UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 18, 2003
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-8351 31-0791746
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
2600 CHEMED CENTER, 255 EAST 5TH STREET
CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Item 5. Other Events.
On December 18, 2003, Roto-Rooter, Inc., a corporation organized under
the laws of Delaware ("Roto-Rooter"), entered into an agreement and plan of
merger (the "Merger Agreement"), among Roto-Rooter, Marlin Merger Corp., a
corporation organized under the laws of Delaware ("Marlin") and a wholly owned
indirect subsidiary of Roto-Rooter , and Vitas Healthcare Corporation, a
corporation organized under the laws of Delaware ("Vitas"). Roto-Rooter
currently owns approximately 37% of the outstanding common shares of Vitas,
and holds a warrant providing for the purchase of up to 1,636,000 additional
common shares of Vitas at a price of $5.50 per share. Timothy S. O'Toole, a
director and executive officer of Roto-Rooter, is also a director of Vitas and
serves as Chairman of Vitas' Board of Directors' Audit Committee. A copy of
the Merger Agreement is attached hereto as Exhibit 99.2.
Under the terms of the Merger Agreement:
(1) Marlin will merge into Vitas (the "Merger"), with Vitas surviving the
Merger as an indirect wholly owned Subsidiary of Roto-Rooter; and
(2) holders of Vitas common stock ("Vitas Common Shares") will receive in
the Merger $30.00 per Vitas Common Share in cash. Holders of Vitas Common
Shares who dissent from the Merger will have appraisal rights under Delaware
law.
The Merger is a taxable transaction for Vitas' stockholders.
The aggregate amount of the merger consideration being paid by Roto-
Rooter to the holders of Vitas' Common Shares, options and warrants in
connection with the Merger is approximately $310 million. Approximately $75
million in existing indebtedness of Vitas is expected to be refinanced in
connection with the Merger.
The consummation of the Merger is subject to several significant
conditions, including (i) Roto-Rooter having obtained the financing necessary
to consummate the Merger, (ii) the approval of the Merger by the holders of a
majority of Vitas' Common Shares and (iii) certain regulatory approvals and
other customary closing conditions. The approval of the Merger by the
affirmative vote of holders of a majority of the Vitas Common Shares already
has been obtained by written consent dated as of December 18, 2003.
The Merger Agreement provides that a financing termination fee equal to
$10,000,000 in cash is payable by Roto-Rooter to Vitas if (i) the Merger
Agreement is terminated by either Roto-Rooter or Vitas on or after March 15,
2004, and (ii) at the time of such termination all the conditions to the
Merger were satisfied, but Parent's financing condition was not satisfied.
Roto-Rooter would be entitled to a refund of all or a portion of the
financing termination fee, under certain conditions, if Vitas enters into
another
2
Company Takeover Proposal (as defined in the Merger Agreement) within 12
months and such transaction is subsequently consummated.
Vitas may, under certain circumstances, terminate the Merger Agreement on
or prior to January 24, 2004, to accept an unsolicited Superior Company
Proposal (as defined in the Merger Agreement). In such a case, a $10,000,000
termination fee would be payable by Vitas to Roto-Rooter upon consummation of
such Superior Company Proposal.
The Merger is expected to be completed before March 15, 2004, although no
assurance can be given as to whether or when the Merger will actually be
consummated.
In connection with the Merger, Roto-Rooter entered into a non-
competition and consulting agreement with Hugh Westbrook, the current Chairman
and Chief Executive Officer of Vitas, which will become effective after the
consummation of the Merger. Pursuant to such agreement, Vitas will pay Mr.
Westbrook $25 million in exchange for, among other things, his agreement (i)
to provide consulting services to Vitas for a term of 7 years and (ii) not to
engage in specified activities that are in competition with Vitas for a term
of 8 years.
The text of a press release issued by Roto-Rooter on December 18, 2003
announcing the signing of the Merger Agreement is incorporated by reference
herein as Exhibit 99.1.
Item 7. Exhibits.
Exhibit
No. Exhibit
- ----- --------
99.1 Press release, dated December 19, 2003, issued by Roto-Rooter, Inc.
99.2 Agreement and Plan of Merger, dated as of December 18, 2003,
among Roto-Rooter, Inc., Marlin Merger Corp. and Vitas
Healthcare Corporation.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
ROTO-ROOTER, INC.
By:
/s/ Timothy S. O'Toole
-----------------------------------
Name: Timothy S. O'Toole
Title: Executive Vice President
and Treasurer
Date: December 19, 2003
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INDEX TO EXHIBITS
Exhibit
No. Exhibit
- ----- --------
99.1 Press release, dated December 19, 2003, issued by Roto-Rooter, Inc.
99.2 Agreement and Plan of Merger, dated as of December 18, 2003,
among Roto-Rooter, Inc., Marlin Merger Corp. and Vitas
Healthcare Corporation.
EXHIBIT 99.1
CONTACT: Timothy S. O'Toole FOR IMMEDIATE RELEASE
(513) 762-6702
Roto-Rooter Inc. Signs Merger Agreement to Acquire
VITAS Healthcare Corporation
CINCINNATI, December 19, 2003--Roto-Rooter Inc. ("Roto-Rooter")
(NYSE:RRR) (OTCBB:CHEQP) has entered into a definitive merger agreement to
acquire VITAS Healthcare Corporation ("VITAS"). Currently, Roto-Rooter holds
common shares representing approximately 37 percent of the VITAS outstanding
common shares. Roto-Rooter will acquire the portion of VITAS not already owned
by it through its Comfort Care Holdings subsidiary for aggregate consideration
of approximately $410 million in cash (including the refinancing of existing
VITAS debt and other payments to be made in connection with the merger).
Under the terms of the merger agreement, shareholders of VITAS will
receive cash of $30 per share. The merger is expected to close before March
15, 2004. The closing is contingent upon the receipt of certain regulatory
approvals and the satisfaction of other customary conditions, including a
financing condition.
VITAS, a pioneer and leader in the hospice movement since 1978, is
the nation's largest provider of end-of-life care. Headquartered in Miami,
Florida, VITAS operates 25 hospice programs in eight states (California,
Florida, Illinois, New Jersey, Ohio, Pennsylvania, Texas and Wisconsin). VITAS
reported revenues of more than $420 million for its fiscal year ending
September 30, 2003. VITAS employs more than 5,700 professionals who care for
more than 7,900 terminally ill patients daily, primarily in the patients'
homes, but also in the
company's 17 hospice inpatient units as well as in hospitals, nursing homes
and assisted living facilities/residential care facilities for the elderly.
Roto-Rooter Inc. (www.RotoRooter.com), headquartered in Cincinnati,
is a New York Stock Exchange-listed corporation operating in the residential
and commercial repair-and-maintenance-service industry through two wholly
owned subsidiaries. Roto-Rooter Inc. is North America's largest provider of
plumbing and drain cleaning services. Service America Network Inc. provides
major- appliance and heating/air-conditioning repair, maintenance, and
replacement services.
Statements in this press release or in other Roto-Rooter
communications may relate to future events or Roto-Rooter's future
performance. Such statements are forward-looking statements and are based on
present information Roto-Rooter has related to its existing business
circumstances. Investors are cautioned that such forward-looking statements
are subject to inherent risk that actual results may differ materially from
such forward- looking statements, including the possibility that Roto-Rooter's
acquisition of VITAS may not be completed. Further, investors are cautioned
that Roto-Rooter does not assume any obligation to update forward-looking
statements based on unanticipated events or changed expectations.
###
EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
Dated as of December 18, 2003
Among
ROTO-ROOTER, INC.,
MARLIN MERGER CORP.
And
VITAS HEALTHCARE CORPORATION
TABLE OF CONTENTS
Page
SECTION 1.02. Closing........................................................2
SECTION 1.03. Effective Time.................................................2
SECTION 1.04. Effects........................................................2
SECTION 1.05. Certificate of Incorporation and By-laws.......................2
SECTION 1.06. Directors......................................................2
SECTION 1.07. Officers.......................................................2
ARTICLE II
Effect on the Capital Stock of the Constituent Corporations; Exchange of
Certificates
SECTION 2.01. Effect on Capital Stock........................................3
SECTION 2.02. Exchange of Certificates.......................................4
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power...............................8
SECTION 3.02. Company Subsidiaries; Equity Interests.........................8
SECTION 3.03. Capital Structure..............................................9
SECTION 3.04. Authority; Execution and Delivery; Enforceability.............10
SECTION 3.05. No Conflicts; Consents........................................11
SECTION 3.06. Financial Statements; SEC Reporting...........................12
SECTION 3.07. Information Supplied..........................................13
SECTION 3.08. Absence of Certain Changes or Events..........................13
SECTION 3.09. Taxes.........................................................14
SECTION 3.10. Absence of Changes in Benefit Plans...........................16
SECTION 3.11. ERISA Compliance; Excess Parachute Payments...................17
SECTION 3.12. Proceedings...................................................20
SECTION 3.13. Compliance with Applicable Laws...............................21
SECTION 3.14. Assets Other than Real Property Interests.....................22
SECTION 3.15. Real Property.................................................22
SECTION 3.16. Labor Matters.................................................22
SECTION 3.17. Contracts.....................................................22
SECTION 3.18. Environmental Matters.........................................25
SECTION 3.19. Intellectual Property.........................................26
SECTION 3.20. Brokers.......................................................27
SECTION 3.21. No Grounds for Federal Health Care Program Exclusion..........27
SECTION 3.22. Limitation....................................................27
SECTION 3.23. Acknowledgement...............................................27
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization, Standing and Power..............................28
SECTION 4.02. Sub...........................................................28
SECTION 4.03. Authority; Execution and Delivery; Enforceability.............28
SECTION 4.04. No Conflicts; Consents........................................29
SECTION 4.05. Information Supplied..........................................30
SECTION 4.06. Brokers.......................................................30
SECTION 4.07. Financing.....................................................30
SECTION 4.08. SEC Documents.................................................30
SECTION 4.09. Absence of Certain Changes or Events..........................31
SECTION 4.10. Proceedings...................................................31
SECTION 4.11. State Takeover Statutes.......................................31
SECTION 4.12. No Grounds for Federal Health Care Program Exclusion..........31
SECTION 4.13. Limitation....................................................31
SECTION 4.14. Acknowledgement...............................................31
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business...........................................32
SECTION 5.02. No Solicitation...............................................35
ARTICLE VI
Additional Agreements
SECTION 6.01. Stockholders Vote.............................................38
SECTION 6.02. Access to Information; Confidentiality........................39
SECTION 6.03. Reasonable Efforts; Notification..............................40
ii
SECTION 6.04. Stock Options.................................................41
SECTION 6.05. Benefit Plans.................................................43
SECTION 6.06. Indemnification...............................................44
SECTION 6.07. Fees and Expenses.............................................46
SECTION 6.08. Public Announcements..........................................49
SECTION 6.09. Transfer Taxes................................................49
SECTION 6.10. Stockholder Litigation........................................50
SECTION 6.11. Company Credit Facility.......................................50
SECTION 6.12. Guaranty of Parent............................................50
SECTION 6.13. Advise of Changes.............................................50
SECTION 6.14. Escrow........................................................50
SECTION 6.15. No Transfers..................................................50
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect The
Merger....................................................50
SECTION 7.02. Conditions to Obligations of Parent and Sub...................51
SECTION 7.03. Condition to Obligation of the Company........................52
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination...................................................53
SECTION 8.02. Effect of Termination.........................................54
SECTION 8.03. Amendment.....................................................55
SECTION 8.04. Extension; Waiver.............................................55
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver.....55
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties.................55
SECTION 9.02. Notices.......................................................56
SECTION 9.03. Definitions...................................................57
SECTION 9.04. Interpretation; Disclosure Letters............................58
SECTION 9.05. Severability..................................................59
SECTION 9.06. Counterparts..................................................59
iii
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries................59
SECTION 9.08. Governing Law.................................................60
SECTION 9.09. Assignment....................................................60
SECTION 9.10. Enforcement...................................................60
SECTION 9.11. Waiver of Notice..............................................60
iv
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of December 18, 2003, among ROTO-ROOTER, INC., a Delaware
corporation ("Parent"), MARLIN MERGER CORP., a Delaware
corporation ("Sub"), and a wholly owned indirect subsidiary of
Parent, and VITAS HEALTHCARE CORPORATION, a Delaware
corporation (the "Company").
WHEREAS the Company and the Company Subsidiaries (as defined in
Section 3.01) are engaged in the business of providing palliative care and
related services for patients with severe, life-threatening illnesses through
hospice programs operated in California, Florida, Illinois, New Jersey, Ohio,
Pennsylvania, Texas and Wisconsin;
WHEREAS the Board of Directors of the Company (the "Company Board")
has appointed a Special Committee of the Company Board, consisting entirely of
non-employee directors (the "Special Committee"), to consider and make a
recommendation to the Company Board with respect to the approval and adoption
of this Agreement and the Merger (as defined below);
WHEREAS the respective Boards of Directors of Parent, Sub and,
subsequent to the recommendation of the Special Committee, the Company have
approved this Agreement, which provides for, among other things, the
acquisition of the Company by Parent on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS the respective Boards of Directors of Parent, Sub and,
subsequent to the recommendation of the Special Committee, the Company have
approved the merger (the "Merger") of Sub with and into the Company, on the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value $0.001 per share, of
the Company (the "Company Common Stock") not owned by Parent, Sub or the
Company shall be converted into the right to receive $30.00 in cash;
WHEREAS as security for Parent's obligation to pay the Financing
Termination Fee, if any, Parent shall, on December 19, 2003, deposit in escrow
with The Bank of New York (the "Escrow Agent") $10,000,000 in cash (the
"Escrow Amount") subject to that certain escrow agreement dated as of December
18, 2003, among Parent, Sub, the Company and the Escrow Agent (the "Escrow
Agreement");
WHEREAS, immediately following the execution and delivery of this
Agreement, holders of at least a majority of the outstanding Company Common
Stock will approve this Agreement and the transactions expressly contemplated
hereby (other than the Section 280G Approval (as defined in Section 6.01(b))
by written consent in accordance with Section 228 of the Delaware General
Corporation Law (the "DGCL"); and
2
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, Sub shall be
merged with and into the Company at the Effective Time (as defined in Section
1.03). At the Effective Time, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation").
SECTION 1.02. CLOSING. The closing (the "Closing") of the Merger
shall take place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth
Avenue, New York, New York 10019 at 10:00 a.m. on the second business day
following the satisfaction (or, to the extent permitted by Law (as defined in
Section 3.05), waiver by all parties) of the conditions set forth in Section
7.01, or, if on such day any condition set forth in Section 7.02 or 7.03 has
not been satisfied (or, to the extent permitted by Law, waived by the party or
parties entitled to the benefits thereof), as soon as practicable after all
the conditions set forth in Article VII have been satisfied (or, to the extent
permitted by Law, waived by the parties entitled to the benefits thereof),
except in the case of each of Section 7.02 and Section 7.03, any condition
that by its terms cannot be satisfied until the time of the Closing but
subject to the satisfaction or, to the extent permitted by Law, waiver of such
condition, or at such other place, time and date as shall be agreed in writing
between Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
SECTION 1.03. EFFECTIVE TIME. Prior to the Closing, the Company and
Sub shall prepare, and on the Closing Date or as soon as practicable
thereafter the Company and Sub shall file with the Secretary of State of
Delaware, a certificate of merger (the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with such
Secretary of State, or at such other time as Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").
SECTION 1.04. EFFECTS. The Merger shall have the effects set forth in
Section 259 of the DGCL.
3
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Certificate of Incorporation of the Surviving Corporation shall be amended at
the Effective Time to read in the form of Exhibit A, and, as so amended, such
Certificate of Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable Law.
(a) The Company and Sub shall take all necessary actions to cause
the By-laws of Sub as in effect immediately prior to the Effective Time to be
the By-laws of the Surviving Corporation immediately after the Effective Time
until thereafter changed or amended as provided therein or by applicable Law
(subject to Section 6.06(a)).
SECTION 1.06. DIRECTORS. The Company and Sub shall take all necessary
actions to cause the directors of Sub immediately prior to the Effective Time
to be the directors of the Surviving Corporation immediately after the
Effective Time, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
SECTION 1.07. OFFICERS. The officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share
of Company Common Stock that is owned by the Company, Parent or Sub shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and no other consideration shall be delivered or
deliverable in exchange therefor. Each share of Company Common Stock that is
owned by any wholly-owned subsidiary of the Company or Parent (other than Sub)
shall automatically be converted into one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation.
4
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Sections 2.01(b)
and 2.01(d), each issued and outstanding share of Company Common Stock shall
be converted into the right to receive $30.00 in cash (the "Merger
Consideration").
(1) As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive Merger Consideration
upon surrender of such certificate in accordance with Section 2.02, without
interest.
