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AGREEMENT AND PLAN OF MERGER
By and Among
HEALTHSOUTH Corporation, Aladdin Acquisition Corporation
and
Advantage Health Corporation
Dated as of
December , 1995
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TABLE OF CONTENTS
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Section 1. The Merger........................................................................... 2
1.1 The Merger........................................................................... 2
1.2 The Closing.......................................................................... 2
1.3 Effective Time....................................................................... 2
1.4 Effect of the Merger................................................................. 2
Section 2. Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates............................................................. 2
2.1 Effect on Capital Stock.............................................................. 2
2.2 Exchange of Certificates............................................................. 4
2.3 Certificate of Incorporation of Surviving Corporation................................ 7
2.4 Bylaws of the Surviving Corporation.................................................. 7
2.5 Directors and Officers of the Surviving Corporation.................................. 7
2.6 Assets, Liabilities, Reserves and Accounts........................................... 8
2.7 Corporate Acts of the Subsidiary..................................................... 8
Section 3. Representations and Warranties of Advantage Health................................... 8
3.1 Organization, Existence and Good Standing............................................ 8
3.2 Advantage Health Capital Stock....................................................... 8
3.3 Subsidiaries and Affiliated Partnerships............................................. 9
3.4 Organization, Existence and Good Standing of Advantage Health
Subsidiaries and Advantage Health Partnerships...................................... 9
3.5 Foreign Qualifications............................................................... 10
3.6 Power and Authority.................................................................. 10
3.7 Advantage Health Financial Information............................................... 10
3.8 Subsequent Events.................................................................... 11
3.9 Legal Proceedings.................................................................... 12
3.10 Contracts, etc....................................................................... 12
3.11 Accounts Receivable.................................................................. 12
3.12 Tax Returns.......................................................................... 13
3.13 Employee Benefit Plans; Employment Matters........................................... 13
3.14 Compliance with Laws in General...................................................... 14
3.15 Licenses, Accreditation and Regulatory Approvals..................................... 14
3.16 Commissions and Fees................................................................. 15
3.17 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock............................. 15
3.18 Disposition of Assets of Surviving Corporation....................................... 15
3.19 Vote Required........................................................................ 15
3.20 Opinion of Financial Advisor......................................................... 15
3.21 No Untrue Representations............................................................ 15
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Section 4. Representations and Warranties of HEALTHSOUTH and the Subsidiary..................... 16
4.1 Organization, Existence, Good Standing and Capital Stock............................. 16
4.2 Power and Authority.................................................................. 16
4.3 Legal Proceedings.................................................................... 16
4.4 No Contracts or Liabilities.......................................................... 17
4.5 Commissions and Fees................................................................. 17
Section 5. Representations and Warranties of HEALTHSOUTH........................................ 17
5.1 Organization, Existence and Good Standing............................................ 17
5.2 HEALTHSOUTH Capital Stock............................................................ 17
5.3 Subsidiary Common Stock.............................................................. 18
5.4 Power and Authority.................................................................. 18
5.5 HEALTHSOUTH Financial Information.................................................... 19
5.6 Subsequent Events.................................................................... 19
5.7 Legal Proceedings.................................................................... 20
5.8 Contracts, etc....................................................................... 20
5.9 Accounts Receivable.................................................................. 21
5.10 Tax Returns.......................................................................... 21
5.11 Employee Benefit Plans; Employment Matters........................................... 21
5.12 Compliance with Laws in General...................................................... 22
5.13 Licenses, Accreditation and Regulatory Approvals..................................... 22
5.14 Commissions and Fees................................................................. 23
5.15 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock............................. 23
5.16 Disposition of Assets of Surviving Corporation....................................... 23
5.17 No Vote Required..................................................................... 23
5.18 Opinion of Financial Advisor......................................................... 23
5.19 HEALTHSOUTH Common Stock............................................................. 24
5.20 Investment Intent.................................................................... 24
5.21 No Untrue Representation............................................................. 24
Section 6. Access to Information and Documents.................................................. 24
6.1 Access to Information................................................................ 24
6.2 Return of Records.................................................................... 24
6.3 Effect of Access..................................................................... 25
Section 7. Covenants................................................................................... 25
7.1 Preservation of Business............................................................. 25
7.2 Material Transactions................................................................ 25
7.3 Meeting of Stockholders.............................................................. 26
7.4 Registration Statement............................................................... 26
7.5 Exemption from State Takeover Laws................................................... 28
7.6 HSR Act Compliance................................................................... 28
7.7 Public Disclosures................................................................... 29
7.8 Resignation of Advantage Health Directors............................................ 29
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7.9 Notice of Subsequent Events.......................................................... 29
7.10 No Solicitations..................................................................... 29
7.11 Other Actions........................................................................ 30
7.12 Accounting Methods................................................................... 30
7.13 Pooling and Tax-Free Reorganization Treatment........................................ 30
7.14 Affiliate and Pooling Agreements..................................................... 30
7.15 Cooperation.......................................................................... 30
7.16 Advantage Health Stock Options....................................................... 31
7.17 Publication of Combined Results...................................................... 31
7.18 Advantage Health Employees........................................................... 31
7.19 HEALTHSOUTH Board of Directors....................................................... 32
7.20 Employment Agreements................................................................ 32
Section 8. Termination, Amendment and Waiver.................................................... 32
8.1 Termination.......................................................................... 32
8.2 Effect of Termination................................................................ 33
8.3 Amendment............................................................................ 33
8.4 Extension; Waiver.................................................................... 33
8.5 Procedure for Termination, Amendment, Extension or Waiver............................ 34
8.6 Expenses............................................................................. 34
8.7 Break-up Fee......................................................................... 34
Section 9. Conditions to Closing................................................................ 35
9.1 Mutual Conditions.................................................................... 35
9.2 Conditions to Obligations of HEALTHSOUTH and Aladdin Acquisition
Corporation.......................................................................... 36
9.3 Conditions to Obligations of Advantage Health........................................ 37
10.1 Representations and Warranties; Nonsurvival.......................................... 38
10.2 Notices.............................................................................. 39
10.3 Further Assurances................................................................... 40
10.4 Indemnification...................................................................... 40
10.5 Governing Law........................................................................ 41
10.6 "Including".......................................................................... 41
10.7 "Knowledge".......................................................................... 41
10.8 "Material adverse change" or "material adverse effect"............................... 42
10.9 "Hazardous Materials"................................................................ 42
10.10 Environmental Laws................................................................... 42
10.11 Captions............................................................................. 42
10.12 Integration of Exhibits.............................................................. 42
10.13 Entire Agreement..................................................................... 43
10.14 Counterparts......................................................................... 43
10.15 Binding Effect....................................................................... 43
10.16 No Rule of Construction.............................................................. 43
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the or this "Plan of Merger"), made and
entered into as of the ____ day of December, 1995, by and among HEALTHSOUTH
CORPORATION, a Delaware corporation ("HEALTHSOUTH"), ALADDIN ACQUISITION
CORPORATION a Delaware corporation (the "Subsidiary"), and ADVANTAGE HEALTH
CORPORATION, a Delaware corporation ("Advantage Health") (the Subsidiary and
Advantage Health being sometimes collectively referred to herein as the
"Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of HEALTHSOUTH, and
Advantage Health have approved the merger of the Subsidiary with and into
Advantage Health (the "Merger"), upon the terms and conditions set forth in this
Plan of Merger, whereby each issued and outstanding share (an "Advantage Health
Share") of Common Stock, par value $.01 per share, of Advantage Health
("Advantage Health Common Stock"), not owned directly or indirectly by Advantage
Health, except Dissenting Shares (as hereinafter defined), will be converted
into the right to receive the Merger Consideration (as hereinafter defined);
WHEREAS, the Board of Directors of Advantage Health, subject to the
further exercise of fiduciary or statutory duties (as hereinafter provided), has
also unanimously determined that the Merger presents an opportunity for
Advantage Health to achieve long-term strategic and financial benefits and is
fair to, and in the best interests of, Advantage Health's stockholders, and has
recommended approval of this Plan of Merger by the stockholders of Advantage
Health;
WHEREAS, each of HEALTHSOUTH, the Subsidiary and Advantage Health
desires to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger will
be accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements contained herein, the parties hereto do hereby agree as
follows:
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Section 1. The Merger.
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Subsidiary shall be merged with and into Advantage Health at the
Effective Time (as defined in Section 1.3). Following the Effective Time, the
separate corporate existence of the Subsidiary shall cease and Advantage Health
shall continue as the surviving corporation (the "Surviving Corporation") under
the name "Advantage Health Corporation" and shall succeed to and assume all the
rights and obligations of the Subsidiary and Advantage Health in accordance with
the DGCL.
1.2 The Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. Eastern Time on a date to be specified by the parties (the
"Closing Date"), which (subject to satisfaction or waiver of the conditions set
forth in Sections 9.2 and 9.3) shall be no later than the second business day
after satisfaction of the conditions set forth in Section 9.1 (other than
Section 9.1(a)), at the offices of Haskell Slaughter Young & Johnston,
Professional Association, Birmingham, Alabama unless another date or place is
agreed to in writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Plan of Merger,
the parties shall file a certificate of merger (the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL as soon as practicable
on or after the Closing Date. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as the Subsidiary and Advantage Health shall agree should be
specified in the Certificate of Merger (the "Effective Time").
1.4 Effect of the Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
Advantage Health and the Subsidiary and the Merger shall otherwise have the
effects set forth in Section 259 of the DGCL.
Section 2. Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates.
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of Advantage Health
Shares or any shares of capital stock of the Subsidiary:
(a) The Subsidiary Common Stock. Each share of Common Stock, $.01 par
value per share, of the Subsidiary ("Subsidiary Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
fully paid and nonassessable share of Advantage Health Common Stock.
