\n Section 1. The Merger………………………………………………………………… 2
\n 1.1 The Merger………………………………………………………………… 2
\n 1.2 The Closing……………………………………………………………….. 2
\n 1.3 Effective Time…………………………………………………………….. 2
\n 1.4 Effect of the Merger……………………………………………………….. 2<\/p>\n Section 2. Effect of the Merger on the Capital Stock of the Constituent Corporations;
\n Exchange of Certificates……………………………………………………. 2
\n 2.1 Effect on Capital Stock…………………………………………………….. 2
\n 2.2 Exchange of Certificates……………………………………………………. 4
\n 2.3 Certificate of Incorporation of Surviving Corporation………………………….. 7
\n 2.4 Bylaws of the Surviving Corporation………………………………………….. 7
\n 2.5 Directors and Officers of the Surviving Corporation……………………………. 7
\n 2.6 Assets, Liabilities, Reserves and Accounts……………………………………. 8
\n 2.7 Corporate Acts of the Subsidiary…………………………………………….. 8<\/p>\n
Section 3. Representations and Warranties of Advantage Health…………………………….. 8
\n 3.1 Organization, Existence and Good Standing…………………………………….. 8
\n 3.2 Advantage Health Capital Stock………………………………………………. 8
\n 3.3 Subsidiaries and Affiliated Partnerships……………………………………… 9
\n 3.4 Organization, Existence and Good Standing of Advantage Health
\n Subsidiaries and Advantage Health Partnerships……………………………….. 9
\n 3.5 Foreign Qualifications……………………………………………………… 10
\n 3.6 Power and Authority………………………………………………………… 10
\n 3.7 Advantage Health Financial Information……………………………………….. 10
\n 3.8 Subsequent Events………………………………………………………….. 11
\n 3.9 Legal Proceedings………………………………………………………….. 12
\n 3.10 Contracts, etc…………………………………………………………….. 12
\n 3.11 Accounts Receivable………………………………………………………… 12
\n 3.12 Tax Returns……………………………………………………………….. 13
\n 3.13 Employee Benefit Plans; Employment Matters……………………………………. 13
\n 3.14 Compliance with Laws in General……………………………………………… 14
\n 3.15 Licenses, Accreditation and Regulatory Approvals………………………………. 14
\n 3.16 Commissions and Fees……………………………………………………….. 15
\n 3.17 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock……………………….. 15
\n 3.18 Disposition of Assets of Surviving Corporation………………………………… 15
\n 3.19 Vote Required……………………………………………………………… 15
\n 3.20 Opinion of Financial Advisor………………………………………………… 15
\n 3.21 No Untrue Representations…………………………………………………… 15<\/p>\n
– i –<\/p>\n
Section 4. Representations and Warranties of HEALTHSOUTH and the Subsidiary………………… 16
\n 4.1 Organization, Existence, Good Standing and Capital Stock……………………….. 16
\n 4.2 Power and Authority………………………………………………………… 16
\n 4.3 Legal Proceedings………………………………………………………….. 16
\n 4.4 No Contracts or Liabilities…………………………………………………. 17
\n 4.5 Commissions and Fees……………………………………………………….. 17<\/p>\n
Section 5. Representations and Warranties of HEALTHSOUTH…………………………………. 17
\n 5.1 Organization, Existence and Good Standing…………………………………….. 17
\n 5.2 HEALTHSOUTH Capital Stock…………………………………………………… 17
\n 5.3 Subsidiary Common Stock…………………………………………………….. 18
\n 5.4 Power and Authority………………………………………………………… 18
\n 5.5 HEALTHSOUTH Financial Information……………………………………………. 19
\n 5.6 Subsequent Events………………………………………………………….. 19
\n 5.7 Legal Proceedings………………………………………………………….. 20
\n 5.8 Contracts, etc…………………………………………………………….. 20
\n 5.9 Accounts Receivable………………………………………………………… 21
\n 5.10 Tax Returns……………………………………………………………….. 21
\n 5.11 Employee Benefit Plans; Employment Matters……………………………………. 21
\n 5.12 Compliance with Laws in General……………………………………………… 22
\n 5.13 Licenses, Accreditation and Regulatory Approvals………………………………. 22
\n 5.14 Commissions and Fees……………………………………………………….. 23
\n 5.15 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock……………………….. 23
\n 5.16 Disposition of Assets of Surviving Corporation………………………………… 23
\n 5.17 No Vote Required…………………………………………………………… 23
\n 5.18 Opinion of Financial Advisor………………………………………………… 23
\n 5.19 HEALTHSOUTH Common Stock……………………………………………………. 24
\n 5.20 Investment Intent………………………………………………………….. 24
\n 5.21 No Untrue Representation……………………………………………………. 24<\/p>\n
Section 6. Access to Information and Documents………………………………………….. 24
\n 6.1 Access to Information………………………………………………………. 24
\n 6.2 Return of Records………………………………………………………….. 24
\n 6.3 Effect of Access…………………………………………………………… 25<\/p>\n
Section 7. Covenants……………………………………………………………………….. 25
\n 7.1 Preservation of Business……………………………………………………. 25
\n 7.2 Material Transactions………………………………………………………. 25
\n 7.3 Meeting of Stockholders…………………………………………………….. 26
\n 7.4 Registration Statement……………………………………………………… 26
\n 7.5 Exemption from State Takeover Laws…………………………………………… 28
\n 7.6 HSR Act Compliance…………………………………………………………. 28
\n 7.7 Public Disclosures…………………………………………………………. 29
\n 7.8 Resignation of Advantage Health Directors…………………………………….. 29<\/p>\n
– ii –<\/p>\n
7.9 Notice of Subsequent Events…………………………………………………. 29
\n 7.10 No Solicitations…………………………………………………………… 29
\n 7.11 Other Actions……………………………………………………………… 30
\n 7.12 Accounting Methods…………………………………………………………. 30
\n 7.13 Pooling and Tax-Free Reorganization Treatment…………………………………. 30
\n 7.14 Affiliate and Pooling Agreements…………………………………………….. 30
\n 7.15 Cooperation……………………………………………………………….. 30
\n 7.16 Advantage Health Stock Options………………………………………………. 31
\n 7.17 Publication of Combined Results……………………………………………… 31
\n 7.18 Advantage Health Employees………………………………………………….. 31
\n 7.19 HEALTHSOUTH Board of Directors………………………………………………. 32
\n 7.20 Employment Agreements………………………………………………………. 32<\/p>\n
Section 8. Termination, Amendment and Waiver……………………………………………. 32
\n 8.1 Termination……………………………………………………………….. 32
\n 8.2 Effect of Termination………………………………………………………. 33
\n 8.3 Amendment…………………………………………………………………. 33
\n 8.4 Extension; Waiver………………………………………………………….. 33
\n 8.5 Procedure for Termination, Amendment, Extension or Waiver………………………. 34
\n 8.6 Expenses………………………………………………………………….. 34
\n 8.7 Break-up Fee………………………………………………………………. 34<\/p>\n
Section 9. Conditions to Closing………………………………………………………. 35
\n 9.1 Mutual Conditions………………………………………………………….. 35
\n 9.2 Conditions to Obligations of HEALTHSOUTH and Aladdin Acquisition
\n Corporation……………………………………………………………….. 36
\n 9.3 Conditions to Obligations of Advantage Health…………………………………. 37
\n 10.1 Representations and Warranties; Nonsurvival…………………………………… 38
\n 10.2 Notices…………………………………………………………………… 39
\n 10.3 Further Assurances…………………………………………………………. 40
\n 10.4 Indemnification……………………………………………………………. 40
\n 10.5 Governing Law……………………………………………………………… 41
\n 10.6 “Including”……………………………………………………………….. 41
\n 10.7 “Knowledge”……………………………………………………………….. 41
\n 10.8 “Material adverse change” or “material adverse effect”…………………………. 42
\n 10.9 “Hazardous Materials”………………………………………………………. 42
\n 10.10 Environmental Laws…………………………………………………………. 42
\n 10.11 Captions………………………………………………………………….. 42
\n 10.12 Integration of Exhibits…………………………………………………….. 42
\n 10.13 Entire Agreement…………………………………………………………… 43
\n 10.14 Counterparts………………………………………………………………. 43
\n 10.15 Binding Effect…………………………………………………………….. 43
\n 10.16 No Rule of Construction…………………………………………………….. 43<\/p>\n
– iii –<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER (the or this “Plan of Merger”), made and
\nentered into as of the ____ day of December, 1995, by and among HEALTHSOUTH
\nCORPORATION, a Delaware corporation (“HEALTHSOUTH”), ALADDIN ACQUISITION
\nCORPORATION a Delaware corporation (the “Subsidiary”), and ADVANTAGE HEALTH
\nCORPORATION, a Delaware corporation (“Advantage Health”) (the Subsidiary and
\nAdvantage Health being sometimes collectively referred to herein as the
\n“Constituent Corporations”).<\/p>\n
W I T N E S S E T H:<\/p>\n
WHEREAS, the respective Boards of Directors of HEALTHSOUTH, and
\nAdvantage Health have approved the merger of the Subsidiary with and into
\nAdvantage Health (the “Merger”), upon the terms and conditions set forth in this
\nPlan of Merger, whereby each issued and outstanding share (an “Advantage Health
\nShare”) of Common Stock, par value $.01 per share, of Advantage Health
\n(“Advantage Health Common Stock”), not owned directly or indirectly by Advantage
\nHealth, except Dissenting Shares (as hereinafter defined), will be converted
\ninto the right to receive the Merger Consideration (as hereinafter defined);<\/p>\n
WHEREAS, the Board of Directors of Advantage Health, subject to the
\nfurther exercise of fiduciary or statutory duties (as hereinafter provided), has
\nalso unanimously determined that the Merger presents an opportunity for
\nAdvantage Health to achieve long-term strategic and financial benefits and is
\nfair to, and in the best interests of, Advantage Health’s stockholders, and has
\nrecommended approval of this Plan of Merger by the stockholders of Advantage
\nHealth;<\/p>\n
WHEREAS, each of HEALTHSOUTH, the Subsidiary and Advantage Health
\ndesires to make certain representations, warranties, covenants and agreements in
\nconnection with the Merger and also to prescribe various conditions to the
\nMerger;<\/p>\n
WHEREAS, for federal income tax purposes, it is intended that the
\nMerger will qualify as a reorganization under the provisions of Section 368 of
\nthe Internal Revenue Code of 1986, as amended (the “Code”); and<\/p>\n
WHEREAS, for accounting purposes, it is intended that the Merger will
\nbe accounted for as a “pooling of interests”.<\/p>\n
NOW, THEREFORE, in consideration of the premises, and the mutual
\ncovenants and agreements contained herein, the parties hereto do hereby agree as
\nfollows:<\/p>\n
Section 1. The Merger.<\/p>\n
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
\nMerger, and in accordance with the Delaware General Corporation Law (the
\n“DGCL”), the Subsidiary shall be merged with and into Advantage Health at the
\nEffective Time (as defined in Section 1.3). Following the Effective Time, the
\nseparate corporate existence of the Subsidiary shall cease and Advantage Health
\nshall continue as the surviving corporation (the “Surviving Corporation”) under
\nthe name “Advantage Health Corporation” and shall succeed to and assume all the
\nrights and obligations of the Subsidiary and Advantage Health in accordance with
\nthe DGCL.<\/p>\n
1.2 The Closing. The closing of the Merger (the “Closing”) will take
\nplace at 10:00 a.m. Eastern Time on a date to be specified by the parties (the
\n“Closing Date”), which (subject to satisfaction or waiver of the conditions set
\nforth in Sections 9.2 and 9.3) shall be no later than the second business day
\nafter satisfaction of the conditions set forth in Section 9.1 (other than
\nSection 9.1(a)), at the offices of Haskell Slaughter Young & Johnston,
\nProfessional Association, Birmingham, Alabama unless another date or place is
\nagreed to in writing by the parties hereto.<\/p>\n
1.3 Effective Time. Subject to the provisions of this Plan of Merger,
\nthe parties shall file a certificate of merger (the “Certificate of Merger”)
\nexecuted in accordance with the relevant provisions of the DGCL and shall make
\nall other filings or recordings required under the DGCL as soon as practicable
\non or after the Closing Date. The Merger shall become effective at such time as
\nthe Certificate of Merger is duly filed with the Delaware Secretary of State, or
\nat such other time as the Subsidiary and Advantage Health shall agree should be
\nspecified in the Certificate of Merger (the “Effective Time”).<\/p>\n
1.4 Effect of the Merger. From and after the Effective Time, the
\nSurviving Corporation shall possess all the rights, privileges, powers and
\nfranchises and be subject to all of the restrictions, disabilities and duties of
\nAdvantage Health and the Subsidiary and the Merger shall otherwise have the
\neffects set forth in Section 259 of the DGCL.<\/p>\n
Section 2. Effect of the Merger on the Capital Stock of the Constituent
\n Corporations; Exchange of Certificates.<\/p>\n
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
\nMerger and without any action on the part of any holder of Advantage Health
\nShares or any shares of capital stock of the Subsidiary:<\/p>\n
(a) The Subsidiary Common Stock. Each share of Common Stock, $.01 par
\nvalue per share, of the Subsidiary (“Subsidiary Common Stock”) issued and
\noutstanding immediately prior to the Effective Time shall be converted into one
\nfully paid and nonassessable share of Advantage Health Common Stock.<\/p>\n
– 2 –<\/p>\n
(b) Cancellation of Treasury Stock. Each share of Advantage Health
\nCommon Stock that is owned by Advantage Health or by any subsidiary of Advantage
\nHealth shall automatically be canceled and retired and shall cease to exist, and
\nnone of the Common Stock, par value $.01 per share, of HEALTHSOUTH (“HEALTHSOUTH
\nCommon Stock”), cash or other consideration shall be delivered in exchange
\ntherefor.<\/p>\n
(c) Conversion of Advantage Health Shares. Subject to Section 2.2(d)
\nand in addition to the provision for Advantage Health stock options in Section
\n2.2(e), each issued and outstanding Advantage Health Share (other than shares to
\nbe canceled in accordance with Section 2.1(b) and Dissenting Shares) shall be
\nconverted into the right to receive the right to receive that number of shares
\nof HEALTHSOUTH Common Stock determined by dividing $47.50 by the Base Period
\nTrading Price (as defined below), as may be adjusted as provided below, computed
\nto four decimal places (the “Exchange Ratio”); provided, however, that if the
\nBase Period Trading Price shall be greater than $34.50, the Exchange Ratio shall
\nbe 1.3768; and provided further, however, that if the Base Period Trading Price
\nshall be less than $28.50, the Exchange Ratio shall be 1.6667. The number of
\nshares of HEALTHSOUTH Common Stock issuable with respect to each Advantage
\nHealth Share, as determined as set forth herein, is herein called the “Merger
\nConsideration”. For purposes of this Plan of Merger, the term “Base Period
\nTrading Price” shall mean the average of the daily closing prices per share for
\nHEALTHSOUTH Common Stock for the 20 consecutive trading days on which shares of
\nHEALTHSOUTH Common Stock are actually traded (as reported on the New York Stock
\nExchange Composite Transactions Tape as reported in The Wall Street Journal,
\nEastern Edition, or if not reported thereby, any other authoritative source)
\nending at the close of trading on the second New York Stock Exchange trading day
\nimmediately preceding the date of the Special Meeting (as defined in Section
\n7.3) (such period being herein called the “Base Period”). Promptly after the
\nclose of trading on the New York Stock Exchange on such second trading day, the
\nparties shall issue a joint press release publicly announcing the Exchange
\nRatio. As of the Effective Time, all such Advantage Health Shares shall no
\nlonger be outstanding and shall automatically be canceled and retired and shall
\ncease to exist, and each holder of a certificate representing any Advantage
\nHealth Shares shall cease to have any rights with respect thereto, except the
\nright to receive the Merger Consideration and any cash in lieu of fractional
\nshares of HEALTHSOUTH Common Stock to be issued or paid in consideration
\ntherefor upon surrender of such certificate in accordance with Section 2.2,
\nwithout interest.<\/p>\n
(d) Dissenting Shares. Notwithstanding anything in this Plan of Merger
\nto the contrary, Advantage Health Shares outstanding immediately prior to the
\nEffective Time held by a holder (if any) who is entitled to demand, and who
\nproperly demands, appraisal for such shares in accordance with Section 262 of
\nthe DGCL (“Dissenting Shares”) shall not be converted into a right to receive
\nthe Merger Consideration and any cash in lieu of fractional shares of
\nHEALTHSOUTH Common Stock unless such holder fails to perfect or otherwise loses
\nsuch holder’s right to appraisal, if any. If, after the Effective Time, such
\nholder fails to perfect or loses any such right to appraisal, such shares shall
\nbe treated as if they had been converted as of the Effective Time into the right
\nto receive the Merger Consideration pursuant to Section<\/p>\n
– 3 –<\/p>\n
2.1(c) and the cash in lieu of fractional shares of HEALTHSOUTH Common Stock
\nspecified in Section 2.2.<\/p>\n
(e) Stock Options. At the Effective Time, the holders of each Advantage
\nHealth stock option which are outstanding at the Effective Time, whether or not
\nthen exercisable, shall receive at or as promptly as practicable after the
\nClosing a number of shares of HEALTHSOUTH Common Stock determined as follows:<\/p>\n
(i) if the Base Trading Price is neither greater than $34.50
\nnor less than $28.50, that number of shares which is equal to $47.50 minus the