(d) APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to
the contrary, shares ("Appraisal Shares") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by any
person (i) who has not voted in favor of the Merger or consented thereto in
writing, (ii) who shall have properly demanded in writing appraisal of such
Appraisal Shares pursuant to, and who complies in all respects with, Section
262 of the DGCL ("Section 262") and (iii) who has neither effectively
withdrawn nor lost the right to such payment shall not be converted into the
right to receive Merger Consideration as provided in Section 2.01(c), but
rather the holders of Appraisal Shares shall be entitled to payment of the
fair value of such Appraisal Shares in accordance with Section 262; provided,
however, that if any such holder shall fail to perfect or otherwise shall
waive, withdraw or lose the right to appraisal under Section 262 then the
right of such holder to be paid the fair value of such holder's Appraisal
Shares shall cease and such Appraisal Shares shall be deemed to have been
converted as of the Effective Time into, and to have become exchangeable
solely for the right to receive, Merger Consideration as provided in Section
2.01(c). The Company shall serve prompt notice to Parent of any written
demands received by the Company for appraisal of any shares of Company Common
Stock, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands, or agree to do any of the foregoing. If a person shall demand
appraisal of the fair value of shares of Company Common Stock under Section
262 after the Closing and such shares thereby become Appraisal Shares, Parent
shall be entitled to withdraw from the Exchange Fund any portion of the Merger
Consideration previously deposited therein with respect to such Appraisal
Shares.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to
the Effective Time, Parent shall select a bank or trust company outside the
State of Florida (reasonably acceptable to the Company) to act as paying agent
(the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates representing Company Common Stock. At Closing,
Parent shall deposit with the Paying Agent, as a separate fund, on behalf of
the Surviving Corporation, cash necessary to pay for the
5
shares of Company Common Stock converted into the right to receive cash
pursuant to Section 2.01(c) (such cash, together with the cash deposited
pursuant to Section 6.04(a), being hereinafter referred to as the "Exchange
Fund"); provided that the Exchange Fund may, at the option of Parent, be held
in an escrow arrangement for release upon the occurrence of the Effective
Time.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail or cause to be mailed to each
holder of record of a certificate or certificates (the "Certificates") that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
Merger Consideration pursuant to Section 2.01(c), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates
to the Paying Agent and shall be in such form and have such other provisions
as Parent may reasonably specify, and that is reasonably acceptable to the
Company, prior to the Effective Time) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for Merger
Consideration. Upon surrender of a Certificate for cancelation to the Paying
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount
of cash into which the shares of Company Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.01(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, payment may be made to a person other than
the person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which
the shares of Company Common Stock theretofore represented by such Certificate
have been converted pursuant to Section 2.01(c). No interest shall be paid or
accrue on the cash payable upon surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The Merger
Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Common Stock shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock, subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record date prior to
the Effective Time that may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement
or prior to the date of this Agreement and
6
which remain unpaid at the Effective Time, and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any certificates formerly representing shares of Company Common Stock
are presented to the Surviving Corporation or the Paying Agent for any reason,
they shall be canceled and exchanged as provided in this Article II.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Common Stock, Company
Employee Stock Options or Company Warrants for 12 months after the Effective
Time shall be delivered to Parent, upon demand, and any holder of Company
Common Stock, Company Employee Stock Options or Company Warrants who has not
theretofore complied with this Article II or Section 6.04, as applicable,
shall thereafter look only to Parent for payment of its claim for Merger
Consideration or payment under Section 6.04, as applicable.
(e) NO LIABILITY. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. If any Certificate, Company Employee Stock
Option or Company Warrant has not been surrendered prior to five years after
the Effective Time (or immediately prior to such earlier date on which Merger
Consideration in respect of such Certificate or payments due under Section
6.04, as applicable, would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.05(b))), any such shares, cash,
dividends or distributions in respect of such Certificate, Company Employee
Stock Option or Company Warrant shall, to the extent permitted by applicable
Law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis;
provided that such cash may only be invested in Permitted Investments. Any
interest and other income resulting from such investments shall be paid to
Parent. Parent will promptly replace any monies lost through any investment
made in accordance with its instructions pursuant to this Section 2.02(f). If
for any reason (including losses) the Exchange Fund is inadequate to pay the
amounts to which holders of the Company Common Stock, Company Employee Stock
Options and Company Warrants shall be entitled under this Article II or
Section 6.04, as applicable, Parent shall in any event be liable for payment
thereof. The Exchange Fund shall not be used except as provided in this
Agreement. All costs and expenses of the Paying Agent shall be borne
exclusively by and shall be the sole responsibility of Parent. As used in this
Agreement, the term "Permitted Investments" means (i) marketable direct
obligations having a term not in excess of 90 days issued or unconditionally
guaranteed by the United States government and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of
7
the United States or any political subdivision of any such state or any public
instrumentality thereof, having the first or second highest rating obtainable
from either Standard & Poor's Ratings Service ("S&P") or Moody's Investor
Service, Inc. ("Moody's") having a term not in excess of 90 days; (iii)
certificates of deposit having a term not in excess of 90 days issued by any
commercial bank organized under the Laws of the United States of America or
any state thereof or the District of Columbia having combined capital and
surplus of not less than $100,000,000 provided that if such commercial bank is
not organized under the Laws of the United States of America, it must be a
member of the Federal Deposit Insurance Corporation; and (iv) any money market
mutual fund, substantially all of which is invested in the foregoing
investment categories.
(g) LOST CERTIFICATES. If any Certificate shall have at any time
been lost, stolen or destroyed, the Paying Agent (or Parent as contemplated in
Section 2.02(d)) shall pay the amounts required by Section 2.02(c) in respect
of such lost, stolen or destroyed Certificate only if (i) the person claiming
such Certificate to be lost, stolen or destroyed makes an affidavit of that
fact in the form reasonably specified by Parent and that is reasonably
acceptable to the Company, prior to the Effective Time, (ii) the beneficial
owner of such Certificate executes an indemnity agreement with respect to such
Certificate in the form reasonably specified by Parent, and that is reasonably
acceptable to the Company, prior to the Effective Time and (iii) in the case
of any such Certificate representing more than 40,000 shares of Company Common
Stock, the posting by the beneficial owner of such Certificate of a bond in
such reasonable amount and on such customary terms as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate.
(h) WITHHOLDING RIGHTS. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the
Code (as defined in Section 3.11(b)), or under any provision of state, local
or foreign tax Law. To the extent that amounts are so withheld and paid over
to the appropriate taxing authority by Parent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except
as set forth in the letter (arranged in sections and subsections corresponding
to the numbered and lettered sections and subsections contained in this
Article III with the disclosures in any section or subsection of such letter
qualifying the corresponding section or subsection
8
in this Article III, as well as any other section or subsection of this
Article III if the application to such other section or subsection is
reasonably apparent on its face), dated as of the date of this Agreement, from
the Company to Parent and Sub executed and delivered by the Company
immediately prior to the execution and delivery of this Agreement (the
"Company Disclosure Letter"), and, subject to Section 3.22:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. Each of the Company
and each of its subsidiaries (the "Company Subsidiaries") is duly organized or
duly formed (as applicable), validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has all corporate,
limited liability company or partnership power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and
assets and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the Company or a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement or a material adverse effect on the ability of the Company to
consummate the Merger (a "Company Material Adverse Effect"). Each of the
Company and each Company Subsidiary is duly qualified to do business in each
jurisdiction where the nature of its business or the ownership or leasing of
its properties makes such qualification necessary or the failure to so qualify
has had or would reasonably be expected to have a Company Material Adverse
Effect. The Company has delivered to Parent true and complete copies of the
certificates of incorporation of the Company, as amended to the date of this
Agreement (as so amended, the "Company Charter"), and the By-laws of the
Company, as amended to the date of this Agreement (as so amended, the "Company
By-laws"), and the comparable charter and organizational documents of each
Company Subsidiary, in each case as amended through the date of this
Agreement.
SECTION 3.02. COMPANY SUBSIDIARIES; EQUITY INTERESTS. (a) Section
3.02 of the Company Disclosure Letter lists each Company Subsidiary and its
jurisdiction of organization or formation. All the outstanding shares of
capital stock of each Company Subsidiary that is a corporation have been
validly issued and are fully paid and nonassessable. All outstanding equity,
membership or partnership interests of each Company Subsidiary that is not a
corporation are validly issued and are fully paid and are not subject to any
additional required unpaid capital contributions or similar assessments. All
such outstanding shares of capital stock or such other equity, membership and
partnership interests are owned by the Company, by another Company Subsidiary
or by the Company and another Company Subsidiary, free and clear of all
pledges, liens, charges, mortgages, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens"), other than pursuant to the
credit facilities and related security arrangements expressly provided for by
that certain Amended and Restated Credit Agreement, dated as of August 6,
2003, among Vitas Hospice Services,
9
L.L.C., the Company, as Guarantor, BNP Paribas and the other lenders
identified therein (the "Company Credit Facility").
(b) Except for its interests in the Company Subsidiaries, the
Company does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity
interest in any person.
SECTION 3.03. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 40,000,000 shares of Company Common Stock and 4,500,000
shares of preferred stock, par value $1.00 per share (the "Company Preferred
Stock"; together with the Company Common Stock, the "Company Capital Stock").
As of the date of this Agreement, (i) 11,138,569 shares of Company Common
Stock and no shares of Company Preferred Stock were issued and outstanding,
(ii) no shares of Company Common Stock were held by the Company in its
treasury and (iii) 2,591,656 shares of Company Common Stock were subject to
outstanding Company Employee Stock Options (as defined in Section 6.04) and
2,144,899 additional shares of Company Common Stock were reserved for issuance
pursuant to the Company Stock Plans (as defined in Section 6.04). As of the
date of this Agreement there were 3,233,168 outstanding warrants (the "Company
Warrants") to purchase in the aggregate 3,233,168 shares of Company Common
Stock. Except as set forth above, as of the date of this Agreement, no shares
of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. All outstanding shares of Company
Capital Stock are, and all such shares that may be issued prior to the
Effective Time will be when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the DGCL, the
Company Charter, the Company By-laws or any Contract (as defined in Section
3.05(a)) to which the Company is a party or otherwise bound. There are not any
bonds, debentures, notes or other indebtedness of the Company or any Company
Subsidiary having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of
Company Common Stock may vote ("Voting Company Debt"). Except as set forth
above, there are not any options, warrants, rights, convertible or
exchangeable securities, "phantom" stock, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i) obligating the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or of any
Company Subsidiary or any Voting Company Debt, (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, unit, commitment, Contract, arrangement or
undertaking or (iii) that give any person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights
occurring to holders of Company Capital Stock or
10
capital stock of any Company Subsidiary. There are not any outstanding
contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary. There are no outstanding repurchase rights
in favor of the Company or any Company Subsidiary with respect to shares of
capital stock of the Company or any Company Subsidiary issued or issuable
pursuant to any Company Employee Stock Option or any Company Stock Plan.
Section 3.03(a) of the Company Disclosure Letter sets forth a true and
complete list, as of the date of this Agreement, of all (i) outstanding
Company Employee Stock Options, the Company Stock Plan (if any) under which
such Company Employee Stock Option was granted, the number of shares of
Company Common Stock subject to each Company Employee Stock Option, the grant
dates, exercise prices and vesting schedules of each Company Employee Stock
Option and the names of the holders thereof and (ii) outstanding Company
Warrants, the number of shares of Company Common Stock subject to each Company
Warrant, the issue dates, exercise prices of each Company Warrant and the
names of the holders thereof. All Company Employee Stock Options outstanding
as of the date of this Agreement are evidenced by one of the forms of stock
option agreement attached as Exhibit A to Section 3.03 of the Company
Disclosure Letter, and no stock option agreement contains terms that are
inconsistent with the applicable form in any material respect. The Company has
provided true, correct and complete copies of all agreements evidencing each
Company Warrant. As of the date of this Agreement, the number of outstanding
shares of Company Common Stock held by the trustee (the "Trustee") under the
Company's Employee Stock Ownership Plan (the "Company ESOP") was 821,132, of
which all of the shares were allocated to participants and beneficiaries under
the Company ESOP and no shares were "eligible shares" (as such term is defined
in the Company ESOP) subject to participants' put rights. There is no loan
from the Company to the Trustee, in its capacity as trustee, of any amount or
type.
SECTION 3.04. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. (a)
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and, subject to the Company Stockholder Approval (as
defined in Section 3.04(c)), to consummate the Merger. The execution and
delivery by the Company of this Agreement and the consummation by the Company
of the Merger and the other transactions expressly contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to receipt of the Company
Stockholder Approval. The Company has duly executed and delivered this
Agreement, and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
(b) The Company Board, at a meeting duly called and held, upon the
unanimous recommendation of the Special Committee, duly adopted resolutions
(i) approving and adopting this Agreement, the Merger and the other
transactions expressly contemplated hereby and requiring the approval of the
Company Board, (ii) determining that the terms of the Merger are fair and in
the best interests of the
11
Company and its stockholders and that the other transactions expressly
contemplated hereby and requiring the approval of the Company Board are in the
best interests of the Company and its stockholders, (iii) recommending that
the Company's stockholders adopt this Agreement and (iv) declaring that this
Agreement is advisable. To the Company's knowledge, no state takeover statute
or similar statute or regulation applies or purports to apply to the Company
with respect to this Agreement, the Merger or any other transaction expressly
contemplated hereby.
(c) The only vote of holders of any class or series of Company
Capital Stock necessary to approve and adopt this Agreement and the Merger is
the adoption of this Agreement by the holders of a majority of the outstanding
Company Common Stock (the "Company Stockholder Approval"). The Company
Stockholder Approval and the Section 280G Approval (as defined in Section
6.01) may be obtained by written consent of the Company's stockholders under
the Company Charter and the DGCL. Except for the Section 280G Approval, the
affirmative vote of the holders of Company Capital Stock, or any of them, is
not necessary to consummate any transaction expressly contemplated hereby
other than the Merger. The Company, promptly following (but in no event more
than one business day following) the execution and delivery of this Agreement
and receipt of the Company Stockholder Approval (but in no event prior to OCR,
as a stockholder of the Company, adopting this Agreement) shall deliver to
Parent a certificate of the Secretary of the Company certifying that the
Company Stockholder Approval has been obtained by written consent of the
Company's stockholders.
SECTION 3.05. NO CONFLICTS; CONSENTS. (a) The execution and delivery
by the Company of this Agreement do not, and the consummation of the Merger
and the other transactions expressly contemplated hereby and compliance with
the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any Company Subsidiary under, any provision of (i) the Company Charter, the
Company By-laws or the comparable charter or organizational documents of any
Company Subsidiary, (ii) any contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a "Contract") to
which the Company or any Company Subsidiary is a party or by which any of
their respective properties or assets is bound or (iii) subject to the filings
and other matters referred to in Section 3.05(b), any judgment, order or
decree ("Judgment") or statute, law (including common law), ordinance, rule or
regulation ("Law") applicable to the Company or any Company Subsidiary or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such items that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material
Adverse Effect.
12
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or permit from,
any Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity") is
required to be obtained or made by the Company, any Company Subsidiary, Parent
or Sub for the execution, delivery and performance of this Agreement or the
consummation of the Merger and the other transactions expressly contemplated
hereby, other than (i) compliance with and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) those
that may be necessary or appropriate in connection with the obtainment and/or
consummation of the Financing (as defined in Section 4.07), (iii) the filing
with the Securities and Exchange Commission (the "SEC") of such reports under,
or other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required to be filed by Parent in
connection with this Agreement or the Merger, (iv) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of the other jurisdictions
in which the Company is qualified to do business, (v) compliance with and such
filings as may be required under applicable Environmental Laws (as defined in
Section 3.18), (vi) such filings as may be required in connection with the
taxes described in Section 6.09, (vii) those that may be required solely by
reason of Parent's or Sub's (as opposed to any third party's) participation in
the Merger and the other transactions expressly contemplated hereby or that
are unique to the industry in which Parent or Sub currently operates and
(viii) such other items (A) that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Company Material Adverse
Effect or (B) as are set forth in Section 3.05(b) of the Company Disclosure
Letter.
SECTION 3.06. FINANCIAL STATEMENTS; SEC REPORTING. (a) Section
3.06(a) of the Company Disclosure Letter sets forth (i) the audited
consolidated balance sheet of the Company and the Company Subsidiaries as of
September 30, 2003 (the "Balance Sheet") and the related audited consolidated
statements of income and cash flow of the Company and the Company Subsidiaries
for the fiscal year ended on such date, together with the notes thereto (the
"2003 Company Financial Statements"), (ii) the audited consolidated balance
sheet of the Company and the Company Subsidiaries as of September 30, 2002,
and September 30, 2001, and the related audited consolidated statements of
income and cash flow of the Company and the Company Subsidiaries for the
fiscal year ended on each such date, together with the notes thereto
(collectively with the 2003 Company Financial Statements, the "Annual
Financial Statements") and (iii) unaudited consolidated balance sheet of the
Company and the Company Subsidiaries as of October 31, 2003 and the related
consolidated statements of income and cash flow of the Company and the Company
Subsidiaries for the month ending such date, in each case, setting forth
comparative figures for the corresponding fiscal month in the prior fiscal
year and the corresponding elapsed portion of the prior fiscal year,
collectively, the "Monthly Financial Statements" and together with the Annual
Financial Statements, the "Company Financial Statements". The Company
Financial Statements have been
13
prepared in conformity with United States generally accepted accounting
principles ("GAAP") consistently applied (except in each case as described in
the notes thereto and, in the case of the Monthly Financial Statements,
subject to normal year- end adjustments and the absence of footnotes). The
Company Financial Statements fairly present in all material respects the
consolidated financial condition, results of operations and cash flows of the
Company and the Company Subsidiaries as of the respective dates thereof and
for the respective periods indicated.
