Exhibit 2
AGREEMENT AND PLAN OF MERGER
dated as of October 1, 1996,
among
Ramsay Managed Care, Inc.,
Ramsay Health Care, Inc.,
and
RHCI Acquisition Corp.
TABLE OF CONTENTS
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Page
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ARTICLE I. THE MERGER................................... 1
SECTION 1.01 The Merger................................. 1
SECTION 1.02 Conversion of Shares....................... 2
SECTION 1.03 Surrender and Payment...................... 3
SECTION 1.04 Stock Options, Warrants and
Restricted Stock........................... 5
SECTION 1.05 Adjustments................................ 6
SECTION 1.06 Fractional Shares.......................... 6
SECTION 1.07 Dissenting Shares.......................... 7
ARTICLE II. THE SURVIVING CORPORATION.................... 8
SECTION 2.01 Certificate of Incorporation............... 8
SECTION 2.02 Bylaws..................................... 8
SECTION 2.03 Directors and Officers..................... 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY...................................... 8
SECTION 3.01 Corporate Existence and Power.............. 8
SECTION 3.02 Corporate Authorization.................... 9
SECTION 3.03 Governmental Authorization................. 9
SECTION 3.04 Non-Contravention.......................... 9
SECTION 3.05 Capitalization............................. 10
SECTION 3.06 Subsidiaries............................... 10
SECTION 3.07 SEC Filings................................ 12
SECTION 3.08 Financial Statements....................... 12
SECTION 3.09 Joint Proxy Statement/Prospectus;
Registration Statement..................... 13
SECTION 3.10 Absence of Certain Changes................. 13
SECTION 3.11 No Undisclosed Material
Liabilities................................ 15
SECTION 3.12 Litigation................................. 16
SECTION 3.13 Taxes...................................... 16
SECTION 3.14 Tax Free Merger............................ 16
SECTION 3.15 ERISA...................................... 17
SECTION 3.16 Compliance with Laws....................... 20
SECTION 3.17 Finders' Fees.............................. 20
SECTION 3.18 Opinion of Financial Advisor............... 20
SECTION 3.19 Vote Required.............................. 20
SECTION 3.20 Medicare and Medicaid...................... 21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF RHCI....... 21
SECTION 4.01 Corporate Existence and Power.............. 21
SECTION 4.02 Corporate Authorization.................... 22
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SECTION 4.03 Governmental Authorization................ 22
SECTION 4.04 Non-Contravention......................... 22
SECTION 4.05 Capitalization............................ 23
SECTION 4.06 Subsidiaries.............................. 24
SECTION 4.07 SEC Filings............................... 25
SECTION 4.08 Financial Statements...................... 26
SECTION 4.09 Joint Proxy Statement/Prospectus
Registration Statement.................... 26
SECTION 4.10 Absence of Certain Changes................ 27
SECTION 4.11 No Undisclosed Material
Liabilities............................... 29
SECTION 4.12 Litigation................................ 29
SECTION 4.13 Taxes..................................... 29
SECTION 4.14 Tax Free Merger........................... 30
SECTION 4.15 ERISA..................................... 31
SECTION 4.16 Compliance with Laws...................... 32
SECTION 4.17 Finders' Fees............................. 32
SECTION 4.18 Opinion of Financial Advisor.............. 32
SECTION 4.19 Vote Required............................. 33
SECTION 4.20 Medicare and Medicaid..................... 33
ARTICLE V. COVENANTS OF THE COMPANY.................... 34
SECTION 5.01 Conduct of the Company.................... 34
SECTION 5.02 Access to Information..................... 35
SECTION 5.03 Other Offers.............................. 36
SECTION 5.04 Notices of Certain Events................. 36
SECTION 5.05 Affiliates................................ 37
SECTION 5.06 Tax Letters............................... 37
ARTICLE VI. COVENANTS OF RHCI........................... 38
SECTION 6.01 Conduct of RHCI........................... 38
SECTION 6.02 Access to Information..................... 38
SECTION 6.03 Obligations of Merger Subsidiary.......... 38
SECTION 6.04 Director and Officer Liability............ 39
SECTION 6.05 NASDAQ National Market System
Listing................................... 39
SECTION 6.06 Notice of Certain Events.................. 39
ARTICLE VII. COVENANTS OF RHCI AND THE COMPANY........... 40
SECTION 7.01 Best Efforts.............................. 40
SECTION 7.02 Certain Filings........................... 40
SECTION 7.03 Public Announcements...................... 40
SECTION 7.04 Further Assurances........................ 40
SECTION 7.05 Stockholder Meeting....................... 41
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SECTION 7.06 Preparation of the Joint Proxy
Statement/Prospectus and
Registration Statement.................... 41
ARTICLE VIII. CONDITIONS TO THE MERGER.................... 42
SECTION 8.01 Conditions to the Obligations of
Each Party................................ 42
SECTION 8.02 Conditions to the Obligations of
RHCI and Merger Subsidiary................ 43
SECTION 8.03 Conditions to the Obligations of
the Company............................... 43
ARTICLE IX. TERMINATION................................. 45
SECTION 9.01 Termination............................... 45
SECTION 9.02 Effect of Termination..................... 46
ARTICLE X. MISCELLANEOUS............................... 46
SECTION 10.01 Notices................................... 46
SECTION 10.02 Survival of Representations and
Warranties................................ 47
SECTION 10.03 Amendments; No Waivers.................... 47
SECTION 10.04 Fees and Expenses......................... 48
SECTION 10.05 Successors and Assigns.................... 48
SECTION 10.06 Governing Law............................. 48
SECTION 10.07 Counterparts; Effectiveness............... 48
SECTION 10.08 Entire Agreement.......................... 49
iii
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER dated as of October 1, 1996,
among Ramsay Managed Care, Inc., a Delaware corporation (the
"Company"), Ramsay Health Care, Inc., a Delaware corporation
("RHCI"), and RHCI Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of RHCI ("Merger Subsidiary").
WHEREAS, the Boards of Directors of RHCI, Merger
Subsidiary and the Company have (in the case of the Company and
RHCI, following the recommendation of their respective special
committees) approved this Agreement and the Merger (as defined
below);
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Code (as defined below); and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a purchase.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
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SECTION 1.01 The Merger. (a) At the Effective Time (as
----------
defined in Section 1.01(b) below), Merger Subsidiary shall be merged
(the "Merger") with and into the Company in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law"),
whereupon the separate existence of Merger Subsidiary shall cease,
and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger,
the Company and Merger Subsidiary will file a certificate of merger
with the Secretary of State of the State of Delaware and make all
other filings or recordings required by Delaware Law in connection
with the Merger. The closing of the Merger will take place at the
offices of Haythe & Curley, 237 Park Avenue, New York, New York
10017,
2
or such other place as the parties may agree. The Merger shall
become effective at such time as the certificate of merger is duly
filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the certificate of merger (the
"Effective Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the assets, rights, privileges, powers
and franchises and be subject to all of the liabilities,
restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Delaware Law.
SECTION 1.02 Conversion of Shares. At the Effective
--------------------
Time:
(a) (i) each outstanding share of common stock, $.01
par value per share (the "Shares"), of the Company and
(ii) each share of series 1996 convertible preferred
stock, $.01 par value per share (the "Company Preferred
Shares"), of the Company held by the Company as treasury
stock or owned by RHCI or any subsidiary of RHCI
immediately prior to the Effective Time shall be
cancelled, and no payment shall be made with respect
thereto;
(b) each share of common stock, $.01 par value per
share, of Merger Subsidiary outstanding immediately prior
to the Effective Time shall be converted into and become
one share of common stock, $.01 par value per share, of
the Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the
Surviving Corporation;
(c) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in
Section 1.02(a) or as provided in Section 1.07 with
respect to Shares as to which appraisal rights have been
exercised, be converted into the right to receive one-
third (1/3)(the "Conversion Number") of a fully paid and
nonassessable share of RHCI's common stock, $.01 par value
per share (the "RHCI Common Stock"), including Rights (as
hereafter defined) in respect thereof under the Rights
Plan (as hereafter defined); and
(d) each Company Preferred Share outstanding immediately
prior to the Effective Time shall, except as otherwise
provided in Section 1.02(a) or as provided in Section 1.07
with respect to Company Preferred
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Shares as to which appraisal rights have been exercised,
be converted into the right to receive one (1) (the
"Preferred Conversion Number") fully paid and
nonassessable share of RHCI's Class B Preferred Stock,
Series 1996, $1.00 par value per share having the rights
and preferences set forth in Section 8.03(iii) hereof (the
"RHCI Series 1996 Preferred Stock").
SECTION 1.03 Surrender and Payment. (a) Prior to the
---------------------
Effective Time, RHCI shall appoint an agent reasonably acceptable to
the Company (which may be First Union National Bank of North
Carolina ("First Union of North Carolina")) (the "Exchange Agent")
for the purpose of exchanging certificates representing Shares and
Company Preferred Shares. As of the Effective Time, RHCI shall
deposit with the Exchange Agent for the benefit of the holders of
Shares and Company Preferred Shares, as the case may be, for
exchange in accordance with this Section 1.03, through the Exchange
Agent, (i) certificates representing the shares of RHCI Common Stock
issuable pursuant to Section 1.02 in exchange for outstanding Shares
and (ii) certificates representing the shares of RHCI Series 1996
Preferred Stock issuable pursuant to Section 1.02 in exchange for
outstanding Company Preferred Shares. Promptly after the Effective
Time, RHCI will send, or will cause the Exchange Agent to send, to
each holder of Shares and Company Preferred Shares, as the case may
be, at the Effective Time a letter of transmittal for use in such
exchange (which shall specify that the delivery shall be effected,
and risk of loss and title shall pass, only upon proper delivery of
the certificates representing Shares or Company Preferred Shares, as
the case may be, to the Exchange Agent).
(b) (i) Each holder of Shares that have been converted
into a right to receive RHCI Common Stock, upon surrender to the
Exchange Agent of a certificate or certificates representing such
Shares, together with a properly completed letter of transmittal
covering such Shares, will be entitled to receive in exchange
therefor (1) that number of whole shares of RHCI Common Stock which
such holder has the right to receive pursuant to Section 1.02, and
(2) cash in lieu of fractional shares of RHCI Common Stock which
such holder has the right to receive pursuant to Section 1.06, and
the certificate or certificates for Shares so surrendered shall be
cancelled. Until so surrendered, each such certificate shall, after
the Effective Time, represent for all purposes, only the right to
receive upon such surrender the certificate representing shares of
RHCI Common Stock and cash in lieu of any fractional shares of RHCI
Common Stock as contemplated by this Section 1.03 and Section 1.06.
4
(ii) Each holder of Company Preferred Shares that have
been converted into a right to receive RHCI Series 1996 Preferred
Stock, upon surrender to the Exchange Agent of a certificate or
certificates representing such Company Preferred Shares, together
with a properly completed letter of transmittal covering such
Company Preferred Shares, will be entitled to receive in exchange
therefor that number of whole shares of RHCI Series 1996 Preferred
Stock which such holder has the right to receive pursuant to Section
1.02, and the certificate or certificates for Company Preferred
Shares so surrendered shall be cancelled. Until so surrendered,
each such certificate shall, after the Effective Time, represent for
all purposes, only the right to receive upon such surrender the
certificate representing shares of RHCI Series 1996 Preferred Stock
as contemplated by this Section 1.03.