\nexercise price of such option (the “spread”), divided by the Base Trading Price
\nand then multiplied by the number of shares of Advantage Health Common Stock
\nwhich are subject to such option; or<\/p>\n
(ii) if the Base Trading Price is greater than $34.50 or less
\nthan $28.50, that number of shares calculated as provided in the preceding
\nclause (i) except that the spread shall be divided by $34.50 or $28.50, as the
\ncase may be (rather than the Base Trading Price) prior to being multiplied by
\nthe number of shares of Advantage Health Common Stock subject to such option.<\/p>\n
(f) Anti-Dilution Provisions. If, after the date hereof and prior to
\nthe Effective Time, HEALTHSOUTH shall have declared a stock split (including a
\nreverse split) of HEALTHSOUTH Common Stock or a dividend payable in HEALTHSOUTH
\nCommon Stock, or any other distribution of securities or dividend (in cash or
\notherwise) to holders of HEALTHSOUTH Common Stock with respect to their
\nHEALTHSOUTH Common Stock (including, without limitation, such a distribution or
\ndividend made in connection with a recapitalization, reclassification, merger,
\nconsolidation, reorganization, reclassification, merger, consolidation,
\nreorganization or similar transaction), then the number of shares of HEALTHSOUTH
\nCommon Stock to be issued upon conversion of a share of Advantage Health Common
\nStock pursuant to Section 2.1(c) shall be appropriately adjusted to reflect such
\nstock split, dividend or other distribution of securities.<\/p>\n
2.2 Exchange of Certificates.<\/p>\n
(a) Exchange Agent. Prior to the Effective Time, HEALTHSOUTH shall
\nenter into an agreement with such bank or trust company as may be designated by
\nHEALTHSOUTH (the “Exchange Agent”) which provides that HEALTHSOUTH shall deposit
\nwith the Exchange Agent as of the Effective Time, for the benefit of the holders
\nof Advantage Health Shares, for exchange in accordance with this Section 2,
\nthrough the Exchange Agent, certificates representing the shares of HEALTHSOUTH
\nCommon Stock (such shares of HEALTHSOUTH Common Stock, together with any
\ndividends or distributions with respect thereto with a record date after the
\nEffective Time, being hereinafter referred to as the “Exchange Fund”) issuable
\npursuant to Section 2.1 in exchange for outstanding Advantage Health Shares.<\/p>\n
– 4 –<\/p>\n
(b) Exchange Procedures. As soon as reasonably practicable after the
\nEffective Time, the Exchange Agent shall mail to each holder of record of a
\ncertificate or certificates which immediately prior to the Effective Time
\nrepresented Advantage Health Shares (the “Certificates”) whose shares were
\nconverted into the right to receive the Merger Consideration pursuant to Section
\n2.1, (i) a letter of transmittal (which shall specify that delivery shall be
\neffected, and risk of loss and title to the Certificates shall pass, only upon
\ndelivery of the Certificates to the Exchange Agent and shall be in such form and
\nhave such other provisions as HEALTHSOUTH may reasonably specify) and (ii)
\ninstructions for use in effecting the surrender of the Certificates in exchange
\nfor certificates representing shares of HEALTHSOUTH Common Stock. Upon surrender
\nof a Certificate for cancellation to the Exchange Agent or to such other agent
\nor agents as may be appointed by HEALTHSOUTH, together with such letter of
\ntransmittal, duly executed, and such other documents as may reasonably be
\nrequired by the Exchange Agent, the holder of such Certificate shall be entitled
\nto receive in exchange therefor a certificate representing that number of whole
\nshares of HEALTHSOUTH Common Stock which such holder has the right to receive
\npursuant to the provisions of this Section 2, and the Certificate so surrendered
\nshall forthwith be canceled. In the event of a transfer of ownership of
\nAdvantage Health Shares which is not registered in the transfer records of
\nAdvantage Health, a certificate representing the proper number of shares of
\nHEALTHSOUTH Common Stock may be issued to a person other than the person in
\nwhose name the Certificate so surrendered is registered, if such Certificate
\nshall be properly endorsed or otherwise be in proper form for transfer and the
\nperson requesting such payment shall pay any transfer or other taxes required by
\nreason of the issuance of shares of HEALTHSOUTH Common Stock to a person other
\nthan the registered holder of such Certificate or establish to the satisfaction
\nof HEALTHSOUTH that such tax has been paid or is not applicable. Until
\nsurrendered as contemplated by this Section 2.2, each Certificate shall be
\ndeemed at any time after the Effective Time to represent only the right to
\nreceive upon such surrender the certificate representing shares of HEALTHSOUTH
\nCommon Stock and cash in lieu of any fractional shares of HEALTHSOUTH Common
\nStock as contemplated by this Section 2.2. No interest will be paid or will
\naccrue on any cash payable in lieu of any fractional shares of HEALTHSOUTH
\nCommon Stock. To the extent permitted by law, former stockholders of record of
\nAdvantage Health shall be entitled to vote after the Effective Time at any
\nmeeting of HEALTHSOUTH stockholders the number of whole shares of HEALTHSOUTH
\nCommon Stock into which their respective Advantage Health Shares are converted,
\nregardless of whether such holders have exchanged their Certificates for
\ncertificates representing HEALTHSOUTH Common Stock in accordance with this
\nSection 2.2.<\/p>\n
(c) Distributions with Respect to Unexchanged Shares. No dividends or
\nother distributions with respect to HEALTHSOUTH Common Stock with a record date
\nafter the Effective Time shall be paid to the holder of any unsurrendered
\nCertificate with respect to the shares of HEALTHSOUTH Common Stock represented
\nthereby and no cash payment in lieu of fractional shares shall be paid to any
\nsuch holder pursuant to Section 2.2(e) until the surrender of such Certificate
\nin accordance with this Section 2. Subject to the effect of applicable laws,
\nfollowing surrender of any such Certificate, there shall be paid to the holder
\nof the certificate representing whole shares of HEALTHSOUTH Common Stock issued
\nin exchange therefor, without interest, (i) at the time of such surrender, the
\namount of any cash payable in lieu of a<\/p>\n
– 5 –<\/p>\n
fractional share of HEALTHSOUTH Common Stock to which such holder is entitled
\npursuant to Section 2.2(e) and the amount of dividends or other distributions
\nwith a record date after the Effective Time theretofore paid with respect to
\nsuch whole shares of HEALTHSOUTH Common Stock, and (ii) at the appropriate
\npayment date, the amount of dividends or other distributions with a record date
\nafter the Effective Time but prior to such surrender and with a payment date
\nsubsequent to such surrender payable with respect to such whole shares of
\nHEALTHSOUTH Common Stock.<\/p>\n
(d) No Further Ownership Rights in Advantage Health Shares. All shares
\nof HEALTHSOUTH Common Stock issued upon the surrender for exchange of
\nCertificates in accordance with the terms of this Section 2 (including any cash
\npaid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
\n(and paid) in full satisfaction of all rights pertaining to the Advantage Health
\nShares theretofore represented by such Certificates. If, after the Effective
\nTime, Certificates are presented to the Surviving Corporation or the Exchange
\nAgent for any reason, they shall be canceled and exchanged as provided in this
\nSection 2, except as otherwise provided by law.<\/p>\n
(e) No Fractional Shares. No certificates or scrip representing
\nfractional shares of HEALTHSOUTH Common Stock shall be issued upon the surrender
\nfor exchange of Certificates, and such fractional share interests will not
\nentitle the owner thereof to vote or to any rights of a stockholder of
\nHEALTHSOUTH. Notwithstanding any other provision of this Plan of Merger, each
\nholder of Advantage Health Shares exchanged pursuant to the Merger who would
\notherwise have been entitled to receive a fraction of a share of HEALTHSOUTH
\nCommon Stock (after taking into account all Certificates delivered by such
\nholder) shall receive, in lieu thereof, cash (without interest) in an amount
\nequal to such fractional part of a share of HEALTHSOUTH Common Stock.<\/p>\n
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
\nwhich remains undistributed to the holders of the Certificates for six months
\nafter the Effective Time shall be delivered to HEALTHSOUTH, upon demand, and any
\nholders of the Certificates who have not theretofore complied with this Section
\n2 shall thereafter look only to HEALTHSOUTH for payment of HEALTHSOUTH Common
\nStock, any cash in lieu of fractional shares of HEALTHSOUTH Common Stock, and
\nany dividends or distributions with respect to HEALTHSOUTH Common Stock.<\/p>\n
(g) No Liability. None of HEALTHSOUTH, Aladdin Acquisition Corporation,
\nAdvantage Health or the Exchange Agent shall be liable to any person in respect
\nof any shares of HEALTHSOUTH Common Stock (or dividends or distributions with
\nrespect thereto) or cash from the Exchange Fund delivered to a public official
\npursuant to any applicable abandoned property, escheat or similar law. If any
\nCertificates shall not have been surrendered prior to seven years after the
\nEffective Time (or immediately prior to such earlier date on which any shares of
\nHEALTHSOUTH Common Stock, any cash in lieu of fractional shares of HEALTHSOUTH
\nCommon Stock or any dividends or distributions with respect to HEALTHSOUTH
\nCommon Stock in respect of such Certificates would otherwise escheat to or<\/p>\n
– 6 –<\/p>\n
become the property of any governmental entity), any such shares, cash,
\ndividends or distributions in respect of such Certificates shall, to the extent
\npermitted by applicable law, become the property of the Surviving Corporation,
\nfree and clear of all claims or interest of any person previously entitled
\nthereto.<\/p>\n
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
\ncash included in the Exchange Fund in deposit accounts or short-term money
\nmarket instruments, as directed by HEALTHSOUTH, on a daily basis. Any interest
\nand other income resulting from such investments shall be paid to HEALTHSOUTH.<\/p>\n
(i) Lost Certificates. In the event any Certificate shall have been
\nlost, stolen or destroyed, upon the making of an affidavit of that fact by the
\nperson claiming such Certificate to be lost, stolen or destroyed and subject to
\nsuch other conditions as the Board of Directors of the Surviving Corporation may
\nimpose, the Surviving Corporation shall issue in exchange for such lost, stolen
\nor destroyed Certificate the Merger Consideration deliverable in respect thereof
\nas determined in accordance with Section 2.1(c). When authorizing such issue of
\nMerger Consideration in exchange therefor, the Board of Directors of the
\nSurviving Corporation may, in its discretion and as a condition precedent to the
\nissuance thereof, require the owner of such lost, stolen or destroyed
\nCertificate to provide a bond or other surety to the Surviving Corporation in
\nsuch sum as it may reasonably direct as indemnity against any claim that may be
\nmade against the Surviving Corporation with respect to the Certificate alleged
\nto have been lost, stolen or destroyed.<\/p>\n
(j) Withholding Rights. The Surviving Corporation or the Exchange Agent
\nshall be entitled to deduct and withhold from the consideration otherwise
\npayable pursuant to this Plan of Merger to any holder of Advantage Health Shares
\nsuch amounts as the Surviving Corporation or the Exchange Agent is required to
\ndeduct and withhold with respect to the making of such payment under the Code or
\nany provision of state, local or foreign tax law. To the extent that amounts are
\nso withheld by the Surviving Corporation or the Exchange Agent, such withheld
\namounts shall be treated for all purposes of this Plan of Merger as having been
\npaid to the holder of the Advantage Health Shares in respect of which such
\ndeduction and withholding was made by the Surviving Corporation or the Exchange
\nAgent.<\/p>\n
2.3 Certificate of Incorporation of Surviving Corporation. The
\nCertificate of Incorporation of Advantage Health shall become the Certificate of
\nIncorporation of the Surviving Corporation from and after the Effective Time and
\nuntil thereafter amended as provided by law.<\/p>\n
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary
\nshall be the Bylaws of the Surviving Corporation from and after the Effective
\nTime and until thereafter altered, amended or repealed in accordance with the
\nlaws of the State of Delaware, the Certificate of Incorporation of Advantage
\nHealth and such Bylaws.<\/p>\n
2.5 Directors and Officers of the Surviving Corporation. The Directors
\nand officers of the Subsidiary immediately prior to the Effective Time shall be
\nthe Directors and officers of<\/p>\n
– 7 –<\/p>\n
the Surviving Corporation, each to hold office in accordance with the
\nCertificate of Incorporation and Bylaws of the Surviving Corporation.<\/p>\n
2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time,
\nthe assets, liabilities, reserves and accounts of each of Aladdin Acquisition
\nCorporation and Advantage Health shall be taken up on the books of the Surviving
\nCorporation at the amounts at which they respectively shall be carried on the
\nbooks of said corporations immediately prior to the Effective Time, except as
\notherwise set forth in the Plan of Merger and subject to such adjustments, or
\nelimination of intercompany items, as may be appropriate in giving effect to the
\nMerger in accordance with generally accepted accounting principles.<\/p>\n
2.7 Corporate Acts of the Subsidiary. All corporate acts, plans,
\npolicies, approvals and authorizations of the Subsidiary, its sole stockholder,
\nits Board of Directors, committees elected or appointed by the Board of
\nDirectors, and all officers and agents, valid immediately prior to the Effective
\nTime, shall be those of the Surviving Corporation and shall be as effective and
\nbinding thereon as they were with respect to the Subsidiary. The employees and
\nagents of the Subsidiary shall become the employees and agents of the Surviving
\nCorporation and continue to be entitled to the same rights and benefits which
\nthey enjoyed as employees and agents of the Subsidiary.<\/p>\n
Section 3. Representations and Warranties of Advantage Health.<\/p>\n
Advantage Health hereby represents and warrants to HEALTHSOUTH and the
\nSubsidiary as follows:<\/p>\n
3.1 Organization, Existence and Good Standing. Advantage Health is a
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the State of Delaware. Advantage Health and has all necessary corporate power
\nto own its properties and assets and to carry on its business as presently
\nconducted. Advantage Health is not, and has not been within the two years
\nimmediately preceding the date of this Plan of Merger, a subsidiary or division
\nof another corporation, nor has Advantage Health within such time owned,
\ndirectly or indirectly, any shares of HEALTHSOUTH Common Stock or Subsidiary
\nCommon Stock.<\/p>\n
3.2 Advantage Health Capital Stock. The authorized capital stock of
\nAdvantage Health consists of (i) 15,000,000 shares of Advantage Health Common
\nStock, of which 5,649,804 shares were issued and outstanding as of November 10,
\n1995, and 493,010 shares are issued and held as treasury shares, (ii) 1,440,000
\nshares of Class B Non-Voting Common Stock, par value $.01 per share, none of
\nwhich shares are issued and outstanding as of the date of this Plan of Merger
\nand none of which are issued and held as treasury shares; and (iii) 5,000,000
\nshares of undesignated Preferred Stock, par value $.01 per share, none of which
\nshares are issued and outstanding as of the date of this Plan of Merger and none
\nof which are issued and held as treasury shares. All of the issued and
\noutstanding Advantage Health Shares are duly and validly issued, fully paid and
\nnonassessable. Except as set forth on Exhibit 3.2 or otherwise disclosed in the
\n1995 Advantage Health 10-K (as hereinafter defined), there are no options,<\/p>\n
– 8 –<\/p>\n
warrants, or similar rights granted by Advantage Health or any other agreements
\nto which Advantage Health is a party providing for the issuance or sale by it of
\nany additional securities which would remain in effect after the Effective Time.