(b) The Company and the Company Subsidiaries do not have any
material (whether individually or in the aggregate) liabilities or obligations
of any nature (whether accrued, absolute, contingent, unasserted or otherwise,
and whether due or to become due) required by GAAP to be reflected on a
consolidated balance sheet of the Company or in the notes thereto that,
individually or in the aggregate, have been or would be reasonably expected to
be material except (i) as disclosed, reflected or reserved against in the
Balance Sheet and the footnotes thereto, (ii) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice
since the date of the Balance Sheet and not in violation of this Agreement and
(iii) liabilities and obligations incurred under this Agreement.
(c) None of the Company or any of the Company Subsidiaries is, or at
any time has been, subject to the reporting requirements of Sections 13(a) and
15(d) of the Exchange Act.
SECTION 3.07. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference
in any information or proxy statement or other materials to be given to the
Company's stockholders, option holders or warrant holders in connection with
the Merger (collectively, the "Information Statement") will, at the time such
document is first sent or given to the Company's stockholders, option holders
or warrant holders, as the case may be, 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, in light of the circumstances
under which they were made, not misleading.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the Balance Sheet until the date of this Agreement, the Company has conducted
its business only in the ordinary course, and during such period there has not
been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or would reasonably be expected to have a
Company Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to
any Company Capital Stock or any repurchase for value by the Company of
any Company Capital Stock;
14
(iii) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares
of Company Capital Stock;
(iv) (A) any granting by the Company or any Company Subsidiary to
any current or former director, officer, employee or consultant of the
Company or any Company Subsidiary of any bonus opportunity or any
increase in compensation or benefits, except in the ordinary course of
business consistent with past practice (or in the case of any employee
below the level of general manager, in the ordinary course of business)
or as was required under employment agreements as in effect as of the
date of the Balance Sheet, (B) any granting by the Company or any Company
Subsidiary to any such current or former director, officer, employee or
consultant of any increase in severance or termination pay, except (x) as
was required under any employment, severance or termination agreement as
in effect as of the date of the Balance Sheet or (y) with respect to
employees below the level of general manager, pursuant to policy number
8:65 of the Company's policy manual provided to Parent prior to the date
hereof, in amounts no greater than those specified in the guidelines
attached to such policy manual, and consistent with past practice, (C)
any entry by the Company or any Company Subsidiary into, or any amendment
of, any Company Benefit Agreement (as defined in Section 3.10) with any
such current or former director, officer, employee (except, in the case
of any employee below the level of general manager, in the ordinary
course of business consistent with past practice) or consultant or (D)
any amendment or modification of any incentive award (including Company
Employee Stock Options) granted or issued to any such current or former
director, officer, employee or consultant or any removal or modification
of any restrictions in any such award;
(v) any change in accounting methods, principles or practices by the
Company or any Company Subsidiary, except insofar as may have been
required by a change in GAAP;
(vi) any material elections with respect to Taxes (as defined in
Section 3.09(j)) by the Company or any Company Subsidiary or settlement
or compromise by the Company or any Company Subsidiary of any material
Tax liability or refund; or
(vii) any other action or inaction by the Company or any Company
Subsidiary that would have violated Section 5.01 if taken after the date
of this Agreement.
SECTION 3.09. TAXES. (a) Each of the Company and each Company
Subsidiary has timely filed, or has caused to be timely filed on its behalf,
all material Tax Returns required to be filed by it, and all such Tax Returns
are true, complete and
15
accurate in all material respects. All Taxes shown to be due on such Tax
Returns, or otherwise owed, have been timely paid.
(b) The 2003 Financial Statements reflect an adequate reserve for
all Taxes payable by the Company and the Company Subsidiaries (in addition to
any reserve for deferred Taxes to reflect timing differences between book and
Tax items) for all Taxable periods and portions thereof through the date of
such financial statements. To the Company's knowledge, no deficiency with
respect to any Taxes has been proposed, asserted or assessed against the
Company or any Company Subsidiary, and no requests for waivers of the time to
assess any such Taxes are pending.
(c) The Federal income Tax Returns of the Company and each Company
Subsidiary consolidated in such Tax Returns have been examined by and settled
with the United States Internal Revenue Service, or have closed by virtue of
the expiration of the relevant statute of limitations, for all years through
September 30, 1999. All material assessments for Taxes due with respect to
such completed and settled examinations or any concluded litigation have been
fully paid.
(d) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company or any Company
Subsidiary. Neither the Company nor any Company Subsidiary is bound by any
agreement with respect to Taxes.
(e) No material issues relating to Taxes were raised by the relevant
taxing authority during any presently pending audit or examination, and no
material issues relating to Taxes were raised by the relevant taxing authority
in any completed audit or examination that can reasonably be expected to recur
in a later taxable period.
(f) Neither the Company nor any Company Subsidiary is party to or
bound by any written or oral tax sharing agreement, tax indemnity obligation
or similar agreement, arrangement or practice with respect to Taxes (including
any advance pricing agreement, closing agreement or other agreement relating
to Taxes with any taxing authority).
(g) Neither the Company nor any Company Subsidiary shall be required
to include in a taxable period ending after the Closing Date taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method
of accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of state, local
or foreign Tax law, or for any other reason.
(h) (A) No person has made with respect to either the Company or any
Company Subsidiary, or with respect to any property held by the Company or any
Company Subsidiary, any consent under Section 341 of the Code, (B) no property
of the Company or any Company Subsidiary is "tax exempt use property" within
the meaning
16
of Section 168(h) of the Code, (C) neither the Company nor any Company
Subsidiary is a party to any lease made pursuant to Section 168(f)(8) of the
Code, as in effect prior to the date of enactment of the Tax Equity and Fiscal
Responsibility Act of 1982, and (D) none of the assets of the Company or any
Company Subsidiary is subject to a lease under Section 7701(h) of the Code or
under any predecessor section.
(i) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any Taxes and
no power of attorney with respect to any Taxes has been executed or filed with
any taxing authority by or on behalf of the Company or any Company Subsidiary.
(j) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or imposed,
and whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, Federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Return" means all Federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
SECTION 3.10. ABSENCE OF CHANGES IN BENEFIT PLANS. Except to the
extent required by applicable Law and except as described in Section 5.01 or
Section 6.05(d) (including those items set forth on the corresponding sections
of the Company Disclosure Letter), since the date of the Balance Sheet, there
has not been any adoption or amendment in any material respect by the Company
or any Company Subsidiary of any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, "phantom" stock, retirement,
vacation, termination, severance, disability, death benefit, hospitalization,
medical or other plan, program, policy, trust, agreement, arrangement or
understanding (whether or not legally binding) maintained or contributed to,
or required to be maintained or contributed to, by the Company, any Company
Subsidiary or any other person, trade or business that, together with the
Company or any Company Subsidiary, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA or any
other applicable Law (each, a "Company Commonly Controlled Entity"), in each
case providing benefits to any current or former employee, officer, director
or consultant of the Company or any Company Subsidiary (collectively, "Company
Benefit Plans"). Section 3.10 of the Company Disclosure Letter contains a list
of (i) all Company Benefit Agreements that contain severance or termination
payment arrangements under which the Company or any Company Subsidiary or any
other person is obligated to make payments and (ii) the maximum amount payable
thereunder based on salaries in effect as of the date of this Agreement. For
purposes of this Agreement, "Company Benefit Agreements" shall mean all
17
employment, consulting, indemnification, severance or termination agreements
or arrangements between the Company or any Company Subsidiary and any current
or former employee, officer, director or consultant of the Company or any
Company Subsidiary.
SECTION 3.11. ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS. (a)
Section 3.11(a) of the Company Disclosure Letter contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Company Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) and all other Company Benefit Plans maintained or contributed to, or
required to be maintained or contributed to, by the Company or any Company
Subsidiary for the benefit of any current or former employees, consultants,
officers or directors of the Company or any Company Subsidiary. Each Company
Benefit Plan has been administered in compliance with its terms and applicable
Law, other than instances of noncompliance that, individually and in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect. The Company has delivered to Parent true, complete
and correct copies of (i) each Company Benefit Plan (or, in the case of any
unwritten Company Benefit Plan, a brief summary of the material terms
thereof), (ii) each Company Benefit Agreement required to be listed on Section
3.10 or Section 3.17 of the Company Disclosure Letter (or, in the case of any
unwritten Company Benefit Agreement, a brief summary of the material terms
thereof), (iii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Company Benefit Plan (if any
such report was required), (iv) the most recent summary plan description for
each Company Benefit Plan for which such summary plan description is required,
(v) each trust agreement and group annuity contract relating to any Company
Benefit Plan and (vi) the most recent actuarial valuation report for each
Company Benefit Plan for which such actuarial valuation report was required or
prepared. Notwithstanding the foregoing, in the case of any special severance
agreements, indemnification agreements or agreements concerning duties, the
Company has delivered to Parent the form of agreement and any forms of
amendment thereto, and no special severance agreement, indemnification
agreement or agreement concerning duties required to be listed on Section 3.10
or Section 3.17 of the Company Disclosure Letter contains terms that are
inconsistent in any material respect with the applicable forms that were
delivered to Parent.
(b) All Company Pension Plans that are intended to meet the
requirements of Section 401(a) or Section 501(a) of the Internal Revenue code
of 1986, as amended (the "Code"), have been the subject of determination
letters from the Internal Revenue Service to the effect that such Company
Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of the Company,
has revocation been threatened, nor has any such Company Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification or
materially increase its costs. The Company has
18
delivered to Parent a true, correct and complete copy of the most recent
determination letter with respect to each Company Pension Plan that is
intended to meet the requirements of Section 401(a) or Section 501(a) of the
Code, as well as a true, correct and complete copy of each pending application
for a determination letter, if any.
(c) No Company Pension Plan, other than any Company Pension Plan
that is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA (a "Multiemployer Pension Plan"), had, as of the respective last annual
valuation date for each such Company Pension Plan, an "unfunded benefit
liability" (as such term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions that have been furnished to Parent and there has been no
material adverse change in the financial condition of any Company Pension Plan
since its last such annual valuation date. Except where any such liabilities,
individually and in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect, no liability under Title IV of ERISA has been
or is expected to be incurred by the Company or any Company Subsidiary with
respect to any ongoing, frozen or terminated "single-employer" plan (as such
term is defined in Section 4001(a)(15) of ERISA), currently or formerly
maintained by any of them, or the single-employer plan of any Company Commonly
Controlled Entity. None of the Company Pension Plans has an "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA or
Section 412 of the Code), whether or not waived, nor has any waiver of the
minimum funding standards of Section 302 of ERISA or Section 412 of the Code
been requested. None of the Company, any Company Subsidiary, any officer of
the Company or any Company Subsidiary or any of the Company Benefit Plans
which are subject to ERISA, including the Company Pension Plans, or, to the
knowledge of the Company, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a material "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code) or
any other breach of fiduciary responsibility that could subject the Company,
any Company Subsidiary or any officer of the Company or any Company Subsidiary
or any of the Company Benefit Plans which are subject to ERISA, or, to the
knowledge of the Company, any trusts created thereunder or any trustee or
administrator thereof to the tax or penalty on prohibited transactions imposed
by such Section 4975 or to any liability under Section 502(i) or 502(1) of
ERISA or to any other liability for breach of fiduciary duty under ERISA or
any other applicable Law. None of such Company Benefit Plans and trusts has
been terminated, nor has there been any "reportable event" (as that term is
defined in Section 4043 of ERISA) with respect to any Company Benefit Plan
during the last five years. None of the Company, any Company Subsidiary or any
Company Commonly Controlled Entity has incurred a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Sections 4203 and 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and
4205 with respect to any Multiemployer Pension Plan.
(d) With respect to any Company Benefit Plan that is an employee
welfare benefit plan (i) no such Company Benefit Plan is unfunded, funded
through a
19
"welfare benefits fund" (as such term is defined in Section 419(e) of the
Code) or self-insured, (ii) each such Company Benefit Plan that is a "group
health plan" (as such term is defined in Section 5000(b)(1) of the Code)
complies in all material respects with the applicable requirements of Section
4980B(f) of the Code, (iii) no such Company Benefit Plan provides benefits
after termination of employment, except where the cost thereof is borne
entirely by the former employee (or his eligible dependents or beneficiaries)
or as required by Section 4980B(f) of the Code, (iv) based on applicable Law
as in effect as of the date of this Agreement, each such Company Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company and the
Company Subsidiaries, except for benefits accrued through the time of such
amendment or termination and (v) based on applicable Law as in effect as of
the date of this Agreement, each such Company Benefit Plan that provides
health or life benefits following termination of employment (other than as
required by Section 4980B(f) of the Code) may be amended or terminated without
material liability to the Company and the Company Subsidiaries, except for
claims incurred but not paid prior to the time of such amendment or
termination.
(e) Other than payments that may be made to the persons listed in
Section 3.11(e) of the Company Disclosure Letter (the "Primary Company
Executives"), any amount that could be received (whether in cash or property
or the vesting of property) as a result of the Merger by any person who is a
"disqualified individual" of the Company or any of its affiliates (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
Company Benefit Plan, Company Benefit Agreement or other compensation
arrangement would not be characterized as an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code) and no such disqualified individual
is entitled to receive any additional payment (e.g., any tax gross-up or other
payment) from the Company, any Company Subsidiary, the Surviving Corporation
or any other person in the event that the excise tax required by Section
4999(a) of the Code is imposed on such disqualified individual. Set forth in
Section 3.11(e) of the Company Disclosure Letter is (i) the estimated maximum
amount that could be paid to each Primary Company Executive as a result of the
Merger and under all Company Benefit Plans, Company Benefit Agreements and
other compensation arrangements currently in effect and (ii) the "base amount"
(as defined in Section 280G(b)(3) of the Code) for each Primary Company
Executive calculated as of the date of this Agreement.
(f) The execution and delivery by the Company of this Agreement does
not, and the consummation of the Merger and compliance with the terms hereof
will not (either alone or in combination with any other event), (i) entitle
any employee, consultant, officer or director of the Company or any Company
Subsidiary to any additional compensation, severance or other benefits, (ii)
accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation pursuant
to, any Company Benefit Plan or Company Benefit Agreement or
20
(iii) result in any breach or violation of, or a default (with or without
notice or lapse of time or both) under, any Company Benefit Plan or Company
Benefit Agreement.
(g) Since January 1, 1998, and through the date of this Agreement,
neither the Company nor any Company Subsidiary has received notice of, and, to
the knowledge of the Company, there are no (i) pending termination proceedings
or other suits, claims (except claims for benefits payable in the normal
operation of the Company Benefit Plans), actions or proceedings against or
involving any Company Benefit Plan or Company Benefit Agreement that,
individually or in the aggregate, would reasonably be expected to have a
Company Material Adverse Effect or (ii) pending investigations (other than
routine inquiries) by any Governmental Entity with respect to any Company
Benefit Plan or Company Benefit Agreement. All contributions, premiums and
benefit payments under or in connection with the Company Benefit Plans or
Company Benefit Agreements that are required to have been made by the Company
or any Company Subsidiary have been timely made, accrued or reserved for in
all material respects.
(h) Neither the Company nor any Company Subsidiary has any material
liability or obligations, including under or on account of a Company Benefit
Plan or Company Benefit Agreement, arising out of (i) the hiring of persons to
provide services to the Company or any Company Subsidiary and (ii) treating
such persons as consultants or independent contractors and not as employees of
the Company or any Company Subsidiary.
(i) Schedule 3.11(i) of the Company Disclosure Letter sets forth a
list of all employees of the Company and the Company Subsidiaries and the
number of vacation, personal and sick days and/or paid time off accrued by
each such employee as of December 6, 2003.