(c) If any shares of RHCI Common Stock or RHCI Series 1996
Preferred Stock, as the case may be, are to be issued to a Person
other than the registered holder of the Shares or the Company
Preferred Shares, respectively, represented by the certificate or
certificates surrendered in exchange therefor, it shall be a
condition to such issuance that the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such issuance shall
pay to the Exchange Agent any transfer or other taxes required as a
result of such issuance to a Person other than the registered holder
of such Shares or such Company Preferred Shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not payable. For purposes of this Agreement, "Person" means an
individual, a corporation, a partnership, an association, a trust or
any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares or Company Preferred Shares.
If, after the Effective Time, certificates representing Shares or
Company Preferred Shares are presented to the Surviving Corporation,
they shall be cancelled and exchanged as provided for, and in
accordance with the procedures set forth, in this Article I.
(e) Any shares of RHCI Common Stock or RHCI Series 1996
Preferred Stock made available to the Exchange Agent pursuant to
Section 1.03(a) that remain unclaimed by the holders of Shares or
Company Preferred Shares, as the case may be, six months after the
Effective Time shall be returned to RHCI, upon demand, and any such
holder who has
5
not exchanged his Shares or Company Preferred Shares, as the case
may be, in accordance with this Section prior to that time shall
thereafter look only to RHCI to exchange such Shares or such Company
Preferred Shares. Notwithstanding the foregoing, RHCI shall not be
liable to any holder of Shares or Company Preferred Shares, as the
case may be, for any amount paid, or any shares of RHCI Common Stock
or RHCI Series 1996 Preferred Stock delivered, to a public official
pursuant to applicable abandoned property laws. Any shares of RHCI
Common Stock or RHCI Series 1996 Preferred Stock or other amounts
remaining unclaimed by holders of Shares or Company Preferred
Shares, as the case may be, two years after the Effective Time (or
such earlier date immediately prior to such time as such amounts
would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the
property of RHCI free and clear of any claims orinterest of any
Person previously entitled thereto.
(f) No dividends or other distributions on shares of RHCI
Common Stock or RHCI Series 1996 Preferred Stock shall be paid to
the holder of any unsurrendered certificates representing Shares or
Company Preferred Shares, as the case may be, until such
certificates are surrendered as provided in this Section. Upon such
surrender, there shall be paid, without interest, to the person in
whose name the certificates representing the shares of RHCI Common
Stock or RHCI Series 1996 Preferred Stock, as the case may be, into
which such shares were converted are registered, all dividends and
other distributions paid in respect of such RHCI Common Stock or
RHCI Series 1996 Preferred Stock, as the case may be, on a date
subsequent to, and in respect of a record date after, the Effective
Time.
(g) Any shares of RHCI Common Stock or RHCI Series 1996
Preferred Stock made available to the Exchange Agent pursuant to
Section 1.03(a) to be exchanged for Shares or Company Preferred
Shares, as the case may be, for which appraisal rights have been
perfected shall be returned to RHCI, upon demand.
SECTION 1.04 Stock Options, Warrants and Restricted
--------------------------------------
Stock. (a) At the Effective Time, each outstanding option to
-----
purchase Shares (a "Company Option"), whether or not exercisable,
and whether or not vested, and each outstanding warrant to purchase
Shares (a "Company Warrant") shall become an option or warrant to
purchase the number of shares of RHCI Common Stock equal to the
number of Shares that could have been purchased under such Company
Option or Company Warrant multiplied by the Conversion
6
Number, at a price per share of RHCI Common Stock equal to the
option exercise price of such Company Option divided by the
Conversion Number or the price per share of RHCI Common Stock equal
to the warrant exercise price of such Company Warrant divided by the
Conversion Number (a "Substitute Security"). No fractional shares of
RHCI Common Stock shall be the subject of or issued in connection
with the exercise of any such Substitute Securities; rather, the
aggregate number of shares which are the subject of and which are to
be issued pursuant to any such exercise of Substitute Securities
shall be rounded up or down to the nearest whole number. Each
Substitute Security shall be subject to all of the other terms and
conditions of the original Company Option or original Company
Warrant to which it relates, including the vesting schedule and
conditions to the exercisability thereof.
(b) At the Effective Time, each Share subject to transfer
restrictions or repurchase rights (the "Restricted Stock") shall
upon conversion into the Conversion Number of shares of RHCI Common
Stock be subject to the same terms and conditions, including such
transfer restrictions or repurchase rights, as the Restricted Stock.
(c) Prior to the Effective Time, (i) the Company shall use
its best efforts to obtain any consents from holders of Company
Options granted under the Company's stock option or compensation
plans or arrangements or holders of the Restricted Stock, as the
case may be, and (ii) the Company and RHCI shall make any amendments
to the terms of such stock option award or plan or compensation
plans or arrangements or other applicable agreements (including
using their respective best efforts to obtain any necessary
stockholder consents or approvals in connection therewith) that, in
the case of either clauses (i) or (ii), are necessary to give effect
to the transactions contemplated by Section 1.04(a) and (b).
SECTION 1.05 Adjustments. If at any time during the
-----------
period between the date of this Agreement and the Effective Time,
any change in the outstanding shares of RHCI Common Stock or RHCI
Series 1996 Preferred Stock shall occur, including by reason of any
reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, or any stock dividend thereon
with a record date during such period, the Conversion Number or the
Preferred Conversion Number, as the case may be, shall be
appropriately adjusted.
SECTION 1.06 Fractional Shares. (a) No fractional
-----------------
shares of RHCI Common Stock shall be issued in
7
the Merger. All fractional shares of RHCI Common Stock that a holder
of Shares would otherwise be entitled to receive as a result of the
Merger shall be aggregated and if a fractional share results from
such aggregation, such holder shall be entitled to receive, in lieu
thereof, an amount in cash determined by multiplying the average of
the daily closing sale price per share of RHCI Common Stock on the
NASDAQ National Market System for the ten trading days next
preceding the Effective Time by the fraction of a share of RHCI
Common Stock to which such holder would otherwise have been
entitled. Alternatively, RHCI shall have the option of instructing
the Exchange Agent to aggregate all fractional shares of RHCI Common
Stock, sell such shares in the public market and distribute to
holders of Shares a pro rata portion of the proceeds of such sale.
No such cash in lieu of fractional shares of RHCI Common Stock shall
be paid to any holder of Shares until certificates representing such
Shares are surrendered and exchanged in accordance with Section
1.03.
(b) No fractional shares of RHCI Series 1996 Preferred
Stock shall be issued in the Merger. Each holder of Company
Preferred Shares who would by virtue of this Article I be entitled
to receive as a result of the Merger an aggregate number of shares
of RHCI Series 1996 Preferred Stock comprising a fractional share,
will have the right to receive an aggregate number of shares of RHCI
Series 1996 Preferred Stock rounded up or down to the nearest whole
share of RHCI Series 1996 Preferred Stock.
SECTION 1.07 Dissenting Shares. Notwithstanding Section
-----------------
1.02, Shares and Company Preferred Shares outstanding immediately
prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares or Company Preferred Shares, as
the case may be, in accordance with Delaware Law shall not be
converted into a right to receive shares of RHCI Common Stock (or
cash in lieu of any fractional shares thereof) or RHCI Series 1996
Preferred Stock, as the case may be, unless such holder fails to
perfect or withdraws or otherwise loses his right to appraisal. If
after the Effective Time such holder fails to perfect or withdraws
or loses his right to appraisal, such Shares or Company Preferred
Shares, as the case may be, shall be treated as if they had been
converted as of the Effective Time into a right to receive shares of
RHCI Common Stock (and cash in lieu of any fractional shares
thereof) or RHCI Series 1996 Preferred Stock, as the case may be.
The Company shall give RHCI prompt notice of any demands received by
the Company for appraisal of Shares or Company Preferred Shares, and
RHCI shall have the right to
8
participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written
consent of RHCI, make any payment with respect to, or settle or
offer to settle, any such demands.
ARTICLE II.
THE SURVIVING CORPORATION
-------------------------
SECTION 2.01 Certificate of Incorporation. The
----------------------------
certificate of incorporation of Merger Subsidiary in effect at the
Effective Time shall be the certificate of incorporation of the
Surviving Corporation until amended in accordance with applicable
law.
SECTION 2.02 Bylaws. The bylaws of Merger Subsidiary in
------
effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.03 Directors and Officers. From and after the
----------------------
Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (i) the directors of
Merger Subsidiary at the Effective Time shall be the directors of
the Surviving Corporation, and (ii) the officers of the Company at
the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to RHCI that:
SECTION 3.01 Corporate Existence and Power. The Company
-----------------------------
is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all
corporate powers and all governmental licenses, permits,
authorizations, consents and approvals required to carry on its
business as now conducted except where the failure to do so would
not have or reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of the Company
and its Subsidiaries (as defined in Section 3.06(a) hereof) taken as
a whole (a "Company Material Adverse Effect"). The Company is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property
owned or
9
leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the
failure to be so qualified would not have or reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company has heretofore delivered to RHCI true
and complete copies of the Company's certificate of incorporation
and bylaws as currently in effect.
SECTION 3.02 Corporate Authorization. The execution,
-----------------------
delivery and performance by the Company of this Agreement and the
consummation of the Merger by the Company are within the Company's
corporate powers and, except for any required approval by the
Company's stockholders in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate action.
This Agreement constitutes a valid and binding agreement of the
Company.
SECTION 3.03 Governmental Authorization. The execution,
--------------------------
delivery and performance by the Company of this Agreement and the
consummation of the Merger by the Company require no action by or in
respect of, or filing with, any governmental body, agency, official
or authority other than (i) the filing of a certificate of merger in
accordance with Delaware Law and (ii) compliance with applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder (the "Exchange Act"),
except where the failure of any such action to be taken or filing to
be made would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect
or prevent consummation of the transactions contemplated hereby.
SECTION 3.04 Non-Contravention. Except as disclosed on
-----------------
Exhibit 3.04 to the Company Disclosure Schedule delivered by the
Company to RHCI simultaneously with the execution and delivery
hereof (the "Company Disclosure Schedule"), the execution, delivery
and performance by the Company of this Agreement and the
consummation of the Merger by the Company do not and will not (i)
contravene or conflict with the certificate of incorporation or
bylaws of the Company, (ii) assuming compliance with the matters
referred to in Section 3.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to
the Company or any of its Subsidiaries, (iii) constitute a default
under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Company or any of its
10
Subsidiaries or to a loss of any benefit to which the Company or any
of its Subsidiaries is entitled under any provision of any material
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit or other similar
authorization held by the Company or any of its Subsidiaries, or
(iv) result in the creation or imposition of any Lien on any
material asset of the Company or any of its Subsidiaries, except for
any occurrences or results referred to in clauses (ii), (iii) and
(iv) which would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect
or prevent consummation of the transactions contemplated hereby.
For purposes of this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or
encumbrance or adverse claim of any kind in respect of such asset.
SECTION 3.05 Capitalization. The authorized capital
--------------
stock of the Company consists of 20,000,000 Shares and 1,000,000
shares of preferred stock, $.01 par value per share, of which
100,000 shares have been designated as Company Preferred Shares. As
of September 15, 1996, there were outstanding (w) 6,397,304 Shares,
(x) 100,000 Company Preferred Shares (which such shares were then
convertible into 3,000,000 Shares), (y) Company Options to purchase
an aggregate of 1,170,750 Shares and (z) Company Warrants to
purchase an aggregate of 640,000 Shares. All outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive
rights. Except as set forth in this Section and except for changes
since September 15, 1996 resulting from the exercise of Company
Options, Company Warrants or other obligations to issue Shares
referred to above outstanding on such date, there are outstanding as
of the date hereof (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock or
voting securities of the Company, and (iii) no options, warrants or
other rights to acquire from the Company, and no obligation of the
Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii)
being referred to collectively as the "Company Securities"). There
are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
SECTION 3.06 Subsidiaries. (a) Each Subsidiary of the
------------
Company is an entity duly organized, validly existing
11
and in good standing under the laws of its jurisdiction of
organization and has all corporate, partnership or company powers,
as applicable, and, to the Company's knowledge, all material
governmental licenses, permits, authorizations, consents and
approvals required to carry on its business as now conducted. Each
Subsidiary of the Company is duly qualified to do business as a
foreign entity and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of
its activities makes such qualification necessary, except where
failure to be so would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
For purposes of this Agreement, "Subsidiary" of any Person means (i)
any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar
functions are directly or indirectly owned by such Person and (ii)
any partnership of which such Person is a general partner.
(b) Except (i) in the case of certain Subsidiaries, the
stock of which is pledged to First Union National Bank of Florida
("First Union of Florida") in connection with the transactions
contemplated by the Loan and Security Agreement dated as of April 6,
1995 between FPM Behavioral Health, Inc. and First Union of Florida,
as amended (the "FPM Loan Agreement"), (ii) in the case of a certain
Subsidiary, the stock of which is pledged to Phoenix South Community
Mental Health Center, Inc. pursuant to the Stock Pledge Agreement
dated June 30, 1994, and (iii) for certain limitations and
restrictions set forth in the FPM Loan Agreement, all of the
outstanding capital stock or other ownership interests, as
applicable, of each Subsidiary of the Company which is owned
by the Company, directly or indirectly, is owned free and clear of
any Lien and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests, as applicable).
There are no outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any
Subsidiary of the Company, or (ii) options or other rights to
acquire from the Company or any of its Subsidiaries, and no other
obligation of the Company or any of its Subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any Subsidiary
of the Company (the items in clauses (i) and (ii) being referred to
collectively
12
as the "Company Subsidiary Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Company Subsidiary
Securities.
SECTION 3.07 SEC Filings. (a) The Company has delivered
-----------
or made available to RHCI (i) its annual report on Form 10-KSB for
the fiscal year ended June 30, 1996 (the "Company 10-K"), (ii) its
proxy statement relating to the annual meeting of stockholders held
on November 10, 1995, and (iii) all of its other reports,
statements, schedules and registration statements filed by the
Company with the Securities and Exchange Commission (the "SEC")
since June 30, 1996, and in each case all materials incorporated
therein by reference or filed therewith as exhibits (the filings
referred to in clauses (i) through (iii) above and the materials
referred to above, in each case delivered or made available to RHCI
prior to the date hereof, being hereinafter referred to as the
"Company SEC Filings").
(b) As of its filing date, each such report or statement
filed pursuant to the Exchange Act complied as to form in all
material respects with the requirements of the Exchange Act and did
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
(c) Each such registration statement and any amendment
thereto filed pursuant to the Securities Act of 1933 and the rules
and regulations promulgated thereunder (the "Securities Act"), as of
the date such statement or amendment became effective,
complied as to form in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 3.08 Financial Statements. The audited
--------------------
consolidated financial statements of the Company and its
consolidated Subsidiaries included in the Company 10-K referred to
in Section 3.07 fairly present in all material respects, in
conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods
then ended.
13
SECTION 3.09 Joint Proxy Statement/Prospectus;
---------------------------------
Registration Statement. None of the information supplied by the
----------------------
Company for inclusion in (a) the joint proxy statement relating to
the meetings of the Company's and RHCI's stockholders to be held in
connection with the Merger (also constituting the prospectus in
respect of RHCI Common Stock to be exchanged for Shares in the
Merger) (the "Joint Proxy Statement/Prospectus"), to be filed by the
Company and RHCI with the SEC, and any amendments or supplements
thereto, or (b) the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by RHCI with the SEC in
connection with the Merger, and any amendments or supplements
thereto, will, at the respective times such documents are filed,
and, in the case of the Joint Proxy Statement/Prospectus, at the
time the Joint Proxy Statement/Prospectus or any amendment or
supplement thereto is first mailed to stockholders of the Company
and at the time such stockholders vote on adoption of this Agreement
and at the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. All documents that the Company is responsible
for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable provisions of
the Exchange Act, the Securities Act and state securities laws.
SECTION 3.10 Absence of Certain Changes. Except as
--------------------------
contemplated hereby or as described or provided for in any Company
SEC Filing or as disclosed on Exhibit 3.10 to the Company Disclosure
Schedule, since June 30, 1996, the Company and its Subsidiaries have
conducted their business in all material respects in the ordinary
course consistent with past practices and there has not been:
(a) any event, occurrence or development or state of
circumstances or facts, which affects or relates to the
Company or any of its Subsidiaries or the industry in
which they operate, which has had or would reasonably be
expected to have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares
of capital stock of the Company, or any repurchase,
redemption or other acquisition by the Company or any of
its Subsidiaries of any outstanding shares of capital
stock or other securities of, or
14
other ownership interests in, the Company or any of its
Subsidiaries;
(c) any amendment of any material term of any
outstanding security of the Company or any of its
Subsidiaries;
(d) any incurrence, assumption or guarantee by the
Company or any of its Subsidiaries of any indebtedness for
borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past
practices;
(e) any creation or assumption by the Company or any of
its Subsidiaries of any Lien on any material asset other
than in the ordinary course of business consistent with
past practices;
(f) any making of any loan, advance or capital
contributions to or investment in any Person other than
loans, advances or capital contributions to or investments
in wholly owned Subsidiaries made in the ordinary course
of business consistent with past practices;
(g) any change in any method of accounting or
accounting practice by the Company or any of its
Subsidiaries, except for any such change required by
reason of a concurrent change in generally accepted
accounting principles or to conform a Subsidiary's
accounting policies and practices to those of the Company;
(h) except for contractual obligations existing on the
date hereof, other than in the ordinary course of business
consistent with past practices, any (i) grant of any
severance or termination pay to any director, officer or
employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar
agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the
Company or any of its Subsidiaries except in the ordinary
course of business consistent with past practice with
persons who are not executive officers, (iii) increase in
benefits payable under any existing severance or
termination pay policies or employment agreements, (iv)
increase in compensation, bonus or other benefits payable
to directors, officers or employees of the Company or any
of its Subsidiaries, other than in the ordinary course of
business consistent with past practices or
15
(v) acceleration of the exercisability or vesting of any
Company Options or Restricted Stock, as the case may be;
(i) any material labor dispute, other than individual
grievances, or any activity or proceeding by a labor union
or representative thereof to organize any employees of the
Company or any of its Subsidiaries, which employees were
not subject to a collective bargaining agreement at June
30, 1996 or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees;
(j) any actual or, to the Company's knowledge,
threatened dispute between the Company or any of its
Subsidiaries and any vendor or customer, other than
disputes which would not have or reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect;
(k) any actual or, to the Company's knowledge,
threatened suspension or cancellation of any governmental
license, permit, authorization, consent or approval, other
than those the suspension or cancellation of which would
not have or reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect; or
(l) to the Company's knowledge, any change in any
federal or state law, rule or regulation applicable to the
Company or any of its Subsidiaries, or in the
interpretation or application thereof, which individually
or in the aggregate has had or would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.11 No Undisclosed Material Liabilities. Except
-----------------------------------
as described or provided for in any Company SEC Filing, there are no
liabilities of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition,
situation or set of circumstances which, individually or in the
aggregate, have or would reasonably be expected to have a Company
Material Adverse Effect, other than:
(i) liabilities disclosed or provided for in the
Company's consolidated balance sheet dated as of June 30, 1996
included in the Company 10-K;
16
(ii) liabilities incurred in the ordinary course of
business consistent with past practices since June 30, 1996,
which in the aggregate are not material to the Company and its
Subsidiaries, taken as a whole; and
(iii) liabilities under this Agreement.
SECTION 3.12 Litigation. Except as described or provided
----------
for in any Company SEC Filing or as disclosed on Exhibit 3.12 to the
Company Disclosure Schedule, there is no action, suit, investigation
or proceeding pending against, or to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any of
their respective properties before any court or arbitrator or any
governmental body, agency or official which would have or reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.13 Taxes. (i) The Company and its Subsidiaries
-----
have timely filed all tax returns, statements, reports and forms
required to be filed with any tax authority when due in accordance
with all applicable laws except where the failure to do so would not
have or reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect; (ii) no deficiency in
payment of any taxes for any period has been asserted by any taxing
authority which remains unsettled at the date hereof except for
deficiencies which would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect;
and (iii) the Company is not liable and it is not reasonably likely
that the Company will be liable for any taxes not heretofore paid or
reserved against in the Company June 30, 1996 financial statements
except those which would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
For purposes of this Agreement, "tax" or "taxes" means all
net income, gross income, gross receipts, sales, use, ad valorem,
transfer, accumulated earnings, personal holding company, excess
profits, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property
or windfall profits taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign).
SECTION 3.14 Tax Free Merger. (a) At the Effective
---------------
Time, the Surviving Corporation will hold at least
17
90 percent of the fair market value of the net assets, and at least
70 percent of the fair market value of the gross assets, held by the
Company prior to the Merger. For purposes of this representation,
amounts used by the Company to pay reorganization expenses and all
redemptions, distributions and payments, in cash or property, made
by the Company in connection with the Merger shall be included as
assets of the Company prior to the Merger.
(b) In the Merger, Shares and Company Preferred Shares
representing control of the Company, as defined in Section 368(c)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"), will
be exchanged solely for voting stock of RHCI. For purposes of this
representation, Shares and Company Preferred Shares exchanged for
cash or other property originating with RHCI will be treated as
outstanding Shares and Company Preferred Shares on the date of the
Merger.
(c) There is no intercorporate indebtedness existing
between RHCI and the Company or between Merger Subsidiary and the
Company that was issued, acquired, or will be settled, in any case
at a discount.
(d) Except as provided in Section 10.04 of this Agreement,
the Company and the stockholders of the Company will pay their
respective expenses, if any, incurred in connection with the Merger.
(e) The Company is not an investment company as such term
is defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(f) The Company is not under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(g) On the Effective Date, the fair market value of the
assets of the Company will exceed the sum of the Company's
liabilities plus the amount of liabilities, if any, to which the
assets are subject.