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(b) Cancellation of Treasury Stock. Each share of Advantage Health
Common Stock that is owned by Advantage Health or by any subsidiary of Advantage
Health shall automatically be canceled and retired and shall cease to exist, and
none of the Common Stock, par value $.01 per share, of HEALTHSOUTH ("HEALTHSOUTH
Common Stock"), cash or other consideration shall be delivered in exchange
therefor.
(c) Conversion of Advantage Health Shares. Subject to Section 2.2(d)
and in addition to the provision for Advantage Health stock options in Section
2.2(e), each issued and outstanding Advantage Health Share (other than shares to
be canceled in accordance with Section 2.1(b) and Dissenting Shares) shall be
converted into the right to receive the right to receive that number of shares
of HEALTHSOUTH Common Stock determined by dividing $47.50 by the Base Period
Trading Price (as defined below), as may be adjusted as provided below, computed
to four decimal places (the "Exchange Ratio"); provided, however, that if the
Base Period Trading Price shall be greater than $34.50, the Exchange Ratio shall
be 1.3768; and provided further, however, that if the Base Period Trading Price
shall be less than $28.50, the Exchange Ratio shall be 1.6667. The number of
shares of HEALTHSOUTH Common Stock issuable with respect to each Advantage
Health Share, as determined as set forth herein, is herein called the "Merger
Consideration". For purposes of this Plan of Merger, the term "Base Period
Trading Price" shall mean the average of the daily closing prices per share for
HEALTHSOUTH Common Stock for the 20 consecutive trading days on which shares of
HEALTHSOUTH Common Stock are actually traded (as reported on the New York Stock
Exchange Composite Transactions Tape as reported in The Wall Street Journal,
Eastern Edition, or if not reported thereby, any other authoritative source)
ending at the close of trading on the second New York Stock Exchange trading day
immediately preceding the date of the Special Meeting (as defined in Section
7.3) (such period being herein called the "Base Period"). Promptly after the
close of trading on the New York Stock Exchange on such second trading day, the
parties shall issue a joint press release publicly announcing the Exchange
Ratio. As of the Effective Time, all such Advantage Health Shares shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any Advantage
Health Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of fractional
shares of HEALTHSOUTH Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.2,
without interest.
(d) Dissenting Shares. Notwithstanding anything in this Plan of Merger
to the contrary, Advantage Health Shares outstanding immediately prior to the
Effective Time held by a holder (if any) who is entitled to demand, and who
properly demands, appraisal for such shares in accordance with Section 262 of
the DGCL ("Dissenting Shares") shall not be converted into a right to receive
the Merger Consideration and any cash in lieu of fractional shares of
HEALTHSOUTH Common Stock unless such holder fails to perfect or otherwise loses
such holder's right to appraisal, if any. If, after the Effective Time, such
holder fails to perfect or loses any such right to appraisal, such shares shall
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Consideration pursuant to Section
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2.1(c) and the cash in lieu of fractional shares of HEALTHSOUTH Common Stock
specified in Section 2.2.
(e) Stock Options. At the Effective Time, the holders of each Advantage
Health stock option which are outstanding at the Effective Time, whether or not
then exercisable, shall receive at or as promptly as practicable after the
Closing a number of shares of HEALTHSOUTH Common Stock determined as follows:
(i) if the Base Trading Price is neither greater than $34.50
nor less than $28.50, that number of shares which is equal to $47.50 minus the
exercise price of such option (the "spread"), divided by the Base Trading Price
and then multiplied by the number of shares of Advantage Health Common Stock
which are subject to such option; or
(ii) if the Base Trading Price is greater than $34.50 or less
than $28.50, that number of shares calculated as provided in the preceding
clause (i) except that the spread shall be divided by $34.50 or $28.50, as the
case may be (rather than the Base Trading Price) prior to being multiplied by
the number of shares of Advantage Health Common Stock subject to such option.
(f) Anti-Dilution Provisions. If, after the date hereof and prior to
the Effective Time, HEALTHSOUTH shall have declared a stock split (including a
reverse split) of HEALTHSOUTH Common Stock or a dividend payable in HEALTHSOUTH
Common Stock, or any other distribution of securities or dividend (in cash or
otherwise) to holders of HEALTHSOUTH Common Stock with respect to their
HEALTHSOUTH Common Stock (including, without limitation, such a distribution or
dividend made in connection with a recapitalization, reclassification, merger,
consolidation, reorganization, reclassification, merger, consolidation,
reorganization or similar transaction), then the number of shares of HEALTHSOUTH
Common Stock to be issued upon conversion of a share of Advantage Health Common
Stock pursuant to Section 2.1(c) shall be appropriately adjusted to reflect such
stock split, dividend or other distribution of securities.
2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, HEALTHSOUTH shall
enter into an agreement with such bank or trust company as may be designated by
HEALTHSOUTH (the "Exchange Agent") which provides that HEALTHSOUTH shall deposit
with the Exchange Agent as of the Effective Time, for the benefit of the holders
of Advantage Health Shares, for exchange in accordance with this Section 2,
through the Exchange Agent, certificates representing the shares of HEALTHSOUTH
Common Stock (such shares of HEALTHSOUTH Common Stock, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding Advantage Health Shares.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Advantage Health Shares (the "Certificates") whose shares were
converted into the right to receive the Merger Consideration pursuant to Section
2.1, (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as HEALTHSOUTH may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of HEALTHSOUTH Common Stock. Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by HEALTHSOUTH, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of HEALTHSOUTH Common Stock which such holder has the right to receive
pursuant to the provisions of this Section 2, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of
Advantage Health Shares which is not registered in the transfer records of
Advantage Health, a certificate representing the proper number of shares of
HEALTHSOUTH Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the issuance of shares of HEALTHSOUTH Common Stock to a person other
than the registered holder of such Certificate or establish to the satisfaction
of HEALTHSOUTH that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of HEALTHSOUTH
Common Stock and cash in lieu of any fractional shares of HEALTHSOUTH Common
Stock as contemplated by this Section 2.2. No interest will be paid or will
accrue on any cash payable in lieu of any fractional shares of HEALTHSOUTH
Common Stock. To the extent permitted by law, former stockholders of record of
Advantage Health shall be entitled to vote after the Effective Time at any
meeting of HEALTHSOUTH stockholders the number of whole shares of HEALTHSOUTH
Common Stock into which their respective Advantage Health Shares are converted,
regardless of whether such holders have exchanged their Certificates for
certificates representing HEALTHSOUTH Common Stock in accordance with this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to HEALTHSOUTH Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of HEALTHSOUTH Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(e) until the surrender of such Certificate
in accordance with this Section 2. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificate representing whole shares of HEALTHSOUTH Common Stock issued
in exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a
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fractional share of HEALTHSOUTH Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of HEALTHSOUTH Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of
HEALTHSOUTH Common Stock.
(d) No Further Ownership Rights in Advantage Health Shares. All shares
of HEALTHSOUTH Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Section 2 (including any cash
paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the Advantage Health
Shares theretofore represented by such Certificates. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in this
Section 2, except as otherwise provided by law.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of HEALTHSOUTH Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
HEALTHSOUTH. Notwithstanding any other provision of this Plan of Merger, each
holder of Advantage Health Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of HEALTHSOUTH
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of HEALTHSOUTH Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to HEALTHSOUTH, upon demand, and any
holders of the Certificates who have not theretofore complied with this Section
2 shall thereafter look only to HEALTHSOUTH for payment of HEALTHSOUTH Common
Stock, any cash in lieu of fractional shares of HEALTHSOUTH Common Stock, and
any dividends or distributions with respect to HEALTHSOUTH Common Stock.
(g) No Liability. None of HEALTHSOUTH, Aladdin Acquisition Corporation,
Advantage Health or the Exchange Agent shall be liable to any person in respect
of any shares of HEALTHSOUTH Common Stock (or dividends or distributions with
respect thereto) or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any shares of
HEALTHSOUTH Common Stock, any cash in lieu of fractional shares of HEALTHSOUTH
Common Stock or any dividends or distributions with respect to HEALTHSOUTH
Common Stock in respect of such Certificates would otherwise escheat to or
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become the property of any governmental entity), any such shares, cash,
dividends or distributions in respect of such Certificates shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund in deposit accounts or short-term money
market instruments, as directed by HEALTHSOUTH, on a daily basis. Any interest
and other income resulting from such investments shall be paid to HEALTHSOUTH.
(i) Lost Certificates. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and subject to
such other conditions as the Board of Directors of the Surviving Corporation may
impose, the Surviving Corporation shall issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration deliverable in respect thereof
as determined in accordance with Section 2.1(c). When authorizing such issue of
Merger Consideration in exchange therefor, the Board of Directors of the
Surviving Corporation may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to provide a bond or other surety to the Surviving Corporation in
such sum as it may reasonably direct as indemnity against any claim that may be
made against the Surviving Corporation with respect to the Certificate alleged
to have been lost, stolen or destroyed.
(j) Withholding Rights. The Surviving Corporation or the Exchange Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Plan of Merger to any holder of Advantage Health Shares
such amounts as the Surviving Corporation or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under the Code or
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld by the Surviving Corporation or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Plan of Merger as having been
paid to the holder of the Advantage Health Shares in respect of which such
deduction and withholding was made by the Surviving Corporation or the Exchange
Agent.
2.3 Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of Advantage Health shall become the Certificate of
Incorporation of the Surviving Corporation from and after the Effective Time and
until thereafter amended as provided by law.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary
shall be the Bylaws of the Surviving Corporation from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
laws of the State of Delaware, the Certificate of Incorporation of Advantage
Health and such Bylaws.
2.5 Directors and Officers of the Surviving Corporation. The Directors
and officers of the Subsidiary immediately prior to the Effective Time shall be
the Directors and officers of
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the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time,
the assets, liabilities, reserves and accounts of each of Aladdin Acquisition
Corporation and Advantage Health shall be taken up on the books of the Surviving
Corporation at the amounts at which they respectively shall be carried on the
books of said corporations immediately prior to the Effective Time, except as
otherwise set forth in the Plan of Merger and subject to such adjustments, or
elimination of intercompany items, as may be appropriate in giving effect to the
Merger in accordance with generally accepted accounting principles.