SECTION 3.12. PROCEEDINGS. Section 3.12 of the Company Disclosure
Letter sets forth a list of each pending or, to the knowledge of the Company,
threatened claim (with respect to which the Company or any Company Subsidiary
has been contacted in writing by counsel for the plaintiff or claimant),
action, suit or proceeding (each, a "Proceeding") against the Company or any
Company Subsidiary or to the knowledge of the Company against any of their
assets that (a) relates to or involves an amount in controversy exceeding
$500,000, (b) seeks any material injunctive relief or (c) may give rise to any
legal restraint on or prohibition against the consummation of the Merger. None
of the Proceedings or claims listed in Section 3.12 of the Company Disclosure
Letter as to which there is at least a reasonable possibility of adverse
determination would be reasonably expected to have, if so determined,
individually or in the aggregate, a Company Material Adverse Effect. Neither
the Company nor any Company Subsidiary is a party or subject to or in default
under any material Judgment. There is not any Proceeding by the Company or any
Company Subsidiary pending, or which the Company or any Company Subsidiary
intends to initiate, against any other person. To the knowledge of the
Company, there is no pending or threatened
21
investigation of the Company or any Company Subsidiary. Notwithstanding the
foregoing, this Section 3.12 shall not apply to any investigation,
Environmental Claim, or Proceeding under or with respect to Environmental
Laws.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAWS. (a) The Company and
the Company Subsidiaries are in compliance in all respects with all applicable
Laws, including those relating to occupational health and safety, and each
applicable license, permit and Certificate of Need ("CON"), if any, held by
the Company or any Company Subsidiary, except where such non-compliance has
not had and would not reasonably be expected to have a Company Material
Adverse Effect. Neither the Company nor any Company Subsidiary has received
any written communication during the past two years from any Governmental
Entity, accrediting organization, patients rights group or other similar
person that alleges that the Company or a Company Subsidiary is not in
compliance in any material respect with any applicable Law or any such
license, permit or CON except for communications (including surveys)
identified on Section 3.13 of the Company Disclosure Letter and/or referenced
in the minutes of the meetings of the Company's Compliance Committee that have
prior to the date of this Agreement been provided to Parent, or such other
communications where such allegations, if true, would not reasonably be
expected to materially adversely affect the business or operations of the
hospice program(s) to which such allegations relate.
(b) To the knowledge of the Company, no action has been taken or
recommended by any Governmental Entity within the past two years or that
otherwise remains pending either: (i) to revoke, withdraw or suspend any CON
or any license, permit or other authority, in each case material to the
operations of the Programs; or (ii) to terminate or decertify any
participation of any of the Programs in the Medicare and Medicaid programs. As
used in this Agreement, "Program" or Programs" refers to any hospice program
owned, operated, leased or managed by the Company or any Company Subsidiary.
All cost reports ("Cost Reports") required to be filed by the Company or any
Company Subsidiary with respect to the Programs under the Medicare and
Medicaid programs, or any other applicable governmental or private provider
regulations have been prepared and filed in accordance with applicable Law,
except where the failure to prepare or file any such Cost Report in accordance
with applicable Law has not and would not reasonably be expected to have a
Company Material Adverse Effect. The Company has or has caused a Company
Subsidiary to have paid or made provision to pay through proper recordation of
any net liability any material overpayments received from the Medicare and
Medicaid programs and any similar obligations with respect to other
reimbursement programs in which the Company and the Company Subsidiaries
participate. Neither the Company nor any Company Subsidiary has received
during the past two years any written communication that a Governmental Entity
or other party is contesting any Cost Report filed by the Company or any
Company Subsidiary. This Section 3.13 does not relate to matters with respect
to Taxes, which are the subject of Section 3.09, or to environmental matters,
which are the subject of Section 3.18.
22
SECTION 3.14. ASSETS OTHER THAN REAL PROPERTY INTERESTS. The Company
or a Company Subsidiary has good and marketable title to all the assets
reflected on the Balance Sheet or thereafter acquired, other than those set
forth in Section 3.14 of the Company Disclosure Letter or otherwise disposed
of since the date of the Balance Sheet in the ordinary course of business
consistent with past practice, in each case free and clear of all Liens,
except (i) mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business, Liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business and liens for
Taxes that are not due and payable or that may thereafter be paid without
penalty, (ii) Liens that secure debt obligations that are reflected as
liabilities on the Balance Sheet and the existence of which is referred to in
the notes to the Balance Sheet and (iii) other imperfections of title or
encumbrances, if any, that, individually or in the aggregate, do not
materially impair, and would not reasonably be expected materially to impair,
the continued use and operation of the assets to which they relate in the
conduct of the business of the Company and the Company Subsidiaries as
presently conducted. This Section 3.14 does not relate to real property or
interests in real property, such items being the subject of Section 3.15, or
to Intellectual Property, such items being the subject of Section 3.19.
SECTION 3.15. REAL PROPERTY. Neither the Company nor any Company
Subsidiary owns any real property. Section 3.15(a) of the Company Disclosure
Letter sets forth a complete list of all real property and interests in real
property leased by the Company or any Company Subsidiary (individually, a
"Company Property"). The Company or a Company Subsidiary has good and valid
title to the leasehold estates in all Company Property, free and clear of all
Liens, except (i) Liens described in clause (i) or (iii) of Section 3.14, (ii)
such Liens as are set forth in Section 3.15 of the Company Disclosure Letter,
(iii) leases, subleases and similar agreements set forth in Section 3.17 of
the Company Disclosure Letter, (iv) easements, covenants, rights-of-way and
other similar restrictions of record, (v) any conditions that may be shown by
a current, accurate survey or physical inspection of any Company Property made
prior to the Closing and (vi)(A) zoning, building and other similar
restrictions, (B) Liens that have been placed by any developer, landlord or
other third party on any Company Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions.
SECTION 3.16. LABOR MATTERS. There are no collective bargaining or
other labor union agreements to which the Company or any Company Subsidiary is
a party or by which any of them is bound. To the knowledge of the Company,
since January 1, 2001, neither the Company nor any Company Subsidiary has
encountered any labor union organizing activity directed at its employees, or
had any actual or threatened employee strikes, work stoppages, slowdowns or
lockouts.
SECTION 3.17. CONTRACTS. (a) Neither the Company nor any Company
Subsidiary is a party to or, to the knowledge of the Company, bound by any:
23
(i) employment or consulting agreement or employment or consulting
contract, other than physician agreements or contracts (excluding any
such agreement or contract with any physician who is an officer or
director of the Company or any Company Subsidiary) entered into in the
ordinary course of business, consistent with past practice and other than
consulting agreements or contracts (excluding any such agreement or
contract entered into with an employee, officer or director of the
Company or any Company Subsidiary) entered into in the ordinary course of
business, consistent with past practice;
(ii) covenant not to compete or other covenant restricting the
development, manufacture, marketing or distribution of the products and
services of the Company or any Company Subsidiary;
(iii) Contract (other than this Agreement, a Company Benefit Plan or
Company Benefit Agreement) with (A) any current or former officer,
director, employee or stockholder of the Company or a Company Subsidiary
(other than employment agreements covered by clause (i) above);
(iv) Contract (other than the Company Credit Facility) under which
the Company or a Subsidiary has borrowed any money from, or issued any
note, bond, debenture or other evidence of indebtedness to, any person or
any other note, bond, debenture or other evidence of indebtedness of the
Company or a Subsidiary in any such case which, individually, is in
excess of $100,000;
(v) Contract (including any so-called take-or-pay or keepwell
agreements, but other than the Company Credit Facility) under which (A)
any person has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or a Company Subsidiary or (B)
except for guarantees by the Company or a Company Subsidiary of
indebtedness, liabilities or obligations of employees or patients of the
Company or any Company Subsidiary in an aggregate amount of less than
$100,000, the Company or a Company Subsidiary has directly or indirectly
guaranteed indebtedness, liabilities or obligations of any person (in
each case other than endorsements for the purpose of collection in the
ordinary course of business);
(vi) Contract under which the Company or a Company Subsidiary has,
directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any person (other than
the Company or a Company Subsidiary and other than extensions of trade
credit in the ordinary course of business);
(vii) Contract to which the Company or a Company Subsidiary is a
party granting a Lien upon any Company Property or Contract granting a
Lien upon any other material asset of the Company or any Company
Subsidiary (except as a result of any Environmental Claim);
24
(viii) Contract providing (a) for indemnification by the Company or
any Company Subsidiary of any current or former employee, officer,
director or consultant or (b) indemnification by the Company or any
Company Subsidiary of any person with respect to material liabilities
relating to any current or former business of the Company, a Company
Subsidiary or any predecessor person (other than, in the case of (b),
contracts providing for indemnification made in the ordinary course of
business consistent with past practice);
(ix) a material Contract not made in the ordinary course of business
(other than relating to environmental matters);
(x) a material Contract with or material license or material permit
by or from any Governmental Entity, except any Environmental Permit;
(xi) currency exchange, interest rate exchange, commodity exchange
or similar Contract;
(xii) a Contract for any joint venture or partnership or any similar
arrangement, to the extent such similar arrangement involves financial
consequences that are material to the Company;
(xiii) a lease, sublease or similar agreement with respect to a
Company Property providing (A) for lease payments to or by the Company or
any Company Subsidiary in excess of $100,000 per annum, or (B) for a term
of more than one year, and, in each case, not terminable by the Company
or a Company Subsidiary by notice of not more than 60 days for a cost of
less than $50,000; or
(xiv) a Contract other than as set forth above to which the Company
or a Company Subsidiary is a party or, to the knowledge of the Company,
by which it or any of its assets or businesses is bound or subject that
is material to the business of the Company and the Company Subsidiaries
or the use or operation of their assets taken as a whole.
(b) All Contracts required to be listed in Section 3.17(a) of the
Company Disclosure Letter (the "Company Contracts") in all material respects
are valid, binding and in full force and effect and, to the Company's
knowledge, are enforceable by the Company or the applicable Company Subsidiary
in accordance with their terms, subject to (i) applicable bankruptcy,
insolvency, fraudulent transfer and conveyance, moratorium, reorganization,
receivership and similar Laws relating to or affecting the enforcement of the
rights and remedies of creditors generally and (ii) principles of equity
(regardless of whether considered and applied in a proceeding in equity or at
law). The Company or the applicable Company Subsidiary has performed all
material obligations required to be performed by it to date under the Company
Contracts, and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and,
to the knowledge of the Company, no other party to any Company
25
Contract is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder. None of the
Company and the Company Subsidiaries has received any written notice of the
intention of any party to terminate any Company Contract, other than, in the
case of notices received more than twelve months prior to the date of this
Agreement, notices that have been withdrawn or which relate to Company
Contracts that have been renewed since the date of such notice. Complete and
correct copies of all Company Contracts, together with all modifications and
amendments thereto, have been made available to Parent prior to the date of
this Agreement.
SECTION 3.18. ENVIRONMENTAL MATTERS. Except for such matters that
individually or in the aggregate have not had, and would not reasonably be
expected to have, a Company Material Adverse Effect:
(a) The Company and each of the Company Subsidiaries are, and have
been, in compliance with all Environmental Laws (as defined below), and
neither the Company nor any of the Company Subsidiaries has received any
communication that alleges that the Company or any of the Company Subsidiaries
is in violation of, or has liability under, any Environmental Law;
(b) the Company and each of the Company Subsidiaries have obtained
and are in compliance with all permits, licenses and governmental
authorizations pursuant to Environmental Law (collectively "Environmental
Permits") necessary for their operations as currently conducted, and (ii)
neither the Company nor any of the Company Subsidiaries has been advised by
any Governmental Entity of any actual or potential change in the status or
terms and conditions of any Environmental Permit;
(c) there are no Environmental Claims (as defined below) pending
and, to the knowledge of the Company, there are no governmental investigations
under Environmental Laws or Environmental Claims threatened, against the
Company or any of the Company Subsidiaries;
(d) there have been no Releases (as defined below) of any Hazardous
Material (as defined below) that could reasonably be expected to form the
basis of any investigations under Environmental Laws or any Environmental
Claim against the Company or any of the Company Subsidiaries or against any
Person whose liabilities for such investigations or Environmental Claims the
Company or any of the Company Subsidiaries has, or may have, retained or
assumed, either contractually or by operation of law; and
(e) (i) neither the Company nor any of the Company Subsidiaries has
retained or assumed, either contractually or by operation of law, any
liabilities or obligations that could reasonably be expected to form the basis
of any investigations under Environmental Laws or any Environmental Claim
against the Company or any of the Company Subsidiaries, and (ii) to the
knowledge of the Company, no investigations under Environmental Laws or
Environmental Claims are pending against any Person
26
whose liabilities for such investigations or Environmental Claims the Company
or any of the Company Subsidiaries has, or may have, retained or assumed,
either contractually or by operation of law.
(f) DEFINITIONS. As used in this Agreement:
(g) "ENVIRONMENTAL CLAIM" means any and all administrative,
regulatory or judicial actions, suits, orders, demands, directives, claims,
liens, legal proceedings or written or oral notices of noncompliance or
violation by or from any Person alleging liability of whatever kind or nature
(including liability or responsibility for the costs of enforcement
proceedings, investigations, cleanup, governmental response, removal or
remediation, natural resources damages, property damages, personal injuries,
medical monitoring, penalties, contribution, indemnification and injunctive
relief) arising out of, based on or resulting from (y) the presence or Release
of, or exposure to, any Hazardous Materials at any location; or (z) the
failure to comply with any Environmental Law.
(h) "ENVIRONMENTAL LAWS" means all applicable federal, state, local
and foreign laws, rules, regulations, orders, decrees, judgments, legally
binding agreements or Environmental Permits issued, promulgated or entered
into by or with any Governmental Entity, relating to pollution, natural
resources or protection of endangered or threatened species, human health or
the environment (including ambient air, surface water, groundwater, land
surface or subsurface strata).
(i) "HAZARDOUS MATERIALS" means (y) any petroleum or petroleum
products, radioactive materials or wastes, asbestos in any form, urea
formaldehyde foam insulation and polychlorinated biphenyls; and (z) any other
chemical, material, substance or waste that in relevant form or concentration
is prohibited, limited or regulated under any Environmental Law.
(j) "RELEASE" means any actual or threatened release, spill,
emission, leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into or through the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata) or
within any building, structure, facility or fixture.
SECTION 3.19. INTELLECTUAL PROPERTY. The Company and its
subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which are material to the conduct of the
business of the Company and its subsidiaries taken as a whole. No claims are
pending or, to the knowledge of the Company, threatened that the Company or
any Company Subsidiary is infringing or otherwise adversely affecting the
rights of any person with regard to any Intellectual Property Right. To the
knowledge of the
27
Company, no person is infringing the rights of the Company or any of the
Company Subsidiaries with respect to any Intellectual Property Right.
SECTION 3.20. BROKERS. No broker, investment banker, financial
advisor or other person, other than Houlihan Lokey Howard & Zukin ("Houlihan
Lokey"), the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of the Company. The Company has furnished to Parent a true and
complete copy of all agreements between the Company and Houlihan Lokey
relating to the Merger.
SECTION 3.21. NO GROUNDS FOR FEDERAL HEALTH CARE PROGRAM EXCLUSION.
To the knowledge of the Company, no person who has an equity ownership
interest of five percent (5%) or more in the Company or any Company Sub: (a)
has been convicted of a criminal offense as described in sections 1128(a) and
1128(b)(1), (2), or (3) of the Social Security Act; (b) has had civil money
penalties or assessments imposed under section 1128A of the Social Security
Act; or (c) has been excluded from participation in Medicare, Medicaid or any
other federal or state health care program.
SECTION 3.22. LIMITATION. NOTWITHSTANDING ANY PROVISION IN THIS
AGREEMENT TO THE CONTRARY AND SOLELY FOR PURPOSES OF THIS AGREEMENT, (A) NO
REPRESENTATION OR WARRANTY IS MADE BY THE COMPANY WITH RESPECT TO (I) PARENT
OR ANY OF ITS AFFILIATES OR THEIR RESPECTIVE BUSINESSES, RIGHTS, ASSETS OR
OPERATIONS, OR (II) ANY BUSINESS RELATIONSHIP BETWEEN THE COMPANY OR ANY OF
ITS AFFILIATES, ON THE ONE HAND, AND PARENT OR ANY OF ITS AFFILIATES, ON THE
OTHER HAND, AND (B) NO FACT, EVENT, CHANGE, EFFECT OR DEVELOPMENT RELATING TO
I OR II ABOVE SHALL BE DEEMED TO RESULT IN THE BREACH BY THE COMPANY OF ANY
REPRESENTATION OR WARRANTY IN THIS ARTICLE III OR TO OTHERWISE RESULT IN A
COMPANY MATERIAL ADVERSE EFFECT (PROVIDED THAT THIS SECTION 3.22 SHALL NOT
APPLY WITH RESPECT TO SECTION 3.03, SECTION 3.04 OR SECTION 3.05).
SECTION 3.23. ACKNOWLEDGEMENT. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, THE COMPANY ACKNOWLEDGES THAT NONE OF
PARENT, SUB, ANY OF THEIR AFFILIATES OR ANY OTHER PERSON MAKES ANY OTHER
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY IN CONNECTION WITH THIS
AGREEMENT AND THE TRANSACTIONS EXPRESSLY CONTEMPLATED HEREBY WITH RESPECT TO
PARENT, SUB OR ANY OF THEIR AFFILIATES, THE BUSINESS OR ASSETS OF PARENT OR
ANY OF ITS AFFILIATES OR OTHERWISE OR WITH RESPECT TO ANY OTHER INFORMATION
PROVIDED TO THE COMPANY OR ITS REPRESENTATIVES.