\nThere is no liability for dividends declared or accumulated but unpaid with
\nrespect to any of the Advantage Health Shares. Advantage Health has not made any
\ndistributions to any holders of Advantage Health Shares or participated in or
\neffected any issuance, exchange or retirement of Advantage Health Shares, or
\notherwise changed the equity interests of holders of Advantage Health Shares, in
\ncontemplation of effecting the Merger, within the two years immediately
\npreceding the date of this Plan of Merger. Any Advantage Health Shares that
\nAdvantage Health has re-acquired during the two years immediately preceding the
\ndate of this Plan of Merger have been so re-acquired only for purposes other
\nthan “business combinations”, as such term is defined in Accounting Principles
\nBoard Opinion No. 16, as amended (“Business Combinations”).<\/p>\n
3.3 Subsidiaries and Affiliated Partnerships. (a) Attached hereto as
\nExhibit 3.3 is a list of all subsidiaries of Advantage Health (individually, an
\n“Advantage Health Subsidiary” and, collectively, the “Advantage Health
\nSubsidiaries”) and their states of incorporation. Except as set forth on Exhibit
\n3.3, Advantage Health does not own stock in and does not control, directly or
\nindirectly, any other corporation, association or business organization other
\nthan the Advantage Health Partnerships (as defined below).<\/p>\n
(b) Also disclosed on Exhibit 3.3 is a list of all general or limited
\npartnerships or joint ventures in which the general partner or a co-venturer is
\nAdvantage Health or an Advantage Health Subsidiary (individually, an “Advantage
\nHealth Partnership” and, collectively, the “Advantage Health Partnerships”) and
\ntheir states of organization. Except as set forth on Exhibit 3.3, neither
\nAdvantage Health nor any Advantage Health Subsidiary owns an equity interest in,
\nnor does such entity control, directly or indirectly, any other joint venture or
\npartnership.<\/p>\n
3.4 Organization, Existence and Good Standing of Advantage Health
\nSubsidiaries and Advantage Health Partnerships. (a) Except as set forth on
\nExhibit 3.4, each Advantage Health Subsidiary is a corporation duly organized,
\nvalidly existing and in good standing under the laws of its respective state of
\nincorporation, and has all necessary corporate power to own its properties and
\nassets and to carry on its business as presently conducted, except where the
\nfailure to be so organized, existing or in good standing, or to have such power,
\nwould not have, individually or in the aggregate, a material adverse effect (as
\nhereinafter defined) on Advantage Health.<\/p>\n
(b) Except as set forth on Exhibit 3.4, each Advantage Health
\nPartnership is a general partnership, a limited partnership or a joint venture
\nvalidly formed and (to the extent such concept is applicable under the laws of
\nsuch jurisdiction) in good standing under the laws of its respective state of
\norganization and has all necessary power to own its property and assets and to
\ncarry on its business as presently conducted, except where the failure to be so
\nformed or in good standing, or to have such power, would not have, individually
\nor in the aggregate, a material adverse effect on Advantage Health.<\/p>\n
– 9 –<\/p>\n
3.5 Foreign Qualifications. Except as set forth on Exhibit 3.5,
\nAdvantage Health, each Advantage Health Subsidiary and each Advantage Health
\nPartnership that is a limited partnership is qualified or licensed to do
\nbusiness as a foreign corporation or foreign limited partnership, as the case
\nmay be, and is in good standing in each jurisdiction where the nature or
\ncharacter of the property owned, leased or operated by it or the nature of the
\nbusiness transacted by it makes such qualification or licensing necessary,
\nexcept for such failures to be so qualified or licensed and in good standing
\nthat would not, individually or in the aggregate, have a material adverse effect
\non Advantage Health.<\/p>\n
3.6 Power and Authority. Subject to the satisfaction of the conditions
\nprecedent set forth herein, Advantage Health has the corporate power to execute,
\ndeliver and perform the Plan of Merger and all agreements and other documents
\nexecuted and delivered, or to be executed and delivered, by it pursuant to the
\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set
\nforth herein, has taken all action required by its Certificate of Incorporation,
\nBylaws or otherwise, to authorize the execution, delivery and performance of the
\nPlan of Merger and such related documents. Except as set forth on Exhibit 3.6,
\nthe execution and delivery of the Plan of Merger does not and, subject to the
\nreceipt of required stockholder and regulatory approvals and any other required
\nthird-party consents or approvals, the consummation of the Merger will not
\nconflict with or violate any provisions of the Certificate of Incorporation of
\nAdvantage Health or any provisions of, or result in the acceleration of any
\nobligation under, any mortgage, lien, lease, agreement, instrument, order,
\narbitration award, judgment or decree, applicable to Advantage Health, any
\nAdvantage Health Subsidiary or any Advantage Health Partnership, or to which
\nAdvantage Health, any Advantage Health Subsidiary or any Advantage Health
\nPartnership is a party or by which Advantage Health, any Advantage Health
\nSubsidiary or any Advantage Health Partnership is bound, or conflict with or
\nviolate any restrictions of any kind to which it is subject which, if violated
\nor accelerated, would have, individually or in the aggregate, a material adverse
\neffect on Advantage Health, or which would prevent or delay consummation of the
\nMerger in any material respect or otherwise prevent Advantage Health from
\nperforming its obligations hereunder in any material respect. The execution and
\ndelivery of this Plan of Merger has been approved by the Board of Directors of
\nAdvantage Health. This Plan of Merger has been duly executed and delivered by
\nAdvantage Health and, assuming this Plan of Merger constitutes a valid and
\nbinding obligation of HEALTHSOUTH and Aladdin Acquisition Corporation,
\nenforceable against HEALTHSOUTH and Aladdin Acquisition Corporation in
\naccordance with its terms, constitutes a valid and binding obligation of
\nAdvantage Health, enforceable against Advantage Health in accordance with its
\nterms.<\/p>\n
3.7 Advantage Health Financial Information. Advantage Health has
\nheretofore furnished HEALTHSOUTH with its Annual Report on Form 10-K for its
\nfiscal year ended August 31, 1995 (the “Advantage Health 1995 10-K”). As of its
\ndate, the Advantage Health 1995 10-K did not contain any untrue statements of
\nmaterial facts or omit to state material facts required to be stated therein or
\nnecessary to make the statements therein, in light of the circumstances under
\nwhich they were made, not misleading (except any such misstatement or omission
\nwhich was expressly corrected in a subsequent filing). As of its date, the
\ndescriptions<\/p>\n
– 10 –<\/p>\n
of the business, operations and financial condition of Advantage Health
\ncontained in the Advantage Health 1995 10-K complied in all material respects
\nwith the applicable requirements of the Securities Act of 1933, as amended (the
\n“Securities Act”), and the Securities Exchange Act of 1934, as amended (the
\n“Exchange Act”), and the rules and regulations promulgated under such statutes.
\nAdvantage Health has not filed any reports on Form 10-Q or 8-K since the filing
\nof the Advantage Health 1995 10-K. The financial statements contained in the
\nAdvantage Health 1995 10-K, together with the notes thereto, have been prepared
\nin accordance with generally accepted accounting principles consistently
\nfollowed throughout the periods indicated (except as may be indicated in the
\nnotes thereto), reflect all known liabilities of Advantage Health, including all
\nknown contingent liabilities as at August 31, 1995, and present fairly the
\nfinancial condition of Advantage Health at such date and the consolidated
\nresults of operations and cash flows of Advantage Health for its fiscal year
\nended August 31, 1995. The consolidated balance sheet of Advantage Health at
\nAugust 31, 1995 included in the Advantage Health 1995 10-K is herein referred to
\nas the “Advantage Health 1995 Balance Sheet”.<\/p>\n
3.8 Subsequent Events. Except as set forth on Exhibit 3.8 or disclosed
\nin the Advantage Health 1995 10-K or as otherwise permitted hereunder, Advantage
\nHealth has not, since the date of the Advantage Health 1995 Balance Sheet:<\/p>\n
(a) Incurred any material adverse change;<\/p>\n
(b) Discharged or satisfied any material lien or encumbrance,
\n or paid or satisfied any material obligation or liability (absolute,
\n accrued, contingent or otherwise) other than (i) liabilities shown or
\n reflected on the Advantage Health 1995 Balance Sheet or (ii)
\n liabilities incurred since the date of the Advantage Health 1995
\n Balance Sheet in the ordinary course of business, which discharge or
\n satisfaction would, individually or in the aggregate, have a material
\n adverse effect on Advantage Health;<\/p>\n
(c) Increased or established any reserve for taxes or any
\n other liability on its books or otherwise provided therefor which
\n would, individually or in the aggregate, have a material adverse effect
\n on Advantage Health, except as may have been required due to income or
\n operations of Advantage Health since the date of the Advantage Health
\n 1995 Balance Sheet;<\/p>\n
(d) Mortgaged, pledged or subjected to any lien, charge or
\n other encumbrance any of the assets, tangible or intangible, which
\n assets are material to the consolidated business or financial condition
\n of Advantage Health;<\/p>\n
(e) Sold or transferred any of the assets material to the
\n consolidated business of Advantage Health, cancelled any material debts
\n or claims or waived any material rights, except in the ordinary course
\n of business;<\/p>\n
(f) Granted any general or uniform increase in the rates of
\n pay of employees or any material increase in salary payable or to
\n become payable by Advantage Health to<\/p>\n
– 11 –<\/p>\n
any officer or employee, consultant or agent (other than normal merit
\n increases or consistent with past practice), or by means of any bonus
\n or pension plan, contract or other commitment, increased in a material
\n respect the compensation of any officer, employee, consultant or agent;<\/p>\n
(g) Except for this Plan of Merger and any other agreement
\n executed and delivered pursuant to this Plan of Merger, entered into
\n any material transaction other than in the ordinary course of business
\n or permitted under other Sections hereof; or<\/p>\n
(h) Issued any stock, bonds or other securities, other than
\n stock options granted to employees or consultants of Advantage Health
\n or warrants granted to third parties, and other than shares issued upon
\n the exercise of stock options granted to employees or consultants or
\n upon the exercise of warrants granted to third parties, all of which
\n are disclosed on Exhibit 3.2<\/p>\n
3.9 Legal Proceedings. Except as listed on Exhibit 3.9 or described in
\nthe Advantage Health 1995 10-K, Advantage Health has no knowledge of any pending
\nor threatened litigation, governmental investigation, condemnation or other
\nproceeding against or relating to or affecting Advantage Health or the
\ntransactions contemplated by this Plan of Merger for which Advantage Health is
\nuninsured or which, if resolved adversely to Advantage Health, would,
\nindividually or in the aggregate, have a material adverse effect on Advantage
\nHealth. To the best knowledge of Advantage Health, no valid basis for recovery
\nor other relief in any such action exists.<\/p>\n
3.10 Contracts, etc. (a) Advantage Health has made available to
\nHEALTHSOUTH true copies of those outstanding contracts, leases, agreements and
\narrangements filed as Item 10 exhibits to the Advantage Health 1995 10-K
\n(including those of such Item 10 exhibits as are incorporated by reference) as
\nare listed on Exhibit 3.10. Except as otherwise indicated on Exhibit 3.10, all
\nof such contracts, leases, agreements and arrangements are legally valid and
\nbinding in accordance with their terms (assuming the other parties thereto are
\nbound) and in full force and effect, except for any such invalidity or failure
\nto be binding or in full force and effect which would not have, individually or
\nin the aggregate, a material adverse effect on Advantage Health. Except as
\notherwise indicated on Exhibit 3.10, to Advantage Health’s best knowledge, all
\nparties to such contracts, leases, agreements and arrangements have complied
\nwith the provisions of such contracts, leases, agreements and arrangements in
\nall material respects and, to the best knowledge of Advantage Health, no party
\nthereto is in material default thereunder and no event has occurred which, but
\nfor the lapse of time or the giving of notice or both, would constitute a
\nmaterial default thereunder, except, in any such case, where such noncompliance
\nwith or default under the contract, lease, agreement or arrangement would not,
\nindividually or in the aggregate, have a material adverse effect on Advantage
\nHealth.<\/p>\n
3.11 Accounts Receivable. (a) Since the date of the Advantage Health
\nBalance Sheet, Advantage Health has not changed any principle or practice with
\nrespect to the recordation of accounts receivable or the calculation of reserves
\ntherefor, or any material collection, discount or write-off policy or procedure.
\nAdvantage Health (including the Advantage Health<\/p>\n
– 12 –<\/p>\n
Subsidiaries and Advantage Health Partnerships) is in compliance with the terms
\nand conditions of all third-party payor arrangements relating to its accounts
\nreceivable, except to the extent that such noncompliance would not, individually
\nor in the aggregate, have a material adverse effect on Advantage Health.<\/p>\n
(b) Except as set forth on Exhibit 3.11, without limiting the
\ngenerality of the foregoing, Advantage Health and each Advantage Health
\nSubsidiary or Advantage Health Partnership is in compliance with all Medicare
\nand Medicaid provider agreements to which it is a party, except to the extent
\nthat such noncompliance would not, individually or in the aggregate, have a
\nmaterial adverse effect on Advantage Health.<\/p>\n
3.12 Tax Returns. Advantage Health has filed all tax returns and
\nreports required to be filed by it or requests for extensions to file such
\nreturns or reports have been timely filed and granted and have not expired,
\nexcept to the extent that such failures to file, taken together, do not,
\nindividually or in the aggregate, have a material adverse effect on Advantage
\nHealth. Except as disclosed on Exhibit 3.12, Advantage Health has made all
\nmaterial payments shown as due on such returns. Except as disclosed on Exhibit
\n3.12, Advantage Health has not been notified that any tax returns of Advantage
\nHealth are currently under audit by the Internal Revenue Service or any state or
\nlocal tax agency. Except as set forth on Exhibit 3.12, no agreements have been
\nmade by Advantage Health for the extension of time or the waiver of the statute
\nof limitations for the assessment or payment of any federal, state or local
\ntaxes.<\/p>\n
3.13 Employee Benefit Plans; Employment Matters. (a) Except as set
\nforth on Exhibit 3.13(a), Advantage Health has neither established nor maintains
\nnor is obligated to make contributions to or under or otherwise participate in
\n(i) any bonus or other type of incentive compensation plan, program, agreement,
\npolicy, commitment, contract or arrangement (whether or not set forth in a
\nwritten document), (ii) any pension, profit-sharing, retirement or other plan,
\nprogram or arrangement, or (iii) any other employee benefit plan, fund or
\nprogram, including, but not limited to, those described in Section 3(3) of the
\nEmployee Retirement Income Security Act of 1974, as amended (“ERISA”). Except as
\ndisclosed on Exhibit 3.13(a), all such plans listed on Exhibit 3.13(a)
\n(individually, a “Plan” and collectively, the “Plans”) have been operated and
\nadministered in all material respects in accordance with, as applicable, ERISA,
\nthe Code, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay
\nAct of 1967, as amended, the Age Discrimination in Employment Act of 1967, as
\namended, and the related rules and regulations adopted by those federal agencies
\nresponsible for the administration of such laws. Except as disclosed on Exhibit
\n3.13(a), no act or failure to act by Advantage Health has resulted in a
\n“prohibited transaction” (as defined in ERISA) with respect to the Plans that is
\nnot subject to a statutory or regulatory exception. No “reportable event” (as
\ndefined in ERISA) has occurred with respect to any of the Plans which is subject
\nto Title IV of ERISA. Advantage Health has not previously made, is not currently
\nmaking, and is not obligated in any way to make, any contributions to any
\nmulti-employer plan within the meaning of the Multi-Employer Pension Plan
\nAmendments Act of 1980, as amended.<\/p>\n
– 13 –<\/p>\n
(b) Except as disclosed in the Advantage Health 1995 10-K or on Exhibit
\n3.13(b), Advantage Health is not a party to any oral or written (i) union, guild
\nor collective bargaining agreement which agreement covers employees in the
\nUnited States (nor is it aware of any union organizing activity currently being
