-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LjUvsTETpKVXjyQy42Moaftlz0kdGx7fSrUkslDVxUR5K2k0myPs1Bu4nIXtzSzC cK2lLBZUX2kA+Lnr/hjj5g== /in/edgar/work/20000530/0000944209-00-000966/0000944209-00-000966.txt : 20000919 0000944209-00-000966.hdr.sgml : 20000919 ACCESSION NUMBER: 0000944209-00-000966 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000530 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VETERINARY CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000817366 STANDARD INDUSTRIAL CLASSIFICATION: [0700 ] IRS NUMBER: 954097995 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-45093 FILM NUMBER: 646125 BUSINESS ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 BUSINESS PHONE: 310-584-6500 MAIL ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GREEN EQUITY INVESTORS III LP CENTRAL INDEX KEY: 0001072272 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 11111 SANTA MONICA BLVD STREET 2: SUITE 2000 CITY: LOS ANGELES STATE: CA ZIP: 90025 MAIL ADDRESS: STREET 1: C/O LEONARD GREEN & PARTNERS LP STREET 2: 11111 SANTA MONICA BLVD - SUITE 2000 CITY: LOS ANGELES STATE: CA ZIP: 90025 SC 13D 1 0001.txt SCHEDULE 13D ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 (Amendment No. __)* VETERINARY CENTERS OF AMERICA, INC. (Name of Issuer) COMMON STOCK (Title of Class of Securities) 925514 10 (CUSIP Number) Edmund Kaufman, Esq. Irell & Manella LLP 333 South Hope Street, Suite 3300 Los Angeles, CA 90071 (213) 620-1555 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 30, 2000 (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. /1/ The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
- ------------------------------------ ---------------- CUSIP NO. 925514 10 13D Page 2 of 10 Pages - ------------------------------------ ---------------- ================================================================================ 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Green Equity Investors III, L.P. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF, WC, BK, 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 919,259 SHARES - -------------------------------------------------------------------------------- 8. SHARED VOTING POWER 919,259 SHARES - -------------------------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER -0- SHARES - -------------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- SHARES - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 919,259 SHARES - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 4.19% beneficial ownership of the voting stock based on 21,918,269 shares of Common Stock, outstanding on May 8, 2000 as reported by the Issuer on Form 10-Q for the quarter ended March 31, 2000. - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* PN ================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT! -2-
- ------------------------------------ ---------------- CUSIP NO. 925514 10 13D Page 3 of 10 Pages - ------------------------------------ ---------------- ================================================================================ 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Vicar Recap, Inc. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF, WC, BK, 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 919,259 SHARES - -------------------------------------------------------------------------------- 8. SHARED VOTING POWER 919,259 SHARES - -------------------------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER -0- SHARES - -------------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- SHARES - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 919,259 SHARES - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 4.19% beneficial ownership of the voting stock based on 21,918,269 shares of Common Stock, outstanding on May 8, 2000 as reported by the Issuer on Form 10-Q for the quarter ended March 31, 2000. - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* CO ================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT! -3- Page 4 of 10 Pages SCHEDULE 13D This Schedule 13D is being filed by Green Equity Investors III, L.P. ("GEI III") and Vicar Recap, Inc. ("Vicar Recap" and together with GEI III, the "Reporting Persons"), with respect to the shares of Common Stock, par value $.001 per share (the "Common Stock") of Veterinary Centers of America, Inc., a Delaware corporation (the "Issuer"), beneficially owned by Robert L. Antin ("Robert Antin"). The Reporting Persons have a right to acquire up to 919,259 shares of Common Stock pursuant to the stock purchase agreement and the exchange and subscription agreement described in Item 4. In addition, the Reporting Persons have shared voting power of up to 919,259 shares of Common Stock pursuant to the voting agreement described in Item 4. As a result of these agreements described in Item 4, the Reporting Persons and Robert Antin may be deemed to constitute a "group" within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended. Neither the present filing nor anything contained herein shall be construed as an admission that the Reporting Persons together with Robert Antin constitute a "person" or "group" for any purpose. The Reporting Persons as of the date of this statement, do not directly own any shares of Common Stock. The Reporting persons do not directly or indirectly beneficially own more than five percent of the Common Stock of the Issuer that would require the filing of this Schedule 13D, however, the Reporting Persons, subject to certain terms and conditions, intend to acquire all of the outstanding Common Stock of the Issuer pursuant to the Agreement and Plan of Merger described in Item 4. ITEM 1. SECURITY AND ISSUER. This statement relates to the Common Stock, $.001 par value per share of Veterinary Centers of America, Inc., a Delaware corporation (the "Issuer"). The Issuer's principal executive offices are located at 12401 West Olympic Boulevard, Los Angeles, California 90064. The Issuer's telephone number is (310) 584-6500. ITEM 2(a), (b), (c) and (f). IDENTITY AND BACKGROUND. This statement is being filed jointly by Vicar Recap, Inc., a Delaware corporation ("Vicar Recap"), Vicar Operating, Inc., a Delaware corporation ("Vicar Operating") and Green Equity Investors III, L.P., a Delaware limited partnership ("GEI III"), pursuant to their agreement to the joint filing of this statement. The principal place of business of the Reporting Persons is located at 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025. Vicar Recap is wholly owned by GEI III. The general partner of GEI III is GEI Capital III, L.L.C., a Delaware limited liability company ("GEI"). LGP Management, Inc., a Delaware corporation ("LGPM"), is the general partner of Leonard Green & Partners, L.P., a -4- Page 5 of 10 Pages Delaware limited partnership ("LGP"), which is an affiliate of GEI and the management company of GEI III. The principal place of business of each of GEI, LGPM and LGP is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025. As a result of their relationship with the Reporting Persons, each of GEI, LGPM and LGP may be deemed to have indirect beneficial ownership of the Common Stock with respect to which the Reporting Persons have beneficial ownership; however, each of GEI, LGPM and LGP disclaims beneficial ownership of the Common Stock. Leonard I. Green, Jonathan D. Sokoloff, John G. Danhakl, Gregory J. Annick, Peter J. Nolan and Jonathan A. Seiffer, each an individual United states citizen having a principal business address at 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025, either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control GEI, LGPM and LGP. As stated above, GEI, LGPM and LGP may be deemed to share beneficial ownership with respect to the Common Stock of which the Reporting Persons have beneficial ownership. As such, Messrs. Green, Sokoloff, Danhakl, Annick, Nolan and Seiffer may be deemed to have shared beneficial ownership with respect to the Common Stock. However, such individuals disclaim beneficial ownership of the Common Stock. ITEM 2(d) CRIMINAL CONVICTIONS IN LAST FIVE YEARS: None of the Reporting