28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant to the
Company that, except as set forth in the letter (arranged in sections and
subsections corresponding to the numbered and lettered sections and
subsections contained in this Article IV with the disclosures in any section
or subsection of such letter qualifying the corresponding section or
subsection in this Article IV, as well as any other section or subsection of
this Article IV if the application to such other section or subsection is
reasonably apparent on its face), dated as of the date of this Agreement, from
Parent and Sub to the Company executed and delivered by Parent immediately
prior to the execution and delivery of this Agreement (the "Parent Disclosure
Letter"), and, subject to Section 4.13:
SECTION 4.01. ORGANIZATION, STANDING AND POWER. Each of Parent and
Sub, is duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has all corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease or otherwise
hold its properties and assets and to conduct its businesses as presently
conducted, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, has not had and
would not reasonably be expected to have a material adverse effect on the
ability of Parent or Sub to perform its obligations under this Agreement or a
material adverse effect on the ability of Parent or Sub to consummate the
Merger (a "Parent Material Adverse Effect").
SECTION 4.02. SUB. (a) Since the date of its incorporation, Sub has
not carried on any business or conducted any operations other than the
execution of this Agreement, the performance of its obligations hereunder and
matters ancillary thereto.
(b) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which have been validly
issued, are fully paid and nonassessable and are owned by Comfort Care
Holdings Co. (formerly known as OCR Holding Company), a Nevada corporation and
wholly owned subsidiary of Parent ("OCR") free and clear of any Lien.
SECTION 4.03. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. Each
of Parent and Sub has all requisite corporate power and authority to execute
and deliver this Agreement and, subject to the adoption of this Agreement by
OCR, as the sole stockholder of Sub, to consummate the Merger. Subject to the
adoption of this Agreement by OCR, as the sole stockholder of Sub, the
execution and delivery by each of Parent and Sub of this Agreement and the
consummation by it of the Merger and the other transactions expressly
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parent and Sub. No action by the stockholders
29
of Parent, OCR or Sub is required to adopt and approve this Agreement and the
Merger other than the adoption of this Agreement by OCR as the sole
stockholder of Sub. The affirmative vote of the holders of the capital stock
of Parent is not necessary to consummate any transaction expressly
contemplated hereby, including the Financing. Each of Parent and Sub has duly
executed and delivered this Agreement, and this Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms. OCR, promptly following (but in no event more than one business day
following) the execution and delivery of this Agreement, shall deliver to the
Company a certificate of the Secretary of OCR certifying that OCR, as sole
stockholder of Sub, has adopted this Agreement.
SECTION 4.04. NO CONFLICTS; CONSENTS. (a) The execution and delivery
by each of Parent and Sub of this Agreement do not, and the consummation of
the Merger and the other transactions expressly contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under, any provision of (i) the
charter or organizational documents of Parent or any of its subsidiaries, (ii)
any Contract to which Parent or any of its subsidiaries is a party or by which
any of their respective properties or assets is bound or (iii) subject to the
filings and other matters referred to in Section 4.04(b), any Judgment or Law
applicable to Parent or any of its subsidiaries or their respective properties
or assets, other than, in the case of clauses (ii) and (iii) above, any such
items that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by Parent or any of its
subsidiaries with respect to Parent or any of its subsidiaries for the
execution, delivery and performance of this Agreement or the consummation of
the Merger and the other transactions expressly contemplated hereby, other
than (i) compliance with and filings under the HSR Act, (ii) the filing with
the SEC of such reports under the Exchange Act as may be required in
connection with this Agreement and the Merger, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
(iv) compliance with and such filings as may be required under applicable
Environmental Laws, (v) such filings as may be required in connection with the
Taxes described in Section 6.09, (vi) those that may be required solely by
reason of the Company's (as opposed to any third party's) participation in the
Merger or that are unique to the industry in which the Company currently
operates and (vii) such other items that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Parent Material
Adverse Effect or as are set forth in the Parent Disclosure Letter.
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SECTION 4.05. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or Sub for inclusion or incorporation by reference
in the Information Statement will, at the time it is first sent or given to
the Company's stockholders, option holders or warrantholders, as the case may
be, 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, in light of the circumstances under which they were made,
not misleading.
SECTION 4.06. BROKERS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Parent.
SECTION 4.07. FINANCING. Parent has received commitment letters with
respect to proposed senior credit facilities and has received a letter from
its financial advisors indicating that such financial advisors are highly
confident that Parent can obtain subordinated debt and/or equity financing,
and Parent has cash available, that together with such senior credit
facilities and subordinated debt and/or equity financing are sufficient to
consummate the Merger on the terms contemplated by this Agreement. True and
correct copies of such letters (the "Financing Commitments") have been
provided to the Company. Section 4.07 of the Parent Disclosure Letter sets
forth as of the date of this Agreement the material details of the plan for
the financing of the Merger that are available as of the date of this
Agreement (subject to any amendment to Section 4.07 of the Parent Disclosure
Letter in accordance with Section 6.03(e), the "Financing"). Parent is
confident that it can obtain the Financing; provided that there does not occur
a Company Material Adverse Effect, a Parent Material Adverse Effect or any of
the events or changes contemplated in the proviso to the definition of
"material adverse effect" set forth in Section 9.03.
SECTION 4.08. SEC DOCUMENTS. Since January 1, 2000, Parent has filed
with the SEC all reports and other documents required to be filed by it during
such period under the Exchange Act (the "Parent SEC Documents"). At the
respective times they were filed, none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading except
to the extent corrected in a subsequently filed Parent SEC Document. The
consolidated financial statements (including, in each case, any notes thereto)
of Parent included in the Parent SEC Documents were prepared in conformity
with GAAP consistently applied throughout the periods covered thereby (except
in each case as described in the notes thereto) and fairly presented in all
material respects the consolidated financial position, results of operations
and cash flows of Parent and its consolidated subsidiaries as at the
respective dates thereof and for the periods then ended (subject, in the case
of unaudited statements to normal year-end audit adjustments and to any other
31
adjustments described therein), except to the extent corrected in a
subsequently filed Parent SEC Document.
SECTION 4.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Parent SEC Documents, since January 1, 2003 until the date of
this Agreement, there has not been any event, change, effect or development
that, individually or in the aggregate, has had or would reasonably be
expected to have a Parent Material Adverse Effect.
SECTION 4.10. PROCEEDINGS. Except as disclosed in the Parent SEC
Documents, there are no Proceedings pending or, to the knowledge of Parent,
threatened, against Parent or Sub that would reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 4.11. STATE TAKEOVER STATUTES. To Parent's knowledge as of
the date hereof, no state takeover statute or similar statute or regulation
applies or purports to apply to this Agreement or the Merger.
SECTION 4.12. NO GROUNDS FOR FEDERAL HEALTH CARE PROGRAM EXCLUSION.
To the knowledge of the Parent no person who has an ownership interest of five
percent (5%) or more in the Parent or Sub: (a) has been convicted of a
criminal offense as described in sections 1128(a) and 1128(b)(1), (2), or (3)
of the Social Security Act; (b) has had civil money penalties or assessments
imposed under section 1128A of the Social Security Act; or (c) has been
excluded from participation in Medicare, Medicaid or any other federal or
state health care program.
SECTION 4.13. LIMITATION. NOTWITHSTANDING ANY PROVISION IN THIS
AGREEMENT TO THE CONTRARY AND SOLELY FOR THE PURPOSE OF THIS AGREEMENT, (A) NO
REPRESENTATION OR WARRANTY IS MADE BY PARENT OR SUB WITH RESPECT TO (I) THE
COMPANY OR ANY OF ITS AFFILIATES OR THEIR RESPECTIVE BUSINESSES, RIGHTS,
ASSETS OR OPERATIONS, OR (II) ANY BUSINESS RELATIONSHIP BETWEEN PARENT, SUB OR
ANY OF THEIR RESPECTIVE AFFILIATES, ON THE ONE HAND, AND THE COMPANY OR ANY OF
ITS AFFILIATES, ON THE OTHER HAND, AND (B) NO FACT, EVENT, CHANGE, EFFECT OR
DEVELOPMENT RELATING TO I OR II ABOVE SHALL BE DEEMED TO RESULT IN THE BREACH
BY PARENT OR SUB OF ANY REPRESENTATION OR WARRANTY IN THIS ARTICLE IV OR TO
OTHERWISE RESULT IN A PARENT MATERIAL ADVERSE EFFECT (PROVIDED THAT THIS
SECTION 4.13 SHALL NOT APPLY WITH RESPECT TO SECTION 4.03 OR SECTION 4.04).
SECTION 4.14. ACKNOWLEDGEMENT. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, PARENT AND SUB ACKNOWLEDGE THAT
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES NOR ANY OTHER PERSON MAKES ANY
OTHER
32
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY IN CONNECTION WITH THIS
AGREEMENT AND THE TRANSACTIONS EXPRESSLY CONTEMPLATED HEREBY WITH RESPECT TO
THE COMPANY COMMON STOCK, THE COMPANY OR ANY OF THE COMPANY SUBSIDIARIES, THE
BUSINESS OR ASSETS OF THE COMPANY OR ANY OF THE COMPANY SUBSIDIARIES OR
OTHERWISE OR WITH RESPECT TO ANY OTHER INFORMATION PROVIDED TO PARENT, SUB OR
THEIR RESPECTIVE REPRESENTATIVES.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS. (a) Conduct of Business by the
Company. Except for matters set forth in Section 5.01 of the Company
Disclosure Letter or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the Effective Time the Company shall, and shall
cause each Company Subsidiary to, use reasonable efforts to conduct its
business in the usual, regular and ordinary course consistent with past
practice and to use reasonable efforts to preserve intact its current business
organization, to keep available the services of its current officers and
employees, to keep its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them (other
than replacements of suppliers and licensors in the ordinary course of
business consistent with past practice) and to preserve its goodwill and
ongoing business. In addition, and without limiting the generality of the
foregoing, except for matters set forth in Section 5.01 of the Company
Disclosure Letter or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the Effective Time, the Company shall not, and shall
not permit any Company Subsidiary to, do any of the following without the
prior written consent of Parent (which consent, in the case of clauses (vii),
(ix) and (xi), shall not be unreasonably withheld or delayed):
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned
subsidiary of the Company to its parent, (B) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (C) purchase, redeem or otherwise acquire (1) any
shares of capital stock of the Company or any Company Subsidiary, (2) any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities or (3) any options, warrants, rights,
securities, units, commitments, Contracts, arrangements or undertakings
of any kind that give any person the right to receive any economic
benefits and rights accruing to holders of capital stock of the Company
or any Company Subsidiary;
33
(ii) issue, deliver, sell or grant (A) any shares of capital stock
of the Company or any Company Subsidiary, (B) any Voting Company Debt or
other voting securities, (C) any securities convertible into or
exchangeable for, or any options, warrants or rights to acquire, any such
shares, Voting Company Debt, voting securities or convertible or
exchangeable securities, (D) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units or (E) any
options, warrants, rights, securities, units, commitments, Contracts,
arrangements or undertakings of any kind that give any person the right
to receive any economic benefits and rights accruing to holders of
capital stock of the Company or any Company Subsidiary, other than the
issuance of Company Common Stock upon the exercise of Company Employee
Stock Options or Company Warrants outstanding on the date of this
Agreement and in accordance with their present terms;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial equity interest in or portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (B) any assets that are material, individually or in
the aggregate, to the Company and the Company Subsidiaries, taken as a
whole;
(v) except as may be required by changes in Law, (A) grant to any
employee, consultant, officer or director of the Company or any Company
Subsidiary any increase in compensation or benefits, or pay any bonus to
any such person, except to the extent required under Company Benefit
Agreements in effect as of the date of the Balance Sheet and except in
the case of employees below the level of general manager, salary
increases and bonuses in the ordinary course of business consistent with
past practice, (B) grant to any employee, consultant, officer or director
of the Company or any Company Subsidiary any increase in severance or
termination pay, except to the extent required under any Company Benefit
Agreement in effect as of the date of the Balance Sheet, (C) pay to any
employee, consultant, officer or director of the Company or any Company
Subsidiary any material benefit not provided for under any Company
Benefit Plan or Company Benefit Agreement as in effect on the date of the
Balance Sheet other than the payment of base compensation in the ordinary
course of business consistent with past practice and other than, in the
case of employees below the level of general manager, payment of normal
quarterly bonuses and commissions in the ordinary course of business
consistent with past practice, (D) take any action to fund or in any
other way secure the payment of compensation or benefits under any
Company Benefit Plan or Company Benefit Agreement, except in the ordinary
course of business consistent with past practice, (E) establish, adopt,
34
enter into, terminate or amend in any material respect any collective
bargaining agreement, Company Benefit Plan or Company Benefit Agreement
or (F) take any action to accelerate any rights or benefits, including
vesting and payment, or make any material determinations not in the
ordinary course of business consistent with past practice, under any
collective bargaining agreement, Company Benefit Plan or Company Benefit
Agreement;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in GAAP or applicable Law;
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any properties or assets other than, in the case of
any such transaction that does not involve any officer or director of the
Company or any Company Subsidiary, properties and assets that have a fair
value, individually, of less than $100,000, in the ordinary course of
business consistent with past practice;
(viii) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any Company Subsidiary, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except
for borrowings under the Company's revolving credit line under the
Company Credit Facility incurred in the ordinary course of business
consistent with past practice, or (B) make any loans, advances or capital
contributions to, or investments in, any other person, other than to or
in the Company or any direct or indirect wholly owned subsidiary of the
Company;
(ix) make or agree to make any new capital expenditure or
expenditures that, individually, is in excess of $250,000 or, in the
aggregate, are in excess of $500,000, other than as contemplated in the
current budget attached as Exhibit A to Section 5.01 of the Company
Disclosure Letter;
(x) make or change any material Tax election or settle or compromise
any material Tax liability or refund;
(xi) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the Balance Sheet or incurred since the date of
the Balance Sheet in the ordinary course of business consistent with past
practice, (B) cancel any material indebtedness (individually or in the
aggregate) or
35
waive any claims or rights of substantial value or (C) waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or
similar agreement to which the Company or any Company Subsidiary is a
party, except to the extent such waiver or modification is necessary or
appropriate in order to enable the Company to take any of the actions
permitted by Section 5.02(a) or Section 5.02(b); or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) OTHER ACTIONS. Except as expressly contemplated or permitted by
this Agreement, the Company and Parent shall not, and shall not permit any of
their respective subsidiaries to, take any action that causes or would
reasonably be expected to result in any condition to the Merger set forth in
Article VII not being satisfied.
SECTION 5.02. NO SOLICITATION. (a) The Company shall not, nor shall
it authorize or permit any Company Subsidiary to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker,
attorney or other advisor or representative (collectively, "Representatives")
of, the Company or any Company Subsidiary to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Company Takeover
Proposal (as defined in Section 5.02(e)), (ii) enter into any agreement with
respect to any Company Takeover Proposal or (iii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal; provided,
however, that prior to 11:59 p.m. Eastern Time on January 24, 2004, the
Company may, in response to an unsolicited Company Takeover Proposal made
after the date of this Agreement which did not result from a knowing breach of
this Section 5.02(a) and which each of the Company Board and the Special
Committee determines, in good faith, after consultation with outside legal
counsel and financial advisors, may reasonably be expected to lead to a
Superior Company Proposal (as defined in Section 5.02(e)), and subject to
compliance with Section 5.02(c), (x) furnish information with respect to the
Company to the person making such Company Takeover Proposal and its
Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement (as defined
in Section 6.02) and also containing reasonable nonsolicitation and standstill
provisions, and (y) participate in discussions or negotiations with such
person and its Representatives regarding such Company Takeover Proposal.
Without limiting the foregoing, it is agreed that any material violation of
the restrictions set forth in the preceding sentence by any Representative of
the Company or any Company Subsidiary, whether or not such person is
purporting to act on behalf of the Company or any Company Subsidiary or
otherwise, shall be a breach of this Section 5.02(a) by the Company. For the
avoidance of doubt, a stockholder of the Company shall not be considered a
"Representative" for purposes of Section 5.02 as long as such stockholder is
36
not acting in concert with the Company or any other Representative of the
Company in a manner that would otherwise be prohibited under this Section
5.02.