(h) The Company has not knowingly taken, and will not
knowingly take, any action that would jeopardize the qualification
of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
SECTION 3.15 ERISA. (a) "Employee Plans" shall mean each
-----
"employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which
(i) is subject to any provision
18
of ERISA and (ii) is maintained, administered or contributed to by
the Company or any affiliate (as defined below) and covers any
employee or former employee of the Company or any affiliate or under
which the Company or any affiliate has any liability. Copies of such
plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof will be
promptly furnished to RHCI after the date of this Agreement. For
purposes of this Section and Section 4.15, "affiliate" of any Person
means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code. No
Employee Plan individually or collectively constitutes a "defined
benefit plan" as defined in Section 3(35) of ERISA.
(b) No Employee Plan constitutes a "multiemployer plan",
as defined in Section 3(37) of ERISA, and no Employee Plan is
maintained in connection with any trust described in Section
501(c)(9) of the Code. No Employee Plan is subject to Title IV of
ERISA. Neither the Company nor any of its affiliates has incurred,
nor has reason to expect to incur, any liability under Title IV of
ERISA arising in connection with the termination of, or complete or
partial withdrawal from, any plan previously covered by Title IV of
ERISA that would have, or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Employee Plan has or will
make the Company or any of its Subsidiaries or any officer or
director of the Company or any of its Subsidiaries subject to any
liability under Title I of ERISA or liable for any tax pursuant to
Section 4975 of the Code that would have, or reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) Except as disclosed on Exhibit 3.15 to the Company
Disclosure Schedule or except to the extent it would not have, or
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) each Employee Plan which is
intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its
adoption to date, and each trust forming a part thereof is exempt
from tax pursuant to Section 501(a) of the Code and (ii) each
Employee Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders,
final rules and final regulations, including but not limited to
ERISA and the Code, which are applicable to such Employee Plan.
19
(d) Except to the extent it would not have, or reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, there is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company
or any affiliate that, individually or collectively, could give rise
to the payment of any amount that would not be deductible pursuant
to the terms of Sections 162(a)(1) or 280G of the Code.
(e) "Benefit Arrangement" shall mean each employment,
severance or other similar contract, arrangement or policy and each
plan or arrangement (written or oral) providing for compensation,
bonus, profit-sharing, stock option, or other stock related rights
or other forms of incentive or deferred compensation, vacation
benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance
benefits and post-employment or retirement benefits (including
compensation, health or medical insurance or other benefits) which
(i) is not an Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by the Company or any of its
affiliates and (iii) covers any employee or former employee of the
Company or any of its affiliates. Copies or descriptions of the
Benefit Arrangements will be promptly furnished to RHCI. The
Company will promptly furnish to RHCI a schedule showing all
outstanding Company Options, including the applicable exercise price
with respect thereto. Except to the extent that it would not have,
or reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect, each Benefit Arrangement has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Benefit Arrangement.
(f) Except to the extent that it would not have, or
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, the transactions contemplated
hereby will not result in any liability for severance pay to any
employee or accelerate the exercisability or vesting of any Company
Options or Restricted Stock, as the case may be, nor will any
employee be entitled to any payment solely by reason of such
transactions.
(g) The Company does not provide, nor has it made any
current or past commitment to provide, post-retirement health or
medical benefits for retired employees of the Company or its
Subsidiaries, except as specifically required
20
under Section 4980B of the Code or Section 601 of ERISA. The Company
has substantially complied with the notice and continuation
requirements of Section 4980B of the Code and Section 601 of ERISA.
(h) Except as disclosed on Exhibit 3.15 to the Company
Disclosure Schedule and subject to the provisions of Section
3.10(h), there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its
affiliates relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement which in
the aggregate would increase the per employee expense of maintaining
such Employee Plan or Benefit Arrangement above the level of the
expense incurred on a per employee basis in respect thereof for the
fiscal year ended on June 30, 1996 except to the extent, with
respect to all employees, that such increase results from premium
increases in the normal course or as would not have, or reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.16 Compliance with Laws. Except as described
--------------------
or provided for in any Company SEC Filing or as disclosed on Exhibit
3.16 to the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is in violation of, or has violated, any
applicable provisions of any laws, statutes, ordinances or
regulations other than violations which would not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.17 Finders' Fees. Except for Dean Witter
-------------
Reynolds, Inc. ("Dean Witter"), there is no investment banker,
broker, finder or other intermediary which has been retained by or
is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.18 Opinion of Financial Advisor. The Company
----------------------------
has received the opinion of Dean Witter to the effect that, as of
the date of such opinion, the Conversion Number and the Preferred
Conversion Number is fair to the Company's stockholders from a
financial point of view, a copy of which opinion will be delivered
to RHCI.
SECTION 3.19 Vote Required. Except as contemplated by
-------------
this Agreement, the affirmative vote of the holders of a majority of
the outstanding (i) voting power of the Shares and Company Preferred
Shares, voting together as a single class, and (ii) Company
Preferred Shares, voting as
21
a separate class, are the only votes of the holders of any class or
series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
SECTION 3.20 Medicare and Medicaid. The Company and its
---------------------
Subsidiaries have complied in all material respects with all
Medicare and Medicaid laws, rules and regulations and have filed all
returns, cost reports and other filings in the manner prescribed,
except where the failure to do so would not have or reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All returns, cost reports and other
filings made by the Company and its Subsidiaries to Medicare,
Medicaid or any other governmental health or welfare related entity
or any other third party payor are in all material respects true and
complete, except where the failure to be so would not have or
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. No deficiency in any such returns,
cost reports and other filings, including deficiencies for late
filings, has been asserted or, to the Company's knowledge,
threatened by any federal or state agency or instrumentality or
other provider reimbursement entities relating to Medicare or
Medicaid claims or third party payor, and, to the knowledge of the
Company, there is no basis for any claims or requests for
reimbursement from any such agency, instrumentality, entity or third
party payor except for any deficiencies which would not have or
reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has been subject to any audit relating to fraudulent
Medicare or Medicaid procedures or practices, except for audits
which would not have or reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF RHCI
--------------------------------------
RHCI represents and warrants to the Company that:
SECTION 4.01 Corporate Existence and Power. Each of RHCI
-----------------------------
and Merger Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has all corporate powers and all governmental licenses,
permits, authorizations, consents and approvals required to carry on
its business as now conducted, except where the failure to
22
do so would not have or reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations
of RHCI and its Subsidiaries taken as a whole (a "RHCI Material
Adverse Effect"). RHCI is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not have or
reasonably be expected to have, individually or in the aggregate, a
RHCI Material Adverse Effect. RHCI has heretofore delivered to the
Company true and complete copies of RHCI's certificate of
incorporation and bylaws as currently in effect. Since the date of
its incorporation, Merger Subsidiary has not engaged in any
activities other than in connection with or as contemplated by this
Agreement.
SECTION 4.02 Corporate Authorization. The execution,
-----------------------
delivery and performance by RHCI and Merger Subsidiary of this
Agreement and the consummation of the Merger by Merger Subsidiary
are within the corporate powers of RHCI and Merger Subsidiary and
have been duly authorized by all necessary corporate action, except
for any required approval by RHCI's stockholders of the issuance of
RHCI Common Stock and RHCI Series 1996 Preferred Stock in
connection with the Merger. This Agreement constitutes a valid and
binding agreement of RHCI and Merger Subsidiary.
SECTION 4.03 Governmental Authorization. The execution,
--------------------------
delivery and performance by RHCI and Merger Subsidiary of this
Agreement and the consummation of the Merger by Merger Subsidiary
require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (i) the
filing of a certificate of merger in accordance with Delaware Law;
(ii) compliance with any applicable requirements of the HSR Act, the
Exchange Act and the Securities Act; (iii) compliance with the
listing requirements of the National Association of Securities
Dealers, Inc. ("NASD"); and (iv) compliance with any applicable
state securities or Blue Sky laws, except where the failure of any
such action to be taken or filing to be made would not have or
reasonably be expected to have, individually or in the aggregate, a
RHCI Material Adverse Effect or prevent consummation of the
transactions contemplated hereby.
SECTION 4.04 Non-Contravention. Except with respect to
-----------------
(x) the Credit Agreement (the "RHCI Credit Agreement") dated as of
May 15, 1993 among RHCI, certain
23
Subsidiaries of RHCI, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as
amended, and (y) the Trust Indenture (the "RHCI Trust Indenture")
dated as of March 31, 1990 among RHCI, certain Subsidiaries of RHCI,
the Citizens and Southern National Bank and Susan L. Adams, as
amended, the execution, delivery and performance by RHCI and Merger
Subsidiary of this Agreement and the consummation of the Merger by
Merger Subsidiary do not and will not (i) contravene or conflict
with the certificate of incorporation or bylaws of RHCI or Merger
Subsidiary, (ii) assuming compliance with the matters referred to in
Section 4.03, contravene or conflict with or constitute a violation
of any provision of law, regulation, judgment, injunction, order or
decree binding upon or applicable to RHCI or any of its
Subsidiaries, (iii) constitute a default under or give rise to any
right of termination, cancellation or acceleration of any right or
obligation of RHCI or any of its Subsidiaries or to a loss of any
benefit to which RHCI or any of its Subsidiaries is entitled under
any material agreement or other instrument binding upon RHCI or any
of its Subsidiaries or any license, franchise, permit or other
similar authorization held by RHCI or any of its Subsidiaries, or
(iv) result in the creation or imposition of any Lien on any
material asset of RHCI or any of its Subsidiaries, except for any
occurrences or results referred to in clauses (ii), (iii) and (iv)
which would not have or reasonably be expected to have, individually
or in the aggregate, a RHCI Material Adverse Effect or prevent
consummation of the transactions contemplated hereby.
SECTION 4.05 Capitalization. The authorized capital
--------------
stock of RHCI consists of 20,000,000 shares of RHCI Common Stock,
800,000 shares of Class A Preferred Stock, $1.00 par value per share
(the "Class A Preferred Stock"), and 1,000,000 shares of Class B
Preferred Stock, $1.00 par value per share, of which 333,333 shares
have been designated as Class B Preferred Stock, Series 1987, $1.00
par value per share (the "Class B Preferred Stock, Series 1987") and
152,321 shares have been designated as the Class B Preferred Stock,
Series C, $1.00 par value per share (the "Series C Preferred
Stock"). As of September 15, 1996, there were outstanding (v)
8,306,726 shares of RHCI Common Stock (with attached common share
purchase rights (the "Rights") in accordance with RHCI's Stockholder
Rights Plan (the "Rights Plan") evidenced by the Rights Agreement
dated August 1, 1995, as amended, between RHCI and First Union of
North Carolina), (w) no shares of Class A Preferred Stock or Class B
Preferred Stock, Series 1987, (x) 142,486 shares of Series C
Preferred Stock (which such shares were then convertible into
1,424,860 shares of RHCI Common Stock)
24
(with attached Rights in accordance with the Rights Plan), (y)
employee and other stock options to purchase an aggregate of
1,967,411 shares of RHCI Common Stock and (z) warrants to purchase
an aggregate of 908,588 shares of RHCI Common Stock. All outstanding
shares of capital stock of RHCI have been duly authorized and
validly issued and are fully paid and nonassessable and free of
preemptive rights. Except as set forth in this Section, and except
for changes since September 15, 1996 resulting from the exercise of
employee stock options or other obligations to issue shares of RHCI
Common Stock referred to above outstanding on such date, there are
outstanding as of the date hereof (i) no shares of capital stock or
other voting securities of RHCI, (ii) no securities of RHCI
convertible into or exchangeable for shares of capital stock or
voting securities of RHCI, and (iii) no options, warrants or other
rights to acquire from RHCI, and, no obligation of RHCI to issue,
any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of RHCI (the
items in clauses (i), (ii) and (iii) being referred to collectively
as the "RHCI Securities"). There are no outstanding obligations of
RHCI or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any RHCI Securities. The shares of RHCI Common Stock and the
shares of RHCI Series 1996 Preferred Stock to be exchanged for
Shares and Company Preferred Shares, respectively, in the Merger
have been duly authorized, except for any required approval by
RHCI's stockholders of the issuance of RHCI Common Stock and RHCI
Series 1996 Preferred Stock in connection with the Merger, and when
issued and delivered in accordance with the terms of this Agreement,
will have been validly issued and will be fully paid and
nonassessable and the issuance thereof is not subject to any
preemptive or other similar right. The transactions contemplated
hereby will not by themselves result in the Rights under the Rights
Plan becoming exercisable.
SECTION 4.06 Subsidiaries. (a) Each Subsidiary of RHCI
------------
is an entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, has all
corporate, partnership or company powers, as applicable, and, to
RHCI's knowledge, all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted. Each Subsidiary of RHCI is duly
qualified to do business as a foreign entity and is in good standing
in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such
qualification necessary, except where failure to be would not have
or reasonably be expected to have, individually or in the aggregate,
a RHCI Material Adverse Effect.
25
(b) Except (i) for certain limitations and restrictions
set forth in the RHCI Credit Agreement and the RHCI Trust Indenture
and (ii) in the case of certain Subsidiaries of RHCI the stock of
which is pledged pursuant to the RHCI Credit Agreement and the RHCI
Trust Indenture, all of the outstanding capital stock or other
ownership interests, as applicable, of each Subsidiary of RHCI which
is owned by RHCI, directly or indirectly, is owned free and clear of
any Lien and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests, as applicable).
There are no outstanding (i) securities of RHCI or any of its
Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any
Subsidiary of RHCI, or (ii) options or other rights to acquire from
RHCI or any of its Subsidiaries, and no other obligation of RHCI or
any of its Subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary of RHCI (the
items in clauses (i) and (ii) being referred to collectively as the
"RHCI Subsidiary Securities"). Except as described or provided for
in any RHCI SEC Filing (as defined below) or as disclosed on Exhibit
4.06 to the RHCI Disclosure Schedule delivered by RHCI to the
Company simultaneously with the execution and delivery hereof (the
"RHCI Disclosure Schedule"), there are no outstanding obligations of
RHCI or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any outstanding RHCI Subsidiary Securities.
SECTION 4.07 SEC Filings. (a) RHCI has delivered or made
-----------
available to the Company (i) its annual report on Form 10-K for the
fiscal year ended June 30, 1995 (the "RHCI 10-K"), (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996, (iii) its
current reports on Form 8-K dated August 2, 1995 and September 20,
1995, (iv) its proxy statement relating to the annual meeting of
stockholders held on November 10, 1995, and (v) all of its other
reports, statements, schedules and registration statements filed by
RHCI with the SEC since June 30, 1995, and in each case all
materials incorporated therein by reference or filed therewith as
exhibits (the filings referred to in clauses (i) through (v) above
and the materials referred to above, in each case delivered or made
available to the Company prior to the date hereof, being hereinafter
referred to as the "RHCI SEC Filings").
26
(b) As of its filing date, each such report or statement
filed pursuant to the Exchange Act complied as to form in all
material respects with the requirements of the Exchange Act and did
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
(c) Each such registration statement and any amendment
thereto filed pursuant to the Securities Act, as of the date such
statement or amendment became effective, complied as to form in all
material respects with the Securities Act and did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION 4.08 Financial Statements. The audited
--------------------
consolidated financial statements and unaudited consolidated interim
financial statements of RHCI and its consolidated Subsidiaries
included in the RHCI 10-K and the quarterly reports on Form 10-Q
referred to in Section 4.07 fairly present in all material respects,
in conformity with generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of RHCI and its
consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods
then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments, none of which,
individually or in the aggregate, would have a RHCI Material Adverse
Effect).
SECTION 4.09 Joint Proxy Statement/Prospectus;
---------------------------------
Registration Statement. None of the information supplied by RHCI
----------------------
for inclusion in (a) the Joint Proxy Statement/Prospectus to be
filed by the Company and RHCI with the SEC and any amendments or
supplements thereto, or (b) the Registration Statement to be filed
by RHCI with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, at the respective times
when such documents are filed, and, in the case of the Joint Proxy
Statement/Prospectus, at the time the Joint Proxy
Statement/Prospectus or any amendment or supplement thereto is first
mailed to stockholders of RHCI and at the time such stockholders
vote on adoption of this Agreement and at the Effective Time, and,
in the case of the Registration Statement, when it becomes effective
under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the
27
statements made therein, in the light of the circumstances under
which they were made, not misleading. All documents that RHCI is
responsible for filing with the SEC in connection with the Merger
will comply as to form in all material respects with the applicable
provisions of the Exchange Act, the Securities Act and state
securities laws.
SECTION 4.10 Absence of Certain Changes. Except as
--------------------------
contemplated hereby or as described or provided for in any RHCI SEC
Filing or as disclosed on Exhibit 4.10 to the RHCI Disclosure
Schedule, since March 31, 1996, RHCI and its Subsidiaries have
conducted their business in all material respects in the ordinary
course consistent with past practices and there has not been:
(a) any event, occurrence or development or state of
circumstances or facts, which affects or relates to RHCI or any
of its Subsidiaries or the industry in which they operate,
which has had or would reasonably be expected to have a RHCI
Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of RHCI, or any repurchase, redemption or other
acquisition by RHCI or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of, or
other ownership interests in, RHCI or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding
security of RHCI or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by RHCI or any
of its Subsidiaries of any indebtedness for borrowed money
other than in the ordinary course of business and in amounts
and on terms consistent with past practices;
(e) any creation or assumption by RHCI or any of its
Subsidiaries of any Lien on any material asset other than in
the ordinary course of business consistent with past practices;
(f) any making of any loan, advance or capital
contributions to or investment in any Person other than loans,
advances or capital contributions to or investments in wholly
owned Subsidiaries of RHCI made in the ordinary course of
business consistent with past practices;
28
(g) any change in any method of accounting or accounting
practice by RHCI or any of its Subsidiaries, except for any
such change required by reason of a concurrent change in
generally accepted accounting principles or to conform a
Subsidiary's accounting policies and practices to those of
RHCI;
(h) except for contractual obligations existing on the
date hereof, other than in the ordinary course of business
consistent with past practices, any (i) grant of any severance
or termination pay to any director, officer or employee of
RHCI, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to
any such existing agreement) with any director, officer or
employee of RHCI or any of its Subsidiaries, (iii) increase in
benefits payable under any existing severance or termination
pay policies or employment agreements, or (iv) increase in
compensation, bonus or other benefits payable to directors,
officers or employees of RHCI or any of its Subsidiaries;
(i) any material labor dispute, other than individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of RHCI or any
of its Subsidiaries, which employees were not subject to a
collective bargaining agreement at March 31, 1996, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to such employees;
(j) any actual or, to RHCI's knowledge, threatened dispute
between RHCI or any of its Subsidiaries and any vendor or
customer, other than disputes which would not have or
reasonably be expected to have, individually or in the
aggregate, a RHCI Material Adverse Effect;
(k) any actual or, to RHCI's knowledge, threatened
suspension or cancellation of any governmental license, permit,
authorization, consent or approval, other than those the
suspension or cancellation of which would not have or
reasonably be expected to have, individually or in the
aggregate, a RHCI Material Adverse Effect; or
(l) to RHCI's knowledge, any change in any federal or
state law, rule or regulation applicable to RHCI or any of its
Subsidiaries, or in the interpretation or application thereof,
which individually or in the aggregate has had or would
29
reasonably be expected to have a RHCI Material Adverse Effect.
SECTION 4.11 No Undisclosed Material Liabilities. Except
-----------------------------------
as described or provided for in any RHCI SEC Filing or as disclosed
on Exhibit 4.11 to the RHCI Disclosure Schedule, there are no
liabilities of RHCI or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition,
situation or set of circumstances which, individually or in the
aggregate, have or would reasonably be expected to have a RHCI
Material Adverse Effect, other than:
(i) liabilities disclosed or provided for in RHCI's
consolidated balance sheet dated as of March 31, 1996 included
in RHCI's quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 1996;
(ii) liabilities incurred in the ordinary course of
business consistent with past practices since March 31, 1996,
which in the aggregate are not material to RHCI and its
Subsidiaries, taken as a whole; and
(iii) liabilities under this Agreement.
SECTION 4.12 Litigation. Except as described or provided
----------
for in any RHCI SEC Filing or as disclosed on Exhibit 4.12 to the
RHCI Disclosure Schedule, there is no action, suit, investigation or
proceeding pending against, or, to the knowledge of RHCI, threatened
against RHCI or any of its Subsidiaries or any of their respective
properties before any court or arbitrator or any governmental body,
agency or official which would have or reasonably be expected to
have a RHCI Material Adverse Effect.
SECTION 4.13 Taxes. (i) RHCI and its Subsidiaries have
-----
timely filed all tax returns, statements, reports and forms required
to be filed with any tax authority when due in accordance with all
applicable laws except where the failure to do so would not have or
reasonably be expected to have, individually or in the aggregate, a
RHCI Material Adverse Effect; (ii) no deficiency in payment of any
taxes for any period has been asserted by any taxing authority which
remains unsettled at the date hereof except for deficiencies which
would not have or reasonably be expected to have, individually or in
the aggregate, a RHCI Material Adverse Effect; and (iii) RHCI is not
liable and it is not reasonably likely that RHCI will be liable for
any taxes not heretofore paid or reserved against in the RHCI March
31, 1996 financial statements except those
30
which would not have or reasonably be expected to have, individually
or in the aggregate, a RHCI Material Adverse Effect.
SECTION 4.14 Tax Free Merger. (a) Following the Merger,
---------------
the Surviving Corporation will hold at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets, held by the Company prior to the
Merger, and at least 90 percent of the fair market value of the net
assets and at least 70 percent of the fair market value of the gross
assets, held by Merger Subsidiary prior to the Merger. For purposes
of this representation, amounts used by the Company to pay
reorganization expenses and all redemptions, distributions and
payments, in cash or property, made by the Company in connection
with the Merger shall be included as assets of the Company prior to
the Merger.
(b) Prior to the Merger, RHCI will be in control of Merger
Subsidiary within the meaning of Section 368(c) of the Code.
(c) RHCI has no plan or intention as part of the plan of
the Merger to cause the Surviving Corporation to issue after the
Effective Time additional shares of stock that would result in RHCI
losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code or any warrants, options, convertible
securities, or any other type of right pursuant to which any person
could acquire stock in the Surviving Corporation that, if exercised
or converted, would affect RHCI's acquisition or retention of
control of the Surviving Corporation, as defined in Section 368(c)
of the Code.
(d) RHCI has no plan or intention to reacquire any of the
RHCI Common Stock or RHCI Series 1996 Preferred Stock issued in the
Merger.
(e) RHCI has no plan or intention to liquidate the
Surviving Corporation, to merge the Surviving Corporation with or
into another corporation or to sell or otherwise dispose of the
Surviving Corporation stock except for transfers of stock to a
corporation controlled by RHCI.
(f) Following the Merger, the Surviving Corporation will
continue the Company's historic business or use a significant
portion of its historic business assets in a business.
31
(g) Merger Subsidiary will have no liabilities assumed by
the Company and will not transfer to the Company any assets subject
to liabilities, in the Merger.
(h) There is no intercorporate indebtedness existing
between RHCI and the Company or between Merger Subsidiary and the
Company that was issued, acquired, or will be settled, in any case
at a discount.
(i) Except as provided in Section 10.04 of this Agreement,
RHCI and Merger Subsidiary will pay their respective expenses
incurred in connection with the Merger.
(j) Neither RHCI nor Merger Subsidiary is an investment
company as such term is defined in Section 368(a)(2)(F)(iii) and
(iv) of the Code.
(k) Following the Effective Time, RHCI shall use its best
efforts, and shall cause the Surviving Corporation to use its best
efforts, to conduct its business and the Surviving Corporation's
business in a manner which would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section
368(a)(2)(E) of the Code.
SECTION 4.15 ERISA. (a) "RHCI Employee Plans" shall
-----
mean each "employee benefit plan", as defined in Section 3(3) of
ERISA, which (i) is subject to any provision of ERISA and (ii) is
maintained, administered or contributed to by RHCI or any affiliate
(as defined in Section 3.15) and covers any employee or former
employee of RHCI or any affiliate or under which RHCI or any
affiliate has any liability. No RHCI Employee Plan individually or
collectively constitutes a "defined benefit plan" as defined in
Section 3(35) of ERISA.
(b) No RHCI Employee Plan constitutes a "multiemployer
plan", as defined in Section 3(37) of ERISA, and no RHCI Employee
Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code. No RHCI Employee Plan is subject to Title IV
of ERISA. Neither RHCI nor any of its affiliates has incurred, nor
has reason to expect to incur, any liability under Title IV of ERISA
arising in connection with the termination of, or complete or
partial withdrawal from, any plan previously covered by Title IV of
ERISA that would have, or reasonably be expected to have,
individually or in the aggregate, a RHCI Material Adverse Effect.
Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any RHCI Employee Plan has or
will make RHCI or any of its Subsidiaries or any officer of director
of RHCI or any
32
of its Subsidiaries subject to any liability under Title I of ERISA
or liable for any tax pursuant to Section 4975 of the Code that
would have, or reasonably be expected to have, individually or in
the aggregate, a RHCI Material Adverse Effect.
(c) Except to the extent it would not have, or reasonably
be expected to have, individually or in the aggregate, a RHCI
Material Adverse Effect, (i) each RHCI Employee Plan which is
intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its
adoption to date, and each trust forming a part thereof is exempt
from tax pursuant to Section 501(a) of the Code, and (ii) each RHCI
Employee Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders,
final rules and final regulations, including but not limited to
ERISA and the Code, which are applicable to such Plan.
(d) RHCI does not provide, nor has it made any current or
past commitment to provide, post-retirement health and medical
benefits for retired employees of RHCI or its affiliates, except as
specifically required under Section 4980B of the Code or Section 601
of ERISA. RHCI has substantially complied with the notice and
continuation requirements of Section 4980B of the Code and Section
601 of ERISA.
SECTION 4.16 Compliance with Laws. Except as described
--------------------
or provided for in any RHCI SEC Filing or as disclosed on Exhibit
4.16 to the RHCI Disclosure Schedule, neither RHCI nor any of its
Subsidiaries is in violation of, or has violated, any applicable
provisions of any laws, statutes, ordinances or regulations other
than violations which would not, in the aggregate, reasonably be
expected to have a RHCI Material Adverse Effect.
SECTION 4.17 Finders' Fees. Except for Houlihan, Lokey,
-------------
Howard & Zukin, Inc. ("Houlihan Lokey"), whose fees will be paid by
RHCI, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on
behalf of RHCI or any of its Subsidiaries who might be entitled to
any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 4.18 Opinion of Financial Advisor. RHCI has
----------------------------
received the opinion of Houlihan Lokey to the effect that, as of the
date of such opinion, the Conversion Number and the Preferred
Conversion Number are fair to RHCI from a
33
financial point of view, a copy of which opinion will be delivered
to the Company.
SECTION 4.19 Vote Required. The affirmative vote of the
-------------
holders of a majority of the shares of RHCI Common Stock and Series
C Preferred Stock (voting with the RHCI Common Stock on the basis of
the number of shares of RHCI Common Stock into which such Series C
Preferred Stock is convertible) voted at a meeting of stockholders
is the only vote of the holders of any class or series of RHCI's
capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
SECTION 4.20 Medicare and Medicaid. Except as described
---------------------
or provided for in any RHCI SEC Filing or as disclosed on Exhibit
4.20 to the RHCI Disclosure Schedule, RHCI and its Subsidiaries have
complied in all material respects with all Medicare and Medicaid
laws, rules and regulations and have filed all returns, cost reports
and other filings in the manner prescribed, except where the failure
to do so would not have or reasonably be expected to have,
individually or in the aggregate, a RHCI Material Adverse Effect.
Except as described or provided for in any RHCI SEC Filing or as
disclosed on Exhibit 4.20 to the RHCI Disclosure Schedule, all
returns, cost reports and other filings made by RHCI and its
Subsidiaries to Medicare, Medicaid or any other governmental health
or welfare related entity or any other third party payor are in all
material respects true and complete, except where the failure to be
so would not have or reasonably be expected to have, individually or
in the aggregate, a RHCI Material Adverse Effect. Except as
described or provided for in any RHCI SEC Filing or as disclosed on
Exhibit 4.20 to the RHCI Disclosure Schedule, no deficiency in any
such returns, cost reports and other filings, including deficiencies
for late filings, has been asserted or, to RHCI's knowledge,
threatened by any federal or state agency or instrumentality or
other provider reimbursement entities relating to Medicare or
Medicaid or third party payor claims, and, to the knowledge of RHCI,
there is no basis for any claims or requests for reimbursement from
any such agency, instrumentality, entity or third party payor except
for any deficiencies which would not have or reasonably be expected
to have, individually or in the aggregate, a RHCI Material Adverse
Effect. Neither RHCI nor any of its Subsidiaries has been subject
to any audit relating to fraudulent Medicare or Medicaid procedures
or practices, except for audits which would not have or reasonably
be expected to have, individually or in the aggregate, a RHCI
Material Adverse Effect.
34
ARTICLE V.
COVENANTS OF THE COMPANY
------------------------
The Company agrees with RHCI that:
SECTION 5.01 Conduct of the Company. Except as expressly
----------------------
contemplated by this Agreement or as described or provided for in
any Company SEC Filing or as disclosed in writing by the Company
(including in the Company Disclosure Schedule) prior to the date of
this Agreement, from the date hereof until the earlier to occur of
the Effective Time and the termination hereof, the Company and its
Subsidiaries (i) shall conduct their business in the ordinary course
consistent with past practice and (ii) shall use their respective
best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services
of their present officers and employees. Except as otherwise
approved in writing by RHCI or as expressly contemplated by this
Agreement, and without limiting the generality of the foregoing,
from the date hereof until the Effective Time:
(a) the Company will not adopt or propose any change in
its certificate of incorporation or bylaws;
(b) the Company will not, and, except with respect to the
Apex Transaction (as hereinafter defined), will not permit any
of its Subsidiaries to, merge or consolidate with any other
Person (other than another wholly owned Subsidiary) or acquire
a material amount of stock or assets of any other Person;
(c) except with respect to the sale (whether by sale of
all or substantially all of its assets or capital stock, or by
merger or other business combination) of, or the discontinuance
of the operations of, Apex Healthcare, Inc. and its
Subsidiaries (the "Apex Transaction"), the Company will not,
and will not permit any of its Subsidiaries to, sell, lease,
license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments, (ii)
in the ordinary course consistent with past practice or (iii)
transfers between the Company and/or its Subsidiaries;
(d) except in respect of the Company Preferred Shares,
the Company will not declare or pay any dividends or make any
distributions on any Company Securities;
35
(e) the Company will not, and will not permit any of its
Subsidiaries to, (i) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any Company
Securities or Company Subsidiary Securities, other than the
issuance of the Company Preferred Shares, the issuance of
Company Securities under the Ramsay Managed Care, Inc. 1994
Stock Option Plan the Ramsay Managed Care, Inc. 1996 Long Term
Incentive Plan and the Ramsay Managed Care, Inc. 1994 Employee
Stock Purchase Plan or the issuance of Shares either upon the
exercise of Company Options or Company Warrants or conversion
of the Company Preferred Shares, (ii) split, combine or
reclassify any Company Securities or Company Subsidiary
Securities or (iii) repurchase, redeem or otherwise acquire any
Company Securities or any Company Subsidiary Securities;
(f) except as otherwise expressly permitted hereby, the
Company will not make any commitment or enter into any contract
or agreement material to the Company and its Subsidiaries taken
as a whole except in the ordinary course of business consistent
with past practice;
(g) except as otherwise expressly permitted hereby, the
Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing;
(h) the Company will not, and will not permit any of its
Subsidiaries to, take or agree to commit to take any action
that would make any representation and warranty of the Company
hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time; or
(i) except as otherwise provided in this Agreement, the
Company may, and upon RHCI's request will, upon the occurrence
of any condition entitling the Company to repurchase any Shares
subject to such repurchase, take any and all steps to
consummate the repurchase of such Shares.
SECTION 5.02 Access to Information. From the date hereof
---------------------
until the earlier to occur of the Effective Time and the termination
hereof, the Company will give RHCI, its counsel, financial advisors,
auditors and other authorized representatives full access to the
offices, properties, books and records of the Company and its
Subsidiaries, will furnish to RHCI, its counsel, financial advisors,
auditors
36
and other authorized representatives such financial and operating
data and other information as such Persons may reasonably request
and will instruct the Company's employees, counsel and financial
advisors to cooperate with RHCI in its investigation of the business
of the Company and its Subsidiaries; provided that no investigation
pursuant to this Section shall affect any representation or warranty
given by the Company to RHCI hereunder. All nonpublic information
provided to, or obtained by, RHCI in connection with the
transactions contemplated hereby shall be "Evaluation Material" for
purposes of the Confidentiality Agreement dated as of August 19,
1996 between RHCI and the Company.