Persons or any person disclosed in response to Item 2 has been convicted in a criminal proceeding during the last five years. ITEM 2(e) CERTAIN CIVIL PROCEEDINGS IN LAST FIVE YEARS: None of the Reporting Persons or any person disclosed in response to Item 2 has been party to any civil proceeding of a judicial or administrative body and as a result of which it was or is subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws, or finding any violation with respect to such laws. ITEM 3: SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The source of funds that will be used in connection with the Merger Transaction described in Item 4 is expected to be issuance of debt or equity securities or bank or other commercial borrowings or some combination of securities issuances and borrowings. As set forth in a Letter dated March 30, 2000, from Goldman Sachs Credit Partners L.P. (together with its affiliates, "GSCP") to LGP (attached hereto as Exhibit 7.2), the total cash proceeds required to consummate the Merger Transaction is approximately $531 million, which is expected to be financed with $70.0 million of senior discount notes, $50.0 million of senior subordinated notes, $156 million in capital stock contributed by Robert Antin and GEI III and a credit facility of up to $325 million. Financing is contingent upon the Issuer's satisfaction of the terms and conditions set forth in the Agreement described in Item 4, and the terms and conditions set forth in the Letter of GSCP attached hereto as Exhibit 7.2. -5- Page 6 of 10 Pages ITEM 4: PURPOSE OF TRANSACTION. On March 30, 2000, the Issuer, Vicar Operating, Inc., a Delaware corporation wholly owned by Issuer, and Vicar Recap, Inc., a Delaware corporation wholly owned by GEI III, entered into an Agreement and Plan of Merger (the "Agreement," attached hereto as Exhibit 7.1), pursuant to which the Issuer agreed to be acquired in a cash merger at a price of $15.00 per share of Common Stock. The Agreement provides for the transfer of all assets, properties, business operations and liabilities of Issuer to Vicar Operating prior to the Merger (the "Asset Drop Down"), to be followed by a merger of Vicar Recap with and into the Issuer, with the Issuer as the surviving corporation (the "Merger"). Subject to shareholder approval, in the Merger all shares of the Issuer's Common Stock outstanding (except for (a) approximately 266,666 shares of Common Stock held by certain members of management to remain outstanding and (b) shares of Common Stock held in the Issuer's treasury or owned by Vicar Recap to be cancelled without payment or conversion thereof) would be canceled and converted automatically into the right to receive an amount equal to $15.00 in cash, without interest. In connection with the Agreement, on March 30, 2000, Robert L. Antin and Vicar Recap entered into a voting agreement (attached hereto as Exhibit 7.3), which provides, among other things, that such stockholder agrees to vote his 919,259 shares of Common Stock of the Issuer in favor of the Merger and the Agreement. As a result of such voting agreement, the Reporting Persons have a beneficial ownership interest in up to 919,259 shares of Common Stock of the Issuer through this shared voting control. In connection with the Agreement, on March 30, 2000, Robert L. Antin and Vicar Recap entered into an exchange and subscription agreement (attached hereto as Exhibit 7.4), which provides, among other things, that such stockholder agrees to exchange 133,333 shares of Common Stock of the Issuer for shares of capital stock of Vicar Recap. As a result of this exchange and subscription agreement, the Reporting Persons have a right to acquire up to 133,333 shares of Common Stock of the Issuer. As a result of the Merger, the shares of Common Stock of the Issuer acquired by Vicar Recap pursuant to the foregoing exchange and subscription agreement will be canceled without consideration pursuant to the Agreement. The outstanding capital stock of Vicar Recap, including the shares of common stock of Vicar Recap issued pursuant to the exchange and subscription agreements will be converted into shares of capital stock of the surviving corporation. In connection with the Agreement, on March 30, 2000, Robert Antin and GEI III entered into a stock purchase agreement (attached hereto as Exhibit 7.5), which provides, among other things, that Robert Antin agrees to sell and GEI III agrees to buy up to 919,259 shares of Common Stock of the Issuer held by Robert Antin. As a result of the Merger Transaction, certain members of management of the Issuer, certain stockholders of the Issuer and GEI III will then hold the capital stock of the Issuer in equivalent proportion to the shares of common stock of Vicar Recap acquired by them pursuant to the exchange and subscription agreement. The transactions contemplated by the Agreement are herein collectively referred to as the "Merger Transaction." -6- Page 7 of 10 Pages Completion of the Merger Transaction is subject to a number of conditions, including (i) approval of the Agreement by the holders of the Issuer's Common Stock, (ii) obtaining sufficient financing to complete the Merger Transaction and (iii) compliance with all applicable regulatory requirements. It is anticipated that the Common Stock of the Issuer will be delisted from the NASD National Market System as a result of the Merger Transaction. The description of the Merger Transaction disclosed in this Item 4 is qualified in its entirety by reference to the Exhibits attached hereto. Except as disclosed in this Item 4, no Reporting Persons or any other person disclosed in response to Item 2 has any current plans or proposals which relate to or would result in any of the events described in clauses (a) through (j) of the instructions to Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Although the Reporting Persons do not directly own any shares of Common Stock of the Issuer as of the date hereof, pursuant to the voting agreement described in Item 4, the Reporting Persons beneficially own up to 919,259 shares of Common Stock representing approximately 4.19% of the Issuer's voting stock. The percentage of voting stock indicated is based on 21,918,269 shares of Common Stock outstanding as of May 8, 2000, as disclosed on the Issuer's Form 10-Q for the quarter ended March 31, 2000 filed with the Securities and Exchange Commission. Green Equity Investors III, L.P. has the right to acquire up to 919,259 shares of Common Stock pursuant to the stock purchase agreement. In addition, Vicar Recap has the right to acquire up to 133,333 shares of Common Stock pursuant to the exchange and subscription agreement. (b) The Reporting Persons have shared voting power with respect to the 919,259 shares of Common Stock. (c) Except as set forth in this statement, none of the Reporting Persons or any other person disclosed in response to Item 2 has effected any transactions in the Common Stock in the last 60 days. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Other than the matters disclosed in response to Items 4 and 5, none of the Reporting Persons or any other person disclosed in response to Item 2 is party to any contracts, arrangements, understandings or relationships with respect to any securities of the Issuer, including but not limited to the transfer or voting of any of the securities, finder's fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. -7- Page 8 of 10 Pages Exhibit 7.1 Agreement and Plan of Merger, dated as of March 30, 2000, by and among Veterinary Centers of America, Inc., Vicar Recap, Inc. and Vicar Operating, Inc. Exhibit 7.2 Letter dated March 30, 2000, from Goldman Sachs Credit Partners L.P. to Green Equity Investors III, L.P. Exhibit 7.3 Voting Agreement, dated as of March 30, 2000, between Robert L. Antin and Vicar Recap, Inc. Exhibit 7.4 Exchange and Subscription Agreement, dated as of March 30, 2000, between Robert L. Antin and Vicar Recap, Inc. Exhibit 7.5 Stock Purchase Agreement, dated as of March 30, 2000, between Robert L. Antin and Green Equity Investors III, L.P. Exhibit 7.6 Joint Filing Agreement dated as of May 26, 2000. -8- Page 9 of 10 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: May 26, 2000 Vicar Recap, Inc. By: /s/ John Danhakl __________________________________ Name: John Danhakl Title: President Green Equity Investors III, L.P. By: GEI Capital III, L.L.C. its general partner By: /s/ John Danhakl ______________________________ Name: John Danhakl Title: Member -9- Page 10 of 10 Pages EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ---------- ----------- Exhibit 7.1 Agreement and Plan of Merger, dated as of March 30, 2000, by and among Veterinary Centers of America, Inc., Vicar Recap, Inc. and Vicar Operating, Inc. Exhibit 7.2 Letter dated March 30, 2000, from Goldman Sachs Credit Partners L.P. to Green Equity Investors III, L.P.. Exhibit 7.3 Voting Agreement, dated as of March 30, 2000, between Robert L. Antin and Vicar Recap, Inc. Exhibit 7.4 Exchange and Subscription Agreement, dated as of March 30, 2000, between Robert L. Antin and Vicar Recap, Inc. Exhibit 7.5 Stock Purchase Agreement, dated as of March 30, 2000, between Robert L. Antin and Green Equity Investors III, L.P. Exhibit 7.6 Joint Filing Agreement dated as of May 26, 2000. -10- EX-7.1 2 0002.txt AGREEMENT AND PLAN OF MERGER DATED 03/30/00 Exhibit 7.1 AGREEMENT AND PLAN OF MERGER By and Among VICAR RECAP, INC., a Delaware corporation, VETERINARY CENTERS OF AMERICA, INC., a Delaware corporation and VICAR OPERATING, INC., a Delaware corporation Dated as of March 30, 2000 AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of March 30, 2000 by and among Vicar Recap, Inc., a Delaware corporation ("Recap") wholly owned by Green Equity Investors III, L.P. ("Parent"), Veterinary Centers of America, Inc., a Delaware corporation (together with its Subsidiaries from time to time (except as the context may otherwise require), the "Company"), and Vicar Operating, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Operating Company"), with respect to the facts and circumstances set forth below. Capitalized terms used herein without definition have the meanings set forth elsewhere in this Agreement.: A. The Company Board (acting upon a recommendation of the Special Committee) and the Board of Directors of Operating Company have each determined that it is advisable and in the best interests of their respective stockholders to effect a transfer of all of the assets, properties, business operations and liabilities of the Company to Operating Company prior to the Merger (the "Asset Drop Down"), to create a holding company and operating company structure, in order to facilitate the consummation of the Merger in accordance with this Agreement. Upon consummation of the Asset Drop Down, Operating Company will remain and continue to be a wholly owned subsidiary of the Company. B. The Company Board (acting upon a recommendation of the Special Committee) and the Board of Directors of Recap have each determined that it is advisable and in the best interests of their respective stockholders to effect a merger, following the consummation of the Asset Drop Down, of Recap with and into the Company, with the Company as the surviving corporation, pursuant to the Certificate of Merger and upon the terms and subject to the conditions set forth herein. C. Pursuant to the Merger, all shares of capital stock of the Company (other than Dissenting Shares, shares held by Parent or Recap, and shares held in the Company's treasury) shall be cancelled and converted automatically into the right to receive an amount in cash per share, without interest, as set forth in Section 2.2 of this Agreement. D. As a result of the Merger, all of the outstanding equity interests of the Company will be owned by Parent and certain members of management of the Company. E. Concurrently with the execution and delivery of this Agreement and in order to induce Recap to enter into this Agreement, Recap and certain Rollover Holders are entering into Voting Agreements in the form attached hereto as EXHIBIT A, pursuant to which, among other things, the Rollover Holders will agree to vote their shares of the Company in favor of the Merger. F. In connection with the transactions contemplated by the Merger, certain members of management of the Company (the "Rollover Holders") have entered into Exchange and Subscription Agreements in the form attached hereto as EXHIBIT B with Recap, pursuant to which the Rollover Holders will exchange a portion of their Existing Shares (the "Rollover Shares") of the Company for shares of Recap prior to the closing of the Merger (the "Recapitalization"). NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants contained herein and intending to be legally bound, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS 1.1. Certain Terms. For all purposes of this Agreement, except as otherwise expressly provided: 1.1.1. the terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; A-1 1.1.2. all accounting terms not otherwise defined herein have the meanings assigned under GAAP; 1.1.3. all references in this Agreement to "Articles," "Sections," "Exhibits," "Annexes" and "Schedules" shall be deemed to be references to Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement, unless the context shall otherwise require; 1.1.4. pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms; 1.1.5. the words "include," "includes" and "including" shall be deemed in each case to be followed by the words "without limitation"; 1.1.6. the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; 1.1.7. the term "party" or "parties" when used herein refer to Recap, the Company and Operating Company; and 1.1.8. unless otherwise expressly provided herein, any agreement, plan, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. 1.2. Definitions. As used in this Agreement and the Exhibits, Annexes and Schedules delivered pursuant to this Agreement, the following terms have the meanings set forth below: 1.2.1. "Acquisition Proposal" has the meaning set forth in Section 7.5.2 hereof. 1.2.2. "Action" means any action, complaint, petition, investigation, suit, litigation or other proceeding, whether civil or criminal, in law or in equity, before any court, tribunal, arbitrator or Governmental Entity. 1.2.3. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. The term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 1.2.4. "Agreement" means this Agreement, as amended or supplemented, together with all Annexes and Schedules attached or incorporated by reference, in each case as amended or supplemented. 1.2.5. "Asset Drop Down" has the meaning set forth in the recitals hereof. 1.2.6. "Business Day" means any day that is not a Saturday, Sunday or legal holiday in the State of California. 1.2.7. "Certificate" has the meaning set forth in Section 4.1 hereof. 1.2.8. "Certificate of Merger" has the meaning set forth in Section 2.1.2 hereof. 1.2.9. "Closing" has the meaning set forth in Section 3.1 hereof. 1.2.10. "Closing Date" means the date and time of the Closing. 1.2.11. "Code" means the Internal Revenue Code of 1986, as amended. 1.2.12. "Common Stock" means the Company's common stock, $.001 par value. 1.2.13. "Company" has the meaning set forth in the preamble hereof. 1.2.14. "Company Board" means the Board of Directors of the Company. 1.2.15. "Company Computer System" has the meaning set forth in Section 5.15 hereof. A-2 1.2.16. "Company Plans" has the meaning set forth in Section 5.13 hereof. 1.2.17. "Company Proxy Statement" has the meaning set forth in Section 7.9 hereof. 1.2.18. "Convertible Debentures" means the Company's 5.25% convertible subordinated debentures issued April 17, 1996. 1.2.19. "DGCL" means the Delaware General Corporation Law. 1.2.20. "Disclosure Schedule" has the meaning set forth in Article 5 hereof. 1.2.21. "Dissenting Shares" has the meaning set forth in Section 2.4 hereof. 1.2.22. "Effective Time" has the meaning set forth in Section 2.1.2 hereof. 1.2.23. "Encumbrance" means any charge, encumbrance, security interest, lien, option, equity, adverse claim or restriction, except for any restrictions on transfer generally arising under any applicable Law. 1.2.24. "Environmental Law" has the meaning set forth in Section 5.16.2 hereof. 