EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
EXECUTION COPY
CONFIDENTIAL
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AGREEMENT AND PLAN OF MERGER
Dated as of April 19, 1998
Among
KAPSON SENIOR QUARTERS CORP.,
KA ACQUISITION CORP.,
And
ATRIA COMMUNITIES, INC.
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TABLE OF CONTENTS
Page
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Definitions and Usage.......................................................
ARTICLE I [Intentionally Omitted]
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ARTICLE II The Merger
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SECTION 2.01. The Merger...................................................
SECTION 2.02. Closing......................................................
SECTION 2.03. Effective Time...............................................
SECTION 2.04. Effects of the Merger........................................
SECTION 2.05. Certificate of Incorporation and By-laws.....................
SECTION 2.06. Directors....................................................
SECTION 2.07. Officers.....................................................
SECTION 2.08. Supplemental Indenture.......................................
SECTION 2.09. Parent's Election to Modify the Terms of the Merger..........
ARTICLE III Effect of the Merger on the Capital Stock of the Constituent
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Corporations; Exchange of Certificates
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SECTION 3.01. Effect on Capital Stock......................................
SECTION 3.02. Exchange of Certificates.....................................
ARTICLE IV Representations and Warranties
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SECTION 4.01. Representations and Warranties of the Company................
SECTION 4.02. Representations and Warranties of Parent and Sub.............
ARTICLE V Covenants Relating to Conduct of Business
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SECTION 5.01. Conduct of Business..........................................
SECTION 5.02. No Solicitation..............................................
ARTICLE VI Additional Agreements
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SECTION 6.01. Preparation of Proxy Materials...............................
SECTION 6.02. Access to Information; Confidentiality.......................
SECTION 6.03. Reasonable Efforts; Notification.............................
SECTION 6.04. Rights Agreement.............................................
SECTION 6.05. Stock Options................................................
SECTION 6.06. Benefit Plans................................................
SECTION 6.07. Indemnification..............................................
SECTION 6.08. Fees and Expenses............................................
SECTION 6.09. Public Announcements.........................................
SECTION 6.10. Transfer Taxes...............................................
SECTION 6.11. Support Agreements...........................................
SECTION 6.12. Headquarters.................................................
ARTICLE VII Conditions Precedent
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SECTION 7.01. Conditions to Each Party's Obligation To Effect the Merger...
SECTION 7.02. Conditions to Obligations of Parent and Sub..................
SECTION 7.03. Condition to Obligation of the Company.......................
ARTICLE VIII Termination, Amendment and Waiver
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SECTION 8.01. Termination..................................................
SECTION 8.02. Effect of Termination........................................
SECTION 8.03. Amendment....................................................
SECTION 8.04. Extension; Waiver............................................
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver....
ARTICLE IX General Provisions
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SECTION 9.01. Nonsurvival of Representations and Warranties................
SECTION 9.02. Notices......................................................
SECTION 9.03. Definitions..................................................
SECTION 9.04. Interpretation...............................................
SECTION 9.05. Counterparts.................................................
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries...............
SECTION 9.07. Governing Law................................................
SECTION 9.08. Assignment...................................................
SECTION 9.09. Enforcement..................................................
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EXHIBITS
Exhibit A Form of Press Release Announcing the Transactions
Exhibit B-1 Form of Support Agreement with V Corp.
Exhibit B-2 Form of Support Agreement with Management Stockholders
Exhibit C Form of Shareholders and Registration Rights Agreement
Exhibit D Form of Certificate of Incorporation of Surviving
Corporation
SCHEDULES
Schedule 4.01(a) Organization, Standing and Corporate Power
Schedule 4.01(d) Consents
Schedule 4.01(g) Absence of Certain Changes or Events
Schedule 4.01(j) ERISA Compliance
Schedule 4.01(k) Taxes
Schedule 4.01(l) Excess Parachute Payments
Schedule 4.01(r) Transactions with Affiliates
Schedule 4.01(s)(i) Company Properties
Schedule 4.01(s)(ii) Title Policies
Schedule 4.01(s)(iii) Material Noncompliance
Schedule 4.01(s)(iv) Material Demands
Schedule 4.01(s)(v) The Projects
Schedule 4.01(t) Environmental Matters
Schedule 4.01(u) Labor Matters
Schedule 4.01(w) Permits
Schedule 6.05(a) Stock Plans
Schedule 6.05(d) Rollover Options
AGREEMENT AND PLAN OF MERGER dated as of April 19,
1998, among KAPSON SENIOR QUARTERS CORP, a Delaware corporation
("Parent"), KA ACQUISITION CORP., a Delaware corporation ("Sub")
and a wholly owned subsidiary of Parent, and ATRIA COMMUNITIES,
INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved 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 the
Company have approved the merger (the "Merger") of Sub into the Company on the
terms and subject to the conditions set forth in this Agreement, whereby each
issued share of common stock, par value $0.10 per share, of the Company (the
"Common Stock"), including the associated Rights (as defined in Section 4.01(c))
(except shares (i) owned directly or indirectly by Parent or the Company, (ii)
1,234,568 shares (the "V Corp. Retained Shares") of Common Stock owned by V
CORP. ("V Corp.") and its wholly owned subsidiaries, and (iii) shares held by
Dissenting Stockholders (as defined below)), shall be converted into the right
to receive $20.25 in cash;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and Sub are entering into (i) a Support Agreement with V
Corp., in the form of Exhibit B-1 hereto, and (ii) a Support Agreement with
certain officers and directors of the Company (collectively, the "Management
Stockholders"), in the form of Exhibit B-2 hereto, pursuant to which V Corp. and
such officers and directors shall agree to take certain actions to support the
transactions contemplated by this Agreement (the "Support Agreements");
WHEREAS, the respective Board of Directors of the Company, Parent and
V Corp. have approved the execution and delivery at the Closing (as defined
below) of the Shareholders and Registration Rights Agreement (the "Shareholders
Agreement" and together with this Agreement and the Support Agreements, the
"Operative Agreements") among the Company, Parent, V Corp. and the Management
Stockholders, in the form of Exhibit C;
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, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows (certain terms used herein have the meanings assigned to them in Section
9.03):
ARTICLE I
[Intentionally Omitted]
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ARTICLE II
The Merger
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SECTION 2.01. The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time of the Merger (as hereinafter defined). Following
the Merger, the separate corporate existence of Sub shall cease and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL. At the election of Parent, any affiliate of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing. The Merger and the other transactions contemplated by
the Operative Agreements are referred to in this Agreement collectively as the
"Transactions".
SECTION 2.02. Closing. The closing of the Merger (the "Closing")
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will take place at 10:00 a.m. on a date to be specified by the parties, which
(subject to satisfaction or waiver of the conditions set forth in Sections 7.02
and 7.03) shall be no later than the fifth business day after satisfaction or
waiver of the conditions set forth in Section 7.01 and no earlier than July 15,
1998 (the "Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, N.Y. 10019, unless another date or place is
agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. As soon as practicable following the
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satisfaction or waiver of the conditions set forth in Article VII, the parties
shall file a certificate of merger or other appropriate documents (in any such
case, 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 the Delaware Secretary of State, or at
such other time as Sub and the Company shall agree and specify in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time of the Merger").
SECTION 2.04. Effects of the Merger. The Merger shall have the
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effects set forth in Section 259 of the DGCL.
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SECTION 2.05. Certificate of Incorporation and By-laws. (a) The
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Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time of the Merger, shall be amended as of the Effective Time of
the Merger to read in the form of Exhibit D 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.
(b) The By-laws of Sub as in effect at the Effective Time of the
Merger shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub at the Effective Time
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of the Merger shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company at the Effective
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Time of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 2.08. Supplemental Indenture. Prior to the Effective Time of
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the Merger, the Company and the Trustee (as defined below) shall enter into a
supplemental indenture (the "Supplemental Indenture") to the Indenture dated as
of October 16, 1997 (the "Indenture"), between the Company and PNC Bank,
Kentucky, Inc., as trustee (the "Trustee"), pursuant to Section 15.6 of the
Indenture, which shall (i) become effective upon the Effective Time of the
Merger and (ii) provide that, from and after the Effective Time of the Merger,
each of the Company's outstanding 5.0% Convertible Subordinated Notes due 2002
(the "Convertible Sub Notes") shall cease to be convertible into shares of
Common Stock, but shall be convertible solely into an amount of cash, without
interest, equal to the product of (x) the number of shares of Common Stock into
which such Note was convertible immediately prior to the Effective Time of the
Merger and (y) the Merger Consideration (as defined below). The Company shall
give Parent a reasonable opportunity to comment on the form of the Supplemental
Indenture prior to the execution thereof, and shall not enter into the
Supplemental Indenture if Parent reasonably objects thereto.
SECTION 2.09. Parent's Election to Modify the Terms of the Merger.
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(a) If, at any time following the date of this Agreement and prior to the
initial mailing of the Proxy Materials to the Company's stockholders, Parent
shall determine, in its sole discretion, that the Surviving Corporation would
not be entitled to treat the Merger as a recapitalization under GAAP, Parent
shall have the right to modify the terms of the Merger as set forth in clauses
(i) and (ii) below:
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(i) each holder of any issued and outstanding shares of Common Stock
of the Company (other than shares to be canceled or converted in accordance
with Sections 3.01(b) and 3.01(c)) and other than V Corp. or any of its
subsidiaries (the "Public Stockholders") will have right to elect to
receive the Merger Consideration in the form of cash and/or shares of
Common Stock of the Surviving Corporation ("New Public Shares"), valuing
each such share at $20.25 per share, up to a maximum of 1,234,568 New
Public Shares (or, at the option of Parent, 2,469,136 New Public Shares);
provided, however, that (A) such elections shall be subject to proration
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(based on the number of shares subject to election) if the Public
Stockholders elect to receive more than 1,234,568 New Public Shares (or, at
the option of Parent, 2,469,136 New Public Shares) and (B) at the option of
Parent, no New Public Shares will be issued (and the Public Stockholders
will receive Merger Consideration consisting solely of cash) if the Public
Stockholders elect to receive less than 617,284 New Public Shares; and
(ii) the number of V Corp. Retained Shares shall be reduced on share-
for-share basis by the total number of New Public Shares issued to the
Public Stockholders in the Merger (but not below zero).
