<PAGE> 1
CUSIP NO. 20363B104
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.1)*
Community Care of America, Inc.
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(Name of Issuer)
Common Stock, $.0025 par value
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(Title of Class of Securities)
20363B104
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(CUSIP Number)
Christopher Hilbert, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
(212) 309-6830
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
August 1, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box o.
Check the following box if a fee is being paid with the statement o. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 20363B104
SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Desai Capital Management Incorporated
13-3229933
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | |
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AE
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,331,814 Shares
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,331,814 Shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,331,814 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | |
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.53%
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14 TYPE OF REPORTING PERSON*
IA, CO
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 20363B104
SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Equity-Linked Investors, L.P.
13-3240235
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | |
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 665,907 Shares
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
665,907 Shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
665,907 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | |
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.76%
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14 TYPE OF REPORTING PERSON*
IV, PN
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 20363B104
SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Equity-Linked Investors-II, L.P.
13-3427026
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | |
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) | |
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 665,907 Shares
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
665,907 Shares
-----------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
665,907 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | |
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.76%
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14 TYPE OF REPORTING PERSON*
IV, PN
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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Damon H. Ball, Attorney-in-fact for Equity-Linked Investors, L.P.
("ELI-I"), Equity- Linked Investors II, L.P. ("ELI-II"), Rohit M. Desai
Associates ("RMDA-I"), Rohit M. Desai Associates-II ("RMDA-II") and Rohit M.
Desai, President of Desai Capital Management Incorporated ("DCMI"), hereby
amends the Schedule 13D, dated August 21, 1995, filed in connection with the
acquisition of Common Stock, par value $.0025 per share (the "Common Stock"),
of Community Care of America, Inc. (the "Company") as follows:
Item 4. Purpose of Transaction.
Each of ELI-I and ELI-II have acquired securities of the Company in the
ordinary course of their respective businesses solely for investment purposes.
Neither ELI-I, ELI-II, RMDA-I, RMDA-II, DCMI, the Rohit M. Desai Family
Trust, Joseph F. McDonald, nor any Reporting Person has any plans or proposals
which relate to or would result in:
(a) the acquisition by any person of additional securities of the
issuer or the disposition of securities of the Company, except that ELI-I and/or
ELI-II may from time to time and in furtherance of their respective investment
programs, acquire (for investment) or dispose of the Common Stock or any other
securities of the issuer; and on August 1, 1997 ELI-I and ELI-II entered into a
Voting and Tender Agreement (the "Voting and Tender Agreement") with Integrated
Health Services, Inc. ("Parent") and IHS Acquisition XXVI, Inc. ("Merger
Subsidiary"). The Voting and Tender Agreement provides that ELI-I and ELI-II
shall (i) tender all of the shares owned of record or beneficially by ELI-I and
ELI-II (the "Shares") for sale to the Merger Subsidiary according to the terms
of the Offer (as such term is defined in the Agreement and Plan of Merger, dated
August 1, 1997, among the Company, the Parent and the Merger Subsidiary(the
"Merger Agreement")); (ii) refrain from otherwise disposing of the Shares; and
(iii) during the term of the Voting and Tender Agreement, vote the Shares in
favor of the proposed merger between the Company and the Merger Subsidiary and
against any proposed recapitalization, merger, sale of assets or other business
combination contrary to the terms of the Merger Agreement.
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(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the issuer or
any of its subsidiaries;
(d) any change in the present board of directors or management of
the issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) any material change in the present capitalization or dividend
policy of the issuer;
(f) any other material change in the issuer's business or corporate
structure;
(g) any change in the issuer's charter or by-laws;
(h) causing a class of securities of the issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) any action similar to those enumerated above.
Each of the above matters may be affected if the Merger Agreement is
consummated.
Item 6. Contracts, Arrangements, Understandings or
------------------------------------------
Relationships with Respect to Securities of
-------------------------------------------
the Issuer.
-----------
Neither ELI-I, ELI-II, RMDA-I, RMDA-II, DCMI, the Rohit M. Desai Family
Trust, Joseph F. McDonald, nor any Reporting Person is party to any other
contract, arrangement, understanding or relationship specifically relating to
any securities of the Company other than (i) the Purchase Agreements, (ii) the
Stockholders' Agreement and (iii) the Voting and Tender Agreement described in
Item 4 above.