1.2.25. "ERISA" means the Employee Retirement Income Security Act of 1934, as amended. 1.2.26. "ERISA Affiliate" has the meaning set forth in Section 5.13 hereof. 1.2.27. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.2.28. "Exchange Agreement" means the exchange and subscription agreement in the form attached hereto as EXHIBIT B. 1.2.29. "Exchange Ratio" has the meaning set forth in Section 2.2.3 hereof. 1.2.30. "Executive Officer" means each of Robert Antin, Arthur Antin, Tomas Fuller and Neil Tauber. 1.2.31. "Existing Shares" means all of the Company's issued and outstanding Common Stock. 1.2.32. "Expenses" has the meaning set forth in Section 9.3.2 hereof. 1.2.33. "Financial Statements" means the Company's audited consolidated balance sheet as of December 31, 1999, and the related consolidated income statements, statement of stockholders' equity and comprehensive income and statement of cash flows for the year ended December 31, 1999, in each case as contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed with the SEC on March 24, 2000. 1.2.34. "Financing" has the meaning set forth in Section 6.6 hereof. 1.2.35. "Financing Entities" has the meaning set forth in Section 6.6 hereof. 1.2.36. "Financing Letters" has the meaning set forth in Section 6.6 hereof. 1.2.37. "GAAP" means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied. 1.2.38. "Governmental Entity" means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. 1.2.39. "Hazardous Substance" has the meaning set forth in Section 5.16.2 hereof. 1.2.40. "HSR Act" has the meaning set forth in Section 7.6.1 hereof. 1.2.41. "Indebtedness" means all obligations for borrowed money, however evidenced, including principal and interest. A-3 1.2.42. "Indemnified Party" has the meaning set forth in Section 7.13 hereof. 1.2.43. "Insurance Policies" has the meaning set forth in Section 5.18 hereof. 1.2.44. "Knowledge" means, with respect to any Person other than the Company, the actual knowledge of such Person and its Representatives, and with respect to the Company, the actual knowledge of the Company's Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Senior Vice President of Development. 1.2.45. "Law" means any applicable statute, rule, regulation, administrative requirement, code or ordinance of any Governmental Entity. 1.2.46. "Leased Real Estate" has the meaning set forth in Section 5.22.2 hereof. 1.2.47. "Liabilities" means all liabilities, obligations or Indebtedness of any kind, whether matured or unmatured, liquidated or unliquidated, fixed or contingent. 1.2.48. "Material Adverse Effect" means a material adverse effect on (i) the ability of the subject Person to perform its obligations under, and consummate the transactions contemplated by, this Agreement on a timely basis or (ii) the financial condition, business, results of operations, or prospects of such Person and its Subsidiaries, taken as a whole; provided, however, the parties hereto acknowledge and agree that the adverse effect (if any) on (a) the Company's ability to perform its obligations under, and consummate the transactions contemplated by, this Agreement on a timely basis or (b) the Company's financial condition, business, results of operations, or prospects directly or indirectly resulting from, or which is reasonably likely to result from, (A) this Agreement or the transactions contemplated hereby or the public announcement of this Agreement and the Merger, (B) the economy or securities markets in general, or (C) the Company's industry in general, and not specifically related to the Company, shall not constitute a Material Adverse Effect with respect to the Company hereunder. 1.2.49. "Merger" has the meaning set forth in Section 2.1.1 hereof. 1.2.50. "Merger Consideration" means the cash paid to the holders of the Existing Shares pursuant to Article 2 hereof. 1.2.51. "NASD" has the meaning set forth in Section 5.5.1 hereof. 1.2.52. "New Financing Letters" has the meaning set forth in Section 6.6 hereof. 1.2.53. "NLRB" has the meaning set forth in Section 5.14.3 hereof. 1.2.54. "Notice of Superior Proposal" has the meaning set forth in Section 7.5.2 hereof. 1.2.55. "Operating Company" has the meaning set forth in the preamble hereof. 1.2.56. "Options" means the options to purchase shares of capital stock of the Company. 1.2.57. "Order" means any decree, injunction, judgment, order, ruling, arbitration award, assessment or writ issued by any Governmental Entity. 1.2.58. "Owned Real Estate" has the meaning set forth in Section 5.22.1 hereof. 1.2.59. "Parent" has the meaning set forth in the preamble. 1.2.60. "Paying Agent" has the meaning set forth in Section 2.3.1 hereof. 1.2.61. "Per Share Amount" has the meaning set forth in Section 2.2.1 hereof. 1.2.62. "Permit" means any license, permit, franchise or authorization. 1.2.63. "Permitted Acquisitions" has the meaning set forth in Section 7.1.3 hereof. 1.2.64. "Permitted Encumbrances" means (i) Encumbrances disclosed on the Disclosure Schedule, (ii) liens for Taxes, assessments, governmental charges or levies or mechanics' and other statutory liens A-4 which are not material in amount relative to the property affected, or which are not yet delinquent or can be paid without penalty or are being contested in good faith and by appropriate proceedings in respect thereof, and (iii) imperfections of title which are not substantial in amount relative to the property affected and which do not materially interfere with the present use of the property subject thereto or affected thereby. 1.2.65. "Person" means an association, a corporation, an individual, a partnership, a limited liability company or limited liability partnership, a trust or any other entity or organization, including a Governmental Entity. 1.2.66. "Preferred Stock" means the Company's preferred stock, $.001 par value. 1.2.67. "Recap" has the meaning set forth in the preamble hereof. 1.2.68. "Recapitalization" has the meaning set forth in the recitals hereof. 1.2.69. "Rights Agreement" has the meaning set forth in Section 5.28 hereof. 1.2.70. "Representatives" means Persons acting on behalf of another Person, including such Person's officers, directors, employees, representatives, agents, independent accountants, investment bankers and counsel. 1.2.71. "Rollover Holders" has the meaning set forth in the recitals hereof. 1.2.72. "Rollover Options" means the Options issued under the Stock Options Plans that will continue in the Surviving Corporation. 1.2.73. "Rollover Shares" has the meaning set forth in the recitals hereof. 1.2.74. "SEC" means the United States Securities and Exchange Commission or any successor entity. 1.2.75. "SEC Reports" has the meaning set forth in Section 5.6.1 hereof. 1.2.76. "Securities Act" means the Securities Act of 1933, as amended. 1.2.77. "Service" means the Internal Revenue Service or any successor entity. 1.2.78. "Share Certificates" has the meaning set forth in Section 2.3.1 hereof. 1.2.79. "Special Committee" means the special committee of the Company Board consisting entirely of non-management independent directors established to make recommendations to the Company Board with respect to, among other matters, the advisability of the consummation of the transactions contemplated by this Agreement. 1.2.80. "Special Meeting" has the meaning set forth in Section 7.10 hereof. 1.2.81. "Stockholder Agreement" means the stockholders agreement to be entered into by the Company, Parent and the Rollover Holders on or prior to the Closing Date. 1.2.82 "Stock Option Plans" means, collectively, the Veterinary Centers of America, Inc. 1996 Employee Stock Purchase Plan, the 1996 Stock Incentive Plan, and the 1993 Stock Incentive Plan. 1.2.83 "Subsidiary" of a company means any Person in which such company has a direct or indirect equity or ownership interest by vote or value of in excess of 50%. 1.2.84 "Surviving Corporation" has the meaning set forth in Section 2.1.1 hereof. 1.2.85 "Superior Proposal" has the meaning set forth in Section 7.5.2 hereof. 1.2.86 "Takeover Statute" has the meaning set forth in Section 7.15 hereof. 