2.7 Corporate Acts of the Subsidiary. All corporate acts, plans,
policies, approvals and authorizations of the Subsidiary, its sole stockholder,
its Board of Directors, committees elected or appointed by the Board of
Directors, and all officers and agents, valid immediately prior to the Effective
Time, shall be those of the Surviving Corporation and shall be as effective and
binding thereon as they were with respect to the Subsidiary. The employees and
agents of the Subsidiary shall become the employees and agents of the Surviving
Corporation and continue to be entitled to the same rights and benefits which
they enjoyed as employees and agents of the Subsidiary.
Section 3. Representations and Warranties of Advantage Health.
Advantage Health hereby represents and warrants to HEALTHSOUTH and the
Subsidiary as follows:
3.1 Organization, Existence and Good Standing. Advantage Health is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Advantage Health and has all necessary corporate power
to own its properties and assets and to carry on its business as presently
conducted. Advantage Health is not, and has not been within the two years
immediately preceding the date of this Plan of Merger, a subsidiary or division
of another corporation, nor has Advantage Health within such time owned,
directly or indirectly, any shares of HEALTHSOUTH Common Stock or Subsidiary
Common Stock.
3.2 Advantage Health Capital Stock. The authorized capital stock of
Advantage Health consists of (i) 15,000,000 shares of Advantage Health Common
Stock, of which 5,649,804 shares were issued and outstanding as of November 10,
1995, and 493,010 shares are issued and held as treasury shares, (ii) 1,440,000
shares of Class B Non-Voting Common Stock, par value $.01 per share, none of
which shares are issued and outstanding as of the date of this Plan of Merger
and none of which are issued and held as treasury shares; and (iii) 5,000,000
shares of undesignated Preferred Stock, par value $.01 per share, none of which
shares are issued and outstanding as of the date of this Plan of Merger and none
of which are issued and held as treasury shares. All of the issued and
outstanding Advantage Health Shares are duly and validly issued, fully paid and
nonassessable. Except as set forth on Exhibit 3.2 or otherwise disclosed in the
1995 Advantage Health 10-K (as hereinafter defined), there are no options,
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warrants, or similar rights granted by Advantage Health or any other agreements
to which Advantage Health is a party providing for the issuance or sale by it of
any additional securities which would remain in effect after the Effective Time.
There is no liability for dividends declared or accumulated but unpaid with
respect to any of the Advantage Health Shares. Advantage Health has not made any
distributions to any holders of Advantage Health Shares or participated in or
effected any issuance, exchange or retirement of Advantage Health Shares, or
otherwise changed the equity interests of holders of Advantage Health Shares, in
contemplation of effecting the Merger, within the two years immediately
preceding the date of this Plan of Merger. Any Advantage Health Shares that
Advantage Health has re-acquired during the two years immediately preceding the
date of this Plan of Merger have been so re-acquired only for purposes other
than "business combinations", as such term is defined in Accounting Principles
Board Opinion No. 16, as amended ("Business Combinations").
3.3 Subsidiaries and Affiliated Partnerships. (a) Attached hereto as
Exhibit 3.3 is a list of all subsidiaries of Advantage Health (individually, an
"Advantage Health Subsidiary" and, collectively, the "Advantage Health
Subsidiaries") and their states of incorporation. Except as set forth on Exhibit
3.3, Advantage Health does not own stock in and does not control, directly or
indirectly, any other corporation, association or business organization other
than the Advantage Health Partnerships (as defined below).
(b) Also disclosed on Exhibit 3.3 is a list of all general or limited
partnerships or joint ventures in which the general partner or a co-venturer is
Advantage Health or an Advantage Health Subsidiary (individually, an "Advantage
Health Partnership" and, collectively, the "Advantage Health Partnerships") and
their states of organization. Except as set forth on Exhibit 3.3, neither
Advantage Health nor any Advantage Health Subsidiary owns an equity interest in,
nor does such entity control, directly or indirectly, any other joint venture or
partnership.
3.4 Organization, Existence and Good Standing of Advantage Health
Subsidiaries and Advantage Health Partnerships. (a) Except as set forth on
Exhibit 3.4, each Advantage Health Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its respective state of
incorporation, and has all necessary corporate power to own its properties and
assets and to carry on its business as presently conducted, except where the
failure to be so organized, existing or in good standing, or to have such power,
would not have, individually or in the aggregate, a material adverse effect (as
hereinafter defined) on Advantage Health.
(b) Except as set forth on Exhibit 3.4, each Advantage Health
Partnership is a general partnership, a limited partnership or a joint venture
validly formed and (to the extent such concept is applicable under the laws of
such jurisdiction) in good standing under the laws of its respective state of
organization and has all necessary power to own its property and assets and to
carry on its business as presently conducted, except where the failure to be so
formed or in good standing, or to have such power, would not have, individually
or in the aggregate, a material adverse effect on Advantage Health.
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3.5 Foreign Qualifications. Except as set forth on Exhibit 3.5,
Advantage Health, each Advantage Health Subsidiary and each Advantage Health
Partnership that is a limited partnership is qualified or licensed to do
business as a foreign corporation or foreign limited partnership, as the case
may be, and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, have a material adverse effect
on Advantage Health.
3.6 Power and Authority. Subject to the satisfaction of the conditions
precedent set forth herein, Advantage Health has the corporate power to execute,
deliver and perform the Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to the
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein, has taken all action required by its Certificate of Incorporation,
Bylaws or otherwise, to authorize the execution, delivery and performance of the
Plan of Merger and such related documents. Except as set forth on Exhibit 3.6,
the execution and delivery of the Plan of Merger does not and, subject to the
receipt of required stockholder and regulatory approvals and any other required
third-party consents or approvals, the consummation of the Merger will not
conflict with or violate any provisions of the Certificate of Incorporation of
Advantage Health or any provisions of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, applicable to Advantage Health, any
Advantage Health Subsidiary or any Advantage Health Partnership, or to which
Advantage Health, any Advantage Health Subsidiary or any Advantage Health
Partnership is a party or by which Advantage Health, any Advantage Health
Subsidiary or any Advantage Health Partnership is bound, or conflict with or
violate any restrictions of any kind to which it is subject which, if violated
or accelerated, would have, individually or in the aggregate, a material adverse
effect on Advantage Health, or which would prevent or delay consummation of the
Merger in any material respect or otherwise prevent Advantage Health from
performing its obligations hereunder in any material respect. The execution and
delivery of this Plan of Merger has been approved by the Board of Directors of
Advantage Health. This Plan of Merger has been duly executed and delivered by
Advantage Health and, assuming this Plan of Merger constitutes a valid and
binding obligation of HEALTHSOUTH and Aladdin Acquisition Corporation,
enforceable against HEALTHSOUTH and Aladdin Acquisition Corporation in
accordance with its terms, constitutes a valid and binding obligation of
Advantage Health, enforceable against Advantage Health in accordance with its
terms.
3.7 Advantage Health Financial Information. Advantage Health has
heretofore furnished HEALTHSOUTH with its Annual Report on Form 10-K for its
fiscal year ended August 31, 1995 (the "Advantage Health 1995 10-K"). As of its
date, the Advantage Health 1995 10-K did not contain any untrue statements of
material facts or omit to state material facts required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (except any such misstatement or omission
which was expressly corrected in a subsequent filing). As of its date, the
descriptions
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of the business, operations and financial condition of Advantage Health
contained in the Advantage Health 1995 10-K complied in all material respects
with the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated under such statutes.
Advantage Health has not filed any reports on Form 10-Q or 8-K since the filing
of the Advantage Health 1995 10-K. The financial statements contained in the
Advantage Health 1995 10-K, together with the notes thereto, have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated (except as may be indicated in the
notes thereto), reflect all known liabilities of Advantage Health, including all
known contingent liabilities as at August 31, 1995, and present fairly the
financial condition of Advantage Health at such date and the consolidated
results of operations and cash flows of Advantage Health for its fiscal year
ended August 31, 1995. The consolidated balance sheet of Advantage Health at
August 31, 1995 included in the Advantage Health 1995 10-K is herein referred to
as the "Advantage Health 1995 Balance Sheet".
3.8 Subsequent Events. Except as set forth on Exhibit 3.8 or disclosed
in the Advantage Health 1995 10-K or as otherwise permitted hereunder, Advantage
Health has not, since the date of the Advantage Health 1995 Balance Sheet:
(a) Incurred any material adverse change;
(b) Discharged or satisfied any material lien or encumbrance,
or paid or satisfied any material obligation or liability (absolute,
accrued, contingent or otherwise) other than (i) liabilities shown or
reflected on the Advantage Health 1995 Balance Sheet or (ii)
liabilities incurred since the date of the Advantage Health 1995
Balance Sheet in the ordinary course of business, which discharge or
satisfaction would, individually or in the aggregate, have a material
adverse effect on Advantage Health;
(c) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor which
would, individually or in the aggregate, have a material adverse effect
on Advantage Health, except as may have been required due to income or
operations of Advantage Health since the date of the Advantage Health
1995 Balance Sheet;
(d) Mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of the assets, tangible or intangible, which
assets are material to the consolidated business or financial condition
of Advantage Health;
(e) Sold or transferred any of the assets material to the
consolidated business of Advantage Health, cancelled any material debts
or claims or waived any material rights, except in the ordinary course
of business;
(f) Granted any general or uniform increase in the rates of
pay of employees or any material increase in salary payable or to
become payable by Advantage Health to
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any officer or employee, consultant or agent (other than normal merit
increases or consistent with past practice), or by means of any bonus
or pension plan, contract or other commitment, increased in a material
respect the compensation of any officer, employee, consultant or agent;
(g) Except for this Plan of Merger and any other agreement
executed and delivered pursuant to this Plan of Merger, entered into
any material transaction other than in the ordinary course of business
or permitted under other Sections hereof; or
(h) Issued any stock, bonds or other securities, other than
stock options granted to employees or consultants of Advantage Health
or warrants granted to third parties, and other than shares issued upon
the exercise of stock options granted to employees or consultants or
upon the exercise of warrants granted to third parties, all of which
are disclosed on Exhibit 3.2
3.9 Legal Proceedings. Except as listed on Exhibit 3.9 or described in
the Advantage Health 1995 10-K, Advantage Health has no knowledge of any pending
or threatened litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Advantage Health or the
transactions contemplated by this Plan of Merger for which Advantage Health is
uninsured or which, if resolved adversely to Advantage Health, would,
individually or in the aggregate, have a material adverse effect on Advantage
Health. To the best knowledge of Advantage Health, no valid basis for recovery
or other relief in any such action exists.