ELI-I and ELI-II have each contracted with DCMI for DCMI to provide
investment advisory and other services to each of ELI-I and ELI-II. Pursuant to
their respective investment and advisory contracts, DCMI may exercise investment
power and voting power with respect to
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the investment portfolios of ELI-I and ELI-II. For its services under these
investment and advisory agreements DCMI receives a management fee from each of
ELI-I and ELI-II generally based on the value of their respective portfolios.
Item 7 Material to be Filed as Exhibits.
1. Joint Filing Agreement regarding the filing of this Statement, filed
with the Securities and Exchange Commission as Exhibit 1 to the Company's
Schedule 13D filed by the Company on August 10, 1995, is incorporated herein by
reference.
2. Power of Attorney authorizing Kathy T. Abramson, filed with the
Securities and Exchange Commission as an exhibit to the Company's Schedule 13D
filed by the Company on August 10, 1995, is incorporated herein by reference.
3. Investment and Advisory Agreement between ELI-I and DCMI, as
amended, filed with the Securities and Exchange Commission as an exhibit to the
Company's Schedule 13D filed by the Company on August 10, 1995, is incorporated
herein by reference.
4. Investment and Advisory Agreement between ELI-II and DCMI, filed
with the Securities and Exchange Commission as an exhibit to the Company's
Schedule 13D filed by the Company on August 10, 1995, is incorporated herein by
reference.
5. Share and Warrant Purchase Agreement, dated December 30, 1993 among
the Company and each of ELI-I and ELI-II, as amended, filed with the Securities
and Exchange Commission as Exhibit 10.02(a) to the Company's Registration
Statement on Form S-1 filed by the Company on May 24, 1995, is incorporated
herein by reference.
6. Stockholders' Agreement, dated December 30, 1993, among Robert N.
Elkins, Robert N. Elkins, as voting trustee, ELI-I, ELI-II and the Company, as
amended, filed with the Securities and Exchange Commission as Exhibit 10.01 to
the Company's Registration Statement on Form S-1 filed by the Company on May 24,
1995, is incorporated herein by reference.
7. Power of Attorney authorizing Damon H. Ball.
8. Voting and Tender Agreement, dated August 1, 1997, among ELI-I,
ELI-II, the Parent and the Merger Subsidiary.
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After reasonable inquiry and to the best of their knowledge and belief,
each of the undersigned certifies that the information set forth in this
Statement, is true, complete and correct.
Date: August 6, 1997 EQUITY-LINKED INVESTORS, L.P.
By Rohit M. Desai Associates
General Partner
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai
Managing General Partner
EQUITY-LINKED INVESTORS-II
By Rohit M. Desai Associates-II
General Partner
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai
Managing General Partner
ROHIT M. DESAI ASSOCIATES
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai
Managing General Partner
ROHIT M. DESAI ASSOCIATES-II
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai
Managing General Partner
DESAI CAPITAL MANAGEMENT
INCORPORATED
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai, President
By /s/ Damon H. Ball
-----------------
Damon H. Ball
Attorney-in-fact for
Rohit M. Desai
<PAGE> 9
EXHIBIT INDEX
-------------
1. Joint Filing Agreement regarding the filing of this Statement, filed
with the Securities and Exchange Commission as Exhibit 1 to the Company's
Schedule 13D filed by the Company on August 10, 1995, is incorporated herein by
reference.
2. Power of Attorney authorizing Kathy T. Abramson, filed with the
Securities and Exchange Commission as an exhibit to the Company's Schedule 13D
filed by the Company on August 10, 1995, is incorporated herein by reference.
3. Investment and Advisory Agreement between ELI-I and DCMI, as
amended, filed with the Securities and Exchange Commission as an exhibit to the
Company's Schedule 13D filed by the Company on August 10, 1995, is incorporated
herein by reference.
4. Investment and Advisory Agreement between ELI-II and DCMI, filed
with the Securities and Exchange Commission as an exhibit to the Company's
Schedule 13D filed by the Company on August 10, 1995, is incorporated herein by
reference.
5. Share and Warrant Purchase Agreement, dated December 30, 1993 among
the Company and each of ELI-I and ELI-II, as amended, filed with the Securities
and Exchange Commission as Exhibit 10.02(a) to the Company's Registration
Statement on Form S-1 filed by the Company on May 24, 1995, is incorporated
herein by reference.
6. Stockholders' Agreement, dated December 30, 1993, among Robert N.
Elkins, Robert N. Elkins, as voting trustee, ELI-I, ELI-II and the Company, as
amended, filed with the Securities and Exchange Commission as Exhibit 10.01 to
the Company's Registration Statement on Form S-1 filed by the Company on May 24,
1995, is incorporated herein by reference.