1.2.87 "Tax" or "Taxes", as the context may require, include: (i) any income, alternative or add-on minimum tax, gross income, gross receipts, franchise, profits, sales, use, ad valorem, business license, A-5 withholding, payroll, employment, excise, stamp, transfer, recording, occupation, premium, property, value added, custom duty, severance, windfall profit or license tax, governmental fee, including estimated taxes relating to any of the foregoing, or other similar tax or other like assessment or charge of similar kind whatsoever together with any interest and any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such Tax; or (ii) any liability of a Person for the payment of any taxes, interest, penalty, addition to tax or like additional amount resulting from the application of Treas. Reg. Section 1.1502-6 or comparable provisions of any Governmental Entity in respect of a consolidated or combined return. 1.2.88 "Tax Return" means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Entity in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Law relating to any Tax. 1.2.89 "Termination Fee" shall have the meaning set forth in Section 9.3.1 hereof. 1.2.90 "Third Party" has the meaning set forth in Section 7.5.2 hereof. 1.2.91 "Updated Financial Statements" has the meaning set forth in Section 7.7 hereof. 1.2.92 "Voting Agreement" means the Voting Agreement in the form attached hereto as Exhibit A. ARTICLE 2. THE MERGER 2.1. The Merger. 2.1.1. Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, Recap shall be merged with and into the Company at the Effective Time (the "Merger"). Upon consummation of the Merger, the separate existence of Recap shall cease and the Company shall be the surviving corporation (the "Surviving Corporation"). 2.1.2. As soon as practicable after satisfaction of (or, to the extent permitted hereunder, waiver of) all conditions to the Merger, the Company and Recap will file a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware in accordance with the DGCL and make all other filings or recordings required by Law in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is filed with the Secretary of State of the State of Delaware or at such later time as is specified in the Certificate of Merger (the "Effective Time"). 2.1.3. The Merger shall have the effects set forth in Sections 251, 259 and 261 of DGCL. 2.2. Merger Consideration and Cancellation of Existing Shares. At the Effective Time, pursuant to this Agreement and by virtue of the Merger and without any action on the part of Recap, the Company, or the holders of any of the following securities: 2.2.1. Each Existing Share issued and outstanding immediately prior to the Effective Time (including shares of Common Stock issued upon exercise of Options and other convertible securities of the Company, but excluding any Dissenting Shares, and shares to be cancelled pursuant to Section 2.2.2), shall be cancelled and shall be converted automatically into the right to receive an amount equal to $15.00 in cash (the "Per Share Amount"), without interest, payable to the holder thereof upon surrender of the certificate formerly representing such share of Common Stock in the manner provided in Section 2.3. 2.2.2. Each Existing Share held in the treasury of the Company or held by Recap or Parent, if any, immediately prior to the Effective Time, shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto. A-6 2.2.3. Each share of common stock of Recap that is issued and outstanding immediately prior to the Effective Time shall remain outstanding as an issued, fully paid and nonassessable share of common stock of the Surviving Corporation (the "Exchange Ratio"). 2.2.4. If between the date of this Agreement and the Effective Time the number of outstanding shares of capital stock of the Company shall have been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split-up, combination, exchange of shares or the like other than pursuant to the Merger, the Per Share Amount payable to each holder of Existing Shares shall be correspondingly adjusted. 2.3. Payment of Cash for Existing Shares and Options. 2.3.1. At the Effective Time, the Surviving Corporation shall irrevocably deposit or cause to be deposited with a paying agent appointed by Recap with the Company's prior approval (the "Paying Agent"), as agent for the holders of Existing Shares to be cancelled in accordance with Section 2.2, cash in the aggregate amount required to pay the Merger Consideration in respect of such securities outstanding immediately prior to the Effective Time. Pending distribution pursuant to Section 2.3.2 hereof of the cash deposited with the Paying Agent, such cash shall be held in trust for the benefit of the holders of Existing Shares cancelled in the Merger and such cash shall not be used for any other purposes, and shall be held in obligations of, or guaranteed by, the United States of America, or any agency thereof, and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investor Services, Inc. or Standard & Poors Corporation, respectively, or in deposit accounts, certificates of deposit or bankers' acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from commercial banks with capital, surplus and undivided profits aggregating in excess of $1,000,000,000 (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each Person who was, at the Effective Time, a holder of record of Existing Shares entitled to receive the Per Share Amount pursuant to Section 2.2 hereof, a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing the Existing Shares (the "Share Certificates") shall pass, only upon proper delivery of the Share Certificate to the Paying Agent) and instructions for use in effecting the surrender of the Share Certificate pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Share Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Share Certificate shall be entitled to receive in exchange therefor the Per Share Amount for each Existing Share formerly evidenced by such Share Certificate, and such Share Certificate shall thereupon be cancelled. No interest shall accrue or be paid on the Per Share Amount payable upon the surrender of any Share Certificate for the benefit of the holder of such Share Certificate. 2.3.2. After surrender to the Paying Agent of any Share Certificate or other instrument which prior to the Effective Time shall have represented any Existing Shares, the Paying Agent shall promptly distribute to the Person in whose name such Share Certificate or other instrument shall have been registered, a check in the amount into which such Existing Shares shall have been converted at the Effective Time pursuant to Section 2.2 hereof. Until so surrendered and cancelled, each such Share Certificate or other instrument shall, after the Effective Time, be deemed to represent only the right to receive the Per Share Amount, and until such surrender and cancellation, no cash shall be paid to the holder of such outstanding Share Certificate or other instrument in respect thereof. From and after the Effective Time, the holders of Existing Shares outstanding immediately prior to the Effective Time shall cease, except for Dissenting Shares and otherwise as required by law, to have any rights with respect to such Existing Shares, other than the right to receive the Per Share Amount as provided in this Agreement. 2.3.3. If payment is to be made to a Person other than the registered holder of the Existing Shares represented by the Share Certificate or other instrument so surrendered in exchange therefor, it shall be a condition to such payment that the Share Certificate or other instrument so surrendered shall be properly A-7 endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Paying Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Existing Shares or establish to the satisfaction of the Paying Agent that such tax has been paid or is not payable. 2.3.4. After the Effective Time, there shall be no further transfers on the stock transfer books of the Surviving Corporation of the Existing Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Share Certificates representing Existing Shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the cash amount provided for, and in accordance with the procedures set forth in this Article 2. 