\nconducted in respect to any of its employees), (ii) agreement with any executive
\nofficer or other key employee the benefits of which are contingent, or the terms
\nof which are materially altered, upon the occurrence of a transaction of the
\nnature contemplated by this Plan of Merger and which provides for the payment of
\nin excess of $100,000, or (iii) agreement or plan, including any stock option
\nplan, stock appreciation rights plan, restricted stock plan or stock purchase
\nplan, any of the benefits of which will be increased, or the vesting, the
\nbenefits of which will be accelerated, by the occurrence of any of the
\ntransactions contemplated by this Plan of Merger or the value of any of the
\nbenefits of which will be calculated on the basis of any of the transactions
\ncontemplated by this Plan of Merger.<\/p>\n
3.14 Compliance with Laws in General. Except as disclosed in the
\nAdvantage Health 1995 10-K or on Exhibit 3.14, Advantage Health has not received
\nany notices of material violations of any federal, state and local laws,
\nregulations and ordinances relating to its business and operations, including,
\nwithout limitation, the Occupational Safety and Health Act, the Americans with
\nDisabilities Act, the Medicare or applicable Medicaid statutes and regulations
\nand any Environmental Laws (as hereinafter defined), and no notice of any
\npending inspection or material violation of any such law, regulation or
\nordinance has been received by Advantage Health which, if it were determined
\nthat a violation had occurred, would, individually or in the aggregate, have a
\nmaterial adverse effect on Advantage Health.<\/p>\n
3.15 Licenses, Accreditation and Regulatory Approvals. Advantage
\nHealth, the Advantage Health Subsidiaries and the Advantage Health Partnerships,
\nas applicable, to Advantage Health’s best knowledge, hold all licenses, permits,
\ncertificates of need and other regulatory approvals required by law with respect
\nto their respective businesses, operations and facilities as they are currently
\nor presently conducted (collectively, “Licenses”), except where the failure to
\nhold any such License or Licenses does not have, individually or in the
\naggregate, a material adverse effect on Advantage Health. To Advantage Health’s
\nbest knowledge, all such Licenses are in full force and effect and Advantage
\nHealth is in compliance in all material respects with all conditions and
\nrequirements of such Licenses and with all rules and regulations relating
\nthereto, except where the absence of any such License or Licenses or the failure
\nof any such License or Licenses to be in full force and effect or any such
\nnoncompliance does not have, individually or in the aggregate, a material
\nadverse effect on Advantage Health. Except as disclosed in the Advantage Health
\n1995 10-K or on Exhibit 3.15, any and all past litigation concerning any such
\nLicense, together with all claims and causes of action raised therein, has been
\nfinally adjudicated. To Advantage Health’s best knowledge, no such License has
\nbeen revoked, conditioned (except as may be customary) or restricted, and,
\nexcept as disclosed in the Advantage Health 1995 10-K, no action (equitable,
\nlegal or administrative), arbitration or other process is pending, or to the
\nbest knowledge of Advantage Health, threatened, which in any way challenges the
\nvalidity of, or seeks to revoke, condition or restrict any such License, except
\nwhere the invalidity or revocation, conditioning or restriction thereof would
\nnot have a material adverse effect on Advantage Health. Subject to compliance
\nwith applicable securities laws and<\/p>\n
– 14 –<\/p>\n
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR
\nAct”), the consummation of the Merger will not violate any law or restriction to
\nwhich Advantage Health is subject which, if violated, would, individually or in
\nthe aggregate, have a material adverse effect on Advantage Health.<\/p>\n
3.16 Commissions and Fees. Except for fees payable to Alex. Brown & Sons Incorporated (“Alex. Brown”), there are no valid claims for brokerage
\ncommissions or finder’s or similar fees in connection with the transactions
\ncontemplated by this Plan of Merger which may be now or hereafter asserted
\nagainst HEALTHSOUTH resulting from any action taken by Advantage Health or its
\nstockholders, officers, directors or agents.<\/p>\n
3.17 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
\nAdvantage Health is not a party to any agreement the effect of which would be to
\nrequire HEALTHSOUTH, directly or indirectly, to retire or re-acquire all or part
\nof the shares of HEALTHSOUTH Common Stock to be issued pursuant to Section 2.1
\nhereof.<\/p>\n
3.18 Disposition of Assets of Surviving Corporation. Except as provided
\nin Exhibit 3.18 with the consent of HEALTHSOUTH, Advantage Health is not a party
\nto any plan to dispose of a significant part of the assets of the Surviving
\nCorporation within two years after the Closing Date, other than dispositions in
\nthe ordinary course of business of the Surviving Corporation and dispositions
\nintended to eliminate duplicate facilities or excess capacity.<\/p>\n
3.19 Vote Required. The affirmative vote of a majority of the
\noutstanding Advantage Health Shares entitled to vote thereon is the only vote of
\nthe holders of any class or series of Advantage Health capital stock necessary
\nto approve this Plan of Merger, the Merger and any other of the transactions
\ncontemplated hereby.<\/p>\n
3.20 Opinion of Financial Advisor. Advantage Health has received the
\noral opinion of Alex. Brown to the effect that, as of the date hereof, the
\nMerger Consideration is fair to the holders of Advantage Health Shares from a
\nfinancial point of view, a written copy of which opinion will be delivered by
\nAdvantage Health to HEALTHSOUTH prior to the date on which the definitive proxy
\nmaterials for the Proxy Statement (as defined in Section 7.4(a)) are filed with
\nthe Securities and Exchange Commission (the “SEC”).<\/p>\n
3.21 No Untrue Representations. No representation or warranty by
\nAdvantage Health in this Plan of Merger, and no exhibit to this Plan or Merger
\nor certificate issued by Advantage Health and furnished or to be furnished to
\nHEALTHSOUTH pursuant hereto, contains any untrue statement of a material fact,
\nor omits to state a material fact necessary to make the statements made therein,
\nin the light of the circumstances under which they were made, not misleading.<\/p>\n
– 15 –<\/p>\n
Section 4. Representations and Warranties of HEALTHSOUTH and the Subsidiary.<\/p>\n
The Subsidiary and HEALTHSOUTH, jointly and severally, hereby represent
\nand warrant to Advantage Health as follows:<\/p>\n
4.1 Organization, Existence, Good Standing and Capital Stock. The
\nSubsidiary is a corporation duly organized, validly existing and in good
\nstanding under the laws of the State of Delaware and has all necessary corporate
\npower to own its properties and assets and to carry on its business as presently
\nconducted. The Subsidiary’s authorized capital consists of 1,000 shares of
\nSubsidiary Common Stock, of which 1,000 shares have been duly authorized and
\nvalidly issued and registered in the name of HEALTHSOUTH and are fully paid and
\nnonassessable. The Subsidiary has not, within the two years immediately
\npreceding the date of this Plan of Merger, owned, directly or indirectly, any
\nshares of Advantage Health Common Stock.<\/p>\n
4.2 Power and Authority. The Subsidiary has corporate power to execute,
\ndeliver and perform the Plan of Merger and all agreements and other documents
\nexecuted and delivered, or to be executed and delivered, by it pursuant to the
\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set
\nforth herein, has taken all actions required by law, its Certificate of
\nIncorporation, its Bylaws or otherwise, to duly and validly authorize the
\nexecution and delivery of the Plan of Merger and such related documents. The
\nexecution and delivery of the Plan of Merger does not and, subject to the
\nreceipt of required regulatory approvals and any other required third-party
\nconsents or approvals, the consummation of the Merger contemplated hereby will
\nnot conflict with or violate any provisions of the Certificate of Incorporation
\nor Bylaws of the Subsidiary, or the provisions of, or result in the acceleration
\nof any obligation under, any mortgage, lien, lease agreement, instrument, order,
\narbitration award, judgment or decree applicable to the Subsidiary, or to which
\nthe Subsidiary is a party or by which it is bound, or conflict with or violate
\nany restrictions of any kind to which it is subject which, if violated or
\naccelerated, would have, individually or in the aggregate, a material adverse
\neffect on the Subsidiary or which would prevent of delay consummation of the
\nMerger in any material respect or otherwise prevent the Subsidiary from
\nperforming its obligations hereunder in any material respect. The execution and
\ndelivery of this Plan of Merger has been approved by the Board of Directors of
\nthe Subsidiary and by HEALTHSOUTH as the sole stockholder of Aladdin Acquisition
\nCorporation. This Plan of Merger has been duly and validly executed and
\ndelivered by the Subsidiary and, assuming this Plan of Merger constitutes a
\nvalid and binding obligation of Advantage Health, enforceable against Advantage
\nHealth in accordance with its terms, constitutes the legal, valid and binding
\nobligation of Aladdin Acquisition Corporation, enforceable against the
\nSubsidiary in accordance with its terms.<\/p>\n
4.3 Legal Proceedings. There are no actions, suits or proceedings
\npending or threatened against or relating to or affecting the Subsidiary or the
\ntransactions relating to this Plan of Merger. To the best knowledge of Aladdin
\nAcquisition Corporation, no valid basis for recovery or other relief in such
\naction, suit or proceeding exists.<\/p>\n
– 16 –<\/p>\n
4.4 No Contracts or Liabilities. Other than the obligations created
\nunder the Plan of Merger, the Subsidiary has not engaged in any business
\nactivities of any type or kind whatsoever, and is not obligated under any
\ncontracts, claims, leases, liabilities (contingent or otherwise), loans or
\notherwise.<\/p>\n
4.5 Commissions and Fees. Except for fees owed to Smith Barney Inc.
\n(“Smith Barney”), there are no claims for brokerage commissions, investment
\nbankers’ fees or finder’s fees in connection with the transaction contemplated
\nby the Plan of Merger resulting from any action taken by the Subsidiary,
\nHEALTHSOUTH as its sole stockholder or any of its officers, directors or agents.<\/p>\n
Section 5. Representations and Warranties of HEALTHSOUTH.<\/p>\n
HEALTHSOUTH hereby represents and warrants to Advantage Health as
\nfollows:<\/p>\n
5.1 Organization, Existence and Good Standing. HEALTHSOUTH is a
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the State of Delaware. HEALTHSOUTH has all necessary corporate power to own
\nits properties and assets and to carry on its business as presently conducted.
\nEach subsidiary of HEALTHSOUTH (a “HEALTHSOUTH Subsidiary”), each general
\npartnership, limited partnership and joint venture in which HEALTHSOUTH or any
\nHEALTHSOUTH Subsidiary is a general partner or a co- venturer (a “HEALTHSOUTH
\nPartnership”), and each limited liability company in which HEALTHSOUTH, any
\nHEALTHSOUTH Subsidiary or HEALTHSOUTH Partnership is a member (a “HEALTHSOUTH
\nLLC”) is duly organized, validly existing, and (to the extent such concept is
\napplicable under the laws of such jurisdiction) in good standing in its
\nrespective jurisdiction of organization, and has all necessary corporate power
\nto own its properties and assets and to carry on its business as presently
\nconducted. HEALTHSOUTH, all HEALTHSOUTH Subsidiaries, all HEALTHSOUTH
\nPartnerships and all HEALTHSOUTH LLCs are duly qualified to do business and are
\nin good standing as foreign corporations, foreign limited partnerships or
\nforeign limited liability companies, as the case may be, in all jurisdictions in
\nwhich the character of the property owned, leased or operated or the nature of
\nthe business transacted by them makes qualification necessary, except where the
\nfailure to be so qualified or in good standing would not have a material adverse
\neffect on HEALTHSOUTH. HEALTHSOUTH is not, and has not been within the two years
\nimmediately preceding the date of this Plan of Merger, a subsidiary or division
\nof another corporation, nor has HEALTHSOUTH within such time owned, directly or
\nindirectly, any shares of Advantage Health Common Stock.<\/p>\n
5.2 HEALTHSOUTH Capital Stock. HEALTHSOUTH has an authorized
\ncapitalization of 1,500,000 shares of Preferred Stock, par value $.10 per share,
\nnone of which shares are issued and outstanding, and none of which shares are
\nheld in treasury, and 150,000,000 shares of Common Stock, par value $0.01 per
\nshare, of which 97,217,000 shares are issued and outstanding, and 182,000 shares
\nare held in treasury. All of the issued and outstanding shares of HEALTHSOUTH
\nCommon Stock have been duly and validly issued and<\/p>\n
– 17 –<\/p>\n
are fully paid and nonassessable. Except as disclosed in the HEALTHSOUTH
\nDocuments (as hereinafter defined), there are no options, warrants or similar
\nrights granted by HEALTHSOUTH or any other agreements to which HEALTHSOUTH is a
\nparty providing for the issuance or sale by it of any additional securities.
\nThere is no liability for dividends declared or accumulated but unpaid with
\nrespect to any shares of HEALTHSOUTH Common Stock. HEALTHSOUTH has not made any
\ndistributions to any holder of HEALTHSOUTH Common Stock or participated in or
\neffected any issuance, exchange or retirement of HEALTHSOUTH Common Stock, or
\notherwise changed the equity interests of holders of HEALTHSOUTH Common Stock,
\nin contemplation of effecting the Merger, within the two years immediately
\npreceding the date of this Plan of Merger. Any shares of HEALTHSOUTH Common
\nStock that HEALTHSOUTH has re-acquired during the two years immediately
\npreceding the date of this Plan of Merger have been so re-acquired only for
\npurposes other than Business Combinations.<\/p>\n
5.3 Subsidiary Common Stock. HEALTHSOUTH owns, beneficially and of
\nrecord, all of the issued and outstanding shares of Subsidiary Common Stock,
\nwhich are validly issued and outstanding, fully paid and nonassessable, free and
\nclear of all liens and encumbrances. HEALTHSOUTH has the corporate power to
\nendorse and surrender such shares of Subsidiary Common Stock for cancellation
\npursuant to the Plan of Merger. HEALTHSOUTH has taken all such actions as may be
\nrequired in its capacity as the sole stockholder of Aladdin Acquisition
\nCorporation to approve the Merger.<\/p>\n
5.4 Power and Authority. HEALTHSOUTH has corporate power to execute,
\ndeliver and perform the Plan of Merger and all agreements and other documents
\nexecuted and delivered, or to be executed and delivered, by it pursuant to the
\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set
\nforth herein, has taken all actions required by law, its Certificate of
\nIncorporation, its Bylaws or otherwise, to authorize the execution and delivery
\nof the Plan of Merger and such related documents. The execution and delivery of
\nthe Plan of Merger does not and, subject to the receipt of required regulatory
\napprovals and any other required third-party consents or approvals, the
\nconsummation of the Merger contemplated hereby will not, violate any provisions
\nof the Certificate of Incorporation or Bylaws of HEALTHSOUTH, or any provision
\nof, or result in the acceleration of any obligation under, any mortgage, lien,
\nlease, agreement, instrument, order, arbitration award, judgment or decree to
\nwhich HEALTHSOUTH, any HEALTHSOUTH Subsidiary, any HEALTHSOUTH Partnership or
\nany HEALTHSOUTH LLC is a party or by which HEALTHSOUTH, any HEALTHSOUTH
\nSubsidiary, any HEALTHSOUTH Partnership or any HEALTHSOUTH LLC is bound, or
\nconflict with or violate any restrictions of any kind to which HEALTHSOUTH, any
\nHEALTHSOUTH Subsidiary, any HEALTHSOUTH Partnership or any HEALTHSOUTH LLC is
\nsubject which, if violated or accelerated, would have, individually or in the
\naggregate, a material adverse effect on HEALTHSOUTH or which would prevent or
\ndelay consummation of the Merger in any material respect or otherwise prevent
\nHEALTHSOUTH from performing its obligations hereunder in any material respect.
\nThe execution and delivery of this Agreement has been approved by the Board of
\nDirectors of HEALTHSOUTH. The Plan of Merger has been duly and validly executed
\nand delivered by HEALTHSOUTH and, assuming that the Plan of Merger constitutes a
\nvalid and binding obligation of Advantage Health, enforceable against it<\/p>\n
– 18 –<\/p>\n
in accordance with its terms, constitutes the legal, valid and binding
\nobligation of HEALTHSOUTH, enforceable against HEALTHSOUTH in accordance with
\nits terms.<\/p>\n
5.5 HEALTHSOUTH Financial Information. HEALTHSOUTH has heretofore
\nfurnished Advantage Health with the following documents:<\/p>\n
(i) its Annual Report on Form 10-K for the fiscal year ended
\n December 31, 1995;<\/p>\n
(ii) its Quarterly Reports on Form 10-Q for all completed
\n fiscal quarters following HEALTHSOUTH’s last completed fiscal year and
\n all reports on Form 8-K filed since the end of such fiscal year; and<\/p>\n
(iii) Its Registration Statement on Form S-4 (Registration No.