7. Power of Attorney authorizing Damon H. Ball.
8. Voting and Tender Agreement, dated August 1, 1997, among ELI-I,
ELI-II, the Parent and the Merger Subsidiary.
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, ROHIT M. DESAI,
does hereby constitute and appoint DAMON H. BALL (the "Attorney-in-Fact"), to be
his true and lawful attorney-in-fact and agent, with full power to act
individually for him and in his name, place and stead to do the following acts
and to exercise the following powers at any time and from time to time:
1. To take any and all actions on his behalf which the undersigned
could do if he were personally present with respect to the preparation,
execution, filing and delivery of any and all Forms 3, Forms 4 and Forms 5 or
amendments thereto or related instruments (collectively, the "Forms") now
required or which may hereafter be required or permitted to be made by the
undersigned, Desai Capital Management Incorporated, Rohit M. Desai Associates,
Rohit M. Desai Associates-II, Equity-Linked Investors, L.P., Equity-Linked
Investors-II or any other entity for which the undersigned is a partner or
officer, pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended.
2. To take any and all actions on his behalf which the undersigned
could do if he were personally present with respect to the preparation,
execution, filing and delivery of any and all Schedules 13D and 13G or
amendments thereto or related instruments (collectively, the "Schedules") now
required or which may hereafter be required or permitted to be made by the
undersigned, Desai Capital Management Incorporated, Rohit M. Desai Associates,
Rohit M. Desai Associates-II, Equity-Linked Investors, L.P., Equity-Linked
Investors-II or any other entity for which the undersigned is a partner or
officer, pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended.
3. In connection with the foregoing power, the Attorney-in-Fact is
hereby authorized:
(a) to prepare and execute any such Forms and/or Schedules;
(b) to file such Forms and/or Schedules or cause them to be filed
with the Securities and Exchange
- 1 -
<PAGE> 2
Commission and with such national securities exchanges and other
persons and entities as may be required; and
(c) to execute and/or deliver any and all documents relating to any
of the matters referred to in paragraphs (a) and (b) above, and to make
any changes in such documents as such Attorney-in-Fact shall deem
appropriate.
The undersigned does hereby ratify and confirm all that the
Attorney-in-Fact shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
this 16th day of May, 1996.
/s/ Rohit M. Desai
------------------
Rohit M. Desai
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<PAGE> 1
VOTING AND TENDER AGREEMENT
THIS VOTING AND TENDER AGREEMENT (this "Agreement"), dated as of the
first day of August, 1997, by and between EQUITY-LINKED INVESTORS, L.P.
("Stockholder I"), EQUITY-LINKED INVESTORS-II, L.P. ("Stockholder II")
(Stockholder I and Stockholder II collectively the "Stockholders") and
INTEGRATED HEALTH SERVICES, INC., a Delaware Corporation ("Parent") and IHS
ACQUISITION XXVI, INC. ("Merger Subsidiary").
WHEREAS, Community Care of America, Inc., a Delaware Corporation (the
"Company"), Parent and Merger Subsidiary are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement") which provides
for, among other things, an offer to purchase by Merger Subsidiary all of the
outstanding shares of the Company ("Company Common Stock"), at a purchase price
of Four and 0/100 ($4.00) Dollars per share, net to the seller in cash, without
interest thereon, followed by the merger of Merger Subsidiary with the Company
(the "Merger"); and
WHEREAS, as of the date hereof, Stockholder I owns, of record and/or
beneficially, 665,907 shares of Company Common Stock and Stockholder II owns, of
record and/or beneficially, 665,907 shares of Company Common Stock; and
WHEREAS, as a condition to the willingness of Parent and Merger
Subsidiary to enter into the Merger Agreement, each of Parent and Merger
Subsidiary has required that the Stockholders agree, and in order to induce
Parent and Merger Subsidiary to enter into the Merger Agreement, the
Stockholders have agreed, to enter into this Agreement with respect to (a) all
shares of Company Common Stock now owned, beneficially or otherwise, which may
hereafter be acquired by the Stockholders (the "Shares") and (b) certain other
matters as set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
Section 1.1 Tender Agreement. (a) The Stockholders shall, within five
(5) business days after the commencement of the Offer (as defined in the Merger
Agreement), tender, or cause to be tendered, for sale to Merger Subsidiary,
pursuant to the terms of the Offer (as long as the Offer is at least $4.00 per
share net to the Stockholders in cash, without interest thereon), all of the
Stockholders' Shares then owned of record or beneficially by the Stockholder;
and (b) except as provided in clause (a) above, during the time this Agreement
is in effect, the Stockholders shall not otherwise sell, give, dispose of
(whether by operation of law or by agreement or otherwise) or tender any Shares
or any right, title or interest therein or thereto.