2.3.5. If any cash deposited with the Paying Agent for purposes of payment in exchange for Existing Shares remains unclaimed six months after the Effective Time, such cash shall be returned to the Surviving Corporation, upon demand, and any such holder who has not converted his Existing Shares into the Per Share Amount or otherwise received the Per Share Amount pursuant to this Agreement prior to that time shall thereafter look only to the Surviving Corporation for payment of the Per Share Amount. Notwithstanding the foregoing, the Surviving Corporation shall not be liable to any holder of Existing Shares for any amount paid to a public official pursuant to applicable unclaimed property laws. Any amounts remaining unclaimed by holders of Existing Shares seven (7) years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Entity) shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of any claims or interest of any Person previously entitled thereto. 2.3.6. Any portion of the Merger Consideration made available to the Paying Agent pursuant to Section 2.4 to pay for Existing Shares for which dissenters' rights have been perfected as provided in Section 2.4 hereof shall be returned to the Surviving Corporation upon demand. 2.3.7. No dividends or other distributions with respect to capital stock of the Surviving Corporation with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate for Existing Shares. 2.3.8. In the event that any Share Certificate or other instrument representing Existing Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate or other instrument to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such holder of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Share Certificate or other instrument, the Paying Agent will issue in exchange for and in lieu of such lost, stolen or destroyed certificate or other instrument representing the Existing Shares, the Per Share Amount, and unpaid dividends and distributions on Existing Shares deliverable in respect thereof, pursuant to this Agreement and the Merger. 2.4. Dissenting Shares. Notwithstanding any other provisions of this Agreement, Existing Shares which are issued and outstanding immediately prior to the Effective Time and which are held by a holder who has not voted such shares of capital stock of the Company in favor of the Merger and who has delivered a written demand for relief as a dissenting stockholder in the manner provided by DGCL and who, as of the Effective Time, shall not have effectively withdrawn or lost such right to relief as a dissenting stockholder ("Dissenting Shares") shall not be converted into a right to receive the Per Share Amount. The holders thereof shall be entitled only to such rights as are granted by Section 262 of DGCL. Each holder of Dissenting Shares who becomes entitled to payment for such Dissenting Shares pursuant to Section 262 of DGCL shall receive payment therefor from the Surviving Corporation in accordance with DGCL; provided, however, that if any such holder of Dissenting Shares (i) shall have failed to establish his entitlement to relief as a dissenting stockholder as provided in Section 262 of DGCL, (ii) shall have effectively withdrawn his demand for relief as a dissenting stockholder with respect to such Dissenting Shares or lost his right to relief as a dissenting stockholder and payment for his Dissenting Shares under Section 262 of DGCL or (iii) shall have failed to file a complaint with A-8 the appropriate court seeking relief as to determination of the value of all Dissenting Shares within the time provided in Section 262 of DGCL, such holder shall forfeit the right to relief as a dissenting stockholder with respect to such Dissenting Shares and each such Dissenting Share shall be converted into the right to receive the Per Share Amount from the Surviving Corporation as provided in Section 2.2. The Company shall give Recap prompt notice of any demands received by the Company prior to the Effective Time for relief as a dissenting stockholder, and Recap shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Recap, make any payment with respect to, or settle or offer to settle, any such demands. 2.5. Stock Options. 2.5.1. Except as may be otherwise agreed to in writing between Recap and the holder of any Rollover Options, each Option that has an exercise price of equal to or greater than the Per Share Amount shall be cancelled at the Effective Time, without any payment or other consideration therefor. 2.5.2. At the Effective Time, all other Options (other than the Rollover Options), whether or not vested, shall be cancelled and, in lieu thereof, as soon as reasonably practicable after the Effective Time, each holder of such Options shall receive a cash payment from the Surviving Corporation equal to the excess of the aggregate cash amount that would be paid in the Merger with respect to the shares of Common Stock subject to such Options, if the Options were exercised, over the aggregate exercise price with respect to such Options, as reduced by any required withholding of taxes. The Rollover Options at the Effective Time shall survive the Closing and the Surviving Corporation shall assume all the rights, liabilities and obligations of such Rollover Options in accordance with the respective Stock Option Plan or any successor or replacement stock option plan of the Surviving Corporation. 2.5.3. Prior to the Effective Time, the Company shall (i) take all reasonable steps necessary to make any amendments to the terms of such Stock Option Plans, individual Option agreement or Options that are necessary to give effect to the transactions contemplated by this Agreement, and (ii) use all reasonable and necessary efforts to obtain at the earliest practicable date all written consents (if necessary) from holders of Options to effect the cancellation of such holder's Options to take effect at the Effective Time. 2.5.4. At or prior to the Effective Time, the Company shall take all reasonable and necessary action to fully advise the holders of Options of their respective rights under this Agreement, the Options and the respective Stock Option Plan, to facilitate the timely exercise of such rights and obligations to effectuate the provisions of this Section 2.5. From and after the Effective Time, other than as expressly set forth in this Section 2.5 or any written agreement between Recap and the holder of the Rollover Options, no holder of Options shall have any rights in respect of such Options, other than to receive the cash payment in the manner described in this Section 2.5. The surrender of any Option or the receipt of cash in cancellation of such Options by the holder thereof shall be deemed a release of any and all rights the holder of such Option had or may have had in respect of such Option. ARTICLE 3. CLOSING 3.1. Closing. The closing of the Merger (the "Closing") shall take place (i) at the offices of Troop Steuber Pasich Reddick & Tobey LLP, 2029 Century Park East, Los Angeles, California 90067 at 9:00 A.M. (Los Angeles time) on the Business Day on which the parties hereto designate as the closing date following the fulfillment or waiver of the conditions set forth in Article 8 hereof in accordance with this Agreement or (ii) at such other place and time and/or on such other date as the Company and Recap may agree. A-9 ARTICLE 4. CERTIFICATE OF INCORPORATION AND BYLAWS; OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION 4.1. The Certificate of Incorporation of Surviving Corporation. The Certificate of Incorporation of Recap (the "Certificate") in effect at the Effective Time shall be amended and restated as of the Effective Time and shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with the terms thereof and the DGCL. 4.2. The Bylaws of Surviving Corporation. The Bylaws of Recap in effect at the Effective Time shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with the terms thereof and the DGCL. 4.3 Officers and Directors of Surviving Corporation. From and after the Effective Time, the directors of the Surviving Corporation shall be as set forth in the Disclosure Schedule, and the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation, until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the disclosure letter delivered at or prior to the execution of this Agreement by the Company which shall refer to the relevant sections of this Agreement (the "Disclosure Schedule"), the Company hereby represents and warrants to Recap as follows: 5.1. Organization, Standing and Authority. Each of the Company and its Subsidiaries is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its respective state of incorporation or organization. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing in the states of the United States and any foreign jurisdictions where its respective ownership or leasing of property or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has made available to Recap a complete and correct copy of the certificate of incorporation, bylaws, operating agreements, partnership agreements or other organizational documents, each as amended to date, of each of the Company and its Subsidiaries. Each of the certificates of incorporation, bylaws, operating agreements, partnership agreements or other organizational documents so made available is in full force and effect. The corporate records and minute books or other applicable records of the Company and its Subsidiaries reflect all material action taken and authorizations made at meetings of such companies' partners, members, boards of directors or any committees thereof and at any stockholders' meetings thereof. 5.2. Subsidiaries. 5.2.1. The Company has previously provided a list of the true, accurate and complete legal names, jurisdiction of incorporation or organization and foreign qualification of each of the Company and its Subsidiaries, which list is included as part of the Disclosure Schedule, (ii) no equity securities of any of its Subsidiaries are or may become required to be issued (other than to it or its wholly owned Subsidiaries) by reason of any options, warrants, or otherwise, (iii) there are no contracts, commitments, understandings or arrangements by which any of such Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such Subsidiaries (other than to it or its wholly owned Subsidiaries), and (iv) there are no contracts, commitments, understandings, or arrangements relating to the Subsidiary's rights to vote or to dispose of such securities. A-10 5.2.2. The Company does not own beneficially, directly or indirectly, any equity securities or similar interests of any Person, or any interest in a partnership, limited liability company, joint venture or other entity or organization, other than its Subsidiaries. 5.3 Company Capital Stock. As of March 30, 2000, the authorized capital stock of the Company consists solely of 60,000,000 shares of Common Stock, of which 21,913,336 are issued and outstanding (of which 620,511 are held in the Company treasury) and 2,000,000 shares of Preferred Stock of which 583,333 shares of Series A Preferred Stock are authorized and no shares of Preferred Stock are outstanding. As of the date hereof, no shares of Common Stock or Preferred Stock were held in treasury by the Company or otherwise beneficially owned by the Company or its Subsidiaries. The outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, subject to no preemptive rights, and were not issued in violation of any preemptive rights. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries have been duly authorized, and validly issued and are fully paid and nonassessable and not subject to any preemptive right and owned, either directly or indirectly, by the Company free and clear of all Encumbrances. Except as set forth on the Disclosure Schedule, other than Options to purchase 3,779,244 shares of Common Stock of the Company, with an average weighted exercise price of $10.43 and the issuance of rights pursuant to the terms and conditions of the Rights Agreement, there are no preemptive rights or outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of the Company or any of its Subsidiaries. 5.4 Corporate Power. The Company and its Subsidiaries each has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets. Subject to receipt of the requisite approval of the Merger by the holders of its capital stock entitled to vote thereon, this Agreement and the transactions contemplated hereby and thereby have been authorized by all necessary corporate action of the Company and the Company Board and Operating Company on or prior to the date hereof. This Agreement has been duly executed and delivered by each of the Company, and Operating Company and is a valid and legally binding obligation of each of the Company, and Operating Company enforceable against each of the Company, and Operating Company in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights or by general equity principles). 5.5 Consents and Approvals; No Defaults. 5.5.1. No consents or approvals of, or filings or registrations with, any Governmental Entity or with any third party are required to be made or obtained by the Company or any of its Subsidiaries in connection with the execution, delivery or performance by the Company, or Operating Company of this Agreement or to consummate the Asset Drop Down, or the Merger except for (i) filings of applications, registrations, statements, reports or notices (and expiration of any applicable notice periods) with the United States Department of Justice, the Federal Trade Commission, the National Association of Securities Dealers, Inc. ("NASD"), the NASDAQ National Market, the SEC and state securities authorities, (ii) the requisite approval of this Agreement by the holders of the capital stock of the Company, or Operating Company entitled to vote thereon, (iii) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL and (iv) consents, approvals, filings, or registrations which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. 5.5.2. Subject to receipt of the approvals referred to in the preceding paragraph, and the expiration of related waiting periods, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and compliance with the provisions hereof do not and will not (i) violate, or conflict with, or result in any breach of the terms, conditions, or provisions of, the respective charters, bylaws or other organizational documents of the Company and each of its Subsidiaries; (ii) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, A-11 cancellation, modification or acceleration of the performance required by or a loss of a material benefit under, or result in the creation or imposition of (or the obligation to create or impose) any Encumbrance (other than Permitted Encumbrances) upon any of the properties or assets of the Company under, any of the terms, conditions or provisions of any material agreement, indenture, note, bond, mortgage, deed of trust, undertaking, permit, lease, franchise, license or other instrument to which the Company is a party or by which it or any of its properties or assets may be bound or affected; or (iii) to the knowledge of the Company, violate any Law or Order applicable to the Company; except, in the case of the preceding clauses (i), (ii) or (iii), for any such violation, conflict, breach, default, event, right or Encumbrance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. 5.6 SEC Reports. 5.6.1. The Company has made available to Recap a true and complete copy of each form, report, schedule, registration statement and definitive proxy statement filed by the Company with the SEC since January 1, 1997 (as such documents have since the time of their filing been amended or supplemented, the "SEC Reports"), which are all of the documents that the Company was required to file with the SEC since January 1, 1997. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports (including all financial statements included therein and all exhibits and schedules thereto and documents incorporated by reference therein) contained (as of their respective filing dates) any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, except for such statements, if any, as have been modified or superseded by any subsequent filings. The Financial Statements included in such SEC Reports delivered by the Company to Recap comply in all material respects with the rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited Financial Statements, as permitted by Exchange Act Form 10-Q) and fairly present (subject, in the case of the unaudited Financial Statements, to normal, recurring audit adjustments that, individually and in the aggregate, were not material) the financial position of the Company and its Subsidiaries as at the dates thereof and the results of each of their operations and cash flows for the periods then ended. 5.6.2. As of the date hereof, none of the Subsidiaries of the Company is a reporting company under the Exchange Act, and none is required to file any regular and periodic filings, notices, forms, reports, or statements with the United States Department of Justice, the Federal Trade Commission, the NASD or the SEC. 5.6.3. Except as disclosed in the SEC Reports or the Disclosure Schedule, or as contemplated by this Agreement, since January 1, 2000 to the date hereof, the Company's business has been conducted in the ordinary course, and there has not been any: (a) event, situation or occurrence that individually or in the aggregate has had a Material Adverse Effect on the Company; (b) amendment to the Company's or any of the Company's Subsidiaries' charter, bylaws or other organizational documents; (c) sale, assignment, disposition, transfer, pledge, mortgage or lease of any material portion of the assets primarily used in the Company's business taken as a whole; (d) incurrence of any additional Indebtedness in excess of $1,000,000, other than accounts payable arising in the ordinary course of business, consistent with past practice, and in connection with Permitted Acquisitions; A-12 (e) any increase in the compensation or fringe benefits payable or to become payable to any Executive Officer of the Company, other than routine increases made in the ordinary course of business and consistent with past practice or as required by law or under any existing agreements heretofore disclosed to Recap; (f) any amendment, alteration or modification in the terms of any currently outstanding options, warrants or other rights to purchase any capital stock or equity interest in the Company or any securities convertible into or exchangeable for such capital stock or equity interest, including without limitation any reduction in the exercise or conversion price of any such rights or securities, any change to the vesting or acceleration terms of any such rights or securities, or any change to terms relating to the grant of any such rights or securities; (g) declaration or payment of any dividend or other distribution, or the transfer of any assets, by the Company to any stockholders of the Company with respect to the Common Stock, or any redemption, repurchase or other acquisition by the Company of its capital stock, except in the ordinary course of business; (h) change by the Company in any of its significant accounting principles, methods or practices; (i) any material closure, shut down or other elimination of any of the Company's offices, franchises or any other change in the character of its business, properties or assets, except for closures, shut downs, or other eliminations that have not had a Material Adverse Effect on the Company; (j) loan or advance to or other such agreement with any of its stockholders, officers, directors, employees, agents, consultants or other Representatives, except in the ordinary course of business, consistent with past practice; (k) damage, destruction or loss with respect to any of the properties or assets of the Company that would reasonably be expected to have a Material Adverse Effect on the Company; or (l) agreement to do, cause or suffer any of the foregoing. 5.7. Disclosure Documents. The proxy statement on Schedule 14A in respect of the Special Meeting of the Company's stockholders to vote upon the Asset Drop Down and the Merger to be filed with the SEC in connection with the Merger as the same may be amended or supplemented, will not, at the date it is first mailed to stockholders of the Company or at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Company Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act. No representation is made by the Company with respect to statements made in the Company Proxy Statement based on information supplied by Recap for inclusion therein. 5.8. Litigation. There are no Actions pending or, to the Knowledge of the Company, claims threatened against the Company, at law or in equity, and there is no investigation or proceeding pending or, to the Knowledge of the Company, threatened before or by any Governmental Entity nor is there any currently effective Order against the Company or to the Knowledge of the Company, any Order expected to be issued, except for any such Actions, claims, investigations, proceedings or Orders that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. The Disclosure Schedule identifies those pending or, to the Knowledge of the Company, threatened proceedings before a Governmental Entity and threatened claims listed therein which (i) may not be covered by third party insurance or (ii) with respect to which the insurance carrier has denied coverage or has advised the Company that it is defending such claim under reservation of rights or (iii) for which the Company is self-insured. A-13 5.9. Compliance with Laws. 5.9.1. Except as set forth on the Disclosure Schedule, the Company and each of its Subsidiaries: (i) is in compliance with all Laws and Orders applicable thereto or to the business of the Company and its Subsidiaries or to the employees conducting such businesses, except where the failure to so comply would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; (ii) has all Permits, Orders and Approvals of, and has made all filings, applications and registrations with, all Governmental Entities that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the Company's Knowledge, no suspension or cancellation of any of them is threatened, other than such failure to obtain or maintain the same would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company; and (iii) has not received any notification or communication from any Governmental Entity (a) asserting that the Company or any of its Subsidiaries is not in compliance with any of the statutes, regulations or ordinances which such Governmental Entity enforces or (b) threatening to revoke any license, franchise, permit or governmental authorization (nor, to the Company's Knowledge, do any grounds for any of the foregoing exist), except such notifications or communications which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company. 5.10. Material Contracts; Defaults. 5.10.1. The Disclosure Schedules lists all management contracts and administrative services contracts with the hospitals and/or professional corporations and all contracts or commitments that provide for an aggregate payment from the Company in excess of $500,000 in any contract year other than (i) contracts or commitments that can or in reasonable probability will be completed within 90 days of the Closing Date or can be terminated within such 90 day period without payment of a penalty in excess of $100,000, (ii) contracts or commitments for goods and services purchased in the ordinary course of the Company's business in amounts consistent with past practice, (iii) contracts or commitments in connection with capital expenditures that provide for expenditures consistent with the capital expenditure budget previously supplied by the Company to Recap, and (iv) contracts or commitments reflected on the Financial Statements included as part of the SEC Reports or disclosed in the SEC Reports. 5.10.2. The Company is not in breach or violation of any contract, or in default with respect thereto, except for such violations, breaches or defaