under any legal obligation of any
kind whatsoever with respect to such a transaction by virtue of this letter
agreement, except for the matters specifically agreed to herein.
NNA further acknowledges and agrees that the Company reserves the
right, in its sole discretion, to reject any and all proposals made by NNA or
any of its Representatives with regard to a transaction between NNA and the
Company, and to terminate discussions and negotiations with NNA at any time. NNA
further understands that (i) the Company and its Representatives shall be free
to
<PAGE> 3
Renex Corp.
December 28, 1999
Page 3
conduct any process for any transaction involving the Company, if and as they in
their sole discretion shall determine, including, without limitation,
negotiating with any other interested parties and entering into a definitive
agreement, without prior notice to NNA or any other person), (ii) any procedures
relating to such process or transaction may be changed at any time without
notice to NNA or any other person, and (iii) NNA shall not have any claims
whatsoever against the Company, its Representatives and each of their respective
directors, officers, owners, affiliates or agents arising out of or relating to
any transaction involving the Company, unless a definitive agreement is entered
into with NNA. NNA agrees that neither this paragraph nor any other provision in
this agreement can be waived or amended except by written consent of the
Company.
NNA hereby acknowledges that the Evaluation Material is being
furnished to NNA in consideration of NNA's agreement that, for a period of three
years from the date of this agreement neither NNA nor any of its Representatives
will in any manner, directly or indirectly, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect, or cause or participate in or in any
way assist any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or assets of the Company, (ii) any
tender or exchange offer, merger or other business combination involving the
Company, (iii) any recapitalization, restructuring, liquidation, dissolution or
other extraordinary transaction with respect to the Company, or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
the Company, (b) form, join or in any way participate in a "group" (as defined
under the 1934 Act), (c) otherwise act, alone or in concert with others, to seek
to control or influence the management, Board of Directors or policies of the
Company, (d) take any action which might force the Company to make a public
announcement regarding any of the types of matters set forth in (a) above, or
(e) enter into any discussions or arrangements with any third party with respect
to any of the foregoing. NNA also agrees during such period not to request the
Company (or its directors, officers, employees, advisors or agents), directly or
indirectly, to amend or waive any provision of this paragraph (including this
sentence).
NNA acknowledges that it is aware that the United States
securities laws prohibit NNA, its Representatives, and any person who has
received material non-public information about the Company from purchasing or
selling the Company's securities or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities in reliance on such
information.
In consideration of the Evaluation Material being furnished to
NNA, NNA hereby agrees that, for a period of two years from the date hereof,
neither NNA nor any of its affiliates will solicit to employ any of the current
officers, employees or independent contractors (including medical directors) of
the Company so long as they are employed by the Company, without obtaining the
prior written consent of the Company.
NNA understands and agrees that no failure or delay by the
Company in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege hereunder.
NNA agrees that the restrictions contained herein are fair and
reasonable and necessary to protect the legitimate interests of the Company and
its stockholders. NNA agrees that the Company and its stockholders would suffer
irreparable injury if NNA or its Representatives were to violate any provision
<PAGE> 4
Renex Corp.
December 28, 1999
Page 4
of this letter and that in the event of a breach or threatened breach of this
letter by NNA or its Representatives, the Company, without prejudice to any
rights to judicial relief it may otherwise have, shall be entitled to equitable
relief, including injunction and specific performance, in the event of any
breach of the provisions of this letter agreement and that NNA shall not oppose
the granting of such relief. NNA also waives (and will use its reasonable
efforts to cause its Representatives to waive) any requirement for the securing
or posting of a bond in connection with the Company seeking or obtaining such
relief. In the event of litigation relating to this letter agreement, if a court
of competent jurisdiction determines that NNA or any of its Representatives have
breached this letter agreement, then NNA shall be liable and pay to the Company
the reasonable legal fees incurred by the Company in connection with such
litigation, including any appeal therefrom.
If any one or more provisions of this letter agreement are
declared void or otherwise unenforceable, such provisions shall be declared
separate from this letter agreement and this letter agreements shall otherwise
remain in full force and effect.
This letter agreement is for the benefit of the Company, it
stockholders and their Representatives, officers and directors, and shall be
construed (both as to validity and performance) and enforced in accordance with,
and governed by, the laws of the State of Florida applicable to agreements made
and to be performed wholly within such jurisdiction. The parties acknowledge
that a substantial portion of the negotiations, anticipated performance and
execution of this Agreement occurred or shall occur in Miami-Dade County,
Florida and that, therefore, each party irrevocably and unconditionally agree
that: (a) any suit, action or legal proceeding arising out of or relating to
this Agreement and the subject matter thereof shall be brought in the courts of
record of the State of Florida in Miami-Dade County or the United States
District Court Southern District of Florida; (b) consents to the jurisdiction of
each such court in any suit, action or proceeding, and (c) waives any objection
to the venue of any suit, action or proceeding in any such court.
Very truly yours,
NATIONAL NEPHROLOGY ASSOCIATES, INC.
Date: 11/15/99 By: /s/ STEVEN HARRISON
-------------------------- -------------------------------
Name: STEVEN HARRISON
------------------------------
Title: EXECUTIVE VICE PRESIDENT
-----------------------------
<PAGE> 1
Exhibit 3
December 21, 1999
National Nephrology Associates, Inc.
511 Union Street, Suite 1800
Nashville, TN 37219
Gentlemen:
In connection with our consideration of a possible transaction with
National Nephrology Associates, Inc. (the "Company"), we have requested
information concerning the Company. As a condition to your furnishing of that
information to us, we agree, as set forth below, to treat confidentially that
information and any other information (collectively, "Evaluation Data")
furnished to us (at any time on, before or after the date of this agreement) by
the Company or its affiliates or representatives concerning the Company.
We will not use the Evaluation Data for any purpose other than the
evaluation of the possible transaction with the Company and the Evaluation Data
shall be kept confidential by us and our agents; however, Evaluation Data may be
disclosed to those of our directors, officers and representatives who need to
have access to such Evaluation Data for our evaluation of a possible transaction
with the Company (we shall (x) inform such directors, officers and
representatives of the confidential nature of such information and (y) direct
and cause them (i) to keep such information confidential, and (ii) not to use
such information for any purpose other than the evaluation of the possible
transaction between us and the Company).
In addition, without the prior written consent of the Company, we shall
not, and shall direct and cause our directors, officers and representatives not
to, disclose to any person the fact that discussions or negotiations are taking
place concerning a possible transaction between us and the Company or any of the
terms, conditions or other facts with respect to any such possible transaction,
including, but not limited to, the status thereof. The term "person" as used in
this agreement shall be interpreted very broadly and shall include, but not be
limited to, any individual, corporation, company, partnership, limited liability
company, governmental body or agency, or other legal entity.
At any time at the request of the Company, we shall promptly deliver to
the Company all documents and other material in our possession (or in the
possession of any of our directors, officers and representatives) containing or
based upon any of the Evaluation Data, whether prepared by the Company, us or
any other person at any time before or after the date of this agreement, without
retaining any copies thereof.
This agreement shall not apply to particular portions of the Evaluation
Data that (x) are or become matters of general public knowledge other than as a
result of a disclosure by us or our directors, officers, employees or
representatives or (y) are disclosed to us on a non-confidential basis by a
source (other than the Company or its agents) not thereby violating any
agreement with or other duty to the Company.
<PAGE> 2
We acknowledge that, although the Company has endeavored to provide the
Evaluation Data requested by us, the Company and its agents make no
representation or warranty as to the accuracy or completeness of the Evaluation
Data. We agree that none of the Company, its affiliates, and their respective
directors, officers, employees and representatives shall have any liability to
us or any of our representatives resulting from or in connection with the use of
any of the Evaluation Data by us or our representatives.
No failure or delay by the Company to exercise any right or remedy
under or with respect to this agreement shall operate as a waiver nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right or remedy. This agreement may not be
changed or terminated orally; all waivers hereunder must be in writing and
executed by the Company. This agreement shall be governed and construed in
accordance with the internal laws of the State of New York and we hereby consent
to the jurisdiction of the courts of the State of New York (and the federal
courts located therein) for purposes of any action or proceeding to enforce, or
otherwise relating to, this agreement and agree that process in any such action
or proceeding may be served on us anywhere in the world.
Very truly yours,
Renex Corp.
By: /s/ James P. Shea
---------------------------------
Name: James P. Shea
Title: President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 4
[Renex Corp]
December 30, 1999
Dear Fellow Stockholders:
We are pleased to inform you that on December 28, 1999 Renex
Corp., ("Renex") entered into an Agreement and Plan Merger (the "Merger
Agreement") providing for the acquisition of Renex by RC Acquisition Corp.
("Purchaser"), a wholly owned subsidiary of National Nephrology Associates,
Inc. ("NNA").
As required by the Merger Agreement, Purchaser today commenced a
cash tender offer to purchase all outstanding shares of Renex common stock,
including the associated Preferred Stock Purchase Rights (the "Shares"), at a
price of $10.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated December 30,
1999 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with the Offer to Purchase, as the same may be amended or supplemented
from time to time, constitute the "Offer"). The Offer is currently scheduled to
expire at 12:00 midnight, New York City time, on January 28, 2000, but may be
extended subject to the terms of the Merger Agreement.
Following the purchase of Shares under the Offer and the
satisfaction or waiver of certain other conditions, Purchaser will merge with
and into Renex (the "Merger") and each Share not purchased in the Offer (other
than Shares held by shareholders who have perfected any dissenters' rights
available under Florida law) will be converted into the right to receive $10.00
in cash. Following consummation of the Merger, the Shares will no longer be
publicly traded and will be owned by NNA.
The Offer is conditioned upon, among other things, (i) there
being validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which represents at least a majority of all outstanding Shares
on a fully diluted basis (ii) Parent having received financing of the purchase
price and (iii) the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
The Board of Directors of Renex Corp. 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 shareholders of Renex and
recommends that Renex's shareholders accept the Offer and tender their Shares
pursuant to the Offer. In arriving at its recommendation, the Board of
Directors has given careful consideration to a number of factors as described
in the Schedule 14D-9 filed with the Securities and Exchange Commission,
including the fairness opinion of Prudential Securities Incorporated, Renex's
financial advisor. The Schedule 14D-9 contains other important information
relating to the Offer, and you are encouraged to read the Schedule 14D-9
carefully.
Also accompanying this letter is the Offer to Purchase, together
with the related materials, including the Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of the
Offer and provide information with respect to tendering your Shares in the
Offer. If you have any questions or require assistance in tendering your Shares,
you may contact Morrow & Co., Inc., the Information Agent of Purchaser, at the
telephone numbers and addresses listed on the back cover of the Offer to
Purchase.
On behalf of the Board of Directors and management of Renex, we
thank your for your support.
Sincerely,
Milton J. Wallace James P. Shea,
Chairman of the Board President/Chief Executive
of Directors Officer
SunTrust Plaza, 201 Alhambra Circle, Suite 800, Coral Gables, FL 33134
o Phone: (305) 448-2044 o (800) 847-0111 o Fax (305) 448-1154 o
<PAGE> 1
EXHIBIT 5
NATIONAL NEPHROLOGY ASSOCIATES TO ACQUIRE RENEX
NASHVILLE, TN and CORAL GABLES, FL---December 28, 1999 --
National Nephrology Associates, Inc. ("NNA") and Renex Corp. (Nasdaq -NMS: RENX)
("Renex") jointly announced today that they have entered into a definitive
agreement pursuant to which a wholly-owned subsidiary of NNA will offer to
purchase all of the outstanding shares of Renex for $10.00 per share in cash.
The total transaction value, including consideration for shares, stock options
and warrants is approximately $75 million. Pursuant to the agreement, NNA's
subsidiary will promptly commence a tender offer for all outstanding shares of
Renex. The definitive agreement has been approved by both parties' Boards of
Directors. If shares constituting a majority of Renex' outstanding shares on a
fully diluted basis are acquired pursuant to the offer and the other conditions
to the offer are satisfied, any remaining shares will be acquired at the same
price by means of a cash merger of NNA's subsidiary with and into Renex.
Completion of the tender offer is subject to a number of
conditions, including there having been validly tendered shares constituting a
majority of the outstanding shares of Renex on a fully diluted basis, expiration
or termination of the Hart-Scott-Rodino waiting period, NNA having obtained
financing in accordance with the commitments issued by its lenders and other
customary conditions.
In connection with the merger agreement, NNA has entered into a
shareholder agreement with the directors and executive officers of Renex who
collectively own approximately 31% of the outstanding Renex shares on a fully
diluted basis. Pursuant to the shareholder agreement, these directors and
executive officers have agreed to tender their shares in the Offer and have
granted NNA an option to purchase their shares.
The Board of Directors of Renex has approved the offer and
determined that the price to be paid in the offer and in the subsequent merger
is fair to its shareholders and has recommended that Renex shareholders accept
the offer and tender their shares. In connection with the transaction, Renex was
advised by, and received a fairness opinion from, Prudential Vector Healthcare
Group, a unit of Prudential Securities Incorporated.
Milton J. Wallace, Chairman of the Board said, "Our management is
proud that Renex Corp., established in 1993, is realizing value for its
shareholders of approximately $75 million. The Board of Directors recommends
that the shareholders tender their shares in the Offer. We look forward to the
consummation of the transaction and the successful integration of our company
with NNA."
"Renex is an outstanding company with excellent clinical
operations, " said Jerome S. Tannenbaum, M. D., Chairman and Chief Executive
Officer of NNA. "We are pleased to be acquiring a provider of dialysis services
which is known for its high quality of care."
Renex Corp was formed in 1993 by Milton J. Wallace, Chairman and
Arthur Shapiro, M. D., Vice Chairman. James P. Shea is the President and Chief
Executive Officer.
Renex Corp. provides dialysis and ancillary services to
approximately 1,300 patients suffering from kidney failure, generally referred
to as end stage renal disease. The Company provides dialysis services through 21
outpatient facilities and a staff assisted home dialysis program. Additionally,
the Company provides in-patient acute dialysis services at 21 hospitals.
<PAGE> 2
NNA owns and operates 32 dialysis clinics in 5 states. NNA
commenced operations in December 1998 and its principal shareholders are J. W.
Childs Equity Partners II, L. P., Credit Agricole Indosuez and the NNA
management team.
The tender offer will be made only upon and subject to the terms
and conditions of the Offer to Purchase and the related Letter of Transmittal.
THE FOREGOING INFORMATION REGARDING THE SALE OF RENEX CORP. IS
PRELIMINARY AND CONSTITUTES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS,
UNCERTAINTIES AND OTHER FACTS WHICH MAY RESULT IN THE SALE OF RENEX NOT
OCCURRING OR IF IT OCCURS, NOT ON THE TERMS PROVIDED ABOVE.
Contacts
Renex Corp
James P. Shea
(305) 444-9991
NNA
Lief Murphy
(615) 777-6484
- 2 -
<PAGE> 1
[LOGO] Prudential EXHIBIT 6
Prudential Vector Healthcare Group
Prudential Securities Incorporated
1751 Lake Cook Road
Deerfield, IL 60015
Tel 847 940-1970 Fax 847 940-0774
PRIVATE AND CONFIDENTIAL
- ------------------------
December 27, 1999
The Board of Directors
Renex Corp.
201 Alhambra Circle, Suite 800
Coral Gables, Florida 33134
Members of the Board of Directors:
We understand that Renex Corp., a Florida corporation (the "Company"), National
Nephrology Associates, Inc., a Delaware corporation ("NNA"), and RC Acquisition
Corp., a Florida corporation and a wholly-owned subsidiary of NNA
("Subsidiary"), propose to enter into an Agreement and Plan of Merger (the
"Agreement") providing, upon the terms and subject to the conditions set forth
therein, for (i) Subsidiary to commence a tender offer (the "Offer") to purchase
all the outstanding shares (the "Shares") of common stock, par value $0.001 per
Share, of the Company (the "Company Common Stock") at a purchase price of $10.00
per Share, net to the seller in cash (the "Consideration"), and (ii) the
subsequent merger (the "Merger" and, together with the Offer, the "Transaction")
of Subsidiary with and into the Company, pursuant to which each outstanding
Share not previously tendered, other than Shares owned by NNA, any subsidiary of
NNA, the Company, any subsidiary of the Company, or Dissenting Shares (as
defined in the Agreement), shall be converted into the right to receive the
Consideration.
You have requested our opinion as to the fairness from a financial point of view
as of the date hereof of the Consideration to be received by the holders of
Company Common Stock pursuant to the Transaction.
In conducting our analysis and arriving at the opinion expressed herein, we have
reviewed such materials and considered such financial and other factors as we
deemed relevant under the circumstances, including:
(i) a draft, dated December 21, 1999, of the Agreement;
(ii) certain publicly available historical, financial and operating
data for the Company including, but not limited to, (a) the
Annual Report to Shareholders and Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, (b) the Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 1999, and
(c) the Proxy Statement relating to the Annual Meeting of
Shareholders held on June 30, 1999;
(iii) historical stock market prices and trading volumes for the
Company Common Stock;
(iv) certain information relating to the Company, including projected
balance sheet, income statement and cash flow data for the 1999,
2000, 2001 and 2002 fiscal years, prepared by the management of
the Company;
<PAGE> 2
The Board of Directors
Renex Corp.
December 27, 1999
Page 2
(v) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses that we deemed
comparable to the Company or otherwise relevant to our inquiry;
(vi) the financial terms of certain recent transactions that we deemed
relevant to our inquiry; and
(vii) such other financial studies, analyses and investigations that we
deemed relevant to our inquiry.
We have assumed, with your consent, that the draft of the Agreement we reviewed
will conform in all material respects to the Agreement when in final form.
We have met with the senior management of the Company to discuss (i) the past
and current operating and financial condition of the Company, (ii) the prospects
for the Company, (iii) their estimates of the Company's future financial
performance, and (iv) such other matters we deemed relevant.
In connection with our review and analysis and in arriving at our opinion, we
have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and have not undertaken any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company nor have any such
valuations or appraisals been provided to us. With respect to certain financial
forecasts provided to us by the Company, we have assumed that such information
(and the assumptions and bases therefor) has been reasonably prepared and
represents the Company's best currently available estimate as to the future
financial performance of the Company and that the Company will perform in
accordance with such projections. We assume no responsibility for and express no
view as to such forecasts or the assumptions under which they were prepared.
Further, our opinion is necessarily based on economic, financial and market
conditions as they exist and can only be evaluated as of the date hereof.
In connection with the preparation of this opinion, we have not been authorized
by the Company or its Board of Directors to solicit, nor have we solicited,
third party indications of interest for the acquisition of all or part of the
Company.
Our opinion does not address nor should it be construed to address the relative
merits of the Transaction or alternative business strategies that may be
available to the Company.
As you know, we have been retained by the Board of Directors of the Company to
render this opinion and to serve as the Company's financial advisor in
connection with the Transaction and will receive a fee from the Company for such
services, a portion of which fee is contingent upon consummation of the
Transaction. In the ordinary course of business we may actively trade the Shares
of Company Common Stock for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This letter and the opinion expressed herein are for the use and benefit of the
Board of Directors of the Company. This opinion does not constitute a
recommendation to the shareholders of the Company as to whether such
shareholders should tender their Shares in the Offer or how such shareholders
should vote in connection with the Merger or as to any other action such
shareholders should take regarding the Transaction. This opinion may not be
reproduced, summarized, excerpted from or otherwise publicly referred to or
disclosed in any manner without our prior written consent;
<PAGE> 3
The Board of Directors
Renex Corp.
December 27, 1999
Page 3
except that the Company may include this opinion in its entirety in any
materials relating to the Offer or Merger sent to the Company's shareholders and
filed with the Securities and Exchange Commission.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Consideration to be received by the holders of Company Common
Stock pursuant to the Transaction is fair from a financial point of view.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
/s/ Shahab Fatheazam
------------------------------------
Shahab Fatheazam
Managing Director
<PAGE> 1
EXHIBIT 7
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT TO RIGHTS AGREEMENT, dated as of December 28, 1999,
between RENEX CORP., a Florida corporation (the "Company"), and CONTINENTAL
STOCK TRANSFER AND TRUST COMPANY, a New York corporation (the "Rights Agent").
R E C I T A L S:
A. The Company and the Rights Agent entered into a Rights Agreement
as of November 6, 1998 (the "Rights Agreement");
B. Pursuant to Section 26 of the Rights Agreement, the Company and
the Rights Agent may from time to time supplement or amend the Rights Agreement
in accordance with the provisions of Section 26 thereof;
C. All acts necessary to make this Amendment a valid agreement
according to its terms have been done and performed; and
D. The execution and delivery of this Agreement by the Company and
the Rights Agent have been in all respects authorized by the Company and the
Rights Agent.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and such other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. RECITATIONS. The above recitations are true and correct and are
incorporated herein by this reference.
2. Section 1(a) of the Rights Agreement is hereby modified and
amended to read in its entirety as follows:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company,
(iv) any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan, (v) any Person who becomes an
Acquiring Person solely as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of shares of Common Stock by the
Company, unless and until such Person shall purchase or otherwise become the
Beneficial Owner of additional shares of Common Stock constituting 1% or more of
the then outstanding shares of Common Stock or (vi) National Nephrology
Associates, Inc. a Delaware corpora tion, or any wholly owned subsidiary thereof
(collectively, "NNA") from and after the date (the "Offer Date") any shares of
Common Stock are accepted for purchase pursuant to the Offer (as defined in the
Agreement and Plan of Merger, dated as of December 28, 1999 (the "Merger
Agreement") among National Nephrology Associates, Inc., a Delaware corporation,
and the Company), and prior to the Offer Date so long as the Merger Agreement
shall not have been terminated in accordance with its terms.
3. Section 3(a) of the Rights Agreement is hereby amended by adding
as the second sentence thereto the following:
"Notwithstanding the foregoing, neither the first public
announcement of the intent of NNA to commence the Offer (as defined
in the Merger Agreement) nor the commencement of the Offer, shall
cause the Distribution Date to occur."
<PAGE> 2
4. The introductory clause of Section 11(a) (ii)(C) is hereby
amended to read in its entirety:
"(C) the Board of Directors of the Company shall declare any Person
(except NNA so long as the Merger Agreement shall not have been
terminated in accordance with its terms) to be an Adverse Person
upon:"
5. Except as expressly amended hereby, the Rights Agreement remains
in full force and effect in accordance with its terms.
6. This Amendment to the Rights Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
7. This Amendment to the Rights Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed an original, and all such counterparts shall together constitute but one
and the same instrument.
8. Except as expressly set forth herein, this Amendment to the
Rights Agreement shall not by implication or otherwise alter, modify, amend or
in any way affect any of the terms, conditions, obligations, cove nants or
agreements contained in the Rights Agreement, all of which are ratified and
affirmed in all respects and shall Continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
RENEX CORP.
By: /s/ JAMES P. SHEA
-----------------------------------------
JAMES P. SHEA
President/Chief Executive Officer
CONTINENTAL STOCK TRANSFER AND
TRUST COMPANY
By: /s/ ROGER BERNHAMMER
-----------------------------------------
Name: ROBER BERNHAMMER
---------------------------------------
Title: VICE PRESIDENT
--------------------------------------
- 2 -
<PAGE> 1
EXHIBIT 8
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "Agreement") dated as of December 28,
1999, by and among National Nephrology Associates, Inc., a corporation organized
under the laws of Delaware ("Parent"), RC Acquisition Corp., a Florida
corporation and wholly-owned subsidiary of Parent (the "Merger Sub") and the
Shareholders named on Exhibit A hereto (each a "Shareholder").
WHEREAS, each Shareholder is, as of the date hereof, the record and
beneficial owner of the number of shares of common stock, par value $0.001 per
share ("Common Stock") of Renex Corp. (the "Company") set forth next to such
Shareholder's name on Exhibit A hereto; and
WHEREAS, Parent, Merger Sub and Renex Corp. (the "Company")
concurrently herewith are entering into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), which provides, among other
things, for the acquisition of the Company by Parent by means of a cash tender
offer (the "Offer") by Merger Sub for any and all of the outstanding shares of
Common Stock and for the subsequent merger (the "Merger") of Merger Sub with and
into the Company upon the terms and subject to the conditions set forth in the
Merger Agreement; and
WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into the Merger Agreement, and in order to induce Parent and Merger Sub to
enter into the Merger Agreement, each Shareholder has agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and the Merger Sub of the Merger Agreement and the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein
and therein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder hereby severally represents and warrants to Parent and Merger Sub as
follows as to such Shareholder:
a. Such Shareholder is the record and beneficial owner of the shares of
Common Stock ("Shares") set forth next to such Shareholder's name on Exhibit A
hereto. Such Shareholder is the record and beneficial owner of the options
and/or warrants to purchase Common Stock set forth next to such Shareholder's
name on Exhibit B hereto ("Options and Warrants"). Such Shares and Options and
Warrants constitute all of the shares of Common Stock and other securities
convertible into or exercisable or exchangeable for shares of Common Stock owned
of record or beneficially by such Shareholder. The Shares and the shares of
Common Stock issuable upon exercise of the Options and Warrants are collectively
referred to herein as such Shareholder's "Subject Shares".
<PAGE> 2
b. Such Shareholder, if a corporation or other entity, is duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction, has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and has taken all necessary corporate, partnership or other action to authorize
the execution, delivery and performance of this Agreement.
c. This Agreement has been duly authorized, executed and delivered by
such Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms.
d. Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding or arrangement of any kind to which
the Shareholder is a party or bound or to which such Shareholder's Subject
Shares are subject. Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate, or require any consent, approval, or notice under any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to such
Shareholder or such Shareholder's Subject Shares, except for any necessary
filing under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or state takeover laws.
e. Such Shareholder has (or, with respect to Option and Warrants, upon
exercise will have) sole voting power, sole power of disposition and all other
shareholder rights with respect to all of such Shareholder's Subject Shares,
with no restrictions, other than pursuant to applicable securities laws, on the
Shareholder's rights of disposition pertaining thereto. Such Shareholder's
Subject Shares and the certificates or agreements representing such
Shareholder's Subject Shares are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder or otherwise disclosed in writing to the Parent.
f. There is no suit, action, investigation or proceeding pending or, to
the knowledge of such Shareholder, threatened against such Shareholder at law or
in equity before or by any Governmental Authority that could reasonably be
expected to materially impair the ability of such Shareholder to perform such
Shareholder's obligations hereunder or to consummate the transactions
contemplated hereby, and there is no judgment, decree, injunction, rule, order
or writ of any Governmental Authority to which such Shareholder or such
Shareholder's assets are subject that could reasonably be expected to materially
impair the ability of such Shareholder to perform such Shareholder's obligations
hereunder or to consummate the transactions contemplated hereby.
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<PAGE> 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Each of Parent and Merger Sub hereby represents and warrants to each Shareholder
as follows:
a. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Florida, has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement.
b. This Agreement has been duly authorized, executed and delivered by
each of Parent and Merger Sub and constitutes the legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms.
c. Neither the execution and delivery of this Agreement nor the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding or arrangement of any kind
to which each of Parent and Merger Sub is a party or bound. Neither the
execution and delivery of this Agreement nor the consummation by each of Parent
and Merger Sub of the transactions contemplated hereby will violate, or require
any consent, approval, or notice under any provision of any judgment, order,
decree, statute, law, rule or regulation applicable to either Parent or Merger
Sub, except for any necessary filing under the HSR Act, the Exchange Act or
state takeover laws.
SECTION 3. PURCHASE AND SALE OF THE SHARES; OPTION.
a. Merger Sub hereby agrees to make the Offer. Each Shareholder hereby
severally agrees that it shall tender its Subject Shares into the Offer in
accordance with the terms and conditions of the Offer and that it shall not
withdraw any Subject Shares so tendered unless the Merger Agreement is
terminated in accordance with its terms. In addition, each Shareholder hereby
severally agrees to sell to Merger Sub, and Merger Sub hereby agrees to
purchase, all such Shareholder's Subject Shares at the price set forth in the
Offer or such higher price per Subject Share as may be offered by Merger Sub in
the Offer (the "Purchase Price"), provided that such obligation to purchase is
subject to Merger Sub having accepted Shares for payment under the Offer and the
Minimum Condition and other conditions set forth in Annex I of the Merger
Agreement having been satisfied, which conditions may be waived by Merger Sub in
its sole discretion.
b. Each Shareholder hereby grants to Merger Sub (or its designee) an
irrevocable option (collectively, the "Option") to purchase such Shareholder's
Subject Shares at a price per Share equal to the Purchase Price. The Option may
be exercised in whole but not in part at any
3
<PAGE> 4
time on or prior to the thirtieth (30th) day after termination of the Merger
Agreement; provided, that, in the event that the Merger Agreement is terminated
by Parent or the Company pursuant to Section 10.01(b), 10.01(c) or 10.01(d), as
the case may be, at any time after the Company has received an Acquisition
Proposal from a Third Party (a "Competing Proposal"), the Option shall remain
exercisable until such Competing Proposal shall have been withdrawn or any
agreement with such Third Party with respect to such Competing Proposal shall
have been terminated.
c. If Merger Sub wishes to exercise the Option, Merger Sub shall send a
written notice to the Shareholder of its intention to exercise the Option,
specifying the place, and, if then known, the time and the date (the "Closing
Date") of the closing (the "Closing") of the purchase. The Closing Date shall
occur on the fifth business day (or such longer period as may be required by
applicable law or regulation) after the later of (i) the date on which such
notice is delivered and (ii) the satisfaction of the conditions set forth in
Section 3(f).
d. At the Closing, the Shareholder shall deliver to Merger Sub (or its
designee) all of such Shareholder's Subject Shares by delivery of a certificate
or certificates evidencing such Subject Shares in the denominations designated
by Merger Sub in its exercise notice delivered pursuant to Section 3(c), duly
endorsed to Parent (or its designee) or accompanied by stock powers duly
executed in favor of Parent (or its designee), with evidence of payment of all
necessary stock transfer taxes, if any.
e. At the Closing, Merger Sub (or its designee) shall pay to each
Shareholder, by wire transfer in immediately available funds to the account of
such Shareholder specified in writing no more than two days prior to the
Closing, an amount equal to the product of the Purchase Price and the number of
Subject Shares purchased pursuant to the exercise of the Option.
f. The Closing shall be subject to the satisfaction of each of the
following conditions:
i. no court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling that is in
effect, and there shall not be any statute, rule or regulation, which
in either case restrains, enjoins or prohibits the consummation of the
purchase and sale of the Subject Shares pursuant to the exercise of the
Option;
ii. any waiting period applicable to the consummation of the
purchase and sale of the Subject Shares pursuant to the exercise of the
Option under the HSR Act shall have expired or been terminated; and
iii. all actions by or in respect of, and any filing with, any
governmental body, agency, official, or authority required to permit
the consummation of the purchase and sale of the Subject Shares
pursuant to the exercise of the Option shall have been obtained or made
and shall be in full force and effect.
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<PAGE> 5
g. If, after purchasing the Subject Shares pursuant to the Option,
Merger Sub or any of its affiliates has not acquired the remaining outstanding
shares of Common Stock, Merger Sub or any of its affiliates receives any cash or
noncash consideration in respect of the Subject Shares in connection with a
Third Party Business Combination (as defined below) during the period commencing
on the date of the Closing and ending on the first (1st) anniversary thereof,
Merger Sub shall promptly pay over to the Shareholders (pro rata, based on their
holdings of Shares), as an addition to the Purchase Price, one-half of the
excess, if any, of (i) such consideration over (ii) the aggregate Purchase Price
paid for the Subject Shares which are sold by Merger Sub hereunder. If the
consideration received by Merger Sub or such affiliates shall be (i) securities
listed on a national securities exchange or traded on the Nasdaq National
Market, the per share value of such consideration shall be equal to the closing
price per share of such securities listed on such national securities exchange
or the Nasdaq National Market on the date such transaction is consummated and
(ii) in a form other than cash or securities, the per share value shall be
determined in good faith as of the date such transaction is consummated by
Merger Sub and the Shareholders, or, if Merger Sub and the Shareholders cannot
reach agreement, by a nationally recognized investment banking firm reasonably
acceptable to the parties. The term "THIRD PARTY BUSINESS COMBINATION" means the
occurrence of any of the following events: (A) the Company, or more than 50% of
the outstanding shares of the Company's capital stock, is acquired by merger or
otherwise by any Third Party; or (B) a Third Party acquires all or substantially
all of the total assets of the Company and its subsidiaries, taken as a whole;
PROVIDED, HOWEVER, that in no event will any transaction in which shares of the
Company's capital stock or any of its assets are sold or transferred directly or
indirectly in connection with or as a part of a sale or other transaction
involving sale, merger or other similar transaction of Parent or any of its
material assets or business constitute a Third Party Business Combination, and
in no event will a sale of any division, line of business or similar unit of the
Company and its subsidiaries constitute a Third Party Business Combination.
h. Notwithstanding the other provisions of this Section 3, in the event
that the Company enters into a definitive agreement with a third party (and
makes a public announcement thereof) with respect to a Third Party Business
Combination (i) intended to qualify as a "pooling of interests" for accounting
purposes and (ii) pursuant to which holders of Common Stock would be entitled to
receive at least $13.00 per share of Common Stock (a "Qualifying Third Party
Business Combination"), THEN, Merger Sub agrees that, prior to termination of
the definitive agreement with respect to such Qualifying Third Party Business
Combination, it shall not exercise the Option to the extent that the exercise of
the Option by Merger Sub would prevent such Qualifying Third Party Business
Combination from qualifying as a "pooling of interests" for accounting purposes
(or take any other action the sole purpose of which is to prevent consummation
of such a "pooling of interests" transaction); PROVIDED, HOWEVER, that each
Shareholder (and each of such Shareholder's affiliates) that receives any cash
or noncash consideration in respect of such Shareholder's Subject Shares in
connection with a Qualifying Third Party Business Combination shall promptly pay
over to Merger Sub one-half of the excess of such consideration over the
Purchase Price (such excess to be calculated in the same manner as provided in
paragraph (g) above).