(b) If Parent elects to modify the terms of the Merger as set forth
in paragraph (a) above, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect such modification, which amendment shall
include (i) an extension of the Outside Date to December 31, 1998, (ii)
provisions relating to the preparation and filing by the Company with the SEC of
a Registration Statement on Form S-4, in which the proxy statement (including
any appropriate amendment to reflect the modified terms of the Merger) will be
included as a prospectus and (iii) such other provisions regarding the mechanics
and timing of the Merger as are customary for cash-election mergers.
(c) Parent and the Company each represents and warrants to the other
party that its Board of Directors has approved the Merger on the modified terms
set forth in this Section 2.09; provided, however, that each party acknowledges
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that, notwithstanding any other provision of this Agreement, the Board of
Directors of the Company has not, and is not obligated to, approve or recommend
any election by any stockholder of the Company to receive any Merger
Consideration in the form of New Public Shares.
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ARTICLE III
Effect of the Merger on the Capital Stock of the
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Constituent Corporations; Exchange of Certificates
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SECTION 3.01. Effect on Capital Stock. As of the Effective Time of
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the Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
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capital stock of Sub shall be converted into and become 11,111.111 fully
paid and nonassessable shares of Common Stock, par value $0.01 per share,
of the Surviving Corporation.
(b) Treasury Stock and Parent Owned Stock. Each share of Common
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Stock that is owned by the Company and each share of Common Stock that is
owned by Parent or Sub (together, in each case, with the associated Right)
shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor. Each share of
Common Stock that is owned by any subsidiary of the Company or Parent
(other than Sub), together, in each case, with the associated Right, shall
automatically be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving
Corporation.
(c) V Corp. Retained Shares. Each V Corp. Retained Share, together
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with the associated Right, shall automatically be converted into and become
a one fully paid and nonassessable share of Common Stock, par value $0.01
per share, of the Surviving Corporation.
(d) Conversion of Common Stock. Subject to Section 3.01(e), each
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issued and outstanding share of Common Stock (other than shares to be
canceled or converted in accordance with Sections 3.01(b) and 3.01(c)),
together with the associated Right, shall be converted into the right to
receive $20.25 in cash (the "Merger Consideration"). As of the Effective
Time of the Merger, all such shares of Common Stock (and the associated
Rights) 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 Common Stock (and the associated Rights)
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration, without interest.
(e) Shares of Dissenting Stockholders. Notwithstanding anything in
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this Agreement to the contrary, shares of Common Stock that are outstanding
immediately prior to the Effective Time of the Merger and that are held by
any
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person who objects to the Merger and complies with Section 262 of the
DGCL concerning the right of holders of Common Stock to dissent from the
Merger and require appraisal of their shares of Common Stock (a "Dissenting
Stockholder") shall not be converted as described in Section 3.01(d) but,
as of the Effective Time of the Merger, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist and
shall become the right to receive such consideration as may be determined
to be due to such Dissenting Stockholder pursuant to the laws of the State
of Delaware; provided, however, that the shares of Common Stock (together
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with the associated Rights) outstanding immediately prior to the Effective
Time of the Merger and held by a Dissenting Stockholder who shall, after
the Effective Time of the Merger, withdraw his demand for appraisal or lose
his right of appraisal, in either case pursuant to the DGCL, shall be
deemed to be converted as of the Effective Time of the Merger into the
right to receive the Merger Consideration. The Company shall give Parent
(i) prompt notice of any written demands for appraisal of shares of Common
Stock received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, voluntarily make
any payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to
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the Effective Time of the Merger, Parent shall select a bank or trust company
reasonably satisfactory to the Company to act as paying agent (the "Paying
Agent") for the payment of the Merger Consideration upon surrender of
certificates representing Common Stock. At the Effective Time, Parent shall
transfer funds (or provide for the transfer of funds) to Sub in an amount
sufficient to pay the Merger Consideration for every share of Common Stock to be
converted at the Effective Time into the Merger Consideration, and Parent hereby
represents and warrants to the Company that the Surviving Corporation will have
all such funds at the Effective Time.
(b) Surviving Corporation To Provide Funds. The Surviving
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Corporation will provide to the Paying Agent on a timely basis, as and when
needed after the Effective Time of the Merger, funds necessary to pay for the
shares of Common Stock pursuant to Section 3.01, it being understood that any
and all interest earned on funds made available to the Paying Agent in
accordance with this Agreement shall be turned over to Parent.
(c) Exchange Procedure. As soon as reasonably practicable after the
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Effective Time of the Merger, the Paying Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time of the Merger represented outstanding shares of Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 3.01, (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
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Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or agents
as may be appointed by the Parent, 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 Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Common Stock which 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 satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 3.02, each Certificate shall be deemed at any
time after the Effective Time of the Merger to represent only the right to
receive upon such surrender the amount of cash, without interest, into which the
shares of Common Stock theretofore represented by such Certificate shall have
been converted pursuant to Section 3.01. No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate.
(d) No Further Ownership Rights in Common Stock. All cash paid upon
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the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Common Stock theretofore represented by such Certificates, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Common Stock which were
outstanding immediately prior to the Effective Time of the Merger. If, after
the Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article III.
(e) No Liability. None of Parent, Sub, the Company or the Paying
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Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time of the Merger (or immediately prior to such earlier date on
which any payment pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 4.01(d))),
the payment in respect of such Certificate 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.
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(f) Withholding Rights. Parent or Sub, as the case may be, shall be
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entitled to deduct and withhold from the consideration otherwise payable to any
holder of Common Stock pursuant to this Agreement only such amounts as are
required to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), or under any
provision of state, local or foreign tax law.
ARTICLE IV
Representations and Warranties
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SECTION 4.01. Representations and Warranties of the Company. The
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Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company and each
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of its subsidiaries is the type of entity listed on Schedule 4.01(a), duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite power and
authority to carry on its business as now being conducted. The Company and
each of its subsidiaries is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect on the Company. The
Company has delivered to Parent complete and correct copies of its
Certificate of Incorporation and By-laws and the certificates of
incorporation and by-laws (or comparable charter or organizational
documents) of its Significant Subsidiaries, in each case as amended to the
date of this Agreement. For purposes of this Agreement, a "Significant
Subsidiary" means any subsidiary of the Company that constitutes a
significant subsidiary within the meaning of Rule 1-02 of Regulation S-X of
the SEC.
(b) Subsidiaries. Schedule 4.01(a) lists each subsidiary of the
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Company. All the outstanding shares of capital stock or other equity
interests of each such subsidiary have been validly issued and are fully
paid and nonassessable and, except as set forth in Schedule 4.01(a), are
owned by the Company and/or one or more other subsidiaries of the Company,
free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively,
"Liens"). Except for the capital stock or other equity interests of its
subsidiaries and except for the ownership interests set forth in Schedule
4.01(a), the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
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(c) Capital Structure. The authorized capital stock of the Company
------------------
consists of 50,000,000 shares of Common Stock, par value $0.10 per share,
and 5,000,000 shares of preferred stock, par value $1.00 per share. At the
close of business on April 16, 1998, (i) 23,381,362 shares of Common Stock
were issued and outstanding, of which 80,000 shares were shares of
restricted stock granted to employees of the Company pursuant to the Stock
Plans ("Restricted Shares"); (ii) no shares of preferred stock were issued
and outstanding; (iii) no shares of Common Stock were held by the Company
in its treasury; (iv) the outstanding Convertible Sub Notes were
convertible into 6,889,858 shares of Common Stock (without giving effect to
fractional shares) pursuant to the terms of the Indenture governing the
Convertible Sub Notes; (v) Company Stock Options covering 2,255,875 shares
of Common Stock were issued and outstanding, of which (x) Company Stock
Options covering 223,374 shares of Common Stock are currently exercisable
and (y) Company Stock Options covering 2,032,501 shares of Common Stock are
currently not exercisable; and (vi) sufficient shares of Common Stock were
reserved for issuance pursuant to the Convertible Sub Notes and the Company
Stock Options and sufficient shares of preferred stock were reserved for
issuance pursuant to the rights (the "Rights") to purchase shares of Common
Stock issued pursuant to the Rights Agreement dated as of February 15, 1998
(as amended from time to time, the "Rights Agreement"), between the Company
and National City Bank, as Rights Agent (the "Rights Agent"). Except as
set forth above, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding. There are
no outstanding stock appreciation rights granted under any Stock Plan. All
outstanding shares of capital stock of the Company are, and all shares
which may be issued pursuant to the Stock Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except for the Convertible Sub Notes, there are not any
bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may
vote. Except for the Rights, securities issued under the Stock Plans, the
Convertible Sub Notes and as otherwise set forth above, as of the date of
this Agreement, there are not any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its subsidiaries is a party or by which any
of them is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the
Company or of any of its subsidiaries or obligating the Company or any of
its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are not any
outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of
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its subsidiaries. The Company has delivered to Parent a complete and
correct copy of the Rights Agreement as amended and supplemented to the
date of this Agreement.
(d) Authority; Noncontravention. The Company has the requisite
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corporate power and authority to enter into this Agreement and, subject to
receipt of Company Stockholder Approval (as defined in Section 4.01(m)), to
consummate the Transactions. The execution and delivery by the Company of
the Operative Agreements to which it is a party and the consummation by the
Company of the Transactions have been duly authorized by all necessary
corporate action on the part of the Company, subject to receipt of Company
Stockholder Approval. This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or in
law). The execution and delivery by the Company of the Operative
Agreements to which it is a party do not, and the consummation by the
Company of the Transactions and compliance with the provisions of the
Operative Agreements to which it is a party 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 result in the creation of any Lien upon any of the properties or assets
of the Company or any of its subsidiaries under, (i) the Certificate of
Incorporation or By-laws of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to the Company or any of its subsidiaries or their respective properties or
assets or (iii) except for the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other
than, (A) in the case of clause (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a Material Adverse Effect on the Company, (B)
with respect to the Company's obligation to repurchase the Convertible Sub
Notes at the election of the holders thereof upon a "Change of Control" in
accordance with the terms of the Indenture and (C) with respect to the
Credit Agreement dated as of August 15, 1996, as amended, by and among the
Company and the financial institutions listed therein (the "Credit
Agreement"). No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or
11
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery by the Company
of the Operative Agreements to which it is a party or the consummation by
the Company of the Transactions, except for (i) the filing of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (ii) the filing with
the SEC of (x) a proxy or information statement relating to the adoption by
the Company's stockholders of this Agreement (as amended or supplemented
from time to time, the "Proxy Statement") and (y) such reports under
Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the Transactions, (iii) the filing of the Certificate of Merger with the
Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business, (iv) such filings as may be required in connection with the taxes
described in Section 6.10, (v) such filings as may be required under
applicable state licensing and certificate of need laws, (vi) such other
consents, approvals, notices, orders, authorizations, registrations,
declarations and filings as are set forth on Schedule 4.01(d), and (vii)
any such consent, approval, order or authorization, registration,
declaration or filing that, if not obtained or made, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed
---------------------------------------
all required reports, schedules, forms, statements and other documents with
the SEC since January 1, 1997 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933 (the "Securities Act"), or
the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
the Company included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Filed SEC Documents (as
12
defined below), neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the
notes thereto and which, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
(f) Information Supplied. None of the Proxy Materials (as defined in
---------------------
Section 6.01), taken as a whole, will, at the respective times they are
first published, sent or given to the Company's stockholders or at the time
of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub for inclusion or incorporation by reference
therein. The Proxy Materials will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed in
-------------------------------------
Schedule 4.01(g) or in the SEC Documents filed and publicly available prior
to the date of this Agreement (the "Filed SEC Documents"), since the date
of the most recent financial statements included in the SEC Documents, the
Company has conducted its business only in the ordinary course, and there
has not been (i) any Material Adverse Change in the Company and its
subsidiaries taken as a whole, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to, or any repurchase for value by the Company of,
any of the Company's capital stock, (iii) any split, combination or
reclassification of any of its 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 its capital stock, (iv) (x) any
granting by the Company or any of its subsidiaries to any director,
employee or officer of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent financial statements
included in the Filed SEC Documents, (y) any granting by the Company or any
of its subsidiaries to any such director, employee or officer of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of
the most recent financial statements included in the Filed SEC Documents or
(z) any entry by the Company or any of its subsidiaries into any employment
or termination agreement with any such director, employee or officer, (v)
any damage, destruction or loss, whether or not covered by insurance, that
has a Material Adverse Effect on the Company or (vi) any change in
accounting methods, principles or practices by the Company
13
materially affecting its assets, liabilities or results of operations,
except insofar as may have been required by a change in GAAP or other
applicable law or regulation. The foregoing representation and warranty
shall not be deemed to be inaccurate as of the Closing Date solely by
reason of any action described in clauses (i)-(xiii) of Section 5.01 that
is taken by the Company or any of its subsidiaries after the date of this
Agreement with the consent of Parent.
(h) Litigation. Except as disclosed in the Filed SEC Documents,
-----------
there is no suit, action or proceeding pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
subsidiaries (and the Company is not aware of any basis for any such suit,
action or proceeding that is considered by the Company probable of
assertion and which if asserted would have a reasonable probability of an
unfavorable outcome) that, individually or in the aggregate, would (i) have
a Material Adverse Effect on the Company, (ii) materially impair the
ability of the Company to perform its obligations under this Agreement or
(iii) prevent the consummation of any of the Transactions, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries
having any such effect.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the
------------------------------------
Filed SEC Documents, since the date of the most recent financial statements
included in the Filed SEC Documents, there has not been any adoption or
amendment in any material respect by the Company or any of its subsidiaries
of any collective bargaining agreement, employment agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director
of the Company or any of its subsidiaries (collectively, "Benefit Plans").
Except as disclosed in the Filed SEC Documents, there exist no material
employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings between the Company or any of
its subsidiaries and any current or former employee, officer or director of
the Company or any of its subsidiaries.
(j) ERISA Compliance. (i) Schedule 4.01(j) contains a list and
-----------------
brief description of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and
all other Benefit Plans maintained, or contributed to, by the Company or
any of its subsidiaries for the benefit of any current or former employees,
officers or directors of the Company
14
or any of its subsidiaries. The Company has made available to Parent true,
complete and correct copies of (v) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (w) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan (if any such report was required), (x) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (y) each trust agreement and group
annuity contract relating to any Benefit Plan and (z) the most recent
actuarial or financial valuation prepared with respect to any Benefit Plan.
(ii) Except as disclosed in Schedule 4.01(j), all Pension Plans
have been the subject of determination letters from the Internal Revenue
Service to the effect that such Pension Plans are qualified and exempt from
Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Internal Revenue Code of 1986, as amended (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 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. Each Benefit Plan has been operated in
material compliance with the provisions of all applicable laws, including
ERISA and the Code.
(iii) No Pension Plan that the Company or any of its subsidiaries
maintains, or to which the Company or any of its subsidiaries is obligated
to contribute, other than any Pension Plan that is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA) (collectively, the
"Multiemployer Pension Plans"), had, as of the respective last annual
valuation date for each such Pension Plan, an "unfunded benefit liability"
(as such term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions which have been furnished to Parent. None of the
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. None of the Company, any of its subsidiaries, any officer of the
Company or any of its subsidiaries, any trustee of any trust created under
any of the Benefit Plans or any other fiduciary with responsibilities with
respect to such trusts has engaged in a "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the Code)
involving a Benefit Plan that is subject to ERISA (including the Pension
Plans) or any other breach of fiduciary responsibility that could subject
the Company, any of its subsidiaries or any officer of the Company or any
of its subsidiaries to the tax or penalty on prohibited transactions
imposed by such Section 4975 or to any liability under Section 502(i) or
(l) of ERISA. Neither any of such Benefit Plans nor any trusts created
thereunder has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) with respect thereto,
during the
15
last five years. Neither the Company nor any of its subsidiaries has
suffered or otherwise caused a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and
4205 with respect to any of the Multiemployer Pension Plans.
(iv) There are no pending claims or suits, or to the knowledge
of the Company, investigations or threatened claims, suits or
investigations regarding the Benefit Plans (other than claims for benefits
in the ordinary course).
(v) Except as disclosed in Schedule 4.01(j), the consummation
of the Transactions (either alone or with any other event) shall not
entitle any director or employee of the Company or any of its subsidiaries
to additional compensation or benefits or accelerate the vesting, payment
or funding of any compensation or benefits.
(vi) Neither the Company nor any entity required to be treated
with the Company as a single employer under Section 414 of the Code has any
material unsatisfied liability under Title IV of ERISA.
(vii) With respect to any Benefit Plan that is an employee
welfare benefit plan, except as disclosed in Schedule 4.01(j), (x) each
such 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 and (y) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to the
Company or any of its subsidiaries on or at any time after the consummation
of the Merger upon not more than 30 days' notice to the participants in
such Benefit Plan.
(k) Taxes. Except as set forth on Schedule 4.01(k), (i) each of the
------
Company and each of its subsidiaries has timely filed all material tax
returns and reports required to be filed by it, and as of the time of
filing, each such return was true, complete and correct in all material
respects; (ii) each of the Company and each of its subsidiaries has timely
paid (or the Company has paid on its behalf) all material taxes in respect
of such tax returns and all other material taxes; (iii) the most recent
financial statements contained in the Filed SEC Documents reflect an
adequate reserve (other than a reserve for deferred income taxes
established to reflect differences between book basis and tax basis of
assets and liabilities) for all material taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the
date of such financial statements; (iv) no deficiencies for any taxes have
been proposed, asserted or assessed against the Company or any of its
subsidiaries, and no requests for waivers of the time to assess any such
taxes are pending; (v) to the knowledge of the Company, the
16
Federal income tax returns of V Corp. and each of its subsidiaries
consolidated in such returns have been examined by and settled with the
United States Internal Revenue Service for all years through 1993; (vi) to
the knowledge of the Company, all material assessments for taxes due with
respect to such completed and settled examinations or any concluded
litigation have been fully and timely paid; (vii) 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 of its subsidiaries; (viii) no Federal or
state income tax returns of the Company or any of its subsidiaries with
respect to a taxable period beginning on or after August 20, 1996 have ever
been (and no such returns are currently being) examined by the United
States Internal Revenue Service or any state taxing authority; and (ix)
neither the Company nor any of its subsidiaries is bound by any agreement
or arrangement with respect to taxes, other than the Tax Sharing Agreement
dated August 20, 1996 (the "Tax Sharing Agreement"), by and between V Corp.
and the Company. As used in this Agreement, "taxes" shall include 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 body, or in connection with any agreement
with respect to taxes, including all interest, penalties and additions
imposed with respect to such amounts, and "tax return" shall mean all
Federal, state, local, provincial and foreign tax returns, forms and
information returns and any amended tax return relating to taxes.
(l) No Excess Parachute Payments; Waiver of Severance and Other
-----------------------------------------------------------
Payments. (i) Other than payments that may be made to the persons listed
---------
on Schedule 4.01(l) (the "Primary Executives"), any amount that could be
received (whether in cash or property or the vesting of property) as a
result of any of the Transactions by any employee, officer or director of
the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). Set forth in Schedule 4.01(l) is (i) the
maximum amount that could be paid to each Primary Executive as a result of
the Transactions under all employment, severance and termination
agreements, other compensation arrangements and Benefit Plans currently in
effect and (ii) the "base amount" (as such term is defined in Section
280G(b)(3) of the Code) for each Primary Executive calculated as of the
date of this Agreement.
(ii) No director or officer of the Company has any right to
receive any severance or other payment as a result of the Transactions
under any employment, severance or termination agreement, other
compensation arrangement or benefit plan currently in effect, except that
upon the consummation of the Merger (i) all outstanding Company Stock
Options (other than Rollover
17
Options (as defined in Section 6.05(d)) will become immediately exercisable
and (ii) all restrictions applicable to outstanding Restricted Shares will
immediately lapse.
(m) Voting Requirements. (i) The affirmative vote of the holders of
--------------------
a majority of the outstanding shares of Common Stock approving this
Agreement (the "Company Stockholder Approval") is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the Transactions.
(n) Approval by Board; State Takeover Statutes; Opinion of the
----------------------------------------------------------
Company's Financial Advisor. The Board of Directors of the Company, at a
----------------------------
meeting duly called and held, acting on the recommendation of the special
committee of disinterested directors of such Board of Directors (the
"Special Committee"), duly adopted resolutions (i) approving this
Agreement, the Merger and the other Transactions, (ii) determining that the
terms of the Merger and the other Transactions are fair to and in the best
interests of the Company and its stockholders and (iii) recommending that
the Company's stockholders adopt this Agreement. Such resolutions are
sufficient to render inapplicable to this Agreement and the other Operative
Agreements, the Merger and the other Transactions the provisions of Section
203 of the DGCL. To the Company's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to
the Company with respect to this Agreement and the other Operative
Agreements, the Merger or the Transactions. The Company hereby represents
that the Board of Directors of the Company has received the opinion of BT
Alex. Brown Incorporated, dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration to be received in the
Merger by the holders of Common Stock (other than certain affiliates of the
Company who will be continuing stockholders) is fair to such holders from a
financial point of view, and a complete and correct signed copy of such
opinion will be delivered by the Company to Parent promptly after receipt
thereof by the Company.
(o) Rights Agreement. The Company has taken all necessary action to
-----------------
(i) render the Rights inapplicable to the Merger and the other Transactions
and (ii) ensure that (y) neither Parent nor any of its affiliates is or
becomes an Acquiring Person (as defined in the Rights Agreement) as a
result of the execution and delivery of this Agreement or the announcement
or consummation of the Merger or any of the other Transactions and (z) the
Separation Time (as defined in the Rights Agreement) does not occur by
reason of the execution and delivery of this Agreement or the announcement
or consummation of the Merger or any of the other Transactions.
18
(p) Compliance with Laws. Neither the Company nor any of its
---------------------
subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule, judgment, decree or order of any Governmental
Entity applicable to its business or operations, including, without
limitation, with respect to any services reimbursable under the Medicare,
Medicaid, or any other Federal or state funded health care program, except
for violations and failures to comply that would not, individually or in
the aggregate, result in a Material Adverse Effect on the Company.
(q) Contracts. Except as disclosed in the Filed SEC Documents, there
----------
are no contracts or agreements that are material to the business,
properties, assets, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken as a
whole. Neither the Company nor any of its subsidiaries is in violation of
or in default under (nor does there exist any condition which upon the
passage of time or the giving of notice would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party
or by which it or any of its properties or assets is bound, except for
violations or defaults that would not, individually or in the aggregate,
result in a Material Adverse Effect on the Company.
(r) Transactions with Affiliates. As of the date hereof, except in
-----------------------------
connection with the Transactions or as disclosed on Schedule 4.01(r) or in
the Filed SEC Documents, (i) there are no material outstanding amounts
payable to or receivable from, or material advances by the Company or any
of its subsidiaries to, and neither the Company nor any of its subsidiaries
is otherwise a material creditor of or debtor to, V Corp. or any of its
affiliates or any officer, director or employee of the Company and (ii)
neither the Company nor any of its subsidiaries is a party to any
transaction, agreement, arrangement or understanding with V Corp. or any of
its affiliates or any officer, director or employee of the Company, other
than, with respect to clauses (i) and (ii), in the case of officers,
directors and employees, items arising out of the ordinary course of
employment with the Company.
(s) Properties. (i) Schedule 4.01(s)(i) sets forth a complete and
-----------
accurate list and the address of all material real property and interests
in real property owned in fee by the Company and the subsidiaries
(individually, an "Owned Property"). Schedule 4.01(s)(i) also sets forth a
complete list of all material real property and interests in real property
leased by the Company and the subsidiaries (individually, a "Leased
Property"). An Owned Property or Leased Property is sometimes referred to
herein, individually, as a "Company Property" and, collectively, as
"Company Properties".
19
(ii) The Company or one of its subsidiaries has good and
insurable fee title to the Owned Properties, subject to (i) Permitted
Liens, (ii) all matters of record and all matters which would be shown by a
current survey or inspection of Owned Properties, (iii) all matters
disclosed in the Filed SEC Documents and (iv) all other matters which, in
the case of clauses (ii)-(iv) above, do not, individually or in the
aggregate, (x) interfere materially with the ordinary conduct of any Owned
Property or the business of the Company and its subsidiaries as a whole or
(y) detract materially from the value or usefulness of the Owned Properties
to which they apply. Set forth on Schedule 4.01(s)(ii) is a list of all
title insurance policies which the Company has in its possession for the
Owned Properties. To the knowledge of the Company, such title insurance
policies reflect material title exceptions and other matters relating to
the Owned Properties as of the effective date of the policies and surveys.
Since May 1, 1996, the Company has not created or consented to the creation
of any title matters for the Owned Properties which it believes does or
will materially and adversely affect the current use of the Owned
Properties, other than Permitted Liens or as disclosed in the Filed SEC
Documents or on Schedule 4.01(s)(ii). With respect to the Leased
Properties in which a leasehold estate is created under applicable law, the
Company or one of its subsidiaries is the holder of good and valid title to
such leasehold estate (or, with respect to any other Leased Properties, has
the interest of the lessee under the applicable leases), and such party has
not assigned, transferred, or encumbered its interest in the leases in any
material way, except for (i) Permitted Liens, (ii) all matters of record
and all matters which would be shown by a current survey or inspection of
the Leased Properties, (iii) all matters disclosed in the Filed SEC
Documents, and (iv) all other matters which, in the case of clauses (ii)-
(iv) above, do not, individually or in the aggregate, (x) interfere
materially with the ordinary conduct of any Leased Property or the business
of the Company and its subsidiaries as a whole or (y) detract materially
from the value or usefulness of the Leased Properties to which they apply.
To the knowledge of the Company, the uses currently existing with respect
to the Company Properties are permitted under applicable zoning laws. The
Company has made available to Parent for its review originals or copies of
all title insurance policies, material exceptions referenced in such
policies, surveys and title reports which the Company has in its possession
for the Owned Properties.
(iii) Schedule 4.01(s)(iii) contains a complete and accurate
description of any noncompliance by any Company Property, to the Company's
knowledge, with any law, ordinance, code, health and safety regulation or
insurance requirement other than such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(iv) Except as set forth in Schedule 4.01(s)(iv), there are no
outstanding or, to the Company's knowledge, threatened requirements by any
20
insurance company which has issued an insurance policy covering any Company
Property, or by any board of fire underwriters or other body exercising
similar functions, requiring any repairs or alterations to be made to any
Company Property that would, individually or in the aggregate, (x)
interfere materially with the ordinary conduct of any Company Property or
the business of the Company and its subsidiaries as a whole or (y) detract
materially from the value or usefulness of the Company Properties to which
they apply.
(v) Schedule 4.01(s)(v) contains a list of each Company Property
which consists of or includes undeveloped land or which is in the process
of being developed or redeveloped (collectively, the "Development
Properties") and a brief description of the development or redevelopment
intended by the Company or any subsidiary to be carried out or completed
thereon (collectively, the "Projects"). The Company has made available to
Parent all feasibility studies, soil tests, due diligence reports and other
studies, tests or reports performed by or for the Company at any time since
the Company's initial public offering which relate to the Development
Properties or the Projects.
(vi) The Company and each of its subsidiaries have good and
marketable title to all the personal and non-real properties and assets
reflected in their books and records as being owned by them, free and clear
of all Liens, except for (i) Permitted Liens, (ii) Liens created in
connection with the Credit Agreement and described in Schedule 4.01(s)(i),
(iii) all matters disclosed in the Filed SEC Documents, and (iv) all other
matters which, in the case of clauses (iii) and (iv) above, do not,
individually or in the aggregate, interfere materially with the ability of
the Company and its subsidiaries to conduct their businesses, taken as a
whole, as currently conducted.
(t) Environmental Matters. (i) Except as set forth in the Filed SEC
----------------------
Documents or as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, neither the Company nor any of its
subsidiaries has (x) placed, held, located, released, transported or
disposed of any Hazardous Substances (as defined below) on, under, from or
at any of the Company Properties or any other properties, (y) any knowledge
of the presence of any Hazardous Substances on, under or at any of the
Company Properties or any other property but arising from the Company
Properties, or (z) during the preceding five years, received any written
notice (A) of any violation of any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity relating to any
matter of pollution, protection of the environment, environmental
regulation or control or regarding Hazardous Substances on or under any of
the Company Properties or any other properties (collectively,
"Environmental Laws"), (B) of the institution or pendency of any suit,
action, claim, proceeding or investigation by any Governmental Entity or
any third party in connection with any
21
such violation (collectively, "Environmental Claims"), (C) requiring the
response to or remediation of Hazardous Substances at or arising from any
of the Company Properties or any other properties, or (D) demanding payment
for response to or remediation of Hazardous Substances at or arising from
any of the Company Properties or any other properties, except in each case
for the notices set forth in Schedule 4.01(t). For purposes of this
Agreement, the term "Hazardous Substance" shall mean any toxic or hazardous
materials or substances, including asbestos, buried contaminants,
chemicals, flammable explosives, radioactive materials, petroleum and
petroleum products and any substances defined as, or included in the
definition of, "hazardous substances", "hazardous wastes", "hazardous
materials" or "toxic substances" under any Environmental Law.
(ii) Except as set forth in the Filed SEC Documents or Schedule
4.01(t), no Environmental Law imposes any obligation upon the Company or
its subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including, without limitation, any
requirement to modify or to transfer any permit or license, any requirement
to file any notice or other submission with any Governmental Entity, the
placement of any notice, acknowledgment or covenant in any land records, or
the modification of or provision of notice under any agreement, consent
order or consent decree, except for obligations that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
Except as set forth in the Filed SEC Documents, or Liens that, individually
or in the aggregate, would not have a Material Adverse Effect on the
Company, no Lien has been placed upon any of the Company's or its
subsidiaries' properties under any Environmental Law.
(u) Labor Matters. Except as set forth in Schedule 4.01(u), there
--------------
are no collective bargaining or other labor union agreements to which the
Company or any of its subsidiaries is a party or by which any of them is
bound. To the knowledge of the Company, since January 1, 1993, neither the
Company nor any of its subsidiaries has encountered any labor union
organizing activity, or had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts. There are no pending or, to the knowledge
of the Company, threatened, claims, suits, grievances or investigations
regarding the compliance by the Company or its subsidiaries with any
federal, state or local labor or wage law or regulations, except for any
claims, suits, grievances or investigations that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
(v) Brokers. No broker, investment banker, financial advisor or
--------
other person, other than BT Alex. Brown Incorporated, 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 Transactions based upon arrangements made by or on
behalf of the Company. The Company has furnished
22
to Parent a true and complete copy of all agreements between the Company
and BT Alex. Brown Incorporated relating to the Merger and the other
Transactions.
(w) Compliance with Law.
--------------------
(i) Licenses and Permits. The Company and each of its
--------------------
subsidiaries has obtained, maintains in force, and has provided copies to
Parent of all material licenses, permits, certificates of authority, orders
and waivers required from any Governmental Entity ("Permits") to operate or
manage, as the case may be, their respective businesses in the manner in
which they are currently operated and to occupy, operate and use any
buildings, improvements, fixtures and equipment owned or leased in
connection with the operation of all operational assisted living
facilities, independent living facilities, home health agencies and skilled
nursing facilities of the Company and its subsidiaries. Except as
specified in Schedule 4.01(w), all of the Permits referenced in the
foregoing sentence have been issued in the name of the Company or the
applicable subsidiary having an ownership, leasehold, management or
operational interest in the facilities referenced therein. No such permits
of the Company or any of its subsidiaries have been suspended, canceled or
terminated and, to the knowledge of the Company, no suspension, cancelation
or termination of any such Permit is threatened or imminent. To the
knowledge of the Company, each employee of the Company and each of its
subsidiaries has obtained and maintains in force all licenses, permits or
similar authorizations required to authorize such employee to perform his
or her duties on behalf of the Company and its subsidiaries with only such
exceptions that individually and in the aggregate would not have a Material
Adverse Effect on the Company.
(ii) Billing. The Company and each of its subsidiaries has
-------
complied in all material respects with all applicable Medicare and all
other third party billing policies, procedures, limitations and
restrictions, and there is no pending or, to the knowledge of the Company,
threatened recoupment or penalty action or proceeding against the Company
or any of its subsidiaries under the Medicare program or any other third
party payor program except for such noncompliance, actions or proceedings
that individually or in the aggregate would not have a Material Adverse
Effect on the Company.
(iii) No Kickbacks. Neither the Company nor any of its
------------
subsidiaries, nor, to the knowledge of the Company, any director, officer
or employee of the Company or any of its subsidiaries acting for or on
behalf of the Company or any of its subsidiaries, has paid or caused to be
paid, directly or indirectly, in connection with the business of the
Company or any of its subsidiaries, (i) any bribe, kickback or other
similar payment to any Governmental Entity or any agent of any supplier or
customer, except for payments to V. Corp
23
and its affiliates that were in compliance with applicable law, or (ii) any
contribution to any political party or candidate (other than from personal
funds of directors, officers or employees not reimbursed by their
respective employers or in compliance with applicable law).
(iv) No Investigations. To the knowledge of the Company,
-----------------
neither the Company nor any of its subsidiaries is the subject of any
investigation, proceeding or other action, nor has any investigation,
proceeding or other action been threatened by any Governmental Entity or
other person, regarding noncompliance with any law, and no reasonable basis
exists for any such investigation or prosecution which would have a
Material Adverse Effect on the Company.
SECTION 4.02. Representations and Warranties of Parent and Sub. Parent
-------------------------------------------------
and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
-------------------------------------------
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now
being conducted.
(b) Authority; Noncontravention. Parent and Sub have all requisite
----------------------------
corporate power and authority to enter into this Agreement and to
consummate the Transactions. The execution and delivery by Parent and Sub
of the Operative Agreements to which they are parties and the consummation
of the Transactions have been duly authorized by all necessary corporate
action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and
binding obligation of such party, enforceable against such party in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether
considered in a proceeding in equity or in law). The execution and
delivery by Parent and Sub of the Operative Agreements to which they are
parties do not, and the consummation of the Transactions and compliance
with the provisions of the Operative Agreements 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 result in the creation of any Lien upon any of the properties or assets
of Parent or Sub under, (i) the certificate of incorporation or by-laws (or
other comparable organizational documents) of Parent or Sub, (ii) any loan
or credit agreement, note, bond,
24
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or Sub or their
respective properties or assets or (iii) except for the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights, losses or Liens
that individually or in the aggregate would not (x) have a Material Adverse
Effect on Parent, (y) materially impair the ability of Parent and Sub to
perform their respective obligations under this Agreement or (z) prevent or
materially delay the consummation of any of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent or
Sub in connection with the execution and delivery by Parent or Sub of the
Operative Agreements to which they are parties or the consummation by
Parent or Sub, as the case may be, of any of the Transactions, except for
(i) the filing of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of the Proxy Materials and such reports
under Sections 13 and 16(a) of the Exchange Act as may be required in
connection with the Operative Agreements and the Transactions, (iii) the
filing of the Certificate of Merger with the Delaware Secretary of State
and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iv) such filings as may be
required in connection with the taxes described in Section 6.10 and (v)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the "takeover" or "blue
sky" laws of various states.
(c) Information Supplied. None of the information supplied or to be
---------------------
supplied by Parent or Sub for inclusion or incorporation by reference in
the Proxy Materials will, at the respective times they are first published,
sent or given to the Company's stockholders, or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(d) Brokers. No broker, investment banker, financial advisor or
--------
other person, other than Lazard Freres & Co. LLC, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the Transactions based upon arrangements made by or on behalf of Parent or
Sub.
(e) Financing. At the Effective Time of the Merger, Parent and Sub
----------
will have available all of the funds necessary for the acquisition of all
shares of Common Stock pursuant to the Merger, and to perform their
respective obligations under this Agreement.
25
(f) Management Arrangements. Parent has provided the Board of
------------------------
Directors of the Company with a summary of the terms of all contracts,
agreements and other arrangements proposed to be entered into between the
Surviving Corporation (or any of its affiliates) and any of the officers,
directors and employees of the Company (or any of its affiliates), and the
Surviving Corporation shall not enter into any such contracts, agreements
or arrangements on terms that are more favorable to such officers,
directors and employees than those set forth in such summary.
(g) Financial Statements.
---------------------
(i) To the knowledge of Parent, (A) the financial statements of
Parent for the year ended December 31, 1997 previously delivered to the
Company by Parent ("Parent Financial Statements") comply as to form in all
material respects with applicable accounting requirements and (if
applicable) the published rules of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods presented (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Parent and its
subsidiaries, as of the dates thereof and the consolidated financial
position of Parent and its subsidiaries, as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended, and (B) except as set forth in the Parent Financial Statements,
Parent and its subsidiaries had no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) at December 31, 1997
required by GAAP to be set forth on a consolidated balance sheet of the
Parent and its consolidated subsidiaries or in the notes thereto and which
have a Material Adverse Effect on Parent.
(ii) Concurrently with the acquisition of Parent by Prometheus
Senior Quarters LLC ("Prometheus"), Prometheus contributed in excess of
$175 million to the equity capital of Prometheus Acquisition Corp., which
merged with and into Parent on April 7, 1998 (the "Equity Contribution").
To the knowledge of Parent, between December 31, 1997 and the time of such
contribution (the "Contribution Date"), Parent did not suffer any Material
Adverse Change or incur any liability or obligation required by GAAP to be
set forth on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the notes thereto which would have a Material Adverse
Effect on Parent, other than (i) liabilities and obligations for
transaction-related expenses incurred in connection with the acquisition of
Parent by Prometheus and (ii) other liabilities and obligations in an
aggregate amount not in excess of $25 million.
(iii) Between the Contribution Date and the date of this
Agreement, Parent (A) did not (a) suffer any Material Adverse Change or (b)
incur any liability
26
or obligation required by GAAP to be set forth on a consolidated balance
sheet of Parent and its consolidated subsidiaries or in the notes thereto
which would have a Material Adverse Effect on Parent (other than (x)
liabilities and obligations for transaction-related expenses incurred in
connection with the acquisition of Parent by Prometheus and (y) other
liabilities and obligations in an aggregate amount not in excess of $25
million), or (B)(y) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock or other equity
interests (including any distribution of any portion of the Equity
Contribution to any person), or (z) purchase, redeem or otherwise acquire
any shares of capital stock of Parent or any of its subsidiaries or any
other securities thereof any rights, warrants or options to acquire any
such shares or other securities or interests.
(h) Sub; No Prior Activities. Sub was formed solely for the purpose
-------------------------
of engaging in the transactions contemplated by this Agreement. As of the
date hereof and the Effective Time of the Merger, except for obligations or
liabilities incurred in connection with its organization or to be incurred
in connection with the consummation of the Transactions, Sub has not
incurred any obligations or liabilities or engaged in any business activity
of any type of any kind whatsoever or entered into agreements or
arrangements with any person, other than the Operative Agreements.
(i) Certain Actions by Parent. During the period of time from the
--------------------------
date of this Agreement until the Effective Time of the Merger, Parent shall
not, and shall not permit any of its subsidiaries to, (i) pay any
extraordinary dividend, make any extraordinary redemption of any equity
securities or make any other extraordinary distribution of cash or other
property to its securityholders or (ii) sell, transfer or otherwise dispose
any of its assets out of the ordinary course of business unless it receives
consideration equal to the fair market value of such assets (as determined
in good faith by the board of directors of Parent).
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
27
SECTION 5.01. Conduct of Business. (a) Ordinary Course. During the
-------------------- ----------------
period from the date of this Agreement to the Effective Time of the Merger, the
Company shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time of the Merger, the Company shall not, and shall
not permit any of its subsidiaries to:
(i) (x) 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 any direct or indirect wholly owned subsidiary of the
Company to its parent, (y) 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 (z)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than (1) the issuance of Common Stock (and associated Rights) upon
the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their present terms and (2) the issuance of
Common Stock (and associated Rights) upon the exercise of Convertible Sub
Notes in accordance with their terms);
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except purchases of inventory (other
than real property) in the ordinary course of business consistent with past
practice;
(v) (A) grant to any employee, officer or director of Company or any
of its subsidiaries any increase in compensation, except in the ordinary
course of
28
business consistent with prior practice or to the extent required under
employment agreements in effect as of the date of the most recent financial
statements included in the Filed SEC Documents, (B) grant to any employee,
officer or director of Company or any of its subsidiaries any increase in
severance or termination pay, except to the extent required under any
agreement in effect as of the date of the most recent financial statements
included in the Filed SEC Documents, (C) enter into any employment,
consulting, indemnification, severance or termination agreement with any
such employee having an annual salary greater than $75,000, officer or
director, (D) establish, adopt, enter into or amend in any material respect
any collective bargaining agreement or Benefit Plan or (E) take any action
to accelerate any material rights or benefits, or make any material
determinations not in the ordinary course of business consistent with prior
practice, under any collective bargaining agreement or Benefit Plan, except
as otherwise required by applicable law or regulation;
(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 other applicable laws or regulations;
(vii) sell, lease, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of properties or assets of the Company and
its subsidiaries having a fair market value in excess of $50,000, except
sales or inventory (other than real property) in the ordinary course of
business consistent with past practice;
(viii) (y) 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 of its subsidiaries, 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, other than any guarantee of
indebtedness or debt securities of Elder Healthcare Developers, LLC
(including through the issuance of letters of credit) in an aggregate
amount not to exceed $10,000,000, or (z) make any loans, advances or
capital contributions to, or investments in, any other person, other than
to the Company or any direct or indirect wholly owned subsidiary of the
Company, in the case of clause (y) or (z) above is in an amount which
exceeds $50,000;
(ix) make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $500,000 or, in the
aggregate, are in excess of $5,000,000;
29
(x) make any material tax election, amend any material tax return
or settle or compromise any material tax liability or refund;
(xi) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than required payments of interest under the terms of the
Convertible Sub Notes or 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 most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents or
incurred in the ordinary course of business consistent with past practice,
or waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or
any of its subsidiaries is a party;
(xii) except as part of the Transactions as contemplated by this
Agreement, enter into any transaction, agreement, arrangement or
understanding with V Corp. or any of its affiliates; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions (it being understood and agreed that the Company shall
not be deemed to have breached the foregoing covenant by virtue of the
Company's obligation to repurchase the Convertible Sub Notes at the
election of the holders thereof following the consummation of the Merger in
accordance with the "Change of Control" provisions of the Indenture).
(b) Other Actions. The Company shall not, and shall not permit any
--------------
of its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) except as otherwise
permitted by Section 5.02, any of the conditions to the Merger set forth in
Article VII not being satisfied.
(c) Advice of Changes. The Company shall promptly advise Parent
------------------
orally and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, would have, a Material Adverse Effect on the Company.
SECTION 5.02. No Solicitation. (a) The Company shall not, nor shall
----------------
it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to, (i)
directly or indirectly solicit, initiate, or encourage the submission of, any
takeover proposal, (ii) enter into any agreement with respect to any takeover
proposal or (iii) directly or indirectly participate in any discussions or
30
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
takeover proposal; provided, however, that, prior to the adoption of this
-------- -------
Agreement by the stockholders of the Company, to the extent required by the
fiduciary obligations of the Board of Directors of the Company, as determined in
good faith by a majority of the disinterested members thereof based on the
advice of outside counsel, the Company may (x) in response to an unsolicited
request therefor, participate in discussions or negotiations with, or furnish
information with respect to the Company pursuant to a customary confidentiality
agreement (as determined by the Company's independent counsel) to, any person in
connection with any takeover proposal or potential takeover proposal or (y)
issue a press release or other public announcement disclosing the receipt by the
Company of any takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any executive officer of the Company or any of its subsidiaries or
any investment banker, attorney or other advisor or representative of the
Company or any of its subsidiaries, whether or not such person is purporting to
act on behalf of the Company or any of its subsidiaries or otherwise, shall be
deemed to be a breach of this Section 5.02(a) by the Company. For purposes of
this Agreement, "takeover proposal" means any proposal for a merger or other
business combination involving the Company or any of its Significant
Subsidiaries, any proposal for the issuance by the Company of additional equity
securities equal to 20% or more of the outstanding equity securities of the
Company as consideration for the assets or securities of another person or any
proposal or offer to acquire in any manner, directly or indirectly, additional
equity securities equal to 20% or more of the outstanding equity securities of
the Company, or 20% or more of the assets of the Company (and, with respect to
assets, its subsidiaries, taken as a whole), other than the Transactions.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by such Board of
Directors or any such committee of this Agreement or the Merger or (ii) approve
or recommend, or propose to approve or recommend, any takeover proposal.
Notwithstanding the foregoing, the Board of Directors of the Company (or any
committee thereof), to the extent required by the fiduciary obligations thereof,
as determined in good faith by a majority of the disinterested members thereof
based on the advice of outside counsel, may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement and the Merger) another takeover proposal; provided, however that the
-------- -------
Board of Directors of the Company (or any committee thereof) may not approve or
recommend another takeover proposal, or withdraw or modify its approval or
recommendation of this Agreement, the Merger and the Transactions until 48 hours
after Parent shall have received the written notice set forth in Section 5.02(c)
below with respect to such takeover proposal.
31
(c) The Company promptly shall advise Parent orally and in writing,
within 24 hours of receipt of any takeover proposal or any inquiry with respect
to or which could reasonably be expected to lead to any takeover proposal, and
the material terms and conditions of such proposal or inquiry (including any
change to the material terms of any such takeover proposal or inquiry).
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Preparation of Proxy Materials. (a) As soon as
-------------------------------
practicable following the execution of this Agreement, the Company will prepare
and file with the SEC a preliminary Proxy Statement and a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3"; the Proxy Statement and the Schedule 13E-3 are
collectively referred to herein as the "Proxy Materials"). The Company will use
its best efforts to respond to any comments of the SEC or its staff and to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after such filing. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Materials or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Materials or the
Merger. If at any time prior to the adoption of this Agreement by the Company's
stockholders there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Materials, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not mail any Proxy Materials or any amendment or supplement thereto
if Parent reasonably objects thereto. Each of the Company, Parent and Sub
agrees promptly to correct any information provided by it for use in the Proxy
Materials if and to the extent that such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to amend or supplement the Proxy Materials and to cause the
Proxy Materials as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company agrees to provide
Parent, Sub and their counsel copies of any written comments the Company or its
counsel may receive from the SEC or its staff with respect to the Proxy
Materials promptly after the receipt of such comments.
(b) Subject to any necessary SEC approvals of the Proxy Materials,
the Company will, as soon as practicable following the date of this Agreement,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of approving this Agreement and the
Transactions. The Company will,
32
through its Board of Directors or a committee thereof, recommend to its
stockholders approval of this Agreement and the Transactions, except to the
extent that the Board of Directors of the Company or a committee thereof shall
have withdrawn or modified its approval or recommendation of this Agreement or
the Merger as permitted by Section 5.02(b). Without limiting the generality of
the foregoing, except as otherwise provided herein the Company agrees that its
obligations pursuant to the first sentence of this Section 6.01(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any takeover proposal or (ii) the withdrawal or
modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger.
SECTION 6.02. Access to Information; Confidentiality. The Company
---------------------------------------
shall, and shall cause each of its subsidiaries to, afford to Parent, and to
Parent's officers, employees, accountants, counsel, financial advisers and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time of the Merger to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. All such information shall be held in accordance with the
confidentiality agreement (the "Confidentiality Agreement") dated February 2,
1998, as amended.
SECTION 6.03. Reasonable Efforts; Notification. (a) Upon the terms
---------------------------------
and subject to the conditions set forth in this Agreement, unless, to the extent
permitted by Section 5.02(b), the Board of Directors of the Company (or a
committee thereof) approves or recommends another takeover proposal, each of the
parties agrees to 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 and
the other Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary notifications, 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 any of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to consummate the
Transactions and to fully carry out the purposes of the Operative Agreements.
In connection with and without
33
limiting the foregoing, the Company and its Board of Directors shall (i) take
all reasonable action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, any
Operative Agreement or any of the other Transactions and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to the
Merger, any Operative Agreement or any other Transaction, take all reasonable
action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by the
Operative Agreements and otherwise to minimize the effect of such statute or
regulation on the Merger and the other Transactions. Notwithstanding the
foregoing, the Board of Directors of the Company (or any committee thereof)
shall not be prohibited from taking any action permitted by Section 5.02(b).
(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.
SECTION 6.04. Rights Agreement. (a) The Board of Directors of the
-----------------
Company shall take all further action (in addition to that referred to in
Section 4.01(o)) reasonably requested in writing by Parent (including redeeming
the Rights immediately prior to the Effective Time of the Merger or amending the
Rights Agreement) in order to render the Rights inapplicable to the Merger and
the other Transactions. Except as provided in this Agreement or requested in
writing by Parent prior to the Stockholders Meeting, the Board of Directors of
the Company shall not (i) amend the Rights Agreement or (ii) take any action
with respect to, or, except as specifically permitted by Section 6.04(b), make
any determination under, the Rights Agreement (including a redemption of the
Rights).
(b) If, to the extent permitted by Section 5.02(b), the Board of
Directors of the Company (or a committee thereof) approves or recommends a
takeover proposal, the Company may take any action in order to render the Rights
inapplicable to such takeover proposal; provided, however, that the foregoing
-------- -------
shall not permit the Company to make any determination under, or take any action
with respect to, the Rights Agreement in order to render the Rights applicable
to the Merger or any of the other Transactions or to redeem the Rights.
SECTION 6.05. Stock Options. (a) Subject to Section 6.05(d), at the
--------------
Effective Time of the Merger (and without any action by Board of Directors of
the
34
Company or any committee administering the Stock Plans), all outstanding stock
options to purchase shares of Common Stock ("Company Stock Options") heretofore
granted under any stock option or stock appreciation rights plan, program or
arrangement of the Company (collectively, the "Stock Plans"), shall be canceled
in exchange for the right to receive a cash payment by the Surviving Corporation
at that time of an amount equal to (i) the excess, if any, of (x) the price per
share of Common Stock to be paid pursuant to the Merger over (y) the exercise
price per share of Common Stock subject to such Company Stock Option, multiplied
by (ii) the number of shares of Common Stock for which such Company Stock Option
shall not theretofore have been exercised (the "Option Consideration")
(irrespective of whether and the extent to which any or all such options are
exercisable or will be exercisable at the Effective Time). Schedule 6.05(a)
identifies all Stock Plans in effect as of the date of this Agreement.
(b) All amounts payable pursuant to this Section 6.05 shall be
subject to any required withholding of taxes and shall be paid without interest.
The Company shall use its commercially reasonable efforts to obtain all consents
of the holders of the Company Stock Options 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 Stock Option until all necessary consents for such Company Stock Option
are obtained.
(c) The Stock Plans shall terminate as of the Effective Time of the
Merger, and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be deleted as of the Effective Time of
the Merger, and the Company shall ensure that following the Effective Time of
the Merger no holder of a Company Stock Option or any participant in any Stock
Plan or other Benefit Plan shall have any right thereunder to acquire any
capital stock of the Surviving Corporation except as set forth in Section
6.05(d).
(d) Notwithstanding anything the contrary contained herein, the
provisions of Section 6.05(a) shall not apply to the Company Stock Options
listed on Schedule 6.05(d) (the "Rollover Options"). The Rollover Options shall
remain outstanding after the Effective Time of the Merger as options to acquire
shares of the Surviving Corporation, except that the number of shares and the
exercise price with respect thereto shall be equitably adjusted by the Board of
Directors of the Surviving Corporation as of the Effective Time of the Merger in
order to preserve the aggregate spread with respect to each Rollover Option.