\n 33-64935) relating to its pending acquisition of Surgical Care
\n Affiliates, Inc.<\/p>\n
(documents included in (i) – (iii) above being collectively referred to herein
\nas the “HEALTHSOUTH Documents”). As of their respective dates, the HEALTHSOUTH
\nDocuments did not contain any untrue statements of material facts or omit to
\nstate material facts required to be stated therein or necessary to make the
\nstatements therein, in light of the circumstances under which they were made,
\nnot misleading. As of their respective dates, the descriptions of the business,
\noperations and financial condition of HEALTHSOUTH contained in the HEALTHSOUTH
\nDocuments complied in all material respects with the applicable requirements of
\nthe Securities Act, and the Exchange Act, and the rules and regulations
\npromulgated under such statutes. The financial statements contained in the
\nHEALTHSOUTH Documents, together with the notes thereto, have been prepared in
\naccordance with generally accepted accounting principles consistently followed
\nthroughout the periods indicated, reflect all known liabilities of HEALTHSOUTH,
\nincluding all known contingent liabilities as of the end of each period
\nreflected therein, and present fairly the financial condition of HEALTHSOUTH at
\nsuch dates and the consolidated results of operations and cash flows of
\nHEALTHSOUTH for the periods then ended.<\/p>\n
5.6 Subsequent Events. Except as set forth on Exhibit 5.6 or disclosed
\nin the HEALTHSOUTH Documents or as otherwise permitted hereunder, HEALTHSOUTH
\nhas not, since December 31, 1994:<\/p>\n
(a) Incurred any material adverse change;<\/p>\n
(b) Discharged or satisfied any material lien or encumbrance, or paid
\nor satisfied any material obligation or liability (absolute, accrued, contingent
\nor otherwise) other than (i) liabilities shown or reflected on the December 31,
\n1994 Balance Sheet contained in the HEALTHSOUTH Documents or (ii) liabilities
\nincurred since December 31, 1994 which discharge or satisfaction would not have
\na material adverse effect on HEALTHSOUTH;<\/p>\n
– 19 –<\/p>\n
(c) Increased or established any reserve for taxes or any other
\nliability on its books or otherwise provided therefor which would have a
\nmaterial adverse effect on HEALTHSOUTH, except as may have been required due to
\nincome or operations of HEALTHSOUTH since December 31, 1994;<\/p>\n
(d) Mortgaged, pledged or subjected to any lien, charge or other
\nencumbrance any of the assets, tangible or intangible, which assets are material
\nto the consolidated business or financial condition of HEALTHSOUTH;<\/p>\n
(e) Sold or transferred any of the assets material to the consolidated
\nbusiness of HEALTHSOUTH, cancelled any material debts or claims or waived any
\nmaterial rights, except in the ordinary course of business;<\/p>\n
(f) Granted any general or uniform increase in the rates of pay of
\nemployees or any material increase in salary payable or to become payable by
\nHEALTHSOUTH to any officer or employee, consultant or agent (other than normal
\nmerit increases or consistent with its past practice), or by means of any bonus
\nor pension plan, contract or other commitment, increased in a material respect
\nthe compensation of any officer, employee, consultant or agent;<\/p>\n
(g) Except for this Plan or Merger and any other agreement executed and
\ndelivered pursuant to this Plan of Merger and except as disclosed in the
\nHEALTHSOUTH Documents, entered into any material transaction other than in the
\nordinary course of business or permitted under other Sections hereof; or<\/p>\n
(h) Issued any stock, bonds or other securities, other than stock
\noptions granted to employees or consultants of HEALTHSOUTH or warrants granted
\nto third parties, and other than shares issued upon the exercise of stock
\noptions granted to employees or consultants or upon the exercise of warrants
\ngranted to third parties or upon the conversion of convertible debentures, all
\nof which are described or in the HEALTHSOUTH Documents.<\/p>\n
5.7 Legal Proceedings. Except as described in the HEALTHSOUTH
\nDocuments, HEALTHSOUTH has no knowledge of any pending or threatened litigation,
\ngovernmental investigation, condemnation or other proceeding against or relating
\nto or affecting HEALTHSOUTH or the transactions contemplated by this Plan of
\nMerger for which HEALTHSOUTH is uninsured or which, if resolved adversely to
\nHEALTHSOUTH, would have, individually or in the aggregate, a material adverse
\neffect on HEALTHSOUTH. To the best knowledge of HEALTHSOUTH, no valid basis for
\nrecovery or other relief in any such action exists.<\/p>\n
5.8 Contracts, etc. HEALTHSOUTH has made available to Advantage Health
\ntrue copies of those contracts, leases, agreements and arrangements filed as
\nItem 10 exhibits to HEALTHSOUTH’s Report on Form 10-K included in the
\nHEALTHSOUTH Documents (including such of those Item 10 exhibits as are
\nincorporated by reference) as are listed on Exhibit 5.8. Except as otherwise
\nindicated on Exhibit 5.8, to HEALTHSOUTH’s best<\/p>\n
– 20 –<\/p>\n
knowledge, all of such contracts, leases, agreements and arrangements are
\nlegally valid and binding in accordance with their terms (assuming the other
\nparties thereto are bound) and in full force and effect, except for any such
\ninvalidity or failure to be binding or in full force and effect which would not
\nhave, individually or in the aggregate, a material adverse effect on
\nHEALTHSOUTH. Except as otherwise indicated on Exhibit 5.8, all parties to such
\ncontracts, leases, agreements and arrangements have complied with the provisions
\nof such contracts, leases, agreements and arrangements in all material respects
\nand, to the best knowledge of HEALTHSOUTH, no party thereto is in material
\ndefault thereunder and no event has occurred which, but for the lapse of time or
\nthe giving of notice or both, would constitute a material default hereunder,
\nexcept, in any such case, where such noncompliance with or default under the
\ncontract, lease, agreement or arrangement or the default or breach thereunder or
\nthereof would not have, individually or in the aggregate, a material adverse
\neffect on HEALTHSOUTH.<\/p>\n
5.9 Accounts Receivable. (a) Since December 31, 1994, HEALTHSOUTH has
\nnot changed any material principle or practice with respect to the recordation
\nof accounts receivable or the calculation or reserves therefor, or any material
\ncollection, discount or write-off policy or procedure. HEALTHSOUTH (including
\nthe HEALTHSOUTH Subsidiaries, HEALTHSOUTH Partnerships and HEALTHSOUTH LLCs) is
\nin compliance with the terms and conditions of all third-party payor
\narrangements relating to its accounts receivable, except to the extent that such
\nnoncompliance would not have a material adverse effect on HEALTHSOUTH.<\/p>\n
(b) Without limiting the generality of the foregoing, HEALTHSOUTH and
\neach HEALTHSOUTH Subsidiary, HEALTHSOUTH Partnership and HEALTHSOUTH LLC is in
\ncompliance with all Medicare and Medicaid provider agreements to which it is a
\nparty, except to the extent that such noncompliance would not, individually or
\nin the aggregate, have a material adverse effect on HEALTHSOUTH.<\/p>\n
5.10 Tax Returns. HEALTHSOUTH has filed all tax returns required to be
\nfiled by it or requests for extensions to file such returns or reports have been
\ntimely filed and granted and have not expired, except to the extent that such
\nfailures to file, taken together, do not have a material adverse effect on
\nHEALTHSOUTH. HEALTHSOUTH has made all material payments shown as due on such
\nreturns. Except as disclosed on Exhibit 5.10, HEALTHSOUTH has not been notified
\nthat any tax returns of HEALTHSOUTH are currently under audit by the Internal
\nRevenue Service or any state or local tax agency. Except as disclosed on Exhibit
\n5.10, no agreements have been made by HEALTHSOUTH for the extension of time or
\nthe waiver of the statute of limitations for the assessment or payment of any
\nfederal, state or local taxes.<\/p>\n
5.11 Employee Benefit Plans; Employment Matters. (a) Except as
\ndisclosed in the HEALTHSOUTH Documents, HEALTHSOUTH has neither established nor
\nmaintains nor is obligated to make contributions to or under or otherwise
\nparticipate in (i) any bonus or other type of incentive compensation plan,
\nprogram, agreement, policy, commitment, contract or arrangement (whether or not
\nset forth in a written document), (ii) any pension, profit-sharing, retirement
\nor other plan, program or arrangement, or (iii) any other employee benefit plan,
\nfund or program, including, but not limited to, those described in Section 3(3)
\nof ERISA. All such<\/p>\n
– 21 –<\/p>\n
plans have been operated and administered in all material respects in accordance
\nwith, as applicable, ERISA, the Code, Title VII of the Civil Rights Act of 1964,
\nas amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
\nEmployment Act of 1967, as amended, and the related rules and regulations
\nadopted by those federal agencies responsible for the administration of such
\nlaws. No act or failure to act by HEALTHSOUTH has resulted in a “prohibited
\ntransaction” (as defined in ERISA) with respect to the Plans that is not subject
\nto a statutory or regulatory exception. No “reportable event” (as defined in
\nERISA) has occurred with respect to any of the Plans which is subject to Title
\nIV of ERISA. Except as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH has
\nnot previously made, is not currently making, and is not obligated in any way to
\nmake, any contributions to any multi-employer plan within the meaning of the
\nMulti-Employer Pension Plan Amendments Act of 1980, as amended.<\/p>\n
(b) Except as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH is
\nnot a party to any oral or written (i) union, guild or collective bargaining
\nagreement which agreement covers employees in the United States (nor is it aware
\nof any union organizing activity currently being conducted in respect to any of
\nits employees), (ii) agreement with any executive officer or other key employee
\nthe benefits of which are contingent, or the terms of which are materially
\naltered, upon the occurrence of a transaction of the nature contemplated by this
\nPlan of Merger and which provides for the payment of in excess of $100,000, or
\n(iii) agreement or plan, including any stock option plan, stock appreciation
\nrights plan, restricted stock plan or stock purchase plan, any of the benefits
\nof which will be increased, or the vesting the benefits of which will be
\naccelerated, by the occurrence of any of the transactions contemplated by this
\nPlan of Merger or the value of any of the benefits of which will be calculated
\non the basis of any of the transactions contemplated by this Plan of Merger.<\/p>\n
5.12 Compliance with Laws in General. Except as disclosed in the
\nHEALTHSOUTH Documents, HEALTHSOUTH has not received any notices of material
\nviolations of any federal, state and local laws, regulations and ordinances
\nrelating to its business and operations, including, without limitation, the
\nOccupational Safety and Health Act, the Americans with Disabilities Act, the
\nMedicare or applicable Medicaid statutes and regulations and any Environmental
\nLaws, and no notice of any pending inspection or material violation of any such
\nlaw, regulation or ordinance has been received by HEALTHSOUTH with respect to
\nany alleged violation which, if it were determined that a violation occurred,
\nwould have a material adverse effect on HEALTHSOUTH.<\/p>\n
5.13 Licenses, Accreditation and Regulatory Approvals. HEALTHSOUTH, the
\nHEALTHSOUTH Subsidiaries, the HEALTHSOUTH Partnerships and the HEALTHSOUTH LLCs
\nhold all Licenses which are needed or required by law with respect to their
\nrespective businesses, operations and facilities as they are currently or
\npresently conducted, except where the failure to hold any such License or
\nLicenses does not have a material adverse effect on HEALTHSOUTH. To
\nHEALTHSOUTH’s best knowledge, all such Licenses are in full force and effect and
\nHEALTHSOUTH is in compliance in all material respects with all conditions and
\nrequirements of such Licenses and with all rules and regulations relating
\nthereto, except where the absence of any such License or Licenses or the failure
\nof any such License or Licenses to<\/p>\n
– 22 –<\/p>\n
be in full force and effect or any such noncompliance does not have,
\nindividually or in the aggregate, a material adverse effect on HEALTHSOUTH.
\nExcept as disclosed in the HEALTHSOUTH Documents, any and all past litigation
\nconcerning any such License, together with all claims and causes of action
\nraised therein, has been finally adjudicated. To HEALTHSOUTH’s best knowledge,
\nno such License has been revoked, conditioned (except as may be customary) or
\nrestricted, and, except as disclosed in the HEALTHSOUTH Documents, no action
\n(equitable, legal or administrative), arbitration or other process is pending,
\nor to the best knowledge of HEALTHSOUTH, threatened, which in any way challenges
\nthe validity of, or seeks to revoke, condition or restrict any such License,
\nexcept where the invalidity or revocation, conditioning or restriction thereof
\nwould not have a material adverse effect on HEALTHSOUTH. Subject to compliance
\nwith applicable securities laws, the HSR Act and other or local rules or
\nregulations requiring notice, approval, or other action upon the occurrence of a
\nchange in control of Advantage Health, any of the Advantage Health Subsidiaries
\nor any of the Advantage Health Partnerships, the consummation of the Merger will
\nnot violate any law or restriction to which HEALTHSOUTH is subject.<\/p>\n
5.14 Commissions and Fees. Except for fees owed to Smith Barney, there
\nare no claims for brokerage commissions, investment bankers’ fees or finder’s
\nfees in connection with the transactions contemplated by the Plan of Merger
\nresulting from any action taken by HEALTHSOUTH or any of its stockholders,
\nofficers, directors or agents.<\/p>\n
5.15 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
\nHEALTHSOUTH has not agreed directly or indirectly to retire or re-acquire all or
\npart of the shares of HEALTHSOUTH Common Stock to be issued pursuant to Section
\n2.1 hereof.<\/p>\n
5.16 Disposition of Assets of Surviving Corporation. HEALTHSOUTH does
\nnot intend or plan to dispose of, or to cause the Surviving Corporation to
\ndispose of, a significant part of the assets of the Surviving Corporation within
\ntwo years after the Effective Time, other than dispositions in the ordinary
\ncourse of business of the Surviving Corporation and dispositions intended to
\neliminate duplicative facilities or excess capacity.<\/p>\n
5.17 No Vote Required. No vote of the holders of outstanding shares of
\nany class or series of HEALTHSOUTH capital stock is necessary to approve this
\nPlan of Merger, the Merger and the transactions contemplated hereby and no such
\nvote will be sought by HEALTHSOUTH.<\/p>\n
5.18 Opinion of Financial Advisor. HEALTHSOUTH has received the oral
\nopinion of Smith Barney to the effect that, as of the date of this Plan of
\nMerger, the Exchange Ratio is fair to HEALTHSOUTH from a financial point of
\nview, a written copy of which opinion will be delivered by HEALTHSOUTH to
\nAdvantage Health prior to the date on which the definitive proxy materials for
\nthe Proxy Statement (as defined in Section 7.4(a)) are filed with the Securities
\nand Exchange Commission.<\/p>\n
5.19 HEALTHSOUTH Common Stock. HEALTHSOUTH will have a sufficient
\nnumber of authorized but unissued and\/or treasury shares of its Common Stock
\navailable for issuance<\/p>\n
– 23 –<\/p>\n
to the holders of Advantage Health Shares in accordance with the provisions of
\nthe Plan of Merger. The HEALTHSOUTH Common Stock to be issued pursuant to the
\nPlan of Merger will, when so delivered, be (i) duly and validly issued, fully
\npaid and nonassessable, (ii) issued pursuant to an effective registration
\nstatement under the Securities Act, and (iii) authorized for listing on the New
\nYork Stock Exchange (the “NYSE”) upon official notice of issuance.<\/p>\n
5.20 Investment Intent. HEALTHSOUTH is acquiring the Advantage Health
\nShares hereunder for investment, for its own account and not with a view to the
\ndistribution or sale thereof, and HEALTHSOUTH has no understanding, agreement or
\narrangement to sell, distribute, partition or otherwise transfer or assign all
\nor any part of the Advantage Health Shares to any other person, firm or
\ncorporation.<\/p>\n
5.21 No Untrue Representation. No representation or warranty by
\nHEALTHSOUTH in this Plan of Merger, and no exhibit to this Plan of Merger or
\ncertificate issued by HEALTHSOUTH and furnished or to be furnished to Advantage
\nHealth pursuant hereto, contains any untrue statement of a material fact or
\nomits to state a material fact necessary to make the statements made therein, in
\nthe light of the circumstances under which they were made, not misleading.<\/p>\n
Section 6. Access to Information and Documents.<\/p>\n
6.1 Access to Information. Between the date hereof and the Closing
\nDate, each of Advantage Health and HEALTHSOUTH shall give to the other party and
\nits counsel, accountants and other representatives full access to all the
\nproperties, documents, contracts, personnel files and other records of such
\nparty and shall furnish the other party with copies of such documents and with
\nsuch information with respect to the affairs of such party as the other party
\nmay from time to time reasonably request. Each party will disclose and make
\navailable to the other party and its representatives all books, contracts,
\naccounts, personnel records, letters of intent, papers, records, communications
\nwith regulatory authorities and other documents relating to the business and
\noperations of such party. In addition, Advantage Health shall make available to
\nHEALTHSOUTH all such banking, investment and financial information as shall be
\nnecessary to allow for the efficient integration of Advantage Health’s banking,
\ninvestment and financial arrangements with those of HEALTHSOUTH at the Effective
\nTime.<\/p>\n
6.2 Return of Records. If the transactions contemplated hereby are not
\nconsummated and this Plan of Merger terminates, each party agrees to promptly
\nreturn all documents, contracts, records or properties of the other party and
\nall copies thereof furnished pursuant to this Section 6 or otherwise. All
\ninformation disclosed by any party or any affiliate of such party shall be
\ndeemed to be “confidential information” under the terms of the confidentiality
\nagreements, heretofore executed and delivered by and between Advantage Health
\nand HEALTHSOUTH (the “Confidentiality Agreements”).<\/p>\n
– 24 –<\/p>\n
6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
\ndeemed to create any duty or responsibility on the part of either party to
\ninvestigate or evaluate the value, validity or enforceability of any contract,
\nlease or other asset included in the assets of the other party.<\/p>\n
(b) With respect to matters as to which any party has made express
\nrepresentations or warranties herein, the parties shall be entitled to rely upon
\nsuch express representations and warranties irrespective of any investigations
\nmade by such parties, except to the extent that such investigations result in
\nactual knowledge of the inaccuracy or falsehood of particular representations
\nand warranties.<\/p>\n
Section 7. Covenants.<\/p>\n
7.1 Preservation of Business. Advantage Health will use its best
\nefforts to preserve the business organization of Advantage Health intact, to
\nkeep available to HEALTHSOUTH and the Surviving Corporation the services of the
\npresent employees of Advantage Health, and to preserve for HEALTHSOUTH and the
\nSurviving Corporation the goodwill of the suppliers, customers and others having
\nbusiness relations with Advantage Health.<\/p>\n
7.2 Material Transactions. Prior to the Effective Time and except as
\nset forth on Exhibit 7.2, Advantage Health will not (other than as required
\npursuant to the terms of the Plan of Merger and the related documents and other
\nthan with respect to transactions for which binding commitments have been
\nentered into prior to the date hereof and transactions described in Exhibit 7.2
\nwhich do not vary materially from the terms set forth on Exhibit 7.2), without
\nfirst obtaining the written consent of HEALTHSOUTH (such consent not to be
\nunreasonably withheld:<\/p>\n
(a) Encumber any asset or enter into any transaction or make
\n any contract or commitment relating to the properties, assets and
\n business of Advantage Health, other than in the ordinary course of
\n business;<\/p>\n
(b) Enter into any employment contract which is not terminable
\n upon notice of 30 days or less, at will, and without penalty to
\n Advantage Health, except as provided herein;<\/p>\n
(c) In addition to any existing or prospective contract or
\n agreement disclosed on Exhibit 7.2 and other than acquisitions or other
\n commitments not exceeding $15,000,000 in the aggregate, enter into any
\n contract or agreement (i) which cannot be performed within three months
\n or less, or (ii) which involves the expenditure of over $100,000;<\/p>\n
(d) Issue or sell, or agree to issue or sell, any shares of
\n capital stock or other securities of Advantage Health (other than
\n options to purchase shares of Advantage Health Common Stock issued
\n after the date hereof in the ordinary course of Advantage Health’s
\n business or consistent with its past practice), except upon exercise of
\n currently<\/p>\n
– 25 –<\/p>\n
outstanding stock options (or upon exercise of such permitted
\n subsequently granted options);<\/p>\n
(e) Except for contributions to Advantage Health’s existing
\n retirement plans, make any payment or distribution to the trustee under
\n any bonus, pension, profit-sharing or retirement plan or incur any
\n obligation to make any such payment or contribution which is not in
\n accordance with Advantage Health’s usual past practice, or make any
\n payment or contributions or incur any obligation pursuant to or in
\n respect of any other plan or contract or arrangement providing for
\n bonuses, executive incentive compensation, pensions, deferred
\n compensation, retirement payments, profit-sharing or the like,
\n establish or enter into any such plan, contract or arrangement, or
\n terminate any Plan;<\/p>\n
(f) Extend credit to anyone, except in the ordinary course of
\n business or consistent with its past practice;<\/p>\n
(g) Guarantee the obligation of any person, firm or corporation,
\n except in the ordinary course of business or consistent with its past
\n practice; or<\/p>\n
(h) Amend its Certificate of Incorporation or Bylaws.<\/p>\n
(i) Take any action of a kind described in Section 3.8(b) – (h).<\/p>\n
7.3 Meeting of Stockholders. (a) Subject to the further exercise of its
\nBoard of Directors’ fiduciary duties (either prior to or after the taking of any
\nof the following steps), Advantage Health will take all steps necessary in
\naccordance with its Certificate of Incorporation and Bylaws to call, give notice
\nof, convene and hold a special meeting of its stockholders as soon as
\npracticable after the effectiveness of the Registration Statement (as defined in
\nSection 7.4 hereof), for the purpose of approving this Plan of Merger and for
\nsuch other purposes as may be necessary (the “Special Meeting”). Unless this
\nPlan of Merger shall have been validly terminated as provided herein, the Board
\nof Directors of Advantage Health (subject to the provisions of Section 8.1(c)
\nhereof) will (i) recommend to its stockholders the approval of this Plan of
\nMerger, the transactions contemplated hereby and any other matters to be
\nsubmitted to its stockholders in connection therewith, to the extent that such
\napproval is required by applicable law in order to consummate the Merger, and
\n(ii) use reasonable best efforts to obtain the approval by its stockholders of
\nthis Plan of Merger, the Merger and any other of the transactions contemplated
\nhereby requiring such stockholder approval.<\/p>\n
(b) Nothing contained herein shall affect the right of Advantage Health
\nto take action by written consent in lieu of a meeting to the extent permitted
\nby applicable law and its Certificate of Incorporation and Bylaws.<\/p>\n
7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with
\nthe SEC and any other applicable regulatory bodies, as soon as practicable, a
\nRegistration Statement on Form S-4 with respect to the shares of HEALTHSOUTH
\nCommon Stock to be issued in the<\/p>\n
– 26 –<\/p>\n
Merger (the “Registration Statement”), and will otherwise proceed promptly to
\nsatisfy the requirements of the Securities Act, including Rule 145 thereunder.