(b) Neither the Company Board nor any committee thereof shall (i)
approve any letter of intent, agreement in principle, acquisition agreement or
similar agreement relating to any Company Takeover Proposal or (ii) approve or
recommend, or propose publicly to approve or recommend, any Company Takeover
Proposal. Notwithstanding the foregoing, if, after the date of this Agreement
and prior to 11:59 p.m. Eastern Time on January 24, 2004, the Company Board
receives a Superior Company Proposal (as defined in Section 5.02(e)) and as a
result thereof each of the Company Board and the Special Committee determines,
in good faith, after consultation with outside legal counsel, that it is
necessary to do so in order to comply with their fiduciary obligations, in
response to a Superior Company Proposal that was not knowingly solicited by
the Company in violation of Section 5.02(a) or Section 5.02(f), the Company
Board may terminate this Agreement pursuant to Section 8.01(f) and cause the
Company immediately thereafter to enter into an agreement with respect to such
Superior Company Proposal, but only (A) at a time that is not less than 48
hours after the time following the Company's delivery to Parent of written
notice advising Parent that each of the Company Board and the Special
Committee is prepared to approve a Superior Company Proposal, identifying the
person making such Superior Company Proposal and otherwise complying with
Section 5.02(c) and (B) after taking into full account any proposal by Parent
to amend the terms or conditions of the Merger and this Agreement.
(c) The Company promptly shall advise Parent orally and in writing
of any Company Takeover Proposal or any inquiry with respect to or that may
reasonably be expected to lead to any Company Takeover Proposal, the identity
of the person making any such Company Takeover Proposal or inquiry and the
material terms and conditions of any such Company Takeover Proposal or inquiry
(including any changes to the material terms thereof). The Company shall (i)
keep Parent informed of the status (including any change to the material terms
thereof) of any such Company Takeover Proposal or inquiry and (ii) provide to
Parent as soon as practicable after receipt or delivery thereof with copies of
all material correspondence and other material written materials sent or
provided to the Company from any third party in connection with any Company
Takeover Proposal or sent or provided by the Company to any third party in
connection with any Company Takeover Proposal.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company Board or the Special Committee, after consultation with outside
counsel, failure so to disclose would be inconsistent with its obligations
(including fiduciary obligations) under applicable Law.
(e) For purposes of this Agreement:
37
"Company Takeover Proposal" means (i) any proposal or offer for a
merger, consolidation, dissolution, recapitalization or other business
combination involving the Company, (ii) any proposal or offer for the
issuance by the Company of over 20% of its equity securities as
consideration for the assets or securities of another person or (iii) any
proposal or offer to acquire in any manner, directly or indirectly, over
20% of the equity securities or consolidated total assets of the Company,
in each case other than the Merger or the exercise of Company Employee
Stock Options and Company Warrants outstanding on the date hereof and in
accordance with all of their respective terms and conditions on the date
hereof.
"Superior Company Proposal" means any proposal made by a third party
to acquire substantially all the equity securities or assets of the
Company, pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization, a sale
of all or substantially all its assets or otherwise, which each of the
Company Board and the Special Committee determines in good faith, after
consultation with outside legal counsel and financial advisors, to be (i)
on terms more favorable from a financial point of view to the holders of
Company Common Stock than the Merger, taking into account all the terms
and conditions of such proposal and this Agreement (including any
proposal by Parent to amend the terms of the Merger) and (ii) reasonably
capable of being completed, taking into account all financial,
regulatory, legal and other aspects of such proposal; provided that for
the avoidance of doubt the Identified Company Takeover Proposal shall not
be a Superior Company Proposal.
(f) Notwithstanding Section 5.02(a), the Company may continue to
directly or indirectly participate in the discussions and negotiations with
the person who has been identified to Parent in writing on or prior to the
date of this Agreement (the "Identified Party") regarding a Company Takeover
Proposal, the terms of which were described to Parent in writing by the
Company on or prior to the date of this Agreement (the "Identified Company
Takeover Proposal"); provided that Section 5.02(a) and the other provisions of
Section 5.02 (including Section 5.02(c)) otherwise shall apply in all respects
to the Identified Party and the Identified Company Takeover Proposal. The
Company represents and warrants that it has not entered into any agreements
with the Identified Party for the Identified Company Takeover Proposal or that
would reasonably be expected to result in a Company Takeover Proposal.
(g) Notwithstanding anything to the contrary in this Section 5.02 or
in Section 8.01(f), the fact that the Company or any of its Representatives
has had discussions or negotiations with persons prior to the date of this
Agreement regarding a possible Company Takeover Proposal shall not prevent the
Company from taking any of the actions specified in the proviso in Section
5.02(a), the second sentence of Section 5.02(b) or Section 8.01(f) with
respect to a new Company Takeover Proposal that
38
was submitted by such person after the date of this Agreement and that was not
solicited in violation of Section 5.02(a) or Section 5.02(f).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDERS VOTE. (a) The Company shall, on or before
February 2, 2004, (i) seek the Section 280G Approval (as defined in Section
6.01(b)) and (ii) send to any stockholder who did not consent to the Company
Stockholder Approval and each participant in the Company ESOP the notice
contemplated in Section 262(d)(2) of the DGCL (the "Appraisal Notice"). The
Company shall, through the Company Board and the Special Committee, recommend
to its stockholders that they give the Section 280G Approval. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 6.01(a) shall not be affected
by the commencement, public proposal, public disclosure or communication to
the Company of any Company Takeover Proposal.
(b) No earlier than January 25, 2004 and not later than February 2,
2004, but in any event at least two business days prior to the Closing Date,
if this Agreement has not been terminated prior to such time, OCR shall vote
(either by written consent pursuant to Section 228 of the DGCL or at a duly
called meeting of the Company's stockholders), in accordance with the
requirements of Section 280G(b)(5)(B) of the Code and in its capacity as a
stockholder of the Company, all of the shares of Company Common Stock held by
OCR or direct or cause the voting thereof, in favor of the approval of the
payments under the contracts, agreements or other written arrangements between
the Company and any of its employees or between Parent or any of its
affiliates and any of the Company's employees (i) which payments and
contracts, agreements or arrangements are identified on Schedule 6.01(c) of
the Company Disclosure Letter and (ii) of which (as to such contracts,
agreements or arrangements) prior to the date of this Agreement the Company
provided to Parent true and complete copies (other than contracts, agreements
or other written arrangements between Parent or any of its affiliates and any
of the Company's employees) (the "Section 280G Approval"). The Section 280G
Approval shall be expressly limited to the approval of payments triggered by
the consummation of the Merger and shall not be applicable to any other
Company Takeover Proposal.
(c) Notwithstanding anything to the contrary set forth in the
Amended and Restated Investor Agreement dated as of April 27, 2001, among the
Company, Parent and OCR (the "Investor Agreement"), the Company hereby agrees
that the following actions shall not be deemed to cause a breach under the
Investor Agreement and hereby consents to: (i) the execution and delivery of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
Merger on the terms set forth herein and the other transactions expressly
contemplated hereby and public announcements of the
39
foregoing consistent with Section 6.08, (ii) the taking of any action by
written consent by OCR in favor of the adoption of this Agreement and the
consummation of the Merger with respect to all of its shares of Company Common
Stock (including Excess Shares), (iii) the taking of any action by written
consent by OCR (or, if requested by the Company, the vote at any meeting of
stockholders of the Company by OCR) in favor of the Section 280G Approval with
respect to all shares of Company Common Stock owned by OCR (including Excess
Shares), (iv) the taking of any other action by Parent or OCR that is required
to be taken by Parent or OCR under this Agreement and (v) in response to a
Company Takeover Proposal, the proposal by Parent and/or OCR to the Company to
modify or amend the terms and/or conditions of the Merger and this Agreement.
(d) The Company agrees that if this Agreement is terminated by the
Company pursuant to Section 8.01(f), for a period of twelve months following
such termination of this Agreement, notwithstanding anything to the contrary
in the Investor Agreement (including Section 11 thereof), OCR shall be
permitted, at its sole election, to abstain from voting any Excess Shares (as
defined in the Investor Agreement) with respect to any vote of the holders of
voting stock of the Company that relates to a Company Takeover Proposal or
Superior Company Proposal (including any stockholder approval sought in
connection with Section 280G(b)(5)(B) of the Code) and may vote the Allowed
Shares (as defined in the Investor Agreement) other than the Excess Shares,
for, against or in abstention of any such matter, as determined solely by OCR
in its sole discretion. The Company acknowledges and agrees that the intent of
the parties in this Section 6.01(d) is for OCR to be permitted to exercise
appraisal rights with respect to the Excess Shares with respect to any such
Company Takeover Proposal or Superior Company Proposal and for OCR to be
permitted to take all actions required by the DGCL to exercise such rights.
SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable
notice, the Company shall, and shall cause each of the Company Subsidiaries
to, afford to Parent, and to Parent's officers, employees, accountants,
counsel, financial advisors and other representatives, access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records in
a manner that does not unreasonably interfere with the conduct of the business
of the Company or the Company Subsidiaries and, during such period, the
Company shall, and shall cause each of the Company Subsidiaries to, furnish
promptly to Parent all information concerning its business, properties and
personnel as Parent may reasonably request. Notwithstanding the foregoing, the
Company and any of its subsidiaries may withhold any document or information
the disclosure of which would violate applicable Law or any Contract with a
third party or would result in the waiver of any legal privilege or
work-product protection. All information exchanged pursuant to this Section
6.02 shall be subject to the confidentiality agreement dated September 26,
2003 between the Company, OCR and Parent (the "Confidentiality Agreement").
40
SECTION 6.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the terms
and subject to the conditions set forth in this Agreement including Section
5.02, each of the parties shall use its reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger, including (i) the obtaining of all necessary actions
or nonactions, waivers, consents and approvals from Governmental Entities and
the making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the Merger, including
seeking to have any stay or temporary restraining order entered by any court
or other Governmental Entity vacated or reversed, (iv) obtaining the Financing
(consistent with the limitations in Section 6.03(e)) and (v) the execution and
delivery of any additional instruments necessary to consummate the Merger and
to fully carry out the purposes of this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent or
Sub shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants
or agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(c) Nothing in Section 6.03(a) shall require Parent to dispose of
any of its assets or to limit its freedom of action with respect to any of its
businesses, or to consent to any disposition of the Company's assets or limits
on the Company's freedom of action with respect to any of its businesses, or
to commit or agree to any of the foregoing, and nothing in Section 6.03(a)
shall authorize the Company to commit or agree to any of the foregoing, to
obtain any consents, approvals, permits or authorizations to remove any
impediments to the Merger relating to the HSR Act or other antitrust,
competition or premerger notification, trade regulation law, regulation or
order ("Antitrust Laws") or to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or other order in
any suit or proceeding relating to Antitrust Laws.
(d) Parent shall no less frequently than weekly inform the Company
of the current status (including all material developments and in reasonable
detail) of the Financing or any alternative financing thereto for the
consummation of the Merger and the expected timing for the closing of the
Financing or such alternative financing, and
41
provide copies of material documentation or other material written materials
to the Company as the Company may reasonably request in writing from time to
time.
(e) Parent may, from time to time, amend Section 4.07 of the Parent
Disclosure Letter without the consent of the Company or any other person to
accurately set forth the then current material details of the Financing;
provided, however, that in no event shall Section 4.07 of the Parent
Disclosure Letter, the Financing or this Agreement (i) require the sale or
issuance prior to the Effective Time of any securities of the Company or any
Company Subsidiary, (ii) require the taking of any action by the Company Board
or by any board of directors of any Company Subsidiary at or prior to the
Effective Time with respect to the offer, sale or issuance of any securities
of the Company or any Company Subsidiary at or prior to the Effective Time or
(iii) require the delivery by any Representative of the Company or of any
Company Subsidiary of any certificate or document prior to the Effective Time
or, in such Representative's capacity as a Representative of the Company (as
opposed to his or her capacity as a Representative of the Surviving
Corporation), at the Effective Time with respect to the offer, sale or
issuance of any securities of the Company or any Company Subsidiary at or
prior to the Effective Time. For the avoidance of doubt, nothing in the
foregoing proviso is intended to restrict the ability of the Surviving
Corporation to offer, sell or issue any securities of the Surviving
Corporation at or after the Effective Time or to have Representatives of the
Surviving Corporation take any action in connection therewith.
SECTION 6.04. STOCK OPTIONS. (a) As soon as practicable following
the date of this Agreement, the Company Board (or, if appropriate, any
committee administering the Company Stock Plans) shall adopt such resolutions
or take such other actions as are required to adjust the terms of all
outstanding Company Employee Stock Options heretofore granted under any
Company Stock Plan and Company Warrants to provide that (i) each Company
Employee Stock Option outstanding at the Effective Time shall be canceled
effective at the Effective Time with the holder thereof becoming entitled to
receive an amount of cash equal to (A) the excess, if any, of (1) the Merger
Consideration over (2) the exercise price per share of Company Common Stock
subject to such Company Employee Stock Option, multiplied by (B) the number of
shares of Company Common Stock for which such Company Employee Stock Option
shall not theretofore have been exercised, (ii) with respect to each Company
Warrant (other than the Company Warrants held by Parent or OCR) outstanding at
the Effective Time, the right to exercise such Company Warrant shall terminate
effective at the Effective Time with the holder thereof becoming entitled to
receive an amount of cash equal to (C) the excess, if any, of (1) the Merger
Consideration over (2) the exercise price per share of Company Common Stock
subject to such Company Warrant, multiplied by (D) the number of shares of
Company Common Stock for which such Company Warrant shall not theretofore have
been exercised and (iii) and each Company Warrant held by Parent or OCR
outstanding at the Effective Time shall be canceled effective at the Effective
Time. At the Closing, Parent shall deposit with the Paying Agent as a separate
fund within the Exchange Fund the amounts to be paid by Parent to the holders
of Company
42
Employee Stock Options and Company Warrants pursuant to this Section 6.04;
provided that the Exchange Fund may, at the option of Parent, be held in an
escrow arrangement for release upon the occurrence of the Effective Time. As
soon as reasonably practicable after the Effective Time, the Paying Agent
shall mail, or cause to be mailed, to each holder of a Company Employee Stock
Option or a Company Warrant as of the Effective Time notice that the Merger
has been consummated and instructions for effecting the cancelation or
termination, to the extent necessary, of such Company Employee Stock Options
and Company Warrants (and the surrender of any certificates representing any
such Company Warrants for cancelation or termination) and obtaining the
payment of the amounts contemplated in this Section 6.04, which notice and
instructions shall be in such form and have such other provisions as Parent
may reasonably specify, and that are reasonably acceptable to the Company,
prior to the Effective Time. Upon delivery by such holder to the Paying Agent
of such documents as may be reasonably requested by the Paying Agent to
effectuate the payment contemplated by this Section 6.04, the Paying Agent
shall promptly deliver the amount to which such holder is entitled pursuant to
this Section 6.04.
(b) All amounts payable pursuant to this Section 6.04 shall be
subject to any required withholding of Taxes and shall be paid without
interest. The Company shall use its reasonable efforts to obtain all consents
of the holders of the Company Employee Stock Options (if any) as shall be
necessary to effectuate the foregoing. Notwithstanding anything to the
contrary contained in this Agreement, payment shall, at Parent's request, be
withheld in respect of any Company Employee Stock Option until all necessary
consents are obtained.
(c) Prior to the Effective Time, the Company Board shall adopt
resolutions terminating the Company Stock Plans as of the Effective Time, and
deleting provisions in any other Company Benefit Plan providing for the
issuance, transfer or grant of any capital stock of Parent, the Company, the
Surviving Corporation or any of their respective subsidiaries or any interest
in respect of any capital stock of Parent, the Company, the Surviving
Corporation or any of their respective subsidiaries (including any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units) as of the Effective Time, and the Company shall ensure that
following the Effective Time no holder of a Company Employee Stock Option or
any participant in any Company Stock Plan or other Company Benefit Plan or
Company Benefit Agreement shall have any right thereunder to acquire any
capital stock of Parent, the Company, the Surviving Corporation or any of
their respective subsidiaries or any interest in respect of any capital stock
of Parent, the Company, the Surviving Corporation or any of their respective
subsidiaries (including any "phantom" stock, "phantom" stock rights, stock
appreciation rights or stock-based performance units).
(d) In this Agreement:
43
"Company Employee Stock Option" means (i) any option or right to
purchase Company Common Stock granted under any Company Stock Plan or
otherwise, other than the Company Warrants and (ii) the options granted
pursuant to that certain Non-Incentive Stock Option Agreement dated as of
May 23, 2001 between the Company and Hugh A. Westbrook.
"Company Stock Plans" means the Vitas Healthcare Corporation
Management Equity Incentive Plan, the Vitas Healthcare Corporation 1994
Management Equity Incentive Plan and the 1997 Executive Incentive
Compensation Plan.