For purposes of the immediately preceding sentence, (i) the aggregate "spread"
with respect to each Rollover Option immediately prior to the Effective Time of
the Merger shall be equal to the product of (x) the number of shares covered by
such Rollover Option and (y) the excess of the Merger Consideration over the
exercise price of such Rollover Option and (ii) the aggregate "spread" with
respect to each Rollover Option immediately following the Effective Time of the
Merger shall be equal to
35
the product of (x) the number of shares covered by such Rollover Option and (y)
the excess of the fair market value of one share of Common Stock of the
Surviving Corporation (as determined in good faith by the Board of Directors of
the Surviving Corporation, provided that if Parent shall purchase any shares of
--------
Common Stock of the Surviving Corporation at or immediately following the
Effective Time of the Merger, the fair market value of one share of Common Stock
shall be deemed to be equal to the price per share paid by Parent) over the
exercise price of such Rollover Option. The Rollover Options shall be subject
after the Effective Time of the Merger to the same terms and conditions that
applied before the Effective Time of the Merger with the following exceptions:
(i) any provision or agreement providing for the accelerated vesting of such
Rollover Options as a result of the transactions contemplated by this Agreement
shall not be given effect (so that the original vesting schedule shall continue
to apply to such Rollover Options) and (ii) the shares of the Surviving
Corporation delivered upon exercise of the Rollover Options shall be subject to
the shareholder provisions set forth in the Shareholders Agreement. Before the
Effective Time of the Merger, the Company shall take any reasonable actions
(including obtaining any employee consent) as are necessary to implement the
provisions of this Section 6.05(d). The Surviving Corporation shall adopt a
stock option plan as of the Effective Time of the Merger that shall provide for
the issuance of the Rollover Options and by virtue of the Merger and without the
need of any further corporate action, the Surviving Corporation shall assume all
obligations of the Company under the Rollover Options.
SECTION 6.06. Benefit Plans. Except as provided in Section 6.05(c),
--------------
Parent will cause the Surviving Corporation to maintain for the period from the
Effective Time of the Merger through December 31, 1998 the Benefit Plans of the
Company and its subsidiaries in effect on the date of this Agreement or to
provide benefits to employees of the Company and its subsidiaries that are not
materially less favorable in the aggregate to such employees than those in
effect on the date of this Agreement. For purposes of participation, vesting
and benefit accrual under any such plans, the service of the employees of
Company and its subsidiaries prior to the Effective Time shall be treated as
service with any employer participating in such employee benefit plans. Parent
also shall cause the Surviving Corporation and its subsidiaries to honor in
accordance with their terms all employment, severance, consulting and other
compensation contracts, agreements and other arrangements disclosed in the Filed
SEC Documents or in any schedule hereto between any of the Company or any of its
subsidiaries and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the Benefit Plans.
SECTION 6.07. Indemnification. Parent and Sub agree that all rights
----------------
to indemnification for acts or omissions occurring prior to the Effective Time
of the Merger now existing in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
certificates of incorporation or by-laws (or
36
similar organizational documents) shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a period of not less
than six years from the Effective Time of the Merger. Parent will cause to be
maintained for a period of not less than six years from the Effective Time of
the Merger the Company's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time of the Merger (the "D&O Insurance") for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of 200%
of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"). If the existing D&O Insurance expires, is terminated or
canceled during such six-year period, Parent will use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be obtained for the remainder
of such period for an annualized premium not in excess of the Maximum Premium,
on terms and conditions no less advantageous than the existing D&O Insurance.
The Company represents to Parent that the Maximum Premium is $240,720.
SECTION 6.08. Fees and Expenses. (a) Except as provided below, all
------------------
fees and expenses incurred in connection with the Merger, this Agreement and the
Transactions shall be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
(b) The Company shall pay to Parent upon demand a fee of $18,209,496,
payable in same day funds, plus all Expenses (as defined below) of the Company,
if (i) the Company terminates this Agreement pursuant to Section 8.01(f); (ii)
Parent terminates this Agreement pursuant to Section 8.01(c), provided that the
breach or failure to perform by the Company giving rise to such right to
terminate under Section 8.01(c) must be a deliberate breach or failure to
perform with the intent of frustrating the Closing; (iii) Parent terminates this
Agreement pursuant to Section 8.01(d); (iv) any person makes a takeover proposal
that was not withdrawn more than ten days prior to the date of the Stockholders
Meeting and thereafter this Agreement is terminated pursuant to Section
8.01(b)(i); or (v) any person makes a takeover proposal that was not withdrawn
on the date 60 days prior to the Outside Date (as defined in Section
8.01(b)(ii)) and the Company Stockholder Approval is not obtained prior to
termination of this Agreement. Any fee payable to Parent by the Company pursuant
to this Section 6.08(b) is herein referred to as the "Termination Fee".
(c) For purposes of this Agreement, the term "Expenses" shall mean,
with respect to a party hereto, all reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of such party or any of its affiliates in
connection with the Merger or the consummation of any of the Transactions,
including all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants to such party or any or its affiliates and
all fees and expenses of banks, investment banking firms and other financial
37
institutions and their respective counsel, accountants and agents in connection
with arranging or providing financing (collectively, the "Expenses").
(d) Parent shall reimburse all of the Expenses of the Company upon
demand if this Agreement is terminated by the Company pursuant to Section
8.01(e).
SECTION 6.09. Public Announcements. Parent and Sub, on the one hand,
---------------------
and the Company, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the Transactions, including
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. The parties agree that (a) the initial press
release to be issued with respect to the Transactions is set forth in Exhibit A
to this Agreement, (b) such initial press release shall contain a statement to
the effect that, to the extent required by the fiduciary obligations of the
Board of Directors of the Company, determined in good faith by a majority of the
disinterested members thereof based on the advice of outside counsel, the
Company may, in response to an unsolicited request therefor, furnish information
with respect to the Company to any person pursuant to an appropriate
confidentiality agreement, and (c) the Company shall be entitled to prepare (in
its sole discretion) and file a report on Form 8-K with the SEC pursuant to the
Exchange Act describing this Agreement and the Merger and file the Operative
Agreements as exhibits to such Form 8-K.
SECTION 6.10. Transfer Taxes. Parent shall pay or cause Sub to pay
---------------
any state, local, foreign or provincial sales, use, real property transfer,
stock, transfer, stock or similar tax (including any interest or penalties with
respect thereto) payable in connection with the consummation of the Merger
(collectively, the "Transfer Taxes"). The Company agrees to cooperate with
Parent or Sub, as the case may be, in the filing of any returns with respect to
the Transfer Taxes, including supplying in a timely manner a complete list of
all real property interests held by the Company and its subsidiaries and any
information with respect to such property that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the assets
giving rise to such Transfer Taxes shall be agreed to by the Company and the
Parent.
SECTION 6.11. Support Agreements. Parent and Sub hereby represent
-------------------
and warrant to the Company that the Support Agreements, complete and correct
copies of which (including all amendments or other modifications thereto) are
attached hereto as Exhibits B-1 and B-2, are the only contracts, agreements,
arrangements or other understandings currently in effect related to the
Transactions by and among Parent and/or any of its affiliates, on the one hand,
and V Corp. and/or any other stockholder of the Company, on the other hand.
Parent and Sub will not (directly or indirectly) amend either or both of the
Support Agreements, or enter into any other contract, agreement,
38
arrangement or other understanding related (directly or indirectly) to the
Transactions with any stockholder of the Company (record or beneficial), without
the prior written consent of the Company.
SECTION 6.12. Headquarters. Parent, Sub and Surviving Corporation
-------------
hereby covenant that from and after the Effective Time of the Merger until the
date that is three years after the Effective Time of the Merger, the corporate
headquarters and principal offices of the Company and, after the Effective Time
of the Merger, the Surviving Corporation, shall remain in the Louisville,
Kentucky, metropolitan area.
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.
(b) HSR Act. The 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 restraining order,
-----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
-------- -------
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 injunction or other order that may be entered.
39
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. There shall not exist
-------------------------------
inaccuracies in the representations and warranties of the Company set forth
in the Agreement, in each case as of the Closing Date (except for
representations and warranties confined to a specified date, which speak
only to such date), such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a (A) Material Adverse Effect on the
Company or (B) material adverse impact on the ability of the Company (i) to
perform its obligations under this Agreement or (ii) to consummate the
Merger (disregarding for purposes of such determination any exceptions for
materiality or Material Adverse Effect contained in such representations
and warranties so as not to "double-count"), 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.
(b) Performance of Obligations of the Company. The Company shall
------------------------------------------
have performed in all material respects all obligations required 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 any suit, action or
--------------
proceeding by any Governmental Entity or any other person, or before any
court or governmental authority, agency or tribunal, domestic or foreign,
in each case that has a reasonable likelihood of success, (i) challenging
the acquisition by Parent or Sub of any shares of Common Stock, seeking to
restrain or prohibit the consummation of the Merger or any of the other
Transactions, or seeking to obtain from the Company, Parent or Sub any
damages that are material in relation to the Company and its 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 or any of the
other Transactions, (iii) seeking to impose limitations on the ability of
Parent or Sub to acquire or hold, or exercise full rights of ownership of,
any shares of Common Stock, including, without limitation, the right to
vote the Common Stock purchased by it on all matters properly presented to
the stockholders of the Company, (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect
40
the business or operations of the Company or its subsidiaries, or (v) which
otherwise has a Material Adverse Effect on the Company.
(d) Material Filings and Notices. There shall have been made by the
-----------------------------
Company and its subsidiaries, as applicable, all material filings and
notifications required to be made to any Governmental Entity in connection
with the Merger, and all material consents, approvals, authorizations and
Permits required to be obtained by the Company and its subsidiaries from
any Governmental Entity at or prior to the Effective Time of the Merger
shall have been obtained.
SECTION 7.03. Condition to Obligation of the Company. The obligation
---------------------------------------
of the Company to effect the Merger is subject to the following conditions:
(a) 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 Parent and Sub by their respective chief executive officers and chief
financial officers to such effect.
(b) Representations and Warranties. There shall not exist
-------------------------------
inaccuracies in the representations and warranties of Parent and Sub set forth
in this Agreement, in each case as of the Closing Date (except for
representations and warranties confined to a specified date, which speak only to
such date), such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a (A) Material Adverse Effect on Parent or (B)
material adverse impact on the ability of Parent or Sub, respectively, (i) to
perform their respective obligations under this Agreement or (ii) in the case of
Parent and Sub, to consummate the Merger (disregarding for purposes of such
determination any exceptions for materiality or Material Adverse Effect
contained in such representations and warranties so as not to "double-count"),
except as otherwise contemplated by this Agreement, and the Company shall have
received a certificate signed on behalf of Parent and Sub by the chief executive
officers and chief financial officers of Parent and Sub, respectively, to such
effect.