\nThe Registration Statement shall contain a proxy statement of Advantage Health
\nfor the Special Meeting containing the information required by the Exchange Act
\n(the “Proxy Statement”). HEALTHSOUTH shall take all reasonable steps to cause
\nthe Registration Statement to be declared effective and to maintain such
\neffectiveness until all of the shares covered thereby have been distributed.
\nHEALTHSOUTH shall promptly amend or supplement the Registration Statement to the
\nextent necessary in order to make the statements therein not misleading or to
\ncorrect any misstatements which have become false or misleading. HEALTHSOUTH
\nshall use its reasonable best efforts to have the Proxy Statement approved by
\nthe SEC under the provisions of the Exchange Act as soon as practicable.
\nHEALTHSOUTH shall provide Advantage Health with copies of all filings made
\npursuant to this Section 7.4 reasonably in advance of their filing and shall
\nconsult with Advantage Health on responses to any comments made by the staff of
\nthe SEC with respect thereto.<\/p>\n
(b) The information specifically designated as being supplied by
\nAdvantage Health for inclusion in the Registration Statement shall not, at the
\ntime the Registration Statement is declared effective, at the time the Proxy
\nStatement is first mailed to holders of Advantage Health Common Stock, at the
\ntime of the Special Meeting and at the Effective Time, contain any untrue
\nstatement of a material fact or omit to state any material fact required to be
\nstated therein or necessary in order to make the statements therein not
\nmisleading. The information specifically designated as being supplied by
\nAdvantage Health for inclusion in the Proxy Statement shall not, at the date the
\nProxy Statement (or any amendment thereof or supplement thereto) is first mailed
\nto holders of Advantage Health Common Stock at the time of the Special Meetings
\nand at the Effective Time, contain any untrue statement of a material fact or
\nomit to state any material fact required to be stated therein or necessary in
\norder to make the statements therein, in the light of the circumstances under
\nwhich they are made, not misleading. If at any time prior to the Effective Time
\nany event or circumstance relating to Advantage Health, or its officers or
\ndirectors, is discovered by Advantage Health which should be set forth in an
\namendment to the Registration Statement or a supplement to the Proxy Statement,
\nAdvantage Health shall promptly inform HEALTHSOUTH and HEALTHSOUTH shall
\nthereupon file such amendment to the Registration Statement. All documents, if
\nany, that Advantage Health is responsible for filing with the SEC in connection
\nwith the transactions contemplated hereby shall comply as to form in all
\nmaterial respects with the applicable requirements of the Securities Act and the
\nrules and regulations thereunder and the Exchange Act and the rules and
\nregulations thereunder.<\/p>\n
(c) The information specifically designated as being supplied by
\nHEALTHSOUTH for inclusion in the Registration Statement shall not, at the time
\nthe Registration Statement is declared effective, at the time the Proxy
\nStatement (or any amendment thereof or supplement thereto) is first mailed to
\nholders of Advantage Health Common Stock, at the time of the Special Meeting and
\nat the Effective Time, contain any untrue statement of a material fact or omit
\nto state any material fact required to be stated therein or necessary in order
\nto make the statements therein not misleading. The information specifically
\ndesignated as being supplied by HEALTHSOUTH for inclusion in the Proxy Statement
\nto be sent to the holders of Advantage<\/p>\n
– 27 –<\/p>\n
Health Common Stock in connection with the Special Meeting shall not, at the
\ndate the Proxy Statement (or any amendment thereof or supplement thereto) is
\nfirst mailed to holders of Advantage Health Common Stock, at the time of the
\nSpecial Meeting or at the Effective Time, contain any untrue statement or a
\nmaterial fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in the light of the
\ncircumstances under which they are made, not misleading. If at any time prior to
\nthe Effective Time any event or circumstance relating to HEALTHSOUTH or its
\nofficers or directors, is discovered by HEALTHSOUTH which should be set forth in
\nan amendment to the Registration Statement or a supplement to the Proxy
\nStatement, HEALTHSOUTH shall promptly inform Advantage Health and shall promptly
\nfile such amendment to the Registration Statement. All documents that
\nHEALTHSOUTH is responsible for filing with the SEC in connection with the
\ntransactions contemplated hereby shall comply as to form in all material
\nrespects with the applicable requirements of the Securities Act and the rules
\nand regulations thereunder and the Exchange Act and the rules and regulations
\nthereunder.<\/p>\n
(d) Prior to the Closing Date, HEALTHSOUTH shall use its reasonable
\nbest efforts to cause the shares of HEALTHSOUTH Common Stock to be issued
\npursuant to the Merger to be registered or qualified under all applicable
\nsecurities or Blue Sky laws of each of the states and territories of the United
\nStates, and to take any other actions which may be necessary to enable the
\nHEALTHSOUTH Common Stock to be issued pursuant to the Merger to be distributed
\nin each such jurisdiction.<\/p>\n
(e) Prior to the Closing Date, HEALTHSOUTH shall file an additional
\nlisting application (the “Listing Application”) with the NYSE relating to the
\nshares of HEALTHSOUTH Common Stock to be issued in connection with the Merger,
\nand shall use its reasonable best efforts to cause such shares of HEALTHSOUTH
\nCommon Stock to be approved for listing on the NYSE, upon official notice of
\nissuance, prior to the Closing Date.<\/p>\n
(f) Advantage Health shall furnish all information to HEALTHSOUTH with
\nrespect to Advantage Health, the Advantage Health Subsidiaries and the Advantage
\nHealth Partnerships as HEALTHSOUTH may reasonably request for inclusion in the
\nRegistration Statement, the Proxy Statement and the Listing Application, and
\nshall otherwise cooperate with HEALTHSOUTH in the preparation and filing of such
\ndocuments.<\/p>\n
7.5 Exemption from State Takeover Laws. Advantage Health shall take all
\nreasonable steps necessary to exempt Advantage Health and the Merger from the
\nrequirements of any state takeover statute or other similar state law which
\nwould prevent or impede the consummation of the transactions contemplated
\nhereby, by action of Advantage Health’s Board of Directors or otherwise.<\/p>\n
7.6 HSR Act Compliance. HEALTHSOUTH and Advantage Health shall promptly
\nmake their respective filings, and shall thereafter use their reasonable best
\nefforts to promptly make any required submissions, under the HSR Act with
\nrespect to the Merger and the transactions contemplated hereby. HEALTHSOUTH and
\nAdvantage Health shall use their<\/p>\n
– 28 –<\/p>\n
respective reasonable best efforts to obtain all other permits, authorizations,
\nconsents and approvals from third parties and governmental authorities necessary
\nto consummate the Merger and the transactions contemplated hereby.<\/p>\n
7.7 Public Disclosures. HEALTHSOUTH and Advantage Health shall consult
\nwith each other before issuing any press release or otherwise making any public
\nstatement with respect to the transactions contemplated by this Plan of Merger,
\nand shall not issue any such press release or make any such public statement
\nprior to such consultation except as may be required by applicable law or
\nrequirements of the Exchange. The parties shall issue a joint press release,
\nmutually acceptable to HEALTHSOUTH and Advantage Health, promptly upon execution
\nand delivery of this Plan of Merger.<\/p>\n
7.8 Resignation of Advantage Health Directors. On or prior to the
\nClosing Date, Advantage Health shall deliver to HEALTHSOUTH evidence
\nsatisfactory to HEALTHSOUTH of the resignation of the Directors of Advantage
\nHealth, such resignations to be effective on the Closing Date.<\/p>\n
7.9 Notice of Subsequent Events. Each party hereto shall notify the
\nother parties of any changes, additions or events which would cause any material
\nchange in or material addition to any Exhibit delivered by the notifying party
\nunder this Plan of Merger, promptly after the occurrence of the same.<\/p>\n
7.10 No Solicitations. Advantage Health may, directly or indirectly,
\nfurnish information and access, in response to unsolicited requests therefor, to
\nthe same extent permitted by Section 6.1, to any corporation, partnership,
\nperson or other entity or group, pursuant to appropriate confidentiality
\nagreements, and may participate in discussions and negotiate with such
\ncorporation, partnership, person or other entity or group concerning any
\nproposal to acquire Advantage Health upon a merger, purchase of assets, purchase
\nof or tender offer for Advantage Health Shares or similar transaction (an
\n“Alternative Transaction”), if the Board of Directors of Advantage Health
\ndetermines in its good faith judgment in the exercise of its fiduciary duties or
\nthe exercise of its duties under Rule 14e-2 under the Exchange Act, after
\nconsultation with legal counsel and its financial advisors, that such action is
\nappropriate in furtherance of the best interest of its stockholders. Except as
\nset forth above, Advantage Health shall not, and shall direct each officer,
\ndirector, employee, representative and agent of Advantage Health not to,
\ndirectly or indirectly, encourage, solicit, participate in or initiate
\ndiscussions or negotiations with or provide any information to any corporation,
\npartnership, person or other entity or group (other than HEALTHSOUTH or an
\naffiliate or associate or agent of HEALTHSOUTH) concerning any merger, sale of
\nassets, sale of or tender offer for Advantage Health Shares or similar
\ntransactions involving Advantage Health. Advantage Health shall promptly notify
\nHEALTHSOUTH if it shall have, on or after the date hereof, entered into a
\nconfidentiality agreement with any third party in response to any unsolicited
\nrequest for information and access in connection with a possible Alternative
\nTransaction involving such party, such notification to include the identity of
\nsuch third party.<\/p>\n
– 29 –<\/p>\n
7.11 Other Actions. Subject to the provisions of Section 7.10 hereof,
\nneither Advantage Health, nor the Subsidiary, nor HEALTHSOUTH shall knowingly or
\nintentionally take any action or omit to take any action, if such action or
\nomission would, or reasonably might be expected to, result in any of its
\nrepresentations and warranties set forth herein being or becoming untrue in any
\nmaterial respect or in any of the conditions to the Merger set forth in this
\nPlan of Merger not being satisfied, or (unless such action or omission is
\nrequired by applicable law) would adversely affect the ability of Advantage
\nHealth or HEALTHSOUTH to obtain any consents or approvals required of it for the
\nconsummation of the Merger without imposition of a condition or restriction
\nwhich would have a material adverse effect on the Surviving Corporation, would,
\nor might reasonably be expected to, delay the holding of the Special Meeting,
\nthe taking of a vote thereat, the filing of the Registration Statement or the
\ndeclaration of the effectiveness thereof by the SEC, or would otherwise
\nmaterially impair the ability of Advantage Health, the Subsidiary or HEALTHSOUTH
\nto consummate the Merger in accordance with the terms of this Plan of Merger or
\nmaterially delay such consummation.<\/p>\n
7.12 Accounting Methods. Neither HEALTHSOUTH nor Advantage Health shall
\nchange its methods of accounting in effect at its most recent fiscal year end,
\nexcept as required by changes in generally accepted accounting principles as
\nconcurred by such parties’ independent accountants.<\/p>\n
7.13 Pooling and Tax-Free Reorganization Treatment. Neither HEALTHSOUTH
\nnor Advantage Health shall intentionally take or cause to be taken any action,
\nwhether on or before the Effective Time, which would disqualify the Merger as a
\n“pooling of interests” for accounting purposes or as a “reorganization” within
\nthe meaning of Section 368(a) of the Code.<\/p>\n
7.14 Affiliate and Pooling Agreements. HEALTHSOUTH and Advantage Health
\nwill each use their respective reasonable best efforts to cause each of their
\nrespective Directors and executive officers and each of their respective
\n“affiliates” (within the meaning of Rule 145 under the Securities Act) to
\nexecute and deliver to HEALTHSOUTH as soon as practicable an agreement
\nsubstantially in the form attached hereto as Exhibit 7.14 relating to the
\ndisposition of the Advantage Health Shares and shares of HEALTHSOUTH Common
\nStock held by such person and the shares of HEALTHSOUTH Common Stock issuable
\npursuant to this Plan of Merger.<\/p>\n
7.15 Cooperation. (a) HEALTHSOUTH and Advantage Health shall together,
\nor pursuant to an allocation of responsibility agreed to between them, (i)
\ncooperate with one another in determining whether any filings required to be
\nmade or consents required to be obtained in any jurisdiction prior to the
\nEffective Time in connection with the consummation of the transactions
\ncontemplated hereby and cooperate in making any such filings promptly and in
\nseeking to obtain timely any such consents, (ii) use their respective reasonable
\nbest efforts to cause to be lifted any injunction prohibiting the Merger, or any
\npart thereof, or the other transactions contemplated hereby, and (iii) furnish
\nto one another and to one another’s counsel all such information as may be
\nrequired to effect the foregoing actions.<\/p>\n
– 30 –<\/p>\n
(b) Subject to the terms and conditions herein provided, and unless
\nthis Plan of Merger shall have been validly terminated as provided herein, each
\nof HEALTHSOUTH and Advantage Health shall use all reasonable efforts (i) to
\ntake, or cause to be taken, all actions necessary to comply promptly with all
\nlegal requirements which may be imposed on such party (or any subsidiaries or
\naffiliates of such party) with respect to the Plan of Merger and to consummate
\nthe transactions contemplated hereby, subject to the votes of its stockholders
\ndescribed above, and (ii) to obtain (and to cooperate with the other party to
\nobtain) any consent, authorization, order or approval of, or any exemption by,
\nany governmental entity and\/or any other public or private third party which is
\nrequired to be obtained or made by such party or any of its subsidiaries or
\naffiliates in connection with this Plan of Merger and the transactions
\ncontemplated hereby. Each of HEALTHSOUTH and Advantage Health shall promptly
\ncooperate with and furnish information to the other in connection with any such
\nburden suffered by, or requirement imposed upon, either of them or any of their
\nsubsidiaries or affiliates in connection with the foregoing.<\/p>\n
7.16 Advantage Health Stock Options. As soon as reasonably practicable
\nafter the Effective Time of the Merger, HEALTHSOUTH shall deliver to the holders
\nof Advantage Health stock options and appropriate notices setting forth such
\nholders’ rights hereunder.<\/p>\n
7.17 Publication of Combined Results. HEALTHSOUTH agrees that within 20
\ndays after the end of the first calendar month following at least 30 days after
\nthe Closing Date, HEALTHSOUTH shall cause publication of the combined results of
\noperations of HEALTHSOUTH and Advantage Health. For purposes of this Section
\n7.17, the term “publication” shall have the meaning provided in SEC Accounting
\nSeries Release No. 135.<\/p>\n
7.18 Advantage Health Employees. HEALTHSOUTH shall retain all employees
\nof Advantage Health who are employed at the Effective Time as employees-at-will
\n(except to the extent that such employees are parties to contracts providing for
\nother employment terms, in which case such employees shall be retained in
\naccordance with the terms of such contracts) HEALTHSOUTH shall cause the
\nSurviving Corporation to maintain following the Closing Date employee
\ncompensation and benefit plans, programs, policies and fringe benefits
\n(including post- employment benefits) that, in the aggregate are substantially
\nequivalent to those provided to such employees of Advantage Health and Advantage
\nHealth Subsidiaries, as applicable, as in effect on the date hereof (the
\n“Existing Plans”), subject to the right to amend or terminate such Existing
\nPlans in accordance with their terms, provided that after any such amendment or
\ntermination such programs, policies and fringe benefits continue to be, in the
\naggregate, substantially equivalent to the Existing Plans. HEALTHSOUTH will
\ncause the Surviving Corporation to provide to all employees of Advantage Health
\nand Advantage Health Subsidiaries severance pay and benefits which are
\nsubstantially equivalent to the applicable severance plans, programs and
\npolicies of Advantage Health and the Advantage Health Subsidiaries, as
\napplicable, as in effect on the date hereof (the “Existing Benefits”), subject
\nto the right to amend or terminate such Existing Benefits in accordance with
\ntheir terms, provided that after any such amendment or termination such
\nseverance pay and benefits continue to be, in the aggregate, substantially
\nequivalent to the Existing Benefits. Further, HEALTHSOUTH shall credit the<\/p>\n
– 31 –<\/p>\n
prior service of all employees of Advantage Health and Advantage Health
\nSubsidiaries to Advantage Health and the Advantage Health Subsidiaries, as
\napplicable, for purposes of determining the vesting or qualification of such
\nemployees of Advantage Health and Advantage Health Subsidiaries under Existing
\nPlans, Existing Benefits and any successor plans and benefit programs.<\/p>\n
7.19 HEALTHSOUTH Board of Directors. Immediately after the Effective
\nTime, HEALTHSOUTH shall cause Raymond J. Dunn, III to be appointed to the
\nHEALTHSOUTH Board of Directors.<\/p>\n
7.20 Employment Agreements. Employment agreements between Raymond J.
\nDunn and Robert E. Spencer and HEALTHSOUTH in form and substance satisfactory to
\nthe respective parties thereto shall be executed and delivered at the Closing.