<PAGE> 2
Section 1.2 Voting Agreement. The Stockholders hereby agree that during
the time this Agreement is in effect, at any meeting of the stockholders of the
Company, however called, and in any action by consent of the stockholders of the
Company, the Stockholders shall vote the Shares, or cause the Shares to be
voted: (a) in favor of the Merger pursuant to the Merger Agreement; and (b)
against any proposal for any recapitalization, merger, sale of assets or other
business combination between the Company and any person or entity (other than
Merger Subsidiary or Parent) or any other action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or which could prevent
any of the conditions to the Company's obligations under the Merger Agreement
from being fulfilled. If requested by Parent, the Stockholders will grant Parent
an irrevocable proxy to vote the Shares in a manner consistent with this Section
1.2 for so long as this Agreement is in effect. The Stockholders will not join
in any suit or proceeding or participate in any action that is inconsistent
with, or designed or intended to have the effect of discouraging, the completion
of the Merger pursuant to the terms of the Merger Agreement; provided, however,
that the Stockholders hereby reserve any and all rights to defend themselves in
any such suit or proceeding or to take any actions required by applicable law.
Section 1.3 General Release. As an inducement for Parent, Merger
Subsidiary and the Company to enter into the Merger Agreement: (a) the
Stockholders do hereby remise, release and forever discharge Parent, Merger
Subsidiary and the Company, and their respective officers, directors,
shareholders, employees, agents, successors and assigns, from any and all debts,
obligations, suits, actions, causes of action, claims, demands, in law or in
equity, which the Stockholders ever had or now have, for, upon, or by reason of
any matter, cause or thing whatsoever, however arising, other than any
obligations under this Agreement or under the Merger Agreement, including,
without limitation, the obligations under Section 7.07 of the Merger Agreement
respecting the continuation of officers and directors indemnity obligations and
insurance after the consummation of the Merger; and (b) Parent and Merger
Subsidiary hereby do, and upon the Merger Subsidiary obtaining control of the
Company will cause the Company to, remise, release and forever discharge the
Stockholders and their respective partners, officers, directors, shareholders,
employees, agents, successors and assigns, from any and all debts, obligations,
suits, actions, claims, demands, in law or in equity, which they ever had or now
have, for, upon, or by reason of any matter, cause or thing whatsoever, however
arising. In the event any action or proceeding covered by the foregoing releases
has been filed or instituted, the parties hereto agree, following the respective
effective dates of the foregoing releases, to cause its immediate dismissal with
prejudice. Notwithstanding the foregoing, the release by the Stockholders in
clause (a) of this Section 1.3 shall not become effective unless and until the
Stockholders receive said release from the Company in writing.
Section 1.4 Stockholder Capacity. The Stockholders make this Agreement
solely in their capacity as the record and/or beneficial owners of the Shares.
Nothing in this Agreement shall prohibit the Stockholders or any of their
partners, officers, directors, employees, representatives and agents from
taking, or omitting to take, any action as a director, employee, representative
or agent of the Company permitted to be taken or omitted under the Merger
Agreement.
2
<PAGE> 3
Section 1.5 Acknowledgment. The Stockholders acknowledge receipt and
review of a copy of the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Parent as follows:
Section 2.1 Authority Relative to This Agreement. The Stockholders have
all necessary power and authority to execute and deliver this Agreement, to
perform their obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Stockholders and the consummation by the Stockholders of the transactions
contemplated hereby have been duly and validly authorized by the Stockholders
and no other proceedings on the part of the Stockholders are necessary to
authorize this Agreement or to consummate such transactions. This Agreement has
been duly and validly executed and delivered by the Stockholders and, assuming
the due authorization, execution and delivery by Parent and Merger Subsidiary,
constitutes a legal, valid and binding obligation of the Stockholders,
enforceable against the Stockholders in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally or by general
principles governing the availability of equitable remedies.
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Stockholders do not, and the performance of this Agreement by
the Stockholders shall not: (i) conflict with or violate the organizational
documents of the Stockholders; (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Stockholders or by which
the Shares are bound; or (iii) result in any breach of or constitute a default
(or an event that with notice, or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the Shares pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license permit, franchise or other
instrument or obligation to which either of the Stockholders is a party or by
which either of the Stockholders or the Shares are bound or affected, except in
case of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay the performance
by the Stockholders of their obligations under this Agreement; and (b) the
execution and delivery of this Agreement by the Stockholders do not, and the
performance of this Agreement by the Stockholders shall not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any court or arbitrator or any governmental body, agency or official, except
for applicable requirements, if any of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by the Stockholders of their obligations under
this Agreement.