(c) Solvency Opinion. The Company shall have received a solvency
-----------------
letter, dated as of the Closing Date, from a nationally recognized valuation
firm, as to the solvency of the Surviving Corporation after the Effective Time
of the Merger, in form and substance reasonably satisfactory to the Company.
41
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. Termination. This Agreement may be terminated at any
------------
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if, upon a vote at a duly held Stockholders Meeting (or any
adjournment thereof), the Company Stockholder Approval shall not have
been obtained;
(ii) if the Merger is not consummated on or before October 31,
1998 (the "Outside Date"), unless the failure to consummate the Merger
is the result of a wilful and material breach of this Agreement by the
party seeking to terminate this Agreement; provided, however, that the
-------- -------
passage of such period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree, ruling
or action restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(iii) if any Governmental Entity issues an order, decree or
ruling or takes 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; or
(iv) if any condition to the obligation of such party to
consummate the Merger set forth in Section 7.02 (in the case of
Parent) or 7.03 (in the case of the Company) becomes incapable of
satisfaction prior to the Outside Date; provided, however, that the
-------- -------
terminating party is not then in wilful and material breach of any
representation, warranty or covenant contained in this Agreement);
(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
7.02(b) and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to the Parent of such breach (provided that Parent
is not then in wilful and material breach of any representation, warranty
or covenant contained in this Agreement);
42
(d) by Parent:
(i) if the Board of Directors of the Company or any committee
thereof withdraws or modifies in a manner adverse to Parent its
approval of recommendation of this Agreement or fails to recommend to
the Company's stockholders that they give the Company Stockholder
Approval, or such Board of Directors or any committee thereof resolves
to take any of the foregoing actions; or
(ii) if the Board of Directors of the Company fails to reaffirm
publicly and unconditionally its recommendation to the Company's
stockholders that they give the Company Stockholder Approval within
five business days of Parent's written request to do so (which request
may be made at any time following public disclosure of a takeover
proposal, which public reaffirmation must also include the
unconditional rejection of such takeover proposal);
(e) by the Company, if either Parent or Sub breaches or fails to
perform in any material respect of 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 7.03(a) or 7.03(b) and (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 in this Agreement); or
(f) by the Company prior to receipt of the Company Stockholder
Approval in accordance with Section 8.05(b); provided, however, that the
-------- -------
Company shall have complied with all provisions thereof, including the
notice provisions therein.
SECTION 8.02. Effect of Termination. 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, other than the
provisions of Section 4.01(v), Section 4.02(d), the last sentence of Section
6.02, Section 6.08, this Section 8.02 and Article IX and except to the extent
that such termination results from the wilful and material breach by a party of
any of its representations, warranties, covenants or agreements set forth in the
Operative Agreements.
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 after any such approval, there shall not be made any
- -------- -------
amendment that by law requires further approval by such stockholders without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in
43
writing signed on behalf of each of the parties. Notwithstanding the foregoing,
without the written consent of V Corp., the parties shall not make any amendment
to this Agreement that (i) reduces the Merger Consideration or changes the form
of the Merger Consideration provided herein, (ii) changes the number of V Corp.
Retained Shares or the number of shares of Common Stock into which the V Corp.
Retained Shares shall be converted as of the Effective Time of the Merger or
(iii) amends Section 6.05.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
------------------
Time of the Merger, 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. 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 those rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. (a) 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 (a) in the
case of Parent, Sub or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors and (b) in the case of the
Company, action by a majority of the members of the Board of Directors of the
Company who were members thereof on the date of this Agreement and remain as
such hereafter or the duly authorized designee of such members.
(b) The Company may terminate this Agreement pursuant to Section
8.01(f) only if (i) the Board of Directors of the Company has received a
takeover proposal, (ii) in light of such takeover proposal a majority of the
disinterested directors of the Company shall have determined in good faith,
based upon the advice of outside counsel, that the Board of Directors of the
Company should withdraw or modify its approval or recommendation of the Merger
or this Agreement in order to comply with its fiduciary duty under applicable
law, (iii) the Company has notified Parent in writing of the determinations
described in clause (ii) above, (iv) at least 48 hours following receipt by
Parent of the notice referred to in clause (iii) above, and taking into account
any revised proposal made by Parent since receipt of the notice referred to in
clause (iii) above, a majority of the disinterested directors of the Company has
again made the determinations referred to in clause (ii) above, (v) the Company
is in compliance in all material respects with Section 5.02 and (vi) the Company
has previously paid the fee due under Section 6.08. Acceptance by Parent of the
fee due under Section 6.08 shall constitute acceptance by Parent of the validity
of any termination of this Agreement under Section 8.01(f) and this Section
8.05(b).
44
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 of the
Merger. This Section 9.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time of
the Merger.
SECTION 9.02. Notices. All notices, requests, claims, demands and
--------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Kapson Senior Quarters Corp.
242 Crossways Park Drive
Woodbury, NY 11797
Attention: Glenn Kaplan and Ray DiGuardi
Telecopy: (516) 921-8998
Telephone: (516) 921-8900
with copies to:
Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Robert P. Freeman and Murry N. Gunty
Telecopy: (212) 332-5980
Telephone: (212) 632-6000
45
and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Kevin J. Grehan, Esq.
Telecopy: (212) 474-3700
Telephone: (212) 474-1490
(b) if to the Company, to
ATRIA COMMUNITIES, INC.
501 South Fourth Avenue
Suite 140
Louisville, KY 40202
Attention: William C. Ballard Jr.
W. Patrick Mulloy, II
Audra J. Eckerle, Esq.
Telecopy: (502) 719-1699
Telephone: (502) 719-1600
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3424
Attention: J. Vaughan Curtis, Esq.
Telecopy: (404) 881-4777
Telephone: (404) 881-7397
SECTION 9.03. Definitions. For purposes of this Agreement:
------------
(a) 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 (it being understood
and agreed that a person shall be deemed to "control" (i) any corporation
of which such person owns at least 40% of the outstanding equity interests
and (ii) any partnership or limited liability company of which such person
is the general partner or managing member, as applicable; provided,
--------
however, that V Corp. shall not be deemed to be an affiliate of the
-------
Company);
46
(b) "Company Stock Option" has the meaning assigned thereto in
Section 6.05(a).
(c) "Company Stockholder Approval" has the meaning assigned thereto
in Section 4.01(m).
(d) "GAAP" means United States generally accepted accounting
principles;
(e) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company or Parent, any change or effect
(or any development that, insofar as can reasonably be foreseen, is likely
to result in any change or effect) that (i) is materially adverse to the
business, properties, assets, condition (financial or otherwise), results
of operations or prospects of such party and its subsidiaries taken as a
whole, (ii) would materially impair the ability of such party to perform
its obligations under this Agreement or (iii) would prevent or materially
delay the consummation by such party of any of the Transactions.
(f) "Medicaid" means that means-tested entitlement program under
Title XIX of the Social Security Act that provides federal grants to states
for medical assistance based on specific eligibility criteria. (Social
Security Act of 1965, Title XIX, P.L. 89-97, as amended; 42 U.S.C. 1396 et
seq.).
(g) "Medicare" means that government-sponsored entitlement program
under Title XVIII of the Social Security Act that provides for a health
insurance system for eligible elderly and disabled individuals. (Social
Security Act of 1965, Title XVIII, P.L. 89-87, as amended, 42 U.S.C. 1395
et seq.).
(h) "Permitted Liens" means (i) Liens (other than Liens imposed under
ERISA or any Environmental Law, or in connection with any Environmental
Claim) for taxes or other assessments or charges of Governmental Entities
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings, in each case, with respect to which adequate
reserves are being maintained by the Company or its subsidiaries to the
extent required by GAAP, (ii) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being contested in good
faith by appropriate proceedings, in each case, with respect to which
adequate reserves or other appropriate provisions are being maintained by
the Company or its subsidiaries to the extent required by GAAP, (iii)
easements, rights-of-way, covenants and restrictions which are customary
and typical for properties similar to the Company Properties and which do
not (x) interfere materially with the ordinary conduct of any Company
Property or the business of
47
the Company and its subsidiaries as a whole or (y) detract materially from
the value or usefulness of the Company Properties to which they apply, (iv)
Liens described or disclosed on Schedule B of any title insurance policy
held by the Company and its subsidiaries and provided to Parent and (iv)
the other Liens, if any, described in Schedule 4.01(s)(i);
(i) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(j) "Proxy Materials" has the meaning assigned thereto in Section
6.01(a).
(k) "Stockholders Meeting" has the meaning assigned thereto in
Section 6.01(c).
(l) 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;
(m) "takeover proposal" has the meaning assigned thereto in Section
5.02.
SECTION 9.04. Interpretation. When a reference is made in this
---------------
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, 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".
SECTION 9.05. 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 9.06. Entire Agreement; No Third-Party Beneficiaries. The
-----------------------------------------------
Operative Agreements and the Confidentiality Agreement, taken together, (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of the Transactions and (b) except for the provisions of Article
III and Sections 6.06 and 6.07 and the last sentence of Section 8.03, are not
intended to confer upon any person other than the parties any rights or remedies
hereunder.
48
SECTION 9.07. 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 conflict
of laws thereof.
SECTION 9.08. 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, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any affiliate of Parent, but no such assignment
shall relieve Sub of any of its obligations under this Agreement. 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 9.09. Enforcement. 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 any court of the United States
located in the State of New York or the State of Delaware or in Delaware state
court, 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 any Federal court located in the
State of New York or the State of Delaware or any Delaware state court in the
event any dispute arises out of any Operative Agreement or any of the
Transactions, (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
and (c) agrees that it will not bring any action relating to any Operative
Agreement or any of the Transactions in any court other than a Federal or state
court sitting in the State of New York or the State of Delaware or a Delaware
state court.
49
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
KAPSON SENIOR QUARTERS CORP.,
by /s/ Evan A. Kaplan
_______________________________
Name: Evan A. Kaplan
Title: President
KA ACQUISITION CORP.,
by /s/ Evan A. Kaplan
_______________________________
Name: Evan A. Kaplan
Title: President
ATRIA COMMUNITIES, INC.,
by /s/ W. Patrick Mulloy, II
_______________________________
Name: W. Patrick Mulloy, II
Title: President and Chief Executive
Officer