\nFurther, HEALTHSOUTH shall cause Advantage, at or as promptly as practicable
\nafter the Closing, to offer to enter into employment agreements substantially in
\nthe form of Exhibit 7.20 hereto, with appropriate Schedules A attached thereto
\n(which are also part of Exhibit 7.20), with the persons named on such Schedules
\nA.<\/p>\n
Section 8. Termination, Amendment and Waiver.<\/p>\n
8.1 Termination. This Plan of Merger may be terminated at any time
\nprior to the Effective Time of the Merger, whether before or after approval of
\nmatters presented in connection with the Merger by the holders of Advantage
\nHealth Common Stock:<\/p>\n
(a) by mutual written consent of HEALTHSOUTH, the
\n Subsidiary and Advantage Health;<\/p>\n
(b) by either HEALTHSOUTH or Advantage Health:<\/p>\n
(i) if, upon a vote at a duly held meeting of
\n stockholders or any adjournment thereof, any required approval
\n of the holders of Advantage Health Common Stock shall not have
\n been obtained;<\/p>\n
(ii) if the Merger shall not have been consummated on
\n or before July 31, 1996, unless the failure to consummate the
\n Merger is the result of a willful and material breach of this
\n Plan of Merger by the party seeking to terminate this Plan of
\n Merger; provided, however, that the passage of such period
\n shall be tolled for any part thereof (but not exceeding 60
\n days in the aggregate) during which any party shall be subject
\n to a non-final order, decree, ruling or action restraining,
\n enjoining or otherwise prohibiting the consummation of the
\n Merger or the calling or holding of a meeting of stockholders;<\/p>\n
– 32 –<\/p>\n
(iii) if any court of competent jurisdiction or other
\n governmental entity shall have issued an order, decree or
\n ruling or taken any other action permanently enjoining,
\n restraining or otherwise prohibiting the Merger and such
\n order, decree, ruling or other action shall have become final
\n and nonappealable;<\/p>\n
(iv) in the event of a breach by the other party of
\n any representation, warranty, covenant or other agreement
\n contained in this Plan of Merger which (A) results in the
\n failure of a condition set forth in Section 9.2(a) or (b) or
\n Section 9.3(a) or (b), as applicable, and (B) cannot be or has
\n not been cured within 30 days after the giving of written
\n notice to the breaching party of such breach (a “Material
\n Breach”) (provided that the terminating party is not then in
\n Material Breach of any representation, warranty, covenant or
\n other agreement contained in this Plan of Merger);<\/p>\n
(c) by Advantage Health, if Advantage Health’s Board of
\n Directors shall have (i) determined, in the exercise of its fiduciary
\n duties under applicable law, not to recommend the Merger to the holders
\n of Advantage Health Shares or shall have withdrawn such recommendation
\n or (ii) approved, recommended or endorsed any Alternative Transaction
\n (as defined in Section 7.10) other than this Plan of Merger or (iii)
\n resolved to do any of the foregoing; or<\/p>\n
(d) by either HEALTHSOUTH or Advantage Health, if the
\n condition set forth in Section 9.1(g)(i) is not satisfied by January
\n 12, 1996.<\/p>\n
8.2 Effect of Termination. In the event of termination of this Plan of
\nMerger as provided in Section 8.1, this Plan of Merger shall forthwith become
\nvoid and have no effect, without any liability or obligation on the part of any
\nparty, other than the provisions of Sections 6.2, 8.2 and 8.6, and except to the
\nextent that such termination results from the willful and material breach by a
\nparty of any of its representations, warranties, covenants or other agreements
\nset forth in this Plan of Merger.<\/p>\n
8.3 Amendment. This Plan of Merger may be amended by the parties at any
\ntime before or after any required approval of matters presented in connection
\nwith the Merger by the holders of Advantage Health Shares; provided, however,
\nthat after any such approval, there shall be made no amendment that pursuant to
\nSection 251(d) of the DGCL requires further approval by such stockholders
\nwithout the further approval of such stockholders. This Plan of Merger may not
\nbe amended except by an instrument in writing signed on behalf of each of the
\nparties.<\/p>\n
8.4 Extension; Waiver. At any time prior to the Effective Time, the
\nparties may extend the time for the performance of any of the obligations or
\nother acts of the other parties. Any party hereto may (a) waive any inaccuracies
\nin the representations and warranties of the other parties hereto contained in
\nthis Plan of Merger or in any document delivered pursuant to this Plan of Merger
\nor (b) subject to the proviso of Section 8.3, waive compliance by the other
\nparties hereto with any of the agreements or conditions contained in this Plan
\nof Merger or<\/p>\n
– 33 –<\/p>\n
waive or modify any provision hereof for its benefit or for the benefit of any
\nof its stockholders, optionholders or employees, provided that such waiver or
\nmodification does not adversely affect the rights of the other parties hereto.
\nAny agreement on the part of a party to any such extension or waiver shall be
\nvalid only if set forth in an instrument in writing signed on behalf of such
\nparty. The failure of any party to this Plan of Merger to assert any of its
\nrights under this Plan of Merger or otherwise shall not constitute a waiver of
\nsuch rights.<\/p>\n
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
\ntermination of this Plan of Merger pursuant to Section 8.1, an amendment of this
\nPlan of Merger pursuant to Section 8.3, or an extension or waiver pursuant to
\nSection 8.4 shall, in order to be effective, require in the case of HEALTHSOUTH,
\nAladdin Acquisition Corporation or Advantage Health, action by its Board of
\nDirectors or the duly authorized designee of the Board of Directors.<\/p>\n
8.6 Expenses. All costs and expenses incurred in connection with this
\nPlan of Merger and the transactions contemplated hereby shall be paid by the
\nparty incurring such expense, except that expenses incurred in connection with
\nprinting and mailing the Proxy Statement and the Registration Statement shall be
\nshared equally by Advantage Health and HEALTHSOUTH. HEALTHSOUTH acknowledges and
\nagrees that Advantage Health has disclosed that it is obligated and will become
\nfurther obligated for fees and expenses incurred by it in connection with the
\nMerger and the transactions contemplated hereby. It is understood and agreed
\nthat certain of such fees and expenses may be paid by Advantage Health prior to
\nthe execution of this Plan of Merger and prior to or at or following the
\nClosing, and HEALTHSOUTH agrees to refrain from taking any action which would
\nprevent or delay the payment of reasonable fees and expenses by Advantage
\nHealth, whether prior to or following the Closing.<\/p>\n
8.7 Break-up Fee. (a) If this Plan of Merger is terminated by Advantage
\nHealth pursuant to Section 8.1(c), and within one year after the effective date
\nof such termination Advantage Health is the subject of a Third Party Acquisition
\nEvent with any Person (as defined in Sections 3(a)(9) and 13(d)(3) of the
\nExchange Act) other than HEALTHSOUTH, then at the time of consummation of such a
\nThird Party Acquisition Event, Advantage Health shall pay to HEALTHSOUTH a
\nbreak-up fee of $10,000,000 in immediately available funds, which fee represents
\nthe parties’ best estimates of the out-of-pocket costs incurred by HEALTHSOUTH
\nand the value of management time, overhead, opportunity costs and other
\nunallocated costs of HEALTHSOUTH incurred by or on behalf of HEALTHSOUTH in
\nconnection with this Plan of Merger. Advantage Health shall not enter into any
\nagreement with respect to any Third Party Acquisition Event which does not, as a
\ncondition precedent to the consummation of such Third Party Acquisition Event,
\nrequire such break-up fee to be paid to HEALTHSOUTH upon such consummation.<\/p>\n
(b) As used herein, the term “Third Party Acquisition Event” shall mean
\neither of the following:<\/p>\n
(i) Advantage Health shall enter into a definitive agreement
\n with respect to any Alternative Transaction (as defined in Section
\n 7.10); or<\/p>\n
– 34 –<\/p>\n
(ii) Any Person (other than HEALTHSOUTH or a Person who, as of
\n the date of this Plan of Merger, currently has such beneficial
\n ownership) shall have acquired beneficial ownership (as such term is
\n defined in Rule 13d-3 under the Exchange Act) or the right to acquire
\n beneficial ownership of, or a new group has been formed which
\n beneficially owns or has the right to acquire beneficial ownership of,
\n 30% of the outstanding Advantage Health Common Stock.<\/p>\n
(c) Advantage Health acknowledges that the provisions for the payment
\nof a break-up fee and allocation of expenses contained in this Section 8.7 are
\nan integral part of the transactions contemplated by this Plan of Merger and
\nthat, without these provisions, HEALTHSOUTH would not have entered into this
\nPlan of Merger. Accordingly, if a break-up fee shall become due and payable by
\nAdvantage Health, and Advantage Health shall fail to pay such fee when due
\npursuant to this Section, and, in order to obtain such payment, suit is
\ncommenced which results in a judgment against Advantage Health therefor,
\nAdvantage Health shall pay HEALTHSOUTH reasonable costs and expenses (including
\nreasonable attorneys’ fees) in connection with such suit, together with interest
\ncomputed on any such amounts determined to be due pursuant to this Section
\n(computed from the date upon which such amounts were due and payable pursuant to
\nthis Section) and such costs (computed from the date incurred) at the prime rate
\nof interest announced from time to time by NationsBank, N.A. (Carolinas). The
\nobligations of Advantage Health under this Section 8.7 shall survive any
\ntermination of this Plan of Merger.<\/p>\n
Section 9. Conditions to Closing.<\/p>\n
9.1 Mutual Conditions. The respective obligations of each party to
\neffect the Merger shall be subject to the satisfaction, at or prior to the
\nClosing Date, of the following conditions (any of which may be waived in writing
\nby HEALTHSOUTH, and Advantage Health):<\/p>\n
(a) None of HEALTHSOUTH, the Subsidiary or Advantage Health
\n shall be subject to any order, decree or injunction by a court of
\n competent jurisdiction which (i) prevents or materially delays the
\n consummation of the Merger or (ii) would impose any material limitation
\n on the ability of HEALTHSOUTH effectively to exercise full rights of
\n ownership of the Common Stock of the Surviving Corporation or any
\n material portion of the assets or business of Advantage Health, the
\n Advantage Health Subsidiaries and the Advantage Health Partnerships
\n taken as a whole.<\/p>\n
(b) No statute, rule or regulation shall have been enacted by
\n the government (or any governmental agency) of the United States or any
\n state, municipality or other political subdivision thereof that makes
\n the consummation of the Merger and any other transaction contemplated
\n hereby illegal.<\/p>\n
(c) Any waiting period (and any extension thereof) applicable
\n to the consummation of the Merger under the HSR Act shall have expired
\n or been terminated;<\/p>\n
– 35 –<\/p>\n
provided that each party hereto shall take, and be permitted to take,
\n any action necessary for clearance of the Merger under the HSR Act,
\n which action shall not constitute a breach of any of the provisions
\n hereof or the failure of any condition hereunder so long as it does not
\n result in a material adverse effect on such party.<\/p>\n
(d) The Registration Statement shall have been declared
\n effective and no stop order with respect to the Registration Statement
\n shall be in effect.<\/p>\n
(e) The holders of Advantage Health Common Stock shall have
\n approved the adoption of this Plan of Merger and any other matters
\n submitted to them in accordance with the provisions of Section 7.3
\n hereof.<\/p>\n
(f) The shares of HEALTHSOUTH Common Stock to be issued in
\n connection with the Merger shall have been approved for listing on the
\n NYSE and shall have been issued pursuant to an effective registration
\n statement (which is subject to no stop order).<\/p>\n
(g) The Merger shall qualify for “pooling of interests”
\n accounting treatment, and HEALTHSOUTH and Advantage Health shall have
\n received letters to that effect from Ernst & Young, LLP as independent
\n accountants for HEALTHSOUTH and Advantage Health, respectively, dated
\n (i) not later than January 12, 1996, (ii) the date of the mailing of
\n the Proxy Statement and (iii) the Closing Date.<\/p>\n
9.2 Conditions to Obligations of HEALTHSOUTH and Aladdin Acquisition
\nCorporation. The obligations of HEALTHSOUTH and the Subsidiary to consummate the
\nMerger and the other transactions contemplated hereby shall be subject to the
\nsatisfaction, at or prior to the Closing Date, of the following conditions (any
\nof which may be waived by HEALTHSOUTH and the Subsidiary):<\/p>\n
(a) Each of the agreements of Advantage Health to be performed
\n at or prior to the Closing Date pursuant to the terms hereof shall have
\n been duly performed in all material respects, Advantage Health shall
\n have performed, in all material respects, all of the acts required to
\n be performed by it at or prior to the Closing Date by the terms hereof.<\/p>\n
(b) Subject to Section 10.1, the representations and
\n warranties of Advantage Health set forth in this Plan of Merger that
\n are qualified as to materiality shall be true and correct, and those
\n that are not so qualified shall be true and correct in all material
\n respects, as of the date of this Plan of Merger and as of the Closing
\n Date as though made on and as of the Closing Date, except to the extent
\n that such representations and warranties expressly relate to an earlier
\n date (in which case such representations and warranties that are
\n qualified as to materiality shall be true and correct, and those that
\n are not so qualified shall be true and correct in all material
\n respects, on and as of such earlier date).<\/p>\n
– 36 –<\/p>\n
(c) HEALTHSOUTH and the Subsidiary shall have been furnished
\n with a certificate, executed by a duly authorized officer of Advantage
\n Health, dated the Closing Date, certifying in such detail as
\n HEALTHSOUTH and the Subsidiary may reasonably request as to the
\n fulfillment of the conditions set forth in the immediately preceding
\n clauses (a) and (b).<\/p>\n
(d) HEALTHSOUTH and the Subsidiary shall have obtained, or
\n obtained the transfer of, any licenses, certificates of need and other
\n regulatory approvals necessary to allow the Surviving Corporation to
\n operate the Advantage Health facilities, unless the failure to obtain
\n such transfer or approval would not have a material adverse effect on
\n Advantage Health.<\/p>\n
(e) HEALTHSOUTH shall have received an opinion from Haskell
\n Slaughter Young & Johnston, Professional Association, to the effect
\n that the merger will constitute a reorganization within the meaning of
\n Section 368(a) of the Code, which opinion may be based upon reasonable
\n representations of fact provided by officers of HEALTHSOUTH, the
\n Subsidiary and Advantage Health.<\/p>\n
(f) HEALTHSOUTH shall have received an opinion from Mintz,
\n Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in form and substance
\n reasonably acceptable to HEALTHSOUTH as to the due organization, valid
\n existence and good standing of Advantage Health, its corporate
\n authority, the due authorization of the execution and delivery of this
\n Plan of Merger, and the valid and binding nature of this Plan of Merger
\n and the enforceability of this Plan of Merger in accordance with its
\n terms.<\/p>\n
(g) The Employment Agreements between Raymond J. Dunn, III,
\n and Robert E. Spencer and Advantage Health entered into
\n contemporaneously with the execution and delivery hereof shall have
\n become effective as of the time of the Closing.<\/p>\n
(h) The Proxy Agreement executed by Raymond J. Dunn, III, in
\n connection herewith in favor of HEALTHSOUTH shall remain in full force
\n and effect.<\/p>\n
9.3 Conditions to Obligations of Advantage Health. The obligations of
\nAdvantage Health to consummate the Merger and the other transactions
\ncontemplated hereby shall be subject to the satisfaction, at or prior to the
\nClosing Date, of the following conditions (any of which may be waived by
\nAdvantage Health):<\/p>\n
(a) Each of the agreements of HEALTHSOUTH and the Subsidiary
\n to be performed at or prior to the Closing Date pursuant to the terms
\n hereof shall have been duly performed, in all material respects, and
\n HEALTHSOUTH and the Subsidiary shall have performed, in all material
\n respects, all of the acts required to be performed by them at or prior
\n to the Closing Date by the terms hereof.<\/p>\n
– 37 –<\/p>\n
(b) Subject to Section 10.1, the representations and
\n warranties of HEALTHSOUTH and the Subsidiary set forth in this plan of
\n merger that are qualified as to materiality shall be true and correct,
\n and those that are not so qualified shall be true and correct in all
\n material respects, as of the date of this Plan of Merger and as of the
\n Closing Date as though made on and as of the Closing Date, except to
\n the extent that such representations and warranties expressly relate to
\n an earlier date (in which case such representations and warranties that
\n are qualified as to materiality shall be true and correct, and those
\n that are not so qualified shall be true and correct in all material
\n respects, on and as of such earlier date); provided, however, that
\n Advantage Health shall not be deemed to be in breach of any such
\n representations and warranties by taking any action permitted (or
\n approved by HEALTHSOUTH) under Section 7.2.<\/p>\n
(c) Advantage Health shall have been furnished with a
\n certificate, executed by duly authorized officers of HEALTHSOUTH and
\n the Subsidiary, dated the Closing Date, certifying in such detail as
\n Advantage Health may reasonably request as to the fulfillment of the
\n conditions set forth in the immediately preceding clauses (a) and (b).<\/p>\n
(d) Advantage Health shall have received an opinion from
\n Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. to the effect that
\n the Merger will constitute a reorganization with the meaning of Section
\n 368(a) of the Code, which opinion may be based upon reasonable
\n representations of fact provided by officers of HEALTHSOUTH, Advantage
\n Health and the Subsidiary.<\/p>\n
(e) Advantage Health shall have received an opinion from
\n Haskell Slaughter Young & Johnston, Professional Association, in form
\n and substance reasonably acceptable to Advantage Health, as to the due
\n organization, valid existence and good standing of HEALTHSOUTH, its
\n corporate authority, the due authorization of the execution and
\n delivery of this Plan of Merger, and the valid and binding nature of
\n this Plan of Merger and the enforceability of this Plan of Merger in
\n accordance with its terms.<\/p>\n
Section 10. Miscellaneous.<\/p>\n
10.1 Representations and Warranties; Nonsurvival. Representations and
\nwarranties by a party hereto shall apply to all entities which such party has
\nagreed, as of the date hereof, to acquire or to acquire control of, from and
\nafter the respective dates of consummation of such acquisitions occurring as of
\nor prior to the Effective Time and, further, shall apply to all other entities
\nwhich such party shall have acquired or acquired control of or organized after
\nthe date hereof and as of or prior to the Effective Time, from and after the
\nrespective dates of such acquisitions or organization. None of the
\nrepresentations and warranties in this Plan of Merger or in any instrument
\ndelivered pursuant to this Plan of Merger shall survive the Effective Time.<\/p>\n
– 38 –<\/p>\n
10.2 Notices. Any communications required or desired to be given
\nhereunder shall be deemed to have been properly given if sent by hand delivery
\nor by facsimile and overnight courier to the parties hereto at the following
\naddresses, or at such other address as either party may advise the other in
\nwriting from time to time:<\/p>\n
If to HEALTHSOUTH:<\/p>\n
HEALTHSOUTH Corporation
\n Two Perimeter Park South
\n Birmingham, Alabama 35243
\n Attention: Michael D. Martin
\n Facsimile: (205) 969-4719<\/p>\n
with copies to:<\/p>\n
William W. Horton, Esq.