3.10 Contracts, etc. (a) Advantage Health has made available to
HEALTHSOUTH true copies of those outstanding contracts, leases, agreements and
arrangements filed as Item 10 exhibits to the Advantage Health 1995 10-K
(including those of such Item 10 exhibits as are incorporated by reference) as
are listed on Exhibit 3.10. Except as otherwise indicated on Exhibit 3.10, all
of such contracts, leases, agreements and arrangements are legally valid and
binding in accordance with their terms (assuming the other parties thereto are
bound) and in full force and effect, except for any such invalidity or failure
to be binding or in full force and effect which would not have, individually or
in the aggregate, a material adverse effect on Advantage Health. Except as
otherwise indicated on Exhibit 3.10, to Advantage Health's best knowledge, all
parties to such contracts, leases, agreements and arrangements have complied
with the provisions of such contracts, leases, agreements and arrangements in
all material respects and, to the best knowledge of Advantage Health, no party
thereto is in material default thereunder and no event has occurred which, but
for the lapse of time or the giving of notice or both, would constitute a
material default thereunder, except, in any such case, where such noncompliance
with or default under the contract, lease, agreement or arrangement would not,
individually or in the aggregate, have a material adverse effect on Advantage
Health.
3.11 Accounts Receivable. (a) Since the date of the Advantage Health
Balance Sheet, Advantage Health has not changed any principle or practice with
respect to the recordation of accounts receivable or the calculation of reserves
therefor, or any material collection, discount or write-off policy or procedure.
Advantage Health (including the Advantage Health
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Subsidiaries and Advantage Health Partnerships) is in compliance with the terms
and conditions of all third-party payor arrangements relating to its accounts
receivable, except to the extent that such noncompliance would not, individually
or in the aggregate, have a material adverse effect on Advantage Health.
(b) Except as set forth on Exhibit 3.11, without limiting the
generality of the foregoing, Advantage Health and each Advantage Health
Subsidiary or Advantage Health Partnership is in compliance with all Medicare
and Medicaid provider agreements to which it is a party, except to the extent
that such noncompliance would not, individually or in the aggregate, have a
material adverse effect on Advantage Health.
3.12 Tax Returns. Advantage Health has filed all tax returns and
reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed and granted and have not expired,
except to the extent that such failures to file, taken together, do not,
individually or in the aggregate, have a material adverse effect on Advantage
Health. Except as disclosed on Exhibit 3.12, Advantage Health has made all
material payments shown as due on such returns. Except as disclosed on Exhibit
3.12, Advantage Health has not been notified that any tax returns of Advantage
Health are currently under audit by the Internal Revenue Service or any state or
local tax agency. Except as set forth on Exhibit 3.12, no agreements have been
made by Advantage Health for the extension of time or the waiver of the statute
of limitations for the assessment or payment of any federal, state or local
taxes.
3.13 Employee Benefit Plans; Employment Matters. (a) Except as set
forth on Exhibit 3.13(a), Advantage Health has neither established nor maintains
nor is obligated to make contributions to or under or otherwise participate in
(i) any bonus or other type of incentive compensation plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document), (ii) any pension, profit-sharing, retirement or other plan,
program or arrangement, or (iii) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Except as
disclosed on Exhibit 3.13(a), all such plans listed on Exhibit 3.13(a)
(individually, a "Plan" and collectively, the "Plans") have been operated and
administered in all material respects in accordance with, as applicable, ERISA,
the Code, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay
Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as
amended, and the related rules and regulations adopted by those federal agencies
responsible for the administration of such laws. Except as disclosed on Exhibit
3.13(a), no act or failure to act by Advantage Health has resulted in a
"prohibited transaction" (as defined in ERISA) with respect to the Plans that is
not subject to a statutory or regulatory exception. No "reportable event" (as
defined in ERISA) has occurred with respect to any of the Plans which is subject
to Title IV of ERISA. Advantage Health has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multi-employer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980, as amended.
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(b) Except as disclosed in the Advantage Health 1995 10-K or on Exhibit
3.13(b), Advantage Health is not a party to any oral or written (i) union, guild
or collective bargaining agreement which agreement covers employees in the
United States (nor is it aware of any union organizing activity currently being
conducted in respect to any of its employees), (ii) agreement with any executive
officer or other key employee the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction of the
nature contemplated by this Plan of Merger and which provides for the payment of
in excess of $100,000, or (iii) agreement or plan, including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting, the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Plan of Merger or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Plan of Merger.
3.14 Compliance with Laws in General. Except as disclosed in the
Advantage Health 1995 10-K or on Exhibit 3.14, Advantage Health has not received
any notices of material violations of any federal, state and local laws,
regulations and ordinances relating to its business and operations, including,
without limitation, the Occupational Safety and Health Act, the Americans with
Disabilities Act, the Medicare or applicable Medicaid statutes and regulations
and any Environmental Laws (as hereinafter defined), and no notice of any
pending inspection or material violation of any such law, regulation or
ordinance has been received by Advantage Health which, if it were determined
that a violation had occurred, would, individually or in the aggregate, have a
material adverse effect on Advantage Health.
3.15 Licenses, Accreditation and Regulatory Approvals. Advantage
Health, the Advantage Health Subsidiaries and the Advantage Health Partnerships,
as applicable, to Advantage Health's best knowledge, hold all licenses, permits,
certificates of need and other regulatory approvals required by law with respect
to their respective businesses, operations and facilities as they are currently
or presently conducted (collectively, "Licenses"), except where the failure to
hold any such License or Licenses does not have, individually or in the
aggregate, a material adverse effect on Advantage Health. To Advantage Health's
best knowledge, all such Licenses are in full force and effect and Advantage
Health is in compliance in all material respects with all conditions and
requirements of such Licenses and with all rules and regulations relating
thereto, except where the absence of any such License or Licenses or the failure
of any such License or Licenses to be in full force and effect or any such
noncompliance does not have, individually or in the aggregate, a material
adverse effect on Advantage Health. Except as disclosed in the Advantage Health
1995 10-K or on Exhibit 3.15, any and all past litigation concerning any such
License, together with all claims and causes of action raised therein, has been
finally adjudicated. To Advantage Health's best knowledge, no such License has
been revoked, conditioned (except as may be customary) or restricted, and,
except as disclosed in the Advantage Health 1995 10-K, no action (equitable,
legal or administrative), arbitration or other process is pending, or to the
best knowledge of Advantage Health, threatened, which in any way challenges the
validity of, or seeks to revoke, condition or restrict any such License, except
where the invalidity or revocation, conditioning or restriction thereof would
not have a material adverse effect on Advantage Health. Subject to compliance
with applicable securities laws and
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the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"), the consummation of the Merger will not violate any law or restriction to
which Advantage Health is subject which, if violated, would, individually or in
the aggregate, have a material adverse effect on Advantage Health.
3.16 Commissions and Fees. Except for fees payable to Alex. Brown &
Sons Incorporated ("Alex. Brown"), there are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Plan of Merger which may be now or hereafter asserted
against HEALTHSOUTH resulting from any action taken by Advantage Health or its
stockholders, officers, directors or agents.
3.17 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
Advantage Health is not a party to any agreement the effect of which would be to
require HEALTHSOUTH, directly or indirectly, to retire or re-acquire all or part
of the shares of HEALTHSOUTH Common Stock to be issued pursuant to Section 2.1
hereof.
3.18 Disposition of Assets of Surviving Corporation. Except as provided
in Exhibit 3.18 with the consent of HEALTHSOUTH, Advantage Health is not a party
to any plan to dispose of a significant part of the assets of the Surviving
Corporation within two years after the Closing Date, other than dispositions in
the ordinary course of business of the Surviving Corporation and dispositions
intended to eliminate duplicate facilities or excess capacity.
3.19 Vote Required. The affirmative vote of a majority of the
outstanding Advantage Health Shares entitled to vote thereon is the only vote of
the holders of any class or series of Advantage Health capital stock necessary
to approve this Plan of Merger, the Merger and any other of the transactions
contemplated hereby.
3.20 Opinion of Financial Advisor. Advantage Health has received the
oral opinion of Alex. Brown to the effect that, as of the date hereof, the
Merger Consideration is fair to the holders of Advantage Health Shares from a
financial point of view, a written copy of which opinion will be delivered by
Advantage Health to HEALTHSOUTH prior to the date on which the definitive proxy
materials for the Proxy Statement (as defined in Section 7.4(a)) are filed with
the Securities and Exchange Commission (the "SEC").
3.21 No Untrue Representations. No representation or warranty by
Advantage Health in this Plan of Merger, and no exhibit to this Plan or Merger
or certificate issued by Advantage Health and furnished or to be furnished to
HEALTHSOUTH pursuant hereto, contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
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Section 4. Representations and Warranties of HEALTHSOUTH and the Subsidiary.
The Subsidiary and HEALTHSOUTH, jointly and severally, hereby represent
and warrant to Advantage Health as follows:
4.1 Organization, Existence, Good Standing and Capital Stock. The
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary corporate
power to own its properties and assets and to carry on its business as presently
conducted. The Subsidiary's authorized capital consists of 1,000 shares of
Subsidiary Common Stock, of which 1,000 shares have been duly authorized and
validly issued and registered in the name of HEALTHSOUTH and are fully paid and
nonassessable. The Subsidiary has not, within the two years immediately
preceding the date of this Plan of Merger, owned, directly or indirectly, any
shares of Advantage Health Common Stock.
4.2 Power and Authority. The Subsidiary has corporate power to execute,
deliver and perform the Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to the
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein, has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to duly and validly authorize the
execution and delivery of the Plan of Merger and such related documents. The
execution and delivery of the Plan of Merger does not and, subject to the
receipt of required regulatory approvals and any other required third-party
consents or approvals, the consummation of the Merger contemplated hereby will
not conflict with or violate any provisions of the Certificate of Incorporation
or Bylaws of the Subsidiary, or the provisions of, or result in the acceleration
of any obligation under, any mortgage, lien, lease agreement, instrument, order,
arbitration award, judgment or decree applicable to the Subsidiary, or to which
the Subsidiary is a party or by which it is bound, or conflict with or violate
any restrictions of any kind to which it is subject which, if violated or
accelerated, would have, individually or in the aggregate, a material adverse
effect on the Subsidiary or which would prevent of delay consummation of the
Merger in any material respect or otherwise prevent the Subsidiary from
performing its obligations hereunder in any material respect. The execution and
delivery of this Plan of Merger has been approved by the Board of Directors of
the Subsidiary and by HEALTHSOUTH as the sole stockholder of Aladdin Acquisition
Corporation. This Plan of Merger has been duly and validly executed and
delivered by the Subsidiary and, assuming this Plan of Merger constitutes a
valid and binding obligation of Advantage Health, enforceable against Advantage
Health in accordance with its terms, constitutes the legal, valid and binding
obligation of Aladdin Acquisition Corporation, enforceable against the
Subsidiary in accordance with its terms.
4.3 Legal Proceedings. There are no actions, suits or proceedings
pending or threatened against or relating to or affecting the Subsidiary or the
transactions relating to this Plan of Merger. To the best knowledge of Aladdin
Acquisition Corporation, no valid basis for recovery or other relief in such
action, suit or proceeding exists.
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4.4 No Contracts or Liabilities. Other than the obligations created
under the Plan of Merger, the Subsidiary has not engaged in any business
activities of any type or kind whatsoever, and is not obligated under any
contracts, claims, leases, liabilities (contingent or otherwise), loans or
otherwise.
4.5 Commissions and Fees. Except for fees owed to Smith Barney Inc.
("Smith Barney"), there are no claims for brokerage commissions, investment
bankers' fees or finder's fees in connection with the transaction contemplated
by the Plan of Merger resulting from any action taken by the Subsidiary,
HEALTHSOUTH as its sole stockholder or any of its officers, directors or agents.
Section 5. Representations and Warranties of HEALTHSOUTH.
HEALTHSOUTH hereby represents and warrants to Advantage Health as
follows:
5.1 Organization, Existence and Good Standing. HEALTHSOUTH is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. HEALTHSOUTH has all necessary corporate power to own
its properties and assets and to carry on its business as presently conducted.
Each subsidiary of HEALTHSOUTH (a "HEALTHSOUTH Subsidiary"), each general
partnership, limited partnership and joint venture in which HEALTHSOUTH or any
HEALTHSOUTH Subsidiary is a general partner or a co- venturer (a "HEALTHSOUTH
Partnership"), and each limited liability company in which HEALTHSOUTH, any
HEALTHSOUTH Subsidiary or HEALTHSOUTH Partnership is a member (a "HEALTHSOUTH
LLC") is duly organized, validly existing, and (to the extent such concept is
applicable under the laws of such jurisdiction) in good standing in its
respective jurisdiction of organization, and has all necessary corporate power
to own its properties and assets and to carry on its business as presently
conducted. HEALTHSOUTH, all HEALTHSOUTH Subsidiaries, all HEALTHSOUTH
Partnerships and all HEALTHSOUTH LLCs are duly qualified to do business and are
in good standing as foreign corporations, foreign limited partnerships or
foreign limited liability companies, as the case may be, in all jurisdictions in
which the character of the property owned, leased or operated or the nature of
the business transacted by them makes qualification necessary, except where the
failure to be so qualified or in good standing would not have a material adverse
effect on HEALTHSOUTH. HEALTHSOUTH is not, and has not been within the two years
immediately preceding the date of this Plan of Merger, a subsidiary or division
of another corporation, nor has HEALTHSOUTH within such time owned, directly or
indirectly, any shares of Advantage Health Common Stock.
5.2 HEALTHSOUTH Capital Stock. HEALTHSOUTH has an authorized
capitalization of 1,500,000 shares of Preferred Stock, par value $.10 per share,
none of which shares are issued and outstanding, and none of which shares are
held in treasury, and 150,000,000 shares of Common Stock, par value $0.01 per
share, of which 97,217,000 shares are issued and outstanding, and 182,000 shares
are held in treasury. All of the issued and outstanding shares of HEALTHSOUTH
Common Stock have been duly and validly issued and
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are fully paid and nonassessable. Except as disclosed in the HEALTHSOUTH
Documents (as hereinafter defined), there are no options, warrants or similar
rights granted by HEALTHSOUTH or any other agreements to which HEALTHSOUTH is a
party providing for the issuance or sale by it of any additional securities.
There is no liability for dividends declared or accumulated but unpaid with
respect to any shares of HEALTHSOUTH Common Stock. HEALTHSOUTH has not made any
distributions to any holder of HEALTHSOUTH Common Stock or participated in or
effected any issuance, exchange or retirement of HEALTHSOUTH Common Stock, or
otherwise changed the equity interests of holders of HEALTHSOUTH Common Stock,
in contemplation of effecting the Merger, within the two years immediately
preceding the date of this Plan of Merger. Any shares of HEALTHSOUTH Common
Stock that HEALTHSOUTH has re-acquired during the two years immediately
preceding the date of this Plan of Merger have been so re-acquired only for
purposes other than Business Combinations.
5.3 Subsidiary Common Stock. HEALTHSOUTH owns, beneficially and of
record, all of the issued and outstanding shares of Subsidiary Common Stock,
which are validly issued and outstanding, fully paid and nonassessable, free and
clear of all liens and encumbrances. HEALTHSOUTH has the corporate power to
endorse and surrender such shares of Subsidiary Common Stock for cancellation
pursuant to the Plan of Merger. HEALTHSOUTH has taken all such actions as may be
required in its capacity as the sole stockholder of Aladdin Acquisition
Corporation to approve the Merger.
5.4 Power and Authority. HEALTHSOUTH has corporate power to execute,
deliver and perform the Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to the
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein, has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution and delivery
of the Plan of Merger and such related documents. The execution and delivery of
the Plan of Merger does not and, subject to the receipt of required regulatory
approvals and any other required third-party consents or approvals, the
consummation of the Merger contemplated hereby will not, violate any provisions
of the Certificate of Incorporation or Bylaws of HEALTHSOUTH, or any provision
of, or result in the acceleration of any obligation under, any mortgage, lien,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which HEALTHSOUTH, any HEALTHSOUTH Subsidiary, any HEALTHSOUTH Partnership or
any HEALTHSOUTH LLC is a party or by which HEALTHSOUTH, any HEALTHSOUTH
Subsidiary, any HEALTHSOUTH Partnership or any HEALTHSOUTH LLC is bound, or
conflict with or violate any restrictions of any kind to which HEALTHSOUTH, any
HEALTHSOUTH Subsidiary, any HEALTHSOUTH Partnership or any HEALTHSOUTH LLC is
subject which, if violated or accelerated, would have, individually or in the
aggregate, a material adverse effect on HEALTHSOUTH or which would prevent or
delay consummation of the Merger in any material respect or otherwise prevent
HEALTHSOUTH from performing its obligations hereunder in any material respect.
The execution and delivery of this Agreement has been approved by the Board of
Directors of HEALTHSOUTH. The Plan of Merger has been duly and validly executed
and delivered by HEALTHSOUTH and, assuming that the Plan of Merger constitutes a
valid and binding obligation of Advantage Health, enforceable against it
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in accordance with its terms, constitutes the legal, valid and binding
obligation of HEALTHSOUTH, enforceable against HEALTHSOUTH in accordance with
its terms.
5.5 HEALTHSOUTH Financial Information. HEALTHSOUTH has heretofore
furnished Advantage Health with the following documents:
(i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(ii) its Quarterly Reports on Form 10-Q for all completed
fiscal quarters following HEALTHSOUTH's last completed fiscal year and
all reports on Form 8-K filed since the end of such fiscal year; and
(iii) Its Registration Statement on Form S-4 (Registration No.
33-64935) relating to its pending acquisition of Surgical Care
Affiliates, Inc.
(documents included in (i) - (iii) above being collectively referred to herein
as the "HEALTHSOUTH Documents"). As of their respective dates, the HEALTHSOUTH
Documents did not contain any untrue statements of material facts or omit to
state material facts required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the descriptions of the business,
operations and financial condition of HEALTHSOUTH contained in the HEALTHSOUTH
Documents complied in all material respects with the applicable requirements of
the Securities Act, and the Exchange Act, and the rules and regulations
promulgated under such statutes. The financial statements contained in the
HEALTHSOUTH Documents, together with the notes thereto, have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods indicated, reflect all known liabilities of HEALTHSOUTH,
including all known contingent liabilities as of the end of each period
reflected therein, and present fairly the financial condition of HEALTHSOUTH at
such dates and the consolidated results of operations and cash flows of
HEALTHSOUTH for the periods then ended.
5.6 Subsequent Events. Except as set forth on Exhibit 5.6 or disclosed
in the HEALTHSOUTH Documents or as otherwise permitted hereunder, HEALTHSOUTH
has not, since December 31, 1994:
(a) Incurred any material adverse change;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the December 31,
1994 Balance Sheet contained in the HEALTHSOUTH Documents or (ii) liabilities
incurred since December 31, 1994 which discharge or satisfaction would not have
a material adverse effect on HEALTHSOUTH;
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(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on HEALTHSOUTH, except as may have been required due to
income or operations of HEALTHSOUTH since December 31, 1994;
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are material
to the consolidated business or financial condition of HEALTHSOUTH;
(e) Sold or transferred any of the assets material to the consolidated
business of HEALTHSOUTH, cancelled any material debts or claims or waived any
material rights, except in the ordinary course of business;
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable by
HEALTHSOUTH to any officer or employee, consultant or agent (other than normal
merit increases or consistent with its past practice), or by means of any bonus
or pension plan, contract or other commitment, increased in a material respect
the compensation of any officer, employee, consultant or agent;
(g) Except for this Plan or Merger and any other agreement executed and
delivered pursuant to this Plan of Merger and except as disclosed in the
HEALTHSOUTH Documents, entered into any material transaction other than in the
ordinary course of business or permitted under other Sections hereof; or
(h) Issued any stock, bonds or other securities, other than stock
options granted to employees or consultants of HEALTHSOUTH or warrants granted
to third parties, and other than shares issued upon the exercise of stock
options granted to employees or consultants or upon the exercise of warrants
granted to third parties or upon the conversion of convertible debentures, all
of which are described or in the HEALTHSOUTH Documents.
5.7 Legal Proceedings. Except as described in the HEALTHSOUTH
Documents, HEALTHSOUTH has no knowledge of any pending or threatened litigation,
governmental investigation, condemnation or other proceeding against or relating
to or affecting HEALTHSOUTH or the transactions contemplated by this Plan of
Merger for which HEALTHSOUTH is uninsured or which, if resolved adversely to
HEALTHSOUTH, would have, individually or in the aggregate, a material adverse
effect on HEALTHSOUTH. To the best knowledge of HEALTHSOUTH, no valid basis for
recovery or other relief in any such action exists.
5.8 Contracts, etc. HEALTHSOUTH has made available to Advantage Health
true copies of those contracts, leases, agreements and arrangements filed as
Item 10 exhibits to HEALTHSOUTH's Report on Form 10-K included in the
HEALTHSOUTH Documents (including such of those Item 10 exhibits as are
incorporated by reference) as are listed on Exhibit 5.8. Except as otherwise
indicated on Exhibit 5.8, to HEALTHSOUTH's best
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knowledge, all of such contracts, leases, agreements and arrangements are
legally valid and binding in accordance with their terms (assuming the other
parties thereto are bound) and in full force and effect, except for any such
invalidity or failure to be binding or in full force and effect which would not
have, individually or in the aggregate, a material adverse effect on
HEALTHSOUTH. Except as otherwise indicated on Exhibit 5.8, all parties to such
contracts, leases, agreements and arrangements have complied with the provisions
of such contracts, leases, agreements and arrangements in all material respects
and, to the best knowledge of HEALTHSOUTH, no party thereto is in material
default thereunder and no event has occurred which, but for the lapse of time or
the giving of notice or both, would constitute a material default hereunder,
except, in any such case, where such noncompliance with or default under the
contract, lease, agreement or arrangement or the default or breach thereunder or
thereof would not have, individually or in the aggregate, a material adverse
effect on HEALTHSOUTH.
5.9 Accounts Receivable. (a) Since December 31, 1994, HEALTHSOUTH has
not changed any material principle or practice with respect to the recordation
of accounts receivable or the calculation or reserves therefor, or any material
collection, discount or write-off policy or procedure. HEALTHSOUTH (including
the HEALTHSOUTH Subsidiaries, HEALTHSOUTH Partnerships and HEALTHSOUTH LLCs) is
in compliance with the terms and conditions of all third-party payor
arrangements relating to its accounts receivable, except to the extent that such
noncompliance would not have a material adverse effect on HEALTHSOUTH.
(b) Without limiting the generality of the foregoing, HEALTHSOUTH and
each HEALTHSOUTH Subsidiary, HEALTHSOUTH Partnership and HEALTHSOUTH LLC is in
compliance with all Medicare and Medicaid provider agreements to which it is a
party, except to the extent that such noncompliance would not, individually or
in the aggregate, have a material adverse effect on HEALTHSOUTH.
5.10 Tax Returns. HEALTHSOUTH has filed all tax returns required to be
filed by it or requests for extensions to file such returns or reports have been
timely filed and granted and have not expired, except to the extent that such
failures to file, taken together, do not have a material adverse effect on
HEALTHSOUTH. HEALTHSOUTH has made all material payments shown as due on such
returns. Except as disclosed on Exhibit 5.10, HEALTHSOUTH has not been notified
that any tax returns of HEALTHSOUTH are currently under audit by the Internal
Revenue Service or any state or local tax agency. Except as disclosed on Exhibit
5.10, no agreements have been made by HEALTHSOUTH for the extension of time or
the waiver of the statute of limitations for the assessment or payment of any
federal, state or local taxes.
5.11 Employee Benefit Plans; Employment Matters. (a) Except as
disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH has neither established nor
maintains nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (whether or not
set forth in a written document), (ii) any pension, profit-sharing, retirement
or other plan, program or arrangement, or (iii) any other employee benefit plan,
fund or program, including, but not limited to, those described in Section 3(3)
of ERISA. All such
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plans have been operated and administered in all material respects in accordance
with, as applicable, ERISA, the Code, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those federal agencies responsible for the administration of such
laws. No act or failure to act by HEALTHSOUTH has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Plans that is not subject
to a statutory or regulatory exception. No "reportable event" (as defined in
ERISA) has occurred with respect to any of the Plans which is subject to Title
IV of ERISA. Except as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH has
not previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980, as amended.
(b) Except as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH is
not a party to any oral or written (i) union, guild or collective bargaining
agreement which agreement covers employees in the United States (nor is it aware
of any union organizing activity currently being conducted in respect to any of
its employees), (ii) agreement with any executive officer or other key employee
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction of the nature contemplated by this
Plan of Merger and which provides for the payment of in excess of $100,000, or
(iii) agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Plan of Merger or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Plan of Merger.
5.12 Compliance with Laws in General. Except as disclosed in the
HEALTHSOUTH Documents, HEALTHSOUTH has not received any notices of material
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations, including, without limitation, the
Occupational Safety and Health Act, the Americans with Disabilities Act, the
Medicare or applicable Medicaid statutes and regulations and any Environmental
Laws, and no notice of any pending inspection or material violation of any such
law, regulation or ordinance has been received by HEALTHSOUTH with respect to
any alleged violation which, if it were determined that a violation occurred,
would have a material adverse effect on HEALTHSOUTH.
5.13 Licenses, Accreditation and Regulatory Approvals. HEALTHSOUTH, the
HEALTHSOUTH Subsidiaries, the HEALTHSOUTH Partnerships and the HEALTHSOUTH LLCs
hold all Licenses which are needed or required by law with respect to their
respective businesses, operations and facilities as they are currently or
presently conducted, except where the failure to hold any such License or
Licenses does not have a material adverse effect on HEALTHSOUTH. To
HEALTHSOUTH's best knowledge, all such Licenses are in full force and effect and
HEALTHSOUTH is in compliance in all material respects with all conditions and
requirements of such Licenses and with all rules and regulations relating
thereto, except where the absence of any such License or Licenses or the failure
of any such License or Licenses to
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be in full force and effect or any such noncompliance does not have,
individually or in the aggregate, a material adverse effect on HEALTHSOUTH.
Except as disclosed in the HEALTHSOUTH Documents, any and all past litigation
concerning any such License, together with all claims and causes of action
raised therein, has been finally adjudicated. To HEALTHSOUTH's best knowledge,
no such License has been revoked, conditioned (except as may be customary) or
restricted, and, except as disclosed in the HEALTHSOUTH Documents, no action
(equitable, legal or administrative), arbitration or other process is pending,
or to the best knowledge of HEALTHSOUTH, threatened, which in any way challenges
the validity of, or seeks to revoke, condition or restrict any such License,
except where the invalidity or revocation, conditioning or restriction thereof
would not have a material adverse effect on HEALTHSOUTH. Subject to compliance
with applicable securities laws, the HSR Act and other or local rules or
regulations requiring notice, approval, or other action upon the occurrence of a
change in control of Advantage Health, any of the Advantage Health Subsidiaries
or any of the Advantage Health Partnerships, the consummation of the Merger will
not violate any law or restriction to which HEALTHSOUTH is subject.
5.14 Commissions and Fees. Except for fees owed to Smith Barney, there
are no claims for brokerage commissions, investment bankers' fees or finder's
fees in connection with the transactions contemplated by the Plan of Merger
resulting from any action taken by HEALTHSOUTH or any of its stockholders,
officers, directors or agents.
5.15 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
HEALTHSOUTH has not agreed directly or indirectly to retire or re-acquire all or
part of the shares of HEALTHSOUTH Common Stock to be issued pursuant to Section
2.1 hereof.
5.16 Disposition of Assets of Surviving Corporation. HEALTHSOUTH does
not intend or plan to dispose of, or to cause the Surviving Corporation to
dispose of, a significant part of the assets of the Surviving Corporation within
two years after the Effective Time, other than dispositions in the ordinary
course of business of the Surviving Corporation and dispositions intended to
eliminate duplicative facilities or excess capacity.
5.17 No Vote Required. No vote of the holders of outstanding shares of
any class or series of HEALTHSOUTH capital stock is necessary to approve this
Plan of Merger, the Merger and the transactions contemplated hereby and no such
vote will be sought by HEALTHSOUTH.
5.18 Opinion of Financial Advisor. HEALTHSOUTH has received the oral
opinion of Smith Barney to the effect that, as of the date of this Plan of
Merger, the Exchange Ratio is fair to HEALTHSOUTH from a financial point of
view, a written copy of which opinion will be delivered by HEALTHSOUTH to
Advantage Health prior to the date on which the definitive proxy materials for
the Proxy Statement (as defined in Section 7.4(a)) are filed with the Securities
and Exchange Commission.
5.19 HEALTHSOUTH Common Stock. HEALTHSOUTH will have a sufficient
number of authorized but unissued and/or treasury shares of its Common Stock
available for issuance
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to the holders of Advantage Health Shares in accordance with the provisions of
the Plan of Merger. The HEALTHSOUTH Common Stock to be issued pursuant to the
Plan of Merger will, when so delivered, be (i) duly and validly issued, fully
paid and nonassessable, (ii) issued pursuant to an effective registration
statement under the Securities Act, and (iii) authorized for listing on the New
York Stock Exchange (the "NYSE") upon official notice of issuance.
5.20 Investment Intent. HEALTHSOUTH is acquiring the Advantage Health
Shares hereunder for investment, for its own account and not with a view to the
distribution or sale thereof, and HEALTHSOUTH has no understanding, agreement or
arrangement to sell, distribute, partition or otherwise transfer or assign all
or any part of the Advantage Health Shares to any other person, firm or
corporation.
5.21 No Untrue Representation. No representation or warranty by
HEALTHSOUTH in this Plan of Merger, and no exhibit to this Plan of Merger or
certificate issued by HEALTHSOUTH and furnished or to be furnished to Advantage
Health pursuant hereto, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
Section 6. Access to Information and Documents.
6.1 Access to Information. Between the date hereof and the Closing
Date, each of Advantage Health and HEALTHSOUTH shall give to the other party and
its counsel, accountants and other representatives full access to all the
properties, documents, contracts, personnel files and other records of such
party and shall furnish the other party with copies of such documents and with
such information with respect to the affairs of such party as the other party
may from time to time reasonably request. Each party will disclose and make
available to the other party and its representatives all books, contracts,
accounts, personnel records, letters of intent, papers, records, communications
with regulatory authorities and other documents relating to the business and
operations of such party. In addition, Advantage Health shall make available to
HEALTHSOUTH all such banking, investment and financial information as shall be
necessary to allow for the efficient integration of Advantage Health's banking,
investment and financial arrangements with those of HEALTHSOUTH at the Effective
Time.
6.2 Return of Records. If the transactions contemplated hereby are not
consummated and this Plan of Merger terminates, each party agrees to promptly
return all documents, contracts, records or properties of the other party and
all copies thereof furnished pursuant to this Section 6 or otherwise. All
information disclosed by any party or any affiliate of such party shall be
deemed to be "confidential information" under the terms of the confidentiality
agreements, heretofore executed and delivered by and between Advantage Health
and HEALTHSOUTH (the "Confidentiality Agreements").
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<PAGE>
6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party.
(b) With respect to matters as to which any party has made express
representations or warranties herein, the parties shall be entitled to rely upon
such express representations and warranties irrespective of any investigations
made by such parties, except to the extent that such investigations result in
actual knowledge of the inaccuracy or falsehood of particular representations
and warranties.
Section 7. Covenants.
7.1 Preservation of Business. Advantage Health will use its best
efforts to preserve the business organization of Advantage Health intact, to
keep available to HEALTHSOUTH and the Surviving Corporation the services of the
present employees of Advantage Health, and to preserve for HEALTHSOUTH and the
Surviving Corporation the goodwill of the suppliers, customers and others having
business relations with Advantage Health.
7.2 Material Transactions. Prior to the Effective Time and except as
set forth on Exhibit 7.2, Advantage Health will not (other than as required
pursuant to the terms of the Plan of Merger and the related documents and other
than with respect to transactions for which binding commitments have been
entered into prior to the date hereof and transactions described in Exhibit 7.2
which do not vary materially from the terms set forth on Exhibit 7.2), without
first obtaining the written consent of HEALTHSOUTH (such consent not to be
unreasonably withheld:
(a) Encumber any asset or enter into any transaction or make
any contract or commitment relating to the properties, assets and
business of Advantage Health, other than in the ordinary course of
business;
(b) Enter into any employment contract which is not terminable
upon notice of 30 days or less, at will, and without penalty to
Advantage Health, except as provided herein;
(c) In addition to any existing or prospective contract or
agreement disclosed on Exhibit 7.2 and other than acquisitions or other
commitments not exceeding $15,000,000 in the aggregate, enter into any
contract or agreement (i) which cannot be performed within three months
or less, or (ii) which involves the expenditure of over $100,000;
(d) Issue or sell, or agree to issue or sell, any shares of
capital stock or other securities of Advantage Health (other than
options to purchase shares of Advantage Health Common Stock issued
after the date hereof in the ordinary course of Advantage Health's
business or consistent with its past practice), except upon exercise of
currently
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outstanding stock options (or upon exercise of such permitted
subsequently granted options);
(e) Except for contributions to Advantage Health's existing
retirement plans, make any payment or distribution to the trustee under
any bonus, pension, profit-sharing or retirement plan or incur any
obligation to make any such payment or contribution which is not in
accordance with Advantage Health's usual past practice, or make any
payment or contributions or incur any obligation pursuant to or in
respect of any other plan or contract or arrangement providing for
bonuses, executive incentive compensation, pensions, deferred
compensation, retirement payments, profit-sharing or the like,
establish or enter into any such plan, contract or arrangement, or
terminate any Plan;
(f) Extend credit to anyone, except in the ordinary course of
business or consistent with its past practice;
(g) Guarantee the obligation of any person, firm or corporation,
except in the ordinary course of business or consistent with its past
practice; or
(h) Amend its Certificate of Incorporation or Bylaws.
(i) Take any action of a kind described in Section 3.8(b) - (h).
7.3 Meeting of Stockholders. (a) Subject to the further exercise of its
Board of Directors' fiduciary duties (either prior to or after the taking of any
of the following steps), Advantage Health will take all steps necessary in
accordance with its Certificate of Incorporation and Bylaws to call, give notice
of, convene and hold a special meeting of its stockholders as soon as
practicable after the effectiveness of the Registration Statement (as defined in
Section 7.4 hereof), for the purpose of approving this Plan of Merger and for
such other purposes as may be necessary (the "Special Meeting"). Unless this
Plan of Merger shall have been validly terminated as provided herein, the Board
of Directors of Advantage Health (subject to the provisions of Section 8.1(c)
hereof) will (i) recommend to its stockholders the approval of this Plan of
Merger, the transactions contemplated hereby and any other matters to be
submitted to its stockholders in connection therewith, to the extent that such
approval is required by applicable law in order to consummate the Merger, and
(ii) use reasonable best efforts to obtain the approval by its stockholders of
this Plan of Merger, the Merger and any other of the transactions contemplated
hereby requiring such stockholder approval.
(b) Nothing contained herein shall affect the right of Advantage Health
to take action by written consent in lieu of a meeting to the extent permitted
by applicable law and its Certificate of Incorporation and Bylaws.
7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with
the SEC and any other applicable regulatory bodies, as soon as practicable, a
Registration Statement on Form S-4 with respect to the shares of HEALTHSOUTH
Common Stock to be issued in the
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Merger (the "Registration Statement"), and will otherwise proceed promptly to
satisfy the requirements of the Securities Act, including Rule 145 thereunder.
The Registration Statement shall contain a proxy statement of Advantage Health
for the Special Meeting containing the information required by the Exchange Act
(the "Proxy Statement"). HEALTHSOUTH shall take all reasonable steps to cause
the Registration Statement to be declared effective and to maintain such
effectiveness until all of the shares covered thereby have been distributed.
HEALTHSOUTH shall promptly amend or supplement the Registration Statement to the
extent necessary in order to make the statements therein not misleading or to
correct any misstatements which have become false or misleading. HEALTHSOUTH
shall use its reasonable best efforts to have the Proxy Statement approved by
the SEC under the provisions of the Exchange Act as soon as practicable.
HEALTHSOUTH shall provide Advantage Health with copies of all filings made
pursuant to this Section 7.4 reasonably in advance of their filing and shall
consult with Advantage Health on responses to any comments made by the staff of
the SEC with respect thereto.
(b) The information specifically designated as being supplied by
Advantage Health for inclusion in the Registration Statement shall not, at the
time the Registration Statement is declared effective, at the time the Proxy
Statement is first mailed to holders of Advantage Health Common Stock, at the
time of the Special Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information specifically designated as being supplied by
Advantage Health for inclusion in the Proxy Statement shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to holders of Advantage Health Common Stock at the time of the Special Meetings
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to Advantage Health, or its officers or
directors, is discovered by Advantage Health which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Advantage Health shall promptly inform HEALTHSOUTH and HEALTHSOUTH shall
thereupon file such amendment to the Registration Statement. All documents, if
any, that Advantage Health is responsible for filing with the SEC in connection
with the transactions contemplated hereby shall comply as to form in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The information specifically designated as being supplied by
HEALTHSOUTH for inclusion in the Registration Statement shall not, at the time
the Registration Statement is declared effective, at the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
holders of Advantage Health Common Stock, at the time of the Special Meeting and
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. The information specifically
designated as being supplied by HEALTHSOUTH for inclusion in the Proxy Statement
to be sent to the holders of Advantage
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Health Common Stock in connection with the Special Meeting shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to holders of Advantage Health Common Stock, at the time of the
Special Meeting or at the Effective Time, contain any untrue statement or a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to HEALTHSOUTH or its
officers or directors, is discovered by HEALTHSOUTH which should be set forth in
an amendment to the Registration Statement or a supplement to the Proxy
Statement, HEALTHSOUTH shall promptly inform Advantage Health and shall promptly
file such amendment to the Registration Statement. All documents that
HEALTHSOUTH is responsible for filing with the SEC in connection with the
transactions contemplated hereby shall comply as to form in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
(d) Prior to the Closing Date, HEALTHSOUTH shall use its reasonable
best efforts to cause the shares of HEALTHSOUTH Common Stock to be issued
pursuant to the Merger to be registered or qualified under all applicable
securities or Blue Sky laws of each of the states and territories of the United
States, and to take any other actions which may be necessary to enable the
HEALTHSOUTH Common Stock to be issued pursuant to the Merger to be distributed
in each such jurisdiction.
(e) Prior to the Closing Date, HEALTHSOUTH shall file an additional
listing application (the "Listing Application") with the NYSE relating to the
shares of HEALTHSOUTH Common Stock to be issued in connection with the Merger,
and shall use its reasonable best efforts to cause such shares of HEALTHSOUTH
Common Stock to be approved for listing on the NYSE, upon official notice of
issuance, prior to the Closing Date.
(f) Advantage Health shall furnish all information to HEALTHSOUTH with
respect to Advantage Health, the Advantage Health Subsidiaries and the Advantage
Health Partnerships as HEALTHSOUTH may reasonably request for inclusion in the
Registration Statement, the Proxy Statement and the Listing Application, and
shall otherwise cooperate with HEALTHSOUTH in the preparation and filing of such
documents.
7.5 Exemption from State Takeover Laws. Advantage Health shall take all
reasonable steps necessary to exempt Advantage Health and the Merger from the
requirements of any state takeover statute or other similar state law which
would prevent or impede the consummation of the transactions contemplated
hereby, by action of Advantage Health's Board of Directors or otherwise.
7.6 HSR Act Compliance. HEALTHSOUTH and Advantage Health shall promptly
make their respective filings, and shall thereafter use their reasonable best
efforts to promptly make any required submissions, under the HSR Act with
respect to the Merger and the transactions contemplated hereby. HEALTHSOUTH and
Advantage Health shall use their
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respective reasonable best efforts to obtain all other permits, authorizations,
consents and approvals from third parties and governmental authorities necessary
to consummate the Merger and the transactions contemplated hereby.
7.7 Public Disclosures. HEALTHSOUTH and Advantage Health shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this Plan of Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation except as may be required by applicable law or
requirements of the Exchange. The parties shall issue a joint press release,
mutually acceptable to HEALTHSOUTH and Advantage Health, promptly upon execution
and delivery of this Plan of Merger.
7.8 Resignation of Advantage Health Directors. On or prior to the
Closing Date, Advantage Health shall deliver to HEALTHSOUTH evidence
satisfactory to HEALTHSOUTH of the resignation of the Directors of Advantage
Health, such resignations to be effective on the Closing Date.
7.9 Notice of Subsequent Events. Each party hereto shall notify the
other parties of any changes, additions or events which would cause any material
change in or material addition to any Exhibit delivered by the notifying party
under this Plan of Merger, promptly after the occurrence of the same.
7.10 No Solicitations. Advantage Health may, directly or indirectly,
furnish information and access, in response to unsolicited requests therefor, to
the same extent permitted by Section 6.1, to any corporation, partnership,
person or other entity or group, pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with such
corporation, partnership, person or other entity or group concerning any
proposal to acquire Advantage Health upon a merger, purchase of assets, purchase
of or tender offer for Advantage Health Shares or similar transaction (an
"Alternative Transaction"), if the Board of Directors of Advantage Health
determines in its good faith judgment in the exercise of its fiduciary duties or
the exercise of its duties under Rule 14e-2 under the Exchange Act, after
consultation with legal counsel and its financial advisors, that such action is
appropriate in furtherance of the best interest of its stockholders. Except as
set forth above, Advantage Health shall not, and shall direct each officer,
director, employee, representative and agent of Advantage Health not to,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any corporation,
partnership, person or other entity or group (other than HEALTHSOUTH or an
affiliate or associate or agent of HEALTHSOUTH) concerning any merger, sale of
assets, sale of or tender offer for Advantage Health Shares or similar
transactions involving Advantage Health. Advantage Health shall promptly notify
HEALTHSOUTH if it shall have, on or after the date hereof, entered into a
confidentiality agreement with any third party in response to any unsolicited
request for information and access in connection with a possible Alternative
Transaction involving such party, such notification to include the identity of
such third party.
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7.11 Other Actions. Subject to the provisions of Section 7.10 hereof,
neither Advantage Health, nor the Subsidiary, nor HEALTHSOUTH shall knowingly or
intentionally take any action or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
material respect or in any of the conditions to the Merger set forth in this
Plan of Merger not being satisfied, or (unless such action or omission is
required by applicable law) would adversely affect the ability of Advantage
Health or HEALTHSOUTH to obtain any consents or approvals required of it for the
consummation of the Merger without imposition of a condition or restriction
which would have a material adverse effect on the Surviving Corporation, would,
or might reasonably be expected to, delay the holding of the Special Meeting,
the taking of a vote thereat, the filing of the Registration Statement or the
declaration of the effectiveness thereof by the SEC, or would otherwise
materially impair the ability of Advantage Health, the Subsidiary or HEALTHSOUTH
to consummate the Merger in accordance with the terms of this Plan of Merger or
materially delay such consummation.
7.12 Accounting Methods. Neither HEALTHSOUTH nor Advantage Health shall
change its methods of accounting in effect at its most recent fiscal year end,
except as required by changes in generally accepted accounting principles as
concurred by such parties' independent accountants.
7.13 Pooling and Tax-Free Reorganization Treatment. Neither HEALTHSOUTH
nor Advantage Health shall intentionally take or cause to be taken any action,
whether on or before the Effective Time, which would disqualify the Merger as a
"pooling of interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the Code.
7.14 Affiliate and Pooling Agreements. HEALTHSOUTH and Advantage Health
will each use their respective reasonable best efforts to cause each of their
respective Directors and executive officers and each of their respective
"affiliates" (within the meaning of Rule 145 under the Securities Act) to
execute and deliver to HEALTHSOUTH as soon as practicable an agreement
substantially in the form attached hereto as Exhibit 7.14 relating to the
disposition of the Advantage Health Shares and shares of HEALTHSOUTH Common
Stock held by such person and the shares of HEALTHSOUTH Common Stock issuable
pursuant to this Plan of Merger.
7.15 Cooperation. (a) HEALTHSOUTH and Advantage Health shall together,
or pursuant to an allocation of responsibility agreed to between them, (i)
cooperate with one another in determining whether any filings required to be
made or consents required to be obtained in any jurisdiction prior to the
Effective Time in connection with the consummation of the transactions
contemplated hereby and cooperate in making any such filings promptly and in
seeking to obtain timely any such consents, (ii) use their respective reasonable
best efforts to cause to be lifted any injunction prohibiting the Merger, or any
part thereof, or the other transactions contemplated hereby, and (iii) furnish
to one another and to one another's counsel all such information as may be
required to effect the foregoing actions.
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(b) Subject to the terms and conditions herein provided, and unless
this Plan of Merger shall have been validly terminated as provided herein, each
of HEALTHSOUTH and Advantage Health shall use all reasonable efforts (i) to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements which may be imposed on such party (or any subsidiaries or
affiliates of such party) with respect to the Plan of Merger and to consummate
the transactions contemplated hereby, subject to the votes of its stockholders
described above, and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any governmental entity and/or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries or
affiliates in connection with this Plan of Merger and the transactions
contemplated hereby. Each of HEALTHSOUTH and Advantage Health shall promptly
cooperate with and furnish information to the other in connection with any such
burden suffered by, or requirement imposed upon, either of them or any of their
subsidiaries or affiliates in connection with the foregoing.
7.16 Advantage Health Stock Options. As soon as reasonably practicable
after the Effective Time of the Merger, HEALTHSOUTH shall deliver to the holders
of Advantage Health stock options and appropriate notices setting forth such
holders' rights hereunder.
7.17 Publication of Combined Results. HEALTHSOUTH agrees that within 20
days after the end of the first calendar month following at least 30 days after
the Closing Date, HEALTHSOUTH shall cause publication of the combined results of
operations of HEALTHSOUTH and Advantage Health. For purposes of this Section
7.17, the term "publication" shall have the meaning provided in SEC Accounting
Series Release No. 135.
7.18 Advantage Health Employees. HEALTHSOUTH shall retain all employees
of Advantage Health who are employed at the Effective Time as employees-at-will
(except to the extent that such employees are parties to contracts providing for
other employment terms, in which case such employees shall be retained in
accordance with the terms of such contracts) HEALTHSOUTH shall cause the
Surviving Corporation to maintain following the Closing Date employee
compensation and benefit plans, programs, policies and fringe benefits
(including post- employment benefits) that, in the aggregate are substantially
equivalent to those provided to such employees of Advantage Health and Advantage
Health Subsidiaries, as applicable, as in effect on the date hereof (the
"Existing Plans"), subject to the right to amend or terminate such Existing
Plans in accordance with their terms, provided that after any such amendment or
termination such programs, policies and fringe benefits continue to be, in the
aggregate, substantially equivalent to the Existing Plans. HEALTHSOUTH will
cause the Surviving Corporation to provide to all employees of Advantage Health
and Advantage Health Subsidiaries severance pay and benefits which are
substantially equivalent to the applicable severance plans, programs and
policies of Advantage Health and the Advantage Health Subsidiaries, as
applicable, as in effect on the date hereof (the "Existing Benefits"), subject
to the right to amend or terminate such Existing Benefits in accordance with
their terms, provided that after any such amendment or termination such
severance pay and benefits continue to be, in the aggregate, substantially
equivalent to the Existing Benefits. Further, HEALTHSOUTH shall credit the