Section 2.3 Title to the Shares. As of the date hereof, Stockholder I
is the record and/or
3
<PAGE> 4
beneficial owner of 665,907 shares of Company Common Stock and Stockholder II is
the record and/or beneficial owner of 665,907 shares of the Company Common
Stock. Such Shares are all the securities of the Company owned, either of record
or beneficially, by the Stockholders and the Stockholders own no other rights or
interests exercisable for or convertible into any securities of the Company. The
Shares are owned free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Stockholders' voting rights, charges and other encumbrances of any nature
whatsoever, other than limitations under agreements with the Company and/or
Robert N. Elkins. Neither of the Stockholders has appointed or granted any
proxy, which appointment or grant is still effective with respect to the Shares.
Section 2.4 No Fees or Commissions. No broker, financial advisor or
other intermediary is entitled to any fee or other commission in connection with
the transaction contemplated by this Agreement based on an arrangement made by
or on behalf of the Stockholders.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
Section 3.1 No Inconsistent Agreement. The Stockholders hereby covenant
and agree that, except as contemplated by this Agreement and the Merger
Agreement, the Stockholders shall not enter into any agreement or grant a proxy
or power of attorney with respect to the Shares which is inconsistent with this
Agreement.
Section 3.2 No Encumbrances. The Stockholders hereby covenant and agree
that the Stockholders shall not by any action or omission cause any security
interests, liens, pledges, charges, encumbrances, options, rights of first
refusals, agreements or limitations on the Stockholders' voting rights, to
attach to the Shares to be tendered to the Merger Subsidiary pursuant to Section
1.1 hereof.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF PARENT AND MERGER SUBSIDIARY
Section 4.1 Authority. Parent and Merger Subsidiary each have full
right, power and authority to enter into and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by Parent and Merger
Subsidiary and is a valid and binding agreement of Parent and Merger Subsidiary
enforceable against Parent and Merger Subsidiary in accordance with its terms.
Section 4.2 Office Price. Parent and Merger Subsidiary each hereby
confirms to the Stockholders that it has not, in connection with the Merger,
purchased, and each agrees with the Stockholders that it hereafter will not buy,
any shares of stock of the Company for a price higher
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than the price to be received by the Stockholders in the Off er.
ARTICLE V
MISCELLANEOUS
Section 5.1 Termination. It is a condition precedent to the
effectiveness of this Agreement that the Merger Agreement shall have been duly
executed and delivered and shall be in full force and effect. This Agreement
shall automatically terminate: (i) upon the termination of the Merger Agreement;
or (ii) if the Shares shall have not theretofore been sold pursuant to the
Offer, on November 30, 1997; or (iii) if the price contained in the Offer is
reduced below a price of $4.00 per share net in cash, without interest thereon;
or (iv) if the Board of Directors of the Company changes its recommendation to
its stockholders in respect of the Merger, whichever of the four is the earlier
to occur.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 5.3 Entire Agreement. This Agreement constitutes the entire
agreement among Parent, Merger Subsidiary and the Stockholders with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among Parent, Merger Subsidiary and the
Stockholders with respect to the subject matter hereof.
Section 5.4 Amendment. This Agreement may not be amended, except by an
instrument in writing signed by the parties hereto.
Section 5.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
regardless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereby shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
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Section 5.7 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Stockholders, Parent and Merger Subsidiary have
caused this Agreement to be duly executed as the date and year first above
written.
EQUITY-LINKED INVESTORS, L.P.
BY: Rohit M. Desai Associates,
General Partner
By: /s/ Frank J. Pados
-----------------
Name: Frank J. Pados
Title: Attorney in Fact
EQUITY-LINKED INVESTORS-II, L.P.
BY: Rohit M. Desai Associates-II,
General Partner
By: /s/ Frank J. Pados
------------------
Name: Frank J. Pados
Title: Attorney in Fact
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Mark B. Levin
-----------------
Name: Mark B. Levin
Title: Executive Vice President of
Investor Relations
IHS ACQUISITION XXVI, INC.
By: /s/ Mark B. Levin
-----------------
Name: Mark B. Levin
Title: Executive Vice President of
Investor Relations
6