SECTION 5.03 Other Offers. Except in connection with the
------------
Apex Transaction, from the date hereof until the earlier to occur of
the Effective Time and the termination hereof, the Company and its
Subsidiaries and the officers, directors, employees or other agents
of the Company and its Subsidiaries will not, directly or
indirectly, (i) take any action to solicit, initiate or encourage
any Company Acquisition Proposal (as defined below) or (ii) unless
otherwise required in accordance with the fiduciary duties of the
Board of Directors under applicable law as advised by counsel to the
Company, engage in negotiations with, or disclose any nonpublic
information relating to the Company or any of its Subsidiaries or
afford access to the properties, books or records of the Company or
any of its Subsidiaries to, any Person that may be considering
making, or has made, a Company Acquisition Proposal. Except in
connection with the Apex Transaction, the Company will promptly
notify RHCI after receipt of any Company Acquisition Proposal or any
indication that any Person is considering making a Company
Acquisition Proposal or any request for nonpublic information
relating to the Company or any of its Subsidiaries or for access to
the properties, books or records of the Company or any of its
Subsidiaries by any Person that may be considering making, or has
made, a Company Acquisition Proposal. For purposes of this
Agreement, "Company Acquisition Proposal" means any offer or
proposal for, or any indication of interest in, a merger or other
business combination involving the Company or any of its
Subsidiaries or the acquisition of any equity interest in, or a
substantial portion of the assets of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this
Agreement and other than the Apex Transaction.
SECTION 5.04 Notices of Certain Events. The Company
-------------------------
shall promptly notify RHCI of:
37
(i) any notice or other communication from any Person
alleging that the consent of such Person (or another Person) is
or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against,
relating to or involving or otherwise affecting the Company or
any of its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed
pursuant to Section 3.12 or which relate to the consummation of
the transactions contemplated by this Agreement, or of any
event or circumstance which would cause any of the Company's
representations and warranties contained herein to be incorrect
in any material respect.
SECTION 5.05 Affiliates. To ensure that the issuance of
----------
RHCI Common Stock and RHCI Series 1996 Preferred Stock in the Merger
complies with the Securities Act, prior to the Effective Time, the
Company shall cause to be delivered to RHCI a list identifying each
Person who might at the time of the meeting of the Company's
stockholders be deemed to be an "affiliate" of the Company for
purposes of Rule 145 under the Securities Act (each, a "Securities
Act Affiliate"). The Company shall use its best efforts to obtain
from each Person who is identified as a possible Securities Act
Affiliate prior to the Effective Time an agreement (a "Securities
Act Affiliate Agreement") providing that such person will not offer
to sell, sell or otherwise dispose of any RHCI Common Stock or RHCI
Series 1996 Preferred Stock issued to such Person in the Merger in
violation of the Securities Act.
SECTION 5.06 Tax Letters. To ensure that the Merger will
-----------
qualify as a reorganization within the meaning of Section 368 of the
Code, the Company will use its best efforts to obtain from each of
Paul J. Ramsay and each of his affiliated companies which owns
Shares or Company Preferred Shares at or before the Effective Time,
a representation letter (a "Tax Letter") stating that such
stockholder has no present plan or intention to sell any of the
shares of RHCI Common Stock or RHCI Series 1996 Preferred Stock
which such stockholder receives in the Merger.
38
ARTICLE VI.
COVENANTS OF RHCI
-----------------
RHCI agrees with the Company that:
SECTION 6.01 Conduct of RHCI. Except as expressly
---------------
contemplated by this Agreement, from the date hereof until the
earlier to occur of the Effective Time and the termination hereof,
unless the Company shall have consented in writing thereto (which
consent shall not be unreasonably withheld or delayed), RHCI and its
Subsidiaries (i) shall conduct their business in the ordinary course
consistent with past practice, (ii) shall use their respective best
efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services
of their present officers and employees, and (iii) shall not amend
any of the material terms or provisions of any of the RHCI
Securities, except for any such amendments which affect equally all
shares of RHCI Common Stock or all shares of RHCI Series 1996
Preferred Stock, as the case may be.
SECTION 6.02 Access to Information. From the date hereof
---------------------
until the earlier to occur of the Effective Time and the termination
hereof, RHCI will give the Company, its counsel, financial advisors,
auditors and other authorized representatives full access to the
offices, properties, books and records of RHCI and its Subsidiaries,
will furnish to the Company, its counsel, financial advisors,
auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably
request and will instruct RHCI's employees, counsel and financial
advisors to cooperate with the Company in its investigation of the
business of RHCI and its Subsidiaries; provided that no
investigation pursuant to this Section shall affect any
representation or warranty given by RHCI to the Company hereunder.
All nonpublic information provided to, or obtained by, the Company
in connection with the transactions contemplated hereby shall be
"Evaluation Material" for purposes of the Confidentiality Agreement
dated as of August 19, 1996 between RHCI and the Company.
SECTION 6.03 Obligations of Merger Subsidiary. RHCI will
--------------------------------
take all action necessary to cause Merger Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
39
SECTION 6.04 Director and Officer Liability. From and
------------------------------
after the Effective Time, (a) RHCI shall indemnify, defend and hold
harmless the present and former officers and directors of the
Company and its Subsidiaries against all losses, claims, damages and
liability in respect of acts or omissions occurring at or prior to
the Effective Time and (b) the Surviving Corporation shall
indemnify, defend and hold harmless to the fullest extent permitted
by law the present and former officers and directors of the Company
and its Subsidiaries against all losses, claims, damages and
liability in respect of acts or omissions occurring at or prior to
the Effective Time. RHCI shall cause the Surviving Corporation (and
its successors and assigns) to establish and maintain provisions in
its certificate of incorporation or by-laws concerning the
indemnification and exoneration of the Company's and its
Subsidiaries' former and present officers, directors, employees and
agents that are no less favorable to those persons than the
provisions of the Company's certificate of incorporation and by-laws
in effect on the date hereof.
SECTION 6.05 NASDAQ National Market System Listing. RHCI
-------------------------------------
shall use its best efforts to cause the shares of RHCI Common Stock
to be issued in the Merger and the shares of RHCI Common Stock
issuable upon the conversion of the RHCI Series 1996 Preferred Stock
and issuable in connection with the exercise of Substitute
Securities to be approved for listing on the NASDAQ National Market
System subject to official notice of issuance, prior to the
Effective Time.
SECTION 6.06 Notice of Certain Events. Each of RHCI and
------------------------
Merger Subsidiary shall promptly notify the Company of:
(i) any notice or other communication from any Person
alleging that the consent of such Person (or other Person) is
or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against,
relating to or involving or otherwise affecting it or any of
its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed
pursuant to
40
Section 4.12 or which relate to the consummation of the
transactions contemplated by this Agreement, or of any event or
circumstance which would cause any of RHCI's representations
and warranties contained herein to be incorrect in any material
respect.
ARTICLE VII.
COVENANTS OF RHCI AND THE COMPANY
---------------------------------
The parties hereto agree with each other that:
SECTION 7.01 Best Efforts. Subject to the terms and
------------
conditions of this Agreement, each party will use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by
this Agreement.
SECTION 7.02 Certain Filings. The Company and RHCI shall
---------------
cooperate with one another (a) in connection with the preparation of
the Registration Statement and Joint Proxy Statement/Prospectus, and
(b) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by
this Agreement and (c) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the
Registration Statement and Joint Proxy Statement/Prospectus and
seeking timely to obtain any such actions, consents, approvals or
waivers.
SECTION 7.03 Public Announcements. RHCI and the Company
--------------------
will consult with each other before issuing any press release or
making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange or interdealer quotation system, will not issue any such
press release or make any such public statement prior to such
consultation.
SECTION 7.04 Further Assurances. At and after the
------------------
Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name
and on behalf of the Company or Merger Subsidiary, any deeds, bills
of sale, assignments,
41
assurances, instruments or other documents and to take and do, in
the name and on behalf of the Company or Merger Subsidiary, any
other actions and things to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
SECTION 7.05 Stockholder Meeting. Each of RHCI and the
-------------------
Company shall cause a meeting of its stockholders (each, a
"Stockholder Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval and
adoption of this Agreement and the Merger. The Directors of RHCI
and the Directors of the Company shall, unless otherwise required in
accordance with their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by
RHCI's stockholders and the Company's stockholders, respectively.
In connection with such meetings, each of RHCI and the Company will,
subject to the foregoing, use its best efforts to obtain the
necessary approvals by its stockholders of this Agreement, the
transactions contemplated hereby and such other matters as are
contemplated by the terms of this Agreement or required by
Delaware Law, and will otherwise comply with all legal requirements
applicable to such meetings.
SECTION 7.06 Preparation of the Joint Proxy
------------------------------
Statement/Prospectus and Registration Statement. RHCI and the
-----------------------------------------------
Company shall promptly prepare and file with the SEC a preliminary
version of the Joint Proxy Statement/Prospectus and will use their
best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the
definitive Joint Proxy Statement/Prospectus. After receiving
comments from the SEC, RHCI shall promptly file with the SEC the
Registration Statement containing the Joint Proxy
Statement/Prospectus. Each of RHCI and the Company shall use its
best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such
filing. RHCI shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified
or filing a general consent to service of process in any
jurisdiction) required to be taken under any applicable state
securities laws in connection with the issuance of RHCI Common Stock
and RHCI Series 1996 Preferred Stock in the Merger and the Company
shall furnish all information concerning the Company and the holders
of Shares and Company Preferred Shares as may be reasonably
requested in connection with any such action. Promptly after the
42
effectiveness of the Registration Statement, each party will cause
the Joint Proxy Statement/Prospectus to be mailed to its
stockholders, and if necessary, after the definitive Joint Proxy
Statement/Prospectus shall have been mailed, promptly circulate
amended, supplemented or supplemental proxy materials and, if
required in connection therewith, resolicit proxies.
ARTICLE VIII.
CONDITIONS TO THE MERGER
------------------------
SECTION 8.01 Conditions to the Obligations of Each Party.
------------------------------------------
The obligations of the Company, RHCI and Merger Subsidiary to
consummate the Merger are subject to the satisfaction of the
following conditions:
(i) this Agreement shall have been adopted by the
requisite vote of the stockholders of the Company in accordance
with Delaware Law;
(ii) any applicable waiting period under the HSR Act
relating to the Merger shall have expired;
(iii) no provision of any applicable domestic law or
regulation and no judgment, injunction, order or decree of a
court of competent jurisdiction shall restrain or prohibit the
consummation of the Merger;
(iv) there shall have been approved, by the requisite
vote of RHCI's stockholders, the issuance of RHCI Common Stock
and RHCI Series 1996 Preferred Stock in connection with the
Merger in accordance with the rules of the NASD;
(v) the Registration Statement shall have been declared
effective and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings
for such purpose shall be pending before the SEC;
(vi) the shares of RHCI Common Stock to be issued in the
Merger and the shares of RHCI Common Stock issuable upon the
conversion of RHCI Series 1996 Preferred Stock to be issued in
the Merger shall have been approved for listing on the NASDAQ
National Market System, subject to official notice of issuance
and satisfactory distribution;
43
(vii) RHCI and the Company shall have received an opinion
from recognized tax counsel, based upon certain factual
representations of the Company, RHCI and Merger Subsidiary
reasonably requested by such counsel, dated the date of the
Effective Time, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, in form and substance
reasonably satisfactory to the Company and RHCI; and
(viii) RHCI shall have received the consents required for
the consummation of the transactions contemplated hereby
pursuant to the RHCI Credit Agreement and the RHCI Trust
Indenture.