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<PAGE> 6
SECTION 4. TRANSFER OF THE SHARES; OPTION EXERCISES. Except as
otherwise provided in Section 4(b), prior to the termination of this Agreement,
no Shareholder shall: (i) transfer (which term shall include without limitation,
for the purposes of this Agreement, any sale, gift, pledge or other disposition)
or consent to any transfer of any or all of such Shareholder's Subject Shares;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of such Shareholder's Subject Shares or
any interest therein; (iii) except as provided in Section 5(b) hereto, grant any
proxy, power-of-attorney or other authorization or consent or with respect to
such Shareholder's Subject Shares; or (iv) deposit such Shareholder's Subject
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Shareholder's Subject Shares.
a. Each Shareholder shall be permitted to transfer such Shareholder's
Subject Shares in an Exempt Transaction; provided that the transferee shall
agree in writing, in form and substance reasonably acceptable to the Parent, to
be bound by the terms and conditions of this Agreement to the same extent as the
Shareholder from whom such transfer is made. The term "Exempt Transaction" means
(i) any transfer by a Shareholder to a spouse or child (or to a trust for the
benefit of a spouse or child) or to the Shareholder's estate and beneficiary
thereof upon the Shareholder's death, and (ii) any transfer by a Shareholder to
another Shareholder party to this Agreement.
SECTION 5. VOTING OF SHARES; GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF
PROXY.
a. Each Shareholder hereby agrees that at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of the holders
of Common Stock, however called, or in connection with any written consent of
the holders of Common Stock solicited by the Board of Directors, such
Shareholder will appear at the meeting or otherwise cause the Subject Shares to
be counted as present thereat for purposes of establishing a quorum and vote or
consent (or cause to be voted or consented) such Shareholder's Subject Shares
(i) in favor of the Merger during the term of the Merger Agreement and (ii)
against any Acquisition Proposal during the term of this Agreement.
b. Each Shareholder hereby irrevocably grants to, and appoints Parent
and any nominee thereof, its proxy and attorney-in-fact (with full power of
substitution) during the term of this Agreement, for and in the name, place and
stead of such Shareholder, to vote such Shareholder's Subject Shares, or grant a
consent or approval in respect of such Shareholder's Subject Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger during the term of the Merger Agreement, and (ii) against any
Acquisition Proposal during the term of this Agreement.
c. Except as otherwise disclosed to Parent, each Shareholder represents
that any proxies heretofore given in respect of such Shareholder's Subject
Shares, if any, are not irrevocable, and that such proxies are hereby revoked.
6
<PAGE> 7
d. Each Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 5 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 Shareholder under this Agreement. Each Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 5 hereof, is intended to be irrevocable in
accordance with the provisions of Section 607.0722 of the Florida Business
Corporation Act.
SECTION 6. ACQUISITION PROPOSALS. Each Shareholder shall immediately
cease and cause to be terminated all existing discussions or negotiations
relating to an Acquisition Proposal, other than with respect to the transactions
contemplated hereby and by the Merger Agreement, with any parties conducted
heretofore. Each Shareholder will not, directly or indirectly, and will instruct
his or her Representatives not to, directly or indirectly, initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or enter into or maintain discussions or negotiate with any person in
furtherance of or relating to such inquiries or to obtain an Acquisition
Proposal, or agree to or endorse any Acquisition Proposal, or authorize or
permit any of such Shareholder's Representatives to take any such action, and
the Shareholder shall use such Shareholder's best efforts to cause his or her
Representatives not to take any such action, and the Shareholder shall promptly
notify Parent if any such inquiries or proposals are made regarding an
Acquisition Proposal, and the Shareholder shall promptly inform Parent as to the
material details of any such inquiry or proposal and, if in writing, promptly
deliver or cause to be delivered to Parent a copy of such inquiry or proposal
and, the Shareholder shall keep Parent informed, on a current basis, of the
details of any such inquiries and the status and terms of any such proposals.
SECTION 7. FURTHER ASSURANCES; SHAREHOLDER CAPACITY.
a. Each Shareholder shall, upon request of Parent or Merger Sub,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by Parent or Merger Sub to be necessary or desirable to
carry out the provisions hereof and to vest the power to vote the Subject Shares
as contemplated by Section 5 hereof in Parent. Each Shareholder agrees that, to
the extent requested by Parent or Merger Sub, immediately prior to the purchase
of Subject Shares hereunder, such Shareholder shall exercise, exchange or
convert, as the case may be, any options, warrants or other securities
exercisable or exchangeable for or convertible into Subject Shares, in order to
permit Parent and Buyer acquire and exercise control over such Subject Shares;
provided, however, that Parent shall advance to each such Shareholder the
exercise price of such options and warrants, and such advances shall be deducted
from the Purchase Price.
b. Nothing in this Agreement shall be construed to prohibit any
Shareholder or any affiliate of any Shareholder who is or has designated a
member of the Board of Directors of the Company from taking any action solely in
his or her capacity as a member of the Board of Directors of the Company or from
exercising his, her or its fiduciary duties as a member of such Board of
Directors.
7
<PAGE> 8
SECTION 8. TERMINATION. This Agreement and all rights and obligations
of the parties hereunder shall terminate immediately upon the earlier of (i) the
date on which the Option is no longer exercisable in accordance with Section
3(b) or (ii) the Effective Time. The provisions set forth in Sections 3(h) and 9
shall survive any termination of this Agreement.
SECTION 9. EXPENSES. All fees and expenses incurred by any party hereto
shall be borne by the party incurring such fees and expenses; provided, however,
in connection with any controversy or dispute arising out of this Agreement or
the transactions contemplated hereby, the prevailing party shall be entitled to
reasonable attorneys' fees and costs incurred in connection with such
controversy or dispute from the non-prevailing party.