SECTION 6.05. BENEFIT PLANS. (a) For a period of one year after the
Effective Time, Parent shall either (A) maintain or cause the Surviving
Corporation (or in the case of a transfer of all or substantially all the
assets and business of the Surviving Corporation, its successors and assigns)
to maintain the Company Benefit Plans (other than plans providing for the
issuance of capital stock of the Company or any Company Subsidiary or based on
the value of capital stock of the Company or any Company Subsidiary) at or
above the benefit levels in effect on the date of this Agreement or (B)
provide or cause the Surviving Corporation (or, in such case, its successors
or assigns) to provide to employees of the Company and the Company
Subsidiaries who remain employed by the Surviving Corporation and its
subsidiaries benefits that, taken as a whole, are not materially less
favorable in the aggregate to such employees than those provided to such
employees under the Company Benefit Plans (other than plans providing for the
issuance of capital stock of the Company or any Company Subsidiary or based on
the value of capital stock of the Company or any Company Subsidiary) at the
benefit levels in effect on the date of this Agreement. To the extent that the
employee benefits required by this Section 6.05 are provided under an
"employee benefit plan" (as such term is defined in Section 3(3) of ERISA)
maintained by the Parent or an affiliate of the Parent, the employees of the
Company and the Company Subsidiaries shall be given credit for their service
with the Company or a Company Subsidiary for the purposes of eligibility and
vesting (but not for purposes of determining benefit accruals) under such
benefit plans of the Parent and the Parent's affiliates; provided, however,
that such service need not be recognized to the extent that such recognition
would result in any duplication of benefits. Parent shall cause the Surviving
Corporation to honor all vacation, personal and sick days accrued through the
Effective Time by employees of the Company or any Company Subsidiary under the
Company Benefit Plans and Company Benefit Agreements as in effect on the date
of this Agreement. Furthermore, with respect to benefit plans maintained by
Parent or any of its affiliates (other than the Company and the Company
Subsidiaries) that provide medical benefits to employees of the Company or any
Company Subsidiary at or after the Effective Time, Parent shall, or shall
cause its subsidiaries to, waive waiting periods and pre-existing condition
requirements with respect to such employees under such plans (to the extent
that such waiting periods and conditions would not have applied under the
terms of the similar medical benefit plan of the Company or the Company
Subsidiaries), and will give such employees credit for any co- payments and
deductibles actually paid by such employees under the medical plans of
44
the Company or any Company Subsidiary during the calendar year in which the
Effective Time occurs (or the year in which such employees are transitioned
into medical benefit plans of Parent or any of its affiliates (other than the
Company and the Company Subsidiaries), if later) for purposes of satisfying
such year's co-payment limitations and deductibles under the relevant medical
benefit plan in which such employees participate after the Effective Time.
(b) From and after the Effective Time, Parent shall cause the
Surviving Corporation to honor in accordance with their respective terms (as
in effect on the date of this Agreement or as modified in accordance with
Section 5.01(a)(v)) all the Company's employment, severance, change of
control, and termination and similar agreements, plans and policies disclosed
in Section 6.05 of the Company Disclosure Letter.
(c) Nothing contained in this Section 6.05 or elsewhere in this
Agreement shall be construed to prevent, from and after the Effective Time,
the termination of employment of any individual employee of the Company or of
any Company Subsidiary or any change in the particular employee benefits
available to any such individual employee or the amendment or termination of
any particular Company Benefit Plan or Company Benefit Agreement in accordance
with the terms of such Company Benefit Plan or Company Benefit Agreement.
(d) The Company shall: (a) adopt resolutions providing that the
Company ESOP shall be terminated effective as of the Closing Date, (b) apply
for the approval from the Internal Revenue Service for such termination
subject to the prior review and approval of Parent, (c) distribute all Company
ESOP benefits in accordance with the terms of the Company ESOP following
receipt of Internal Revenue Service approval of such termination, and (d) wind
up all affairs of the Company ESOP.
SECTION 6.06. INDEMNIFICATION. (a) To the fullest extent permitted
by Law, the Surviving Corporation shall, and Parent shall cause the Surviving
Corporation to, honor all the Company's and any Company Subsidiary's
obligations to indemnify (including any obligations to advance funds for
expenses) the current or former directors or officers of the Company or such
Company Subsidiary (each a "Covered Person") for acts or omissions by such
Covered Person occurring prior to the Effective Time (including with respect
to this Agreement, the Merger and the other transactions expressly
contemplated hereby) to the extent that such obligations of the Company or
such Company Subsidiary exist on the date of this Agreement, whether pursuant
to the Company Charter, the Company By-laws, individual indemnity agreements,
the charter or by-laws of any Company Subsidiary or otherwise, and such
obligations shall survive the Merger and shall continue in full force and
effect in accordance with the terms of the Company Charter, the Company
By-laws, the charter or by- laws of any Company Subsidiary and such individual
indemnity agreements from the Effective Time until the later of six years
after the Effective Time or the expiration of the applicable statute of
limitations with respect to any claims against such Covered Persons arising
out of such
45
acts or omissions. For the six year period beginning as of the Effective Time,
the by-laws of the Surviving Corporation shall contain the provisions set
forth on Exhibit B to the Agreement (and shall not contain any additional
provisions limiting any rights provided for by such provisions) to the extent
permitted by applicable Law.
(b) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions
which are no less advantageous to the Covered Persons) with respect to claims
arising from or related to facts or events which occurred at or before the
Effective Time, including the transactions expressly contemplated by this
Agreement; provided, however, that Parent shall not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
200% of the annual premiums paid as of the date hereof by the Company for such
insurance (such 200% amount, the "Maximum Premium"). If such insurance
coverage cannot be obtained at all, or can only be obtained at an annual
premium in excess of the Maximum Premium, Parent shall maintain the policies
most advantageous to the Covered Persons (including the most advantageous
terms and conditions) of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Premium. The Company represents to Parent
that the Maximum Premium is $1,214,392, based on the last annual premium
payments by the Company with respect to the current policies of directors' and
officers' liability insurance maintained by the Company set forth in Section
6.06(b) of the Company Disclosure Letter.
(c) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any Covered Person, on or prior to the
sixth anniversary of the Effective Time, the provisions of this Section 6.06
shall continue in effect for such Covered Person, solely with respect to such
claim, action, suit, proceeding or investigation, as the case may be, until
the final disposition of such claim, action, suit, proceeding or
investigation.
(d) The covenants contained in this Section 6.06 are intended to be
for the benefit of, and shall be enforceable by, each of the Covered Persons
and their respective heirs and legal representatives and shall not be deemed
exclusive of any other rights to which such Covered Person is entitled,
whether pursuant to Law, Contract or otherwise.
(e) In the event that (i) Parent or the Surviving Corporation or any
of its successors or assigns consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, (ii) Parent or the Surviving Corporation or any of
its successors or assigns transfers or conveys all or substantially all of its
properties and assets to any person, or (iii) Parent or any affiliate of
Parent effects a spin off (by way of dividend, distribution or otherwise), in
46
whole or in part, of the Surviving Corporation, then, and in each such case,
proper provision shall be made so that the successors or assigns of Parent or
the Surviving Corporation, as the case may be, shall succeed to and have the
obligations set forth in this Section 6.06.
(f) To the fullest extent permitted by Law, the Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to,
indemnify any officer, director, employee or agent of the Company or any
Company Subsidiary for any acts or omissions by such officer, director,
employee or agent occurring at or prior to the Effective Time arising out of,
relating to or resulting from any action taken by such officer, director,
employee or agent with respect to the Financing, until the later of six years
after the Effective Time or the expiration of the applicable statute of
limitations with respect to any claims against such officers, directors,
employees or agents arising out of such acts or omissions; provided that no
indemnity shall be payable hereunder against any liability incurred by such
officer, director, employee or agent by reason of fraud, wilful misconduct,
gross negligence or bad faith.
SECTION 6.07. FEES AND EXPENSES. (a) Except as provided below, all
fees and expenses incurred in connection with the Merger shall be paid by the
party incurring such fees or expenses, whether or not the Merger is
consummated; provided that Parent shall bear all filing fees incurred in
relation to all filings required under the HSR Act.
(b) The Company shall pay to Parent a fee of $10,000,000 if: (i)
this Agreement is terminated by Parent pursuant to Section 8.01(c) or Section
8.01(d) or by the Company pursuant to Section 8.01(f), (ii) within twelve
months of the date of such termination the Company enters into a definitive
agreement to consummate (and thereafter subsequently consummates; provided
that such consummation is not required to occur within such twelve- month
period) or consummates, a Company Takeover Proposal or Superior Company
Proposal and (iii) none of Parent, OCR or any other subsidiary of Parent shall
have, in their capacity as a stockholder of the Company, consented to or voted
in favor of or agreed to or directed or caused the voting in favor of the
approval of such Company Takeover Proposal or Superior Company Proposal of any
shares of Company Common Stock other than the consent or voting of the Excess
Shares in accordance with the Investor Agreement. Any fee due under this
Section 6.07(b) shall be paid by wire transfer of same-day funds on the date
of consummation of the transactions contemplated by such Company Takeover
Proposal or Superior Company Proposal and only if such Company Takeover
Proposal or Superior Company Proposal is consummated.
(c) Parent shall pay to the Company a fee of $10,000,000 (the
"Financing Termination Fee") if (i) either the Company or Parent terminates
this Agreement pursuant to Section 8.01(b)(i), (ii) on the date of such
termination all the conditions to the Merger set forth in Section 7.01 were
satisfied and all the other conditions to the Merger set forth
47
in Section 7.02 (excluding Section 7.02(e)) were satisfied or capable on such
date of being satisfied at the Closing if the Closing were held on the date of
such termination (or had been waived by Parent and Sub), but the conditions
set forth in Section 7.02(e) shall not have been satisfied and shall not have
been capable of being satisfied at the Closing if the Closing were held on the
date of such termination (and shall not have been waived by Parent and Sub)
and (iii) within two business days of the date of any such termination of this
Agreement, the chief executive officer of the Company certifies to Parent in
writing (solely for the purposes of this Section 6.07(c)) that on the date of
such termination, all the conditions to payment to the Company of the
Financing Termination Fee set forth in the foregoing clause (ii) were
satisfied. The Financing Termination Fee, if any, shall be paid from the
Escrow Amount on the second business day after the date on which the Company
provides to Parent the certification required by the foregoing clause (iii),
and the Company and Parent jointly shall instruct the Escrow Agent to release
the Escrow Amount to the Company in accordance with the terms and conditions
of the Escrow Agreement; provided that if Parent disputes that the Financing
Termination Fee is in fact required to be paid by Parent under this Section
6.07(c), the Company and Parent shall promptly submit such dispute to
arbitration in accordance with Section 6.07(g). The Company and Parent agree
that the costs (including court costs, arbitration costs and the reasonable
fees and expenses of legal counsel) of the prevailing party in any litigation,
arbitration or similar proceeding between the Company and Parent relating to a
dispute as to whether the Financing Termination Fee is required to be paid
under this Section 6.07(c) shall be borne by the party who does not prevail in
the final and nonappealable award or order of a court of competent
jurisdiction relating to such matter. Such payment shall be made promptly upon
receipt of such final and nonappealable award or order of a court of competent
jurisdiction.
(d) The Company shall refund to Parent any Financing Termination Fee
paid by Parent to the Company pursuant to Section 6.07(c) (whether paid from
the Escrow Amount or otherwise) if, within twelve months after the termination
of the Merger Agreement, the Company enters into a definitive agreement to
consummate (and thereafter subsequently consummates; provided that such
consummation is not required to occur within such twelve-month period), or if
there is no definitive agreement, consummates (such date, the "Transaction
Date"), (i) the Identified Company Takeover Proposal or (ii) any other Company
Takeover Proposal which provides the Company's common stockholders with
aggregate consideration per share (without giving effect to any per share
holdback, escrow or similar provisions of such Company Takeover Proposal) with
a fair market value on the Transaction Date equal to or more than $22.00 per
share of Company Common Stock (taking into consideration the effects of any
stock split, stock dividend or other similar transaction); provided that if
such other Company Takeover Proposal provides the Company's common
stockholders with aggregate consideration per share (without giving effect to
any per share holdback, escrow or similar provisions of such Company Takeover
Proposal) with a fair market value on the Transaction Date of less than $22.00
per share of Company Common Stock, the Company shall refund to Parent the
Residual Amount, if any, with respect to such
Company Takeover Proposal. Any such refund due from the Company shall be paid
to Parent by the Company in same day funds on the second business day after
the Transaction Date.
(e) For purposes of Section 6.07(d),
(i) the "Residual Amount" shall mean with respect to a Company
Takeover Proposal (A) the amount of the Financing Termination Fee, less
(B) the Gap Amount, provided that the Residual Amount shall not be less
than zero; and
(ii) the "Gap Amount" shall mean with respect to any such other
Company Takeover Proposal the product of (A) (x) $22 less (y) the sum of
(I) the fair market value on the Transaction Date of the aggregate
consideration per share of Company Common Stock provided directly or
indirectly to the Company's common stockholders by such Company Takeover
Proposal (without giving effect to any per share holdback, escrow or
similar provisions of such Company Takeover Proposal) and (II) if the
Company Takeover Proposal is for less than substantially all of the
Company's equity securities or assets, the fair market value per share of
Company Common Stock on the Transaction Date of the equity securities
and/or assets of the Company retained by the Company's common
stockholders, multiplied by (B) the number of outstanding shares of
Company Common Stock on the Transaction Date.
(f) The Company and Parent acknowledge and agree that the payment of
the Financing Termination Fee shall be a payment in respect of damages to the
Company and its subsidiaries and in the event that a claim is made against
Parent or any of its subsidiaries relating to this Agreement or any
transaction expressly contemplated hereby, any amounts payable pursuant to a
judgment or award relating thereto shall be reduced by the amount of the
Financing Termination Fee paid hereunder. For the avoidance of doubt, nothing
in this Section 6.07 (but subject to Section 8.02) and nothing in the Escrow
Agreement shall be deemed to restrict the Company from pursuing, or otherwise
limit the Company's ability to pursue, any remedies available to the Company
(at law, in equity or otherwise) in connection with any of the matters
referenced in Section 6.07.
(g) ARBITRATION. All disputes as to whether the Financing
Termination Fee is payable under Section 6.07(c) shall be finally settled by
arbitration in accordance with the then-existing Rules for Commercial
Arbitration of the American Arbitration Association within 45 days of
submission of the matters in dispute. The arbitration shall be held in New
York City. The arbitration proceedings shall be conducted, and the award shall
be rendered, in the English language. The parties intend that the provisions
to arbitrate set forth in this Section 6.07(g) be valid, exclusive,
enforceable and irrevocable. The designation of a situs or a governing law for
this Agreement or the arbitration shall not be deemed an election to preclude
the Federal Arbitration Act, if it would be applicable. The parties hereto
agree to comply with any determination made in any such arbitration
proceedings that has become final in accordance herewith and agree to the
49
entry of a judgment in any jurisdiction upon any determination rendered in
such proceedings becoming final. Such arbitration shall be subject to the
following conditions:
(i) Each party shall select one arbitrator who shall be an
experienced lawyer and fluent in English. The two arbitrators appointed
by the parties shall select a third arbitrator from among arbitrators
designated by the American Arbitration Association.
(ii) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the application
of the laws of any jurisdiction other than the State of Delaware.
(h) The Company and Parent jointly shall instruct the Escrow Agent
to release the Escrow Amount to Parent in accordance with the terms and
conditions of the Escrow Agreement either (i) upon the consummation of the
Merger or (ii) subject to Section 4 of the Escrow Agreement, within two
business days after the Merger Agreement is terminated under circumstances in
which the Financing Termination Fee is not required to be paid to the Company
pursuant to Section 6.07(c).
SECTION 6.08. PUBLIC ANNOUNCEMENTS. Promptly after the execution of
this Agreement, Parent and the Company will issue a press release relating to
the subject matter of this Agreement in the form previously mutually agreed by
Parent and the Company. Parent and Sub, on the one hand, and the Company, on
the other hand, shall consult with each other before issuing, and provide each
other the opportunity to review and make reasonable comment upon, any press
release or other public statements with respect to the Merger and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. Promptly after the press release (but in no event more than one
business day after the date of this Agreement), Parent shall file one or more
current reports on Form 8-K announcing the Merger and attaching the press
release and this Agreement.
SECTION 6.09. TRANSFER TAXES. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes")
incurred in connection with the Merger shall be paid by either Sub or the
Surviving Corporation, and the Company shall cooperate with Sub and Parent in
preparing, executing and filing any Tax Returns with respect to such Transfer
Taxes, including supplying in a timely manner any information with respect to
property of the Company that is reasonably necessary to complete such Tax
Returns.
50
SECTION 6.10. STOCKHOLDER LITIGATION. The Company shall give Parent
the opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the Merger;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which shall not be unreasonably withheld or delayed.
SECTION 6.11. COMPANY CREDIT FACILITY. At or prior to the Closing,
Parent shall have entered into any necessary agreements or arrangements to
assume, pay or otherwise satisfy or discharge, effective as of the Effective
Time, all of the obligations of the Company and the Company Subsidiaries under
the Company Credit Facility. Parent shall coordinate with the Company in
connection with any negotiations or discussions with the principal lenders
under the Company Credit Facility.