SECTION 8.02 Conditions to the Obligations of RHCI and
-----------------------------------------
Merger Subsidiary. The obligations of RHCI and Merger Subsidiary to
-----------------
consummate the Merger are subject to the satisfaction of the
following further conditions:
(i) the Company shall have performed in all material
respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time, the
representations and warranties of the Company contained in this
Agreement shall be true in all material respects at and as of
the Effective Time as if made at and as of such time, and RHCI
shall have received a certificate signed by an executive
officer of the Company to the foregoing effect;
(ii) receipt by RHCI of the Tax Letters and of a
Securities Act Affiliates Agreement from each Securities Act
Affiliate; and
(iii) RHCI shall have received a copy of the resolutions
of the Board of Directors of the Company authorizing the
Merger, which copy shall be certified by an executive officer
of the Company.
SECTION 8.03 Conditions to the Obligations of the
------------------------------------
Company. The obligations of the Company to consummate the Merger
are subject to the satisfaction of the following further conditions:
(i) RHCI and Merger Subsidiary shall have performed in
all material respects all of their respective obligations
hereunder required to be performed by them at or prior to the
Effective Time, the representations and warranties of RHCI and
Merger Subsidiary contained in this Agreement shall be true in
all material respects at and as of the Effective Time
44
as if made at and as of such time, and the Company shall have
received a certificate signed by an executive officer of each
of RHCI and Merger Subsidiary to the foregoing effect;
(ii) the Company shall have received a copy of the
resolutions of the Board of Directors of RHCI authorizing the
Merger, which copy shall be certified by an executive officer
of RHCI;
(iii) a Certificate of Designations shall have been duly
filed by RHCI with the Secretary of State of the State of
Delaware with respect to the RHCI Series 1996 Preferred Stock,
which Certificate of Designations shall provide that the RHCI
Series 1996 Preferred Stock shall have the following rights and
preferences: (i) each share of RHCI Series 1996 Preferred Stock
shall be entitled to the payment of cumulative cash dividends
at an annual rate of $1.50 per share payable quarterly in
arrears, (ii) each share of RHCI Series 1996 Preferred Stock
shall be entitled to a liquidation preference of $30.00 per
share payable prior to any distribution of assets or funds of
RHCI to any class of capital stock of RHCI other than the
Series C Preferred Stock, (iii) each share of RHCI Series 1996
Preferred Stock shall be entitled to a number of votes per
share on all matters put to a vote of stockholders of RHCI
(voting together with the holders of RHCI Common Stock and
Series C Preferred Stock as one class) equal to the number of
whole shares of RHCI Common Stock into which such share of RHCI
Series 1996 Preferred Stock is then convertible, (iv) each
share of RHCI Series 1996 Preferred Stock shall be convertible
at any time into a number of shares of RHCI Common Stock
determined by dividing the conversion price (which, subject to
antidilution adjustments, initially shall be $3.00) into
$30.00, (v) each share of RHCI Series 1996 Preferred Stock
shall otherwise be entitled to rights and preferences
substantially similar to those applicable to the Company
Preferred Stock; and
(iv) RHCI shall have caused Merger Subsidiary to amend the
certificate of incorporation of Merger Subsidiary to comply
with Section 6.04, all in form and substance reasonably
satisfactory to the Company.
45
ARTICLE IX.
TERMINATION
-----------
SECTION 9.01 Termination. This Agreement may be
-----------
terminated and the Merger may be abandoned at any time prior to the
Effective Time (notwithstanding any approval of this Agreement by
the stockholders of the Company or RHCI);
(i) by mutual written consent of the Company and RHCI;
(ii) by either the Company or RHCI, if the Merger has not
been consummated by April 30, 1997 (provided that the right to
terminate this Agreement under this clause shall not be
available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or
resulted in the failure to consummate the Merger by such date);
(iii) by either the Company or RHCI, if there shall be
any applicable domestic law, rule or regulation that makes
consummation of the Merger illegal or otherwise prohibited or
if any judgment, injunction, order or decree of a court of
competent jurisdiction shall restrain or prohibit the
consummation of the Merger, and such judgment, injunction,
order or decree shall become final and nonappealable;
(iv) by either the Company or RHCI, if the stockholder
approvals referred to in Section 8.01(i) or 8.01 (iv) shall not
have been obtained by reason of the failure to obtain the
requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment thereof; or
(v) by either the Company or RHCI (the "Terminating
Party") if (x) there has been a breach by the other party of
any representation or warranty contained in this Agreement
which would have or would be reasonably likely to have a RHCI
Material Adverse Effect or Company Material Adverse Effect, as
the case may be, or (y) there has been a material breach of any
of the covenants or agreements set forth in this Agreement on
the part of the other party, which breach is not curable or, if
curable, is not cured within 30 days after written notice of
such breach is given by the Terminating Party to the other
party, or (z) the Company has entered into an agreement or
agreement in principle with respect to any Company Acquisition
Proposal.
46
SECTION 9.02 Effect of Termination. If this Agreement is
---------------------
terminated pursuant to Section 9.01, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except that (a) the agreements contained in Section 10.04,
the last sentence of Section 5.02 and the last sentence of Section
6.02 shall survive the termination hereof and (b) the parties shall
be liable for any willful breaches hereof.
ARTICLE X.
MISCELLANEOUS
-------------
SECTION 10.01 Notices. All notices, requests and other
-------
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to RHCI or Merger Subsidiary, to:
Entergy Corporation Building
639 Loyola Avenue
Suite 1700
New Orleans, Louisiana 70113
Telephone: (504) 525-2505
Telecopy: (504) 585-0505
Attention: President
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
Attention: Bradley P. Cost, Esq.
if to the Company, to:
Entergy Corporation Building
639 Loyola Avenue
Suite 1725
New Orleans, Louisiana 70113
Telephone: (504) 585-0515
Telecopy: (504) 585-0506
Attention: President
with a copy to:
Foley & Lardner
47
Suite 1800
111 North Orange Avenue
Orlando, Florida 32802
Telephone: (407) 423-7656
Telecopy: (407) 648-1743
Attention: John A. Sanders, Esq.
or such other address or telecopy number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each
such notice, request or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section and the appropriate
answerback is received or (ii) if given by any other means, when
delivered at the address specified in this Section.
SECTION 10.02 Survival of Representations and Warranties.
------------------------------------------
The representations and warranties and agreements contained herein
and in any certificate or other writing delivered pursuant hereto
shall not survive the Effective Time, except Section 6.04, Section
7.04 and Article I.
SECTION 10.03 Amendments; No Waivers. (a) Any provision
----------------------
of this Agreement may be amended or waived prior to the Effective
Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, RHCI and Merger
Subsidiary or, in the case of a waiver, by the party against whom
the waiver is to be effective; provided that (i) any waiver or
amendment shall be effective against a party only if the special
committee of the Board of Directors of such party approves such
waiver or amendment and only such special committee of the Board of
Directors can take actions on behalf of that party and (ii) after
the adoption of this Agreement by the stockholders of the Company,
no such amendment or waiver shall, without the further approval of
such stockholders and each party's Board of Directors upon
recommendation of its special committee, alter or change (x) the
amount or kind of consideration to be received in exchange for any
shares of capital stock of the Company, (y) any term of the
certificate of incorporation of the Surviving Corporation or (z) any
of the terms or conditions of this Agreement if such alteration or
change would adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise
48
thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 10.04 Fees and Expenses.
-----------------
(a) Except as otherwise provided in this Section, all
costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) In the event that the Company shall have entered into
an agreement or agreement in principle with respect to any Company
Acquisition Proposal before termination of this Agreement, and the
Company or RHCI shall terminate this Agreement, the Company agrees
promptly to reimburse RHCI in immediately available funds for all of
RHCI's reasonable documented out-of-pocket expenses (up to a maximum
of $1,000,000) but in no event later than five business days after
the termination of this Agreement.
(c) The Company and RHCI shall each pay one-half of all
costs and expenses related to printing, filing and mailing the
Registration Statement and the Joint Proxy Statement/Prospectus and
all SEC and other regulatory filing fees.
SECTION 10.05 Successors and Assigns. The provisions of
----------------------
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided
that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of
the other parties hereto.
SECTION 10.06 Governing Law. This Agreement shall be
-------------
construed in accordance with and governed by the law of the State of
Delaware applicable in the case of agreements made and to be
performed entirely within such State.
SECTION 10.07 Counterparts; Effectiveness. This
---------------------------
Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
49
SECTION 10.08 Entire Agreement. This Agreement and the
----------------
Confidentiality Agreement dated as of August 19, 1996 between RHCI
and the Company constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding,
condition or warranty not expressly set forth herein has been made
or relied upon by either party hereto. Neither this Agreement nor
any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder except for
the provisions of Section 6.04, which are intended for the benefit
of the Company's former and present officers, directors, employees
and agents and the provisions of Article I, which are intended for
the benefit of the Company's stockholders, including holders of
Restricted Stock, Company Options, and Company Warrants.
* * * *
50
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
RAMSAY MANAGED CARE, INC.
By:/s/ Martin Lazoritz
--------------------------
Title: Executive Vice
President
RAMSAY HEALTH CARE, INC.
By:/s/ Remberto Cibran
---------------------------
Title: President
RHCI ACQUISITION CORP.
By:/s/ Remberto Cibran
---------------------------
Title: President
51
ATTESTATIONS
I, Warwick D. Syphers, Executive Vice President of Ramsay
Managed Care, Inc., a Delaware corporation ("RMCI"), certify that
the signature of Martin Lazoritz, Executive Vice President of RMC,
appearing on the foregoing Agreement and Plan of Merger dated as of
October 1, 1996 among RMCI, Ramsay Health Care, Inc. and RHCI
Acquisition Corp., is a true specimen of his signature.
Dated as of October 1, 1996
/s/ Warwick D. Syphers
-----------------------------
Warwick D. Syphers
Executive Vice President
I, Luis E. Lamela, Vice Chairman of the Board of Ramsay
Health Care, Inc., a Delaware corporation ("RHCI"), certify that the
signature of Remberto Cibran, President of RHCI, appearing on the
foregoing Agreement and Plan of Merger dated as of October 1, 1996
among Ramsay Managed Care, Inc., RHCI and RHCI Acquisition Corp., is
a true specimen of his signature.
Dated as of October 1, 1996
/s/ Luis E. Lamela
-----------------------------
Luis E. Lamela
Vice Chairman of the Board
I, Luis E. Lamela, Vice Chairman of the Board of RHCI
Acquisition Corp., a Delaware corporation ("Merger Subsidiary"),
certify that the signature of Remberto Cibran, President of Merger
Subsidiary, appearing on the foregoing Agreement and Plan of Merger
dated as of October 1, 1996 among Ramsay Managed Care, Inc., Ramsay
Health Care, Inc. and Merger Subsidiary, is a true specimen of his
signature.
Dated as of October 1, 1996
/s/ Luis E. Lamela
-----------------------------
Luis E. Lamela
Vice Chairman of the Board