SECTION 10. PUBLIC ANNOUNCEMENTS. Each of Parent, Merger Sub and each
Shareholder agrees that it will not issue any press release or otherwise make
any public statement with respect to this Agreement or the transactions
contemplated hereby without the prior consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that such
disclosure can be made without obtaining such prior consent if (i) the
disclosure is required by law or regulation or by obligations imposed pursuant
to any listing agreement with the Nasdaq National Market and (ii) the party
making such disclosure has first used its reasonable best efforts to consult
with the other party about the form and substance of such disclosure.
SECTION 11. MISCELLANEOUS.
a. Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to such terms in the Merger
Agreement.
b. All notices and other communications hereunder shall be in writing
and shall be deemed given upon (i) transmitter's confirmation of a receipt of a
facsimile transmission, (ii) confirmed delivery by a standard overnight carrier
or when delivered by hand or (iii) the expiration of five business days after
the day when mailed in the United States by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
i. If to the Parent or Merger Sub, to the address set forth below:
National Nephrology Associates, Inc.
511 Union Street, Suite 1800
Nashville, TN 37219
Attention: Dr. Jerome S. Tannenbaum,
Chairman and Chief Executive Officer
Telecopy: (615) 259-0693
8
<PAGE> 9
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen C. Koval, Esq.
Telecopy: (212) 836-8689
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto.
ii. If to any Shareholder, to the address set forth for such
Shareholder on Exhibit C hereto.
c. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
d. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same agreement.
e. This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all prior agreements and understandings, whether written or oral,
among the parties hereto with respect to the subject matter hereof.
f. This Agreement shall be governed by, and construed in accordance
with the laws of the State of Delaware without giving effect to the principles
of conflicts of laws thereof. Each party hereto hereby (a) irrevocably and
unconditionally submits in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the state and federal courts in the
State of New York or Florida, and appellate courts thereof, and (b) consents
that any action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
g. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. 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, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
h. If any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its
9
<PAGE> 10
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
i. Each of the parties hereto acknowledges and agrees that in the event
of any breach of this Agreement, each non-breaching party would be irreparably
and immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that the parties hereto (i) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (ii) shall
be entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement.
j. No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
k. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE> 11
IN WITNESS WHEREOF, Parent, Merger Sub and each Shareholder has
executed and delivered or caused this Agreement to be duly executed and
delivered as of the date first written above.
NATIONAL NEPHROLOGY
ASSOCIATES, INC.
By: /s/ JEROME S. TANNENBAUM
-----------------------------------------
Name: Jerome S. Tannenbaum
Title: Chairman and Chief Executive
Officer
RC ACQUISITION CORP.
By: /s/ JEROME S. TANNENBAUM
-----------------------------------------
Name: Jerome S. Tannenbaum
Title: Chairman and Chief Executive
Officer
11
<PAGE> 12
SHAREHOLDER
- ------------------------------
Name:
12
<PAGE> 13
EXHIBIT A
SHARES OF
SHAREHOLDER COMMON STOCK
- -------------------------------------------------- ---------------------
Milton J. Wallace and Patricia Wallace 603,600
Arthur G. Shapiro, M.D. and Rivka Shapiro 617,920
James P. Shea and Julie Shea 136,266
Orestes L. Lugo 40,567
Patsy L. Anders 13,817
Mignon B. Early 1,200
Jeffery C. Finch 95,214
Eugene P. Conese, Sr. 20,000
C. David Finch, M.D. 192,197
John E. Hunt, Sr. 72,134
Charles J. Simons 40,036
Mark D. Wallace 12,000
Jeffrey H. Watson 3,000
A-1
<PAGE> 14
EXHIBIT B
<TABLE>
<CAPTION>
SHAREHOLDER OPTIONS WARRANTS
- -------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Milton J. Wallace and Patricia Wallace 88,091 15,000
Arthur G. Shapiro, M.D. and Rivka Shapiro 40,233 7,500
James P. Shea and Julie Shea 225,513 48,334
Orestes L. Lugo 116,904 7,084
Patsy L. Anders 68,000 --
Mignon B. Early 50,501 --
Jeffery C. Finch 18,000 --
Eugene P. Conese, Sr. 8,342 5,000
C. David Finch, M.D. 26,500 --
John E. Hunt, Sr. 8,341 12,084
Charles J. Simons 12,346 9,167
Mark D. Wallace 7,674 --
Jeffrey H. Watson 8,674 --
</TABLE>
B-1
<PAGE> 15
EXHIBIT C
ADDRESSES FOR NOTICES
SHAREHOLDER
- --------------------------------------------------------------------
MILTON J. WALLACE AND PATRICIA WALLACE
1200 Brickell Avenue, suite 1720
Miami, Florida 33131
ARTHUR G. SHAPIRO, M.D. AND RIVKA SHAPIRO
3141 Royal Palm Avenue
Miami Beach, Florida 33140
JAMES P. SHEA AND JULIE SHEA
10295 Collins Avenue, # 1420
Bal Harbour, Florida 33139
ORESTES L. LUGO
2127 Brickell Avenue, Apt. 2904
Miami, Florida 33129
PATSY L. ANDERS
2965 W. Trade Avenue
Coconut Grove, Florida 33133
MIGNON B. EARLY
109 Bennington Way
Greer, S. C. 29650
JEFFERY C. FINCH
156 Elms Court Circle
Jackson, Mississippi 39204
EUGENE P. CONESE, SR.
650 Casuarina Concourse
Coral Gables, Florida 33143
C. DAVID FINCH, M.D.
112 Water Oaks Drive
Clinton, Mississippi 39056
JOHN E. HUNT, SR.
P. O. Box 14015
Tallahassee, Florida 33155
CHARLES J. SIMONS
3646 S. W. 57th Avenue
Miami, Florida 33155
MARK D. WALLACE
1200 Brickell Avenue, Suite 900
Miami, Florida 33131
JEFFREY H. WATSON
1817 13th Street, N. W.
Washington, D. C. 20009
B-2