SECTION 6.12. GUARANTY OF PARENT. Parent hereby irrevocably and
unconditionally guarantees the full and prompt payment by Parent to the
Company or any Covered Person, when due to the Company or any Covered Person,
of all amounts due under this Agreement from the Surviving Corporation, and
the performance of all other obligations of the Surviving Corporation under
this Agreement (including the obligations of the Surviving Corporation under
Section 6.06).
SECTION 6.13. ADVISE OF CHANGES. The Company shall promptly advise
Parent and Parent shall promptly advise the Company orally and in writing of
any change or event that causes or would reasonably be expected to cause any
condition to the Merger set forth in Article VII not being satisfied.
SECTION 6.14. ESCROW. The Parent shall, on December 19, 2003,
deposit the Escrow Amount with the Escrow Agent, subject to the Escrow
Agreement.
SECTION 6.15. NO TRANSFERS. OCR represents and warrants that, as of
the date of this Agreement, it owns 4,158,243 shares of Company Common Stock
and agrees that, for so long as this Agreement is in effect, it will not sell,
transfer or otherwise dispose of such shares.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained the
Company Stockholder Approval.
51
(b) ANTITRUST. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary judgment issued by
any court of competent jurisdiction or other law preventing the consummation
of the Merger shall be in effect; provided, however, that prior to asserting
this condition, subject to Section 6.03, each of the parties shall have used
its reasonable efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any such judgment that may be
entered.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are further subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, as of the date of this Agreement
and as of the Closing Date as though made on the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, on and as of such earlier date).
Parent shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the Company to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations to be performed by it
under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) NO LITIGATION. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity or any other person, in
each case that has a reasonable likelihood of success, (i) challenging the
acquisition by Parent or Sub of any Company Common Stock, seeking to restrain
or prohibit the consummation of the Merger or seeking to obtain from the
Company, Parent or Sub any damages that are material in relation to the
Company and the Company Subsidiaries taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or any of
their respective subsidiaries of any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries, or to
compel the Company, Parent or any of their respective subsidiaries to dispose
of or hold separate any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries, as a result of the
Merger, (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including the right to vote the Company Common Stock
purchased by it
52
on all matters properly presented to the stockholders of the Company or (iv)
seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the Company
and the Company Subsidiaries.
(d) ABSENCE OF COMPANY MATERIAL ADVERSE EFFECT. Except as disclosed
in Section 7.02(d) of the Company Disclosure Letter, since the date of this
Agreement there shall not have been any event, change, effect or development
that, individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect.
(e) FINANCING. Parent and/or Sub shall have received, pursuant to
the Financing (consistent with Section 6.03(e)), financing sufficient for it
to consummate the Merger and the other transactions contemplated hereby.
(f) CHANGE OF CONTROL APPROVALS. The Company and each Company
Subsidiary shall have received approvals (including any change of control
approvals) from Medicare, Medicaid and each state where such approval is
required by Law to consummate the Merger, except where the failure to obtain
such approval would not have a material adverse effect on the ability of
Parent and/or the Company to consummate the Merger or on the ability of Parent
to obtain the Financing.
SECTION 7.03. Condition to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Sub in Sections 4.01, 4.03, 4.04, 4.08, 4.10 and 4.12
of this Agreement that are qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects as of the Closing Date as though made on the Closing Date, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are qualified as
to materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, on and as of such earlier date).
The Company shall have received a certificate signed on behalf of each of
Parent and Sub by the chief executive officer and the chief financial officer
of the Parent and Sub, respectively, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub
shall have performed in all material respects all obligations to be performed
by them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of each of Parent and Sub
by the chief executive officer and the chief financial officer of Parent and
Sub, respectively, to such effect.
(c) CLOSING PAYMENTS. Parent shall have delivered to the Paying
Agent the aggregate Merger Consideration required to be deposited with the
Paying Agent pursuant to Article II and the amounts required to be deposited
with the Paying Agent pursuant to Section 6.04.
53
(d) COMPANY CREDIT FACILITY. The Company shall have received
evidence reasonably satisfactory to the Company that Parent has satisfied its
obligations under Section 6.11.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger is not consummated on or before March 15,
2004 (the "Outside Date"); provided, however, that the right to
terminate this Agreement pursuant to this Section 8.01(b)(i) shall
not be available to any party whose breach of this Agreement has
been a principal reason the Merger has not been consummated by such
date; or
(ii) if any Governmental Entity issues an order, decree or
ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable.
(c) by Parent, if the Company breaches or fails to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in Section 7.02(a) or
Section 7.02(b), and (ii) cannot be or has not been cured within 30 days
after the giving of written notice to the Company of such breach
(provided that Parent is not then in wilful and material breach of any
representation, warranty or covenant contained in this Agreement);
(d) by Parent if the Company or any of its officers, directors,
employees, representatives or agents breaches Section 5.02 (without
giving effect for purposes of this Section 8.01(d) to the word "knowing"
in the proviso of the first sentence of Section 5.02(a) or the word
"material" in the second sentence of Section 5.02(a));
(e) by the Company, if Parent breaches or fails to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of the condition set forth in Section 7.03(b),
Section 7.03(c) or Section 7.03(d), and
54
(ii) cannot be or has not been cured within 30 days after the giving of
written notice to Parent of such breach (provided that the Company is not
then in wilful and material breach of any representation, warranty or
covenant contained in this Agreement); and
(f) by the Company, if each of the Company Board and the Special
Committee shall have approved, and the Company shall immediately
following such termination enter into, a definitive agreement providing
for a Superior Company Proposal that was received by the Company Board
after the date of this Agreement and prior to 11:59 p.m. Eastern Time on
January 24, 2004; provided, however, that (i) such Superior Company
Proposal was not knowingly solicited by the Company in violation of
Section 5.02(a) or 5.02(f) and (ii) the Company has complied with all the
provisions of the second sentence of Section 5.02(b);
(g) by the Company, if the Merger is not consummated on or before
February 29, 2004; provided, however, that the Company shall not have the
right to terminate this Agreement pursuant to this Section 8.01(g) if the
Company's breach of this Agreement has been a principal reason the Merger
has not been consummated by such date.
SECTION 8.02. EFFECT OF TERMINATION. (a) In the event of termination
of this Agreement by either the Company or Parent as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the Company or any of
their respective Representatives, other than Section 3.20, Section 4.06, the
last sentence of Section 6.02, Section 6.07, this Section 8.02 and Article IX,
which provisions shall survive such termination (and other than as provided in
the Escrow Agreement which shall survive such termination), and except to the
extent that such termination results from the wilful and material breach by a
party of any representation, warranty or covenant set forth in this Agreement.
(b) Parent hereby covenants and agrees that, in the event this
Agreement is terminated by the Company pursuant to Section 8.01(e) or is
terminated under any other circumstances in which Parent is required by
Section 6.07(c) to pay to the Company the Financing Termination Fee, for a
period of 90 days after such termination, OCR shall vote all of the shares of
Company Common Stock, held by OCR or direct or cause the voting thereof, in
favor of the adoption of any definitive agreement providing for the Identified
Company Takeover Proposal, provided that (i) the Identified Company Takeover
Proposal is unanimously recommended by the Special Committee and approved by
the Company Board after consultation with its financial advisors and receipt
of an appropriate fairness opinion and (ii) the Identified Company Takeover
Proposal shall mean only the Identified Company Takeover Proposal (as defined
in Section 5.02(f)). Parent further agrees to execute and deliver any consents
for such
55
purpose and to appear in person or by proxy at any annual or special meeting
of stockholders of the Company called for such purpose.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties at any time before or after receipt of the Company Stockholder
Approval; provided, however, that (i) after receipt of the Company Stockholder
Approval, there shall be made no amendment that by Law requires further
approval by the stockholders of the Company without the further approval of
such stockholders, (ii) no amendment shall be made to this Agreement after the
Effective Time and (iii) except as provided above no amendment of this
Agreement by the Company shall require the approval of the stockholders of the
Company. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Subject to the proviso in Section 8.03, no
extension or waiver by the Company shall require the approval of the
stockholders of the Company. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 8.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 8.01, an amendment
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant
to Section 8.04 shall, in order to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors or the duly
authorized designee or committee of its Board of Directors. Termination of
this Agreement prior to the Effective Time shall not require the approval of
the stockholders of the Company.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
56
SECTION 9.2. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
delivered by hand or sent by facsimile or sent, postage prepaid, by
registered, certified or express mail or overnight courier service and shall
be deemed given upon receipt by the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Roto-Rooter, Inc.
2600 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Facsimile: (513) 762-6919
Attention: Kevin McNamara
with copies (which shall not constitute notice) to:
Roto-Rooter, Inc.
2600 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Facsimile: (513) 287-6216
Attention: Naomi C. Dallob, Esq.
and
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Attention: Thomas E. Dunn, Esq.
57
(b) if to the Company, to
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Suite 1500
Miami, Florida 33131
Facsimile: (305) 350-6059
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004
Facsimile: (202) 637-5910
Attention: Robert J. Waldman, Esq.
SECTION 9.03. DEFINITIONS. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person. The Company and the Company
Subsidiaries shall not be affiliates of Parent or any subsidiary of Parent.
A "business day" means the period from 9:00 a.m. to 5:00 p.m. on any
weekday that is not a banking holiday in New York City.
"knowledge of the Company" or words of similar import used in this
Agreement in relation to the Company mean the actual knowledge of each officer
and director of the Company, without any duty of inquiry or investigation.
A "material adverse effect" on a party means a material adverse
effect on the business, assets, financial condition or results of operations
of such party and its subsidiaries, taken as a whole; provided, however, that
none of the following shall be deemed to constitute or shall be taken into
account in determining the occurrence of a material adverse effect: (a) any
adverse change in (1) general business or economic conditions, (2) national or
international political conditions, including the engagement by the United
States in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or the occurrence of any military or terrorist
attack, (3) financial, banking or securities markets (including any disruption
thereof and any decline in the
58
price of any security or any market index), (4) GAAP, or (5) Law, orders or
other binding directives issued by any Governmental Entity, so long as such
adverse change does not have a materially greater adverse effect on such party
and its subsidiaries, taken as a whole, than on other participants in the
industry in which such party and its subsidiaries operate (other than as a
result solely of the Company's size relative to other participants in the
industry); (b) any adverse change generally applicable to the industry in
which such party or any of its subsidiaries operate, and not specifically
relating to such party or any of its subsidiaries, so long as such adverse
change does not have a materially greater adverse effect on such party and its
subsidiaries, taken as a whole, than on other participants in the industry in
which such party and its subsidiaries operate (other than as a result solely
of the Company's size relative to other participants in the industry); (c) the
failure, in and of itself, by such party or any of its subsidiaries to meet
any internal or published projections, forecasts or revenue or earnings
predictions for any period ending on or after the date of this Agreement; or
(d) any effect arising from compliance by any party to this Agreement or any
subsidiary of such party with the terms of, or the taking of any action
required by or the implementation of, this Agreement or the transactions
expressly contemplated hereby, or the announcement of this Agreement or the
transactions expressly contemplated hereby, including any effects on patients,
customers, suppliers and personnel (provided that this clause (d) shall not
apply with respect to Section 3.04, Section 3.05, Section 4.03 or Section 4.04
or, for purposes of the definitions of Company Material Adverse Effect and
Parent Material Adverse Effect, with respect to the ability of a party to
perform its obligations under this Agreement or to consummate the Merger).
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more
of the equity interests of which) is owned directly or indirectly by such
first person. For the avoidance of doubt, the Foundation for End of Life Care,
Inc., a non-profit corporation organized under the Laws of the State of
Florida (the "Foundation"), shall not be deemed a subsidiary of the Company or
of any subsidiary of the Company for purposes of this Agreement.
SECTION 9.04. INTERPRETATION; DISCLOSURE LETTERS. When a reference is
made in this Agreement to a Section or Exhibit, such reference shall be to a
Section or Exhibit of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof," "herein," "hereby" and
59
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The term "or" is not exclusive. The word "extent" in the phrase "to
the extent" shall mean the degree to which a subject or other thing extends,
and such phrase shall not mean simply "if." The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. For the avoidance of doubt, all lower case words used in this Agreement
shall be interpreted in accordance with the DGCL unless such lower case word
is otherwise defined in this Agreement. Any agreement or instrument defined or
referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended,
modified or supplemented. References to a person are also to its permitted
successors and assigns. Any reference to any federal, state, local, or foreign
statute or Law shall be deemed also to refer to any successor law and all
rules and regulations promulgated thereunder or under such successor law,
unless the context requires otherwise. The mere inclusion of an item in the
Company Disclosure Letter as an exception to a representation or warranty
shall not be deemed an admission by the Company that such item represents an
exception or material fact, event or circumstance or that such item is
reasonably likely to have a Company Material Adverse Effect.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby 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 hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, taken together with the Company Disclosure Letter, the Parent
Disclosure Letter, the Escrow Agreement, the Investor Agreement and the
Confidentiality Agreement, (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the Merger and (b) except for the provisions of
Article II, Section 6.04 and 6.06, are not intended to confer upon any person
other than the parties any rights or remedies. For the avoidance of doubt, (i)
the Investor Agreement shall remain in full force and effect in accordance
with its terms until the Effective Time and (ii) except to the extent
expressly provided in
60
this Agreement, nothing herein shall be deemed to constitute a waiver, change,
modification, alteration or amendment of or to any term or provision of, or
the rights and obligations of the parties under, the Investor Agreement.
SECTION 9.08. 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 laws thereof.
SECTION 9.09. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties. Any purported
assignment without such consent shall be void. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
SECTION 9.10. ENFORCEMENT. (a) The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Court of
Chancery of the State of Delaware, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of
the Court of Chancery of the State of Delaware in the event any dispute arises
out of this Agreement or the Merger (other than as provided in Section
6.07(g)), (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that it will not bring any action relating to this Agreement or the
Merger in any court other than the Court of Chancery of the State of Delaware
(other than as provided in Section 6.07(g)) and (d) waives any right to trial
by jury with respect to any action related to or arising out of this Agreement
or the Merger.
(b) The Company, Parent, Sub and OCR hereby irrevocably consent to
the service of any summons and complaint and any other process which may be
served in any action or proceeding arising out of or related to this Agreement
brought in any the Court of Chancery of the State of Delaware by the mailing
by certified or registered mail of copies of such process to the other parties
at the addresses set forth in Section 9.02. Nothing herein shall preclude
service of process by any other means permitted by Law.
SECTION 9.11. WAIVER OF NOTICE. OCR hereby waives compliance with
the notice requirements set forth in Section 6 of that certain Warrant C
issued on April 27, 2001 by the Company to OCR providing for the purchase of
up to 1,636,364 shares of Company Common Stock with respect to this Agreement,
the Merger or the other transactions expressly contemplated hereby.
61
IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed
and delivered this Agreement, all as of the date first written above.
ROTO-ROOTER, INC.,
by
/s/ Kevin J. McNamara
___________________________________
Name: Kevin J. McNamara
Title: President & Chief Executive
Officer
MARLIN MERGER CORP.,
by
/s/ Kevin J. McNamara
_________________________________
Name: Kevin J. McNamara
Title: President
VITAS HEALTHCARE CORPORATION,
by
/s/ Hugh A. Westbrook
___________________________________
Name: Hugh A. Westbrook
Title: Chairman and Chief Executive
Officer
For purposes of Sections 4.03, 6.01(c),
6.01(d), 6.01(b), 6.15, 8.02(b), 9.07,
9.09, 9.10 and 9.11 only:
COMFORT CARE HOLDINGS CO.,
by
/s/ Kevin J. McNamara
__________________________
Name: Kevin J. McNamara
Title: Vice President
CERTIFICATE OF INCORPORATION
OF
SURVIVING CORPORATION
ARTICLE I
The name of the corporation (hereinafter called the "Corporation")
is [NAME OF CORPORATION].
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is /{circle}/, Delaware. The name of the registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock that the
Corporation shall have authority to issue is 1,000 shares of Common Stock
having the par value of $0.01 per share.
ARTICLE V
The number of directors of the Corporation shall be fixed from
time to time by the Board of Directors of the Corporation.
2
ARTICLE VI
In furtherance and not in limitation of the powers conferred upon
it by law, the Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-laws of the Corporation.
ARTICLE VII
Unless and except to the extent that the By-laws of the
Corporation so require, the election of directors of the Corporation need not
be by written ballot.
ARTICLE VIII
To the fullest extent from time to time permitted by law, no
director of the Corporation shall be personally liable to any extent to the
Corporation or its stockholders for monetary damages for breach of his
fiduciary duty as a director.
ARTICLE IX
Each person who is or was or had agreed to become a director or
officer of the Corporation, and each such person who is or was serving or who
had agreed to serve at the request of the Corporation as a director, officer,
partner, member, employee or agent of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise (including the
heirs, executor, administrators or estate of such person), shall be indemnified
by the Corporation to the fullest extent permitted from time to time by
applicable law.