\n HEALTHSOUTH Corporation
\n Two Perimeter Park South
\n Birmingham, Alabama 35243
\n Facsimile: (205) 969-4732<\/p>\n
and to<\/p>\n
J. Brooke Johnston, Jr., Esq.
\n Haskell Slaughter Young & Johnston,
\n Professional Association
\n 1200 Amsouth\/Harbert Plaza
\n 1901 Sixth Avenue North
\n Birmingham, Alabama 35203
\n Facsimile (205) 324-1133<\/p>\n
If to Advantage Health:<\/p>\n
Advantage Health Corporation
\n 304 Cambridge Road
\n Woburn, Massachusetts 01801
\n Attention: Raymond J. Dunn, III
\n Facsimile: (617) 935-7451<\/p>\n
– 39 –<\/p>\n
with a copy to:<\/p>\n
Richard R. Kelly, Esq.
\n Douglas A. Zingale, Esq.
\n Mintz, Levin, Cohn, Ferris
\n Glovsky and Popeo, P.C.
\n One Financial Center
\n Boston, Massachusetts 02110
\n Facsimile: (617) 542-2241<\/p>\n
All such communications shall be deemed to have been delivered on the date of
\nhand delivery or on the next business day following the deposit of such
\ncommunications with the overnight courier.<\/p>\n
10.3 Further Assurances. Each party hereby agrees to perform any
\nfurther acts and to execute and deliver any documents which may be reasonably
\nnecessary to carry out the provisions of this Plan of Merger.<\/p>\n
10.4 Indemnification. Advantage Health, and from and after the
\nEffective Time HEALTHSOUTH and the Surviving Corporation, shall indemnify,
\ndefend and hold harmless each person who is now, or has been at any time prior
\nto the date of this Plan of Merger or who becomes prior to the Effective Time,
\nan officer, director or employee of Advantage Health or any Advantage Health
\nSubsidiary or Advantage Health Partnership (the “Indemnified Parties”) against
\n(i) all losses, claims, damages, costs, expenses, liabilities or judgments, or
\namounts that are paid in settlement with the approval of the indemnifying party
\n(which approval shall not be unreasonably withheld) of, or in connection with,
\nany claim, action, suit, proceeding or investigation based in whole or in part
\non or arising in whole or in part out of the fact that such person is or was a
\ndirector, officer or employee of Advantage Health or any Advantage Health
\nSubsidiary or Advantage Health Partnership, whether pertaining to any matter
\nexisting or occurring at or prior to, or at or after, the Effective Time
\n(“Indemnified Liabilities”) and (ii) all Indemnified Liabilities based in whole
\nor in part on, or arising in whole or in part out of, or pertaining to this Plan
\nof Merger, the Merger or any other transactions contemplated hereby or thereby,
\nin each case to the full extent a corporation is permitted under the DGCL to
\nindemnify its own directors, officers and employees, as the case may be (and
\nHEALTHSOUTH and the Surviving Corporation, as the case may be, will pay expenses
\nin advance of the final disposition of any such action or proceeding to each
\nIndemnified Party to the full extend permitted by law upon receipt of any
\nundertaking contemplated by Section 145(e) of the DGCL). Without limiting the
\nforegoing, in the event any such claim, action, suit, proceeding or
\ninvestigation is brought against any Indemnified Party (whether arising before
\nor after the Effective Time), (i) the Indemnified Parties may retain counsel
\nsatisfactory to them and Advantage Health (or them and HEALTHSOUTH and the
\nSurviving Corporation after the Effective Time), (ii) Advantage Health (or,
\nafter the Effective Time, HEALTHSOUTH and the Surviving Corporation) shall pay
\nall reasonable fees and expenses of such counsel for the Indemnified Parties
\npromptly as statements therefor are received and (iii) Advantage Health (or,
\nafter the Effective Time,<\/p>\n
– 40 –<\/p>\n
HEALTHSOUTH and the Surviving Corporation) will use all reasonable efforts to
\nassist in the vigorous defense of any such matter, provided that none of
\nAdvantage Health, HEALTHSOUTH or the Surviving Corporation shall be liable for
\nany settlement of any claim effected without its written consent, which consent,
\nhowever, shall not be unreasonably withheld. Any Indemnified Party wishing to
\nclaim, action, suit, proceeding or investigation, shall notify Advantage Health
\n(or after the Effective Time, HEALTHSOUTH and the Surviving Corporation) (but
\nthe failure so to notify an Indemnifying Party shall not relieve it from any
\nliability which it may have under this Section 10.4 except to the extent such
\nfailure prejudices such party), and shall deliver to Advantage Health (or after
\nthe Effective Time, HEALTHSOUTH and the Surviving Corporation) the undertaking
\ncontemplated by Section 145(e) of the DGCL. The Indemnified Parties as a group
\nmay retain only one law firm to represent them with respect to such matter
\nunless there is, under applicable standards of professional conduct, a conflict
\non any significant issue between the positions of any two or more Indemnified
\nParties.<\/p>\n
(b) For a period of three years after the Effective Time, HEALTHSOUTH
\nshall cause to be maintained in effect the current policies of directors’ and
\nofficers’ liability insurance maintained by Advantage Health (provided that
\nHEALTHSOUTH may substitute therefor policies of at least the same coverage and
\namounts containing terms and conditions which are no less advantageous) with
\nrespect to claims arising from facts or events which occurred at or prior to the
\nEffective Time, to the extent such liability insurance can be maintained at an
\nannual cost not greater than 200% of Advantage Health’s 1995 annual premium for
\nits directors’ and officers’ liability insurance; provided, however, if
\nHEALTHSOUTH is unable to maintain or obtain the insurance called for by this
\nSection 10.4(b) at such annual cost, then HEALTHSOUTH shall obtain as much
\ncomparable insurance as is available at such annual cost.<\/p>\n
(c) The provisions of this Section 10.4 are intended to be for the
\nbenefit of, and shall be enforceable by, each Indemnified Party and his or her
\nheirs and representatives.<\/p>\n
10.5 Governing Law. This Plan of Merger shall be interpreted, construed
\nand enforced in accordance with the laws of the State of Delaware, applied
\nwithout giving effect to any conflicts-of-law principles.<\/p>\n
10.6 “Including”. The word “including”, when following any general
\nstatement, term or matter, shall not be construed to limit such statement, term
\nor matter to the specific terms or matters as provided immediately following the
\nword “including” or to similar items or matters, whether or not non-limiting
\nlanguage (such as “without limitation”, “but not limited to”, or words of
\nsimilar import) is used with reference to the word “including” or the similar
\nitems or matters, but rather shall be deemed to refer to all other items or
\nmatters that could reasonably fall within the broadest possible scope of the
\ngeneral statement, term or matter.<\/p>\n
10.7 “Knowledge”. “To the knowledge”, “to the best knowledge”, or any
\nsimilar phrase shall be deemed to refer to the actual knowledge of the Chairman
\nof the Board, Chief Executive Officer or Chief Financial Officer of a party.<\/p>\n
– 41 –<\/p>\n
10.8 “Material adverse change” or “material adverse effect”. “Material
\nadverse change” or “material adverse effect” means, when used in connection with
\nAdvantage Health, HEALTHSOUTH, or the Surviving Corporation, any change, effect,
\nevent or occurrence that has, individually or in the aggregate, a material
\nadverse impact on the business or financial position of such party and its
\nsubsidiaries taken as a whole; provided, however, that “material adverse change”
\nand “material adverse effect” shall be deemed to exclude the impact of (i)
\nchanges in generally accepted accounting principles, (ii) any changes resulting
\nfrom any restructuring or other similar charges or write-offs taken by Advantage
\nHealth with the consent of HEALTHSOUTH, (iii) any continuation of any existing
\nunfavorable business or financial trend without a material worsening thereof and
\n(iv) the termination or failure to be consummated or completed of any
\nacquisition, joint venture, development project or other transaction which had
\nnot been consummated or completed prior to the date of this Plan of Merger;
\nprovided, however, that no such changes or write-offs will be taken if such
\nwould adversely affect pooling-of-interests accounting treatment for the Merger.
\nNotwithstanding the foregoing, “material adverse change” or “material adverse
\neffect” shall not mean, with respect to Advantage Health, any reclassification
\nof long-term indebtedness to short-term indebtedness solely by reason of
\nAdvantage Health’s execution, delivery and performance of its obligations under
\nthis Plan of Merger.<\/p>\n
10.9 “Hazardous Materials”. The term “Hazardous Materials” means any
\nmaterial which has been determined by any applicable governmental authority to
\nbe harmful to the health or safety of human or animal life or vegetation,
\nregardless of whether such material is found on or below the surface of the
\nground, in any surface or underground water, airborne in ambient air or in the
\nair inside any structure built or located upon or below the surface of the
\nground or in building materials or in improvements of any structures, or in any
\npersonal property located or used in any such structure, including, but not
\nlimited to, all hazardous substances, imminently hazardous substances, hazardous
\nwastes, toxic substances, infectious wastes, pollutants and contaminants from
\ntime to time defined, listed, identified, designated or classified as such under
\nany Environmental Laws (as defined in Section 10.10) regardless of the quantity
\nof any such material.<\/p>\n
10.10 Environmental Laws. The term “Environmental Laws” means any
\nfederal, state or local statute, regulation, rule or ordinance, and any judicial
\nor administrative interpretation thereof, regulating the use, generation,
\nhandling, storage, transportation, discharge, emission, spillage or other
\nrelease of Hazardous Materials or relating to the protection of the environment.<\/p>\n
10.11 Captions. The captions or headings in this Plan of Merger are
\nmade for convenience and general reference only and shall not be construed to
\ndescribe, define or limit the scope or intent of the provisions of this Plan of
\nMerger.<\/p>\n
10.12 Integration of Exhibits. All Exhibits attached to this Plan of
\nMerger are integral parts of this Plan of Merger as if fully set forth herein,
\nand all statements appearing therein shall be deemed disclosed for all purposes
\nand not only in connection with the specific representation in which they are
\nexplicitly referenced.<\/p>\n
– 42 –<\/p>\n
10.13 Entire Agreement. This instrument, including all Exhibits
\nattached hereto, and the Confidentiality Agreements contain the entire agreement
\nof the parties and supersede any and all prior or contemporaneous agreements
\nbetween the parties, written or oral, with respect to the transactions
\ncontemplated hereby. This Plan of Merger may not be changed or terminated
\norally, but may only be changed by an agreement in writing signed by the party
\nor parties against whom enforcement of any waiver, change, modification,
\nextension, discharge or termination is sought.<\/p>\n
10.14 Counterparts. This Plan of Merger may be executed in several
\ncounterparts, each of which, when so executed, shall be deemed to be an
\noriginal, and such counterparts shall, together, constitute and be one and the
\nsame instrument.<\/p>\n
10.15 Binding Effect. This Plan of Merger shall be binding on, and
\nshall inure to the benefit of, the parties hereto, and their respective
\nsuccessors and assigns, and nothing in this Plan of Merger, express or implied
\n(other than the provisions of Sections 2.1(e), 7.16, 7.18, 8.6 and 10.4, which
\nprovisions are intended to benefit and may be enforced by the beneficiaries
\nthereof), is intended to or shall confer upon any person any right, benefit or
\nremedy of nature whatsoever under or by virtue of this Plan of Merger. No party
\nmay assign any right or obligation hereunder without the prior written consent
\nof the other parties.<\/p>\n
10.16 No Rule of Construction. The parties acknowledge that this Plan
\nof Merger was initially prepared by Advantage Health, and that all parties have
\nread and negotiated the language used in this Plan of Merger. The parties agree
\nthat, because all parties participated in negotiating and drafting this Plan of
\nMerger, no rule of construction shall apply to this Plan of Merger which
\nconstrues ambiguous language in favor of or against any party by reason of that
\nparty’s role in drafting this Plan of Merger.<\/p>\n
IN WITNESS WHEREOF, HEALTHSOUTH, the Subsidiary and Advantage Health
\nhave caused this Agreement and Plan of Merger to be executed by their respective
\nduly authorized officers, and have caused their respective corporate seals to be
\nhereunto affixed, all as of the day and year first above written.<\/p>\n
ADVANTAGE HEALTH CORPORATION <\/p>\n
By:
\n ——————————–<\/p>\n
– 43 –<\/p>\n
ATTEST:<\/p>\n
– ————————-
\nSecretary<\/p>\n
[CORPORATE SEAL]<\/p>\n
HEALTHSOUTH CORPORATION<\/p>\n
By:
\n ——————————–<\/p>\n
ATTEST:<\/p>\n
– ————————-
\nSecretary<\/p>\n
[CORPORATE SEAL]<\/p>\n
ALADDIN ACQUISITION
\n CORPORATION<\/p>\n
By:
\n ——————————-<\/p>\n
ATTEST:<\/p>\n
– 44 –<\/p>\n
– ————————
\nSecretary<\/p>\n
[CORPORATE SEAL]<\/p>\n
– 45 –<\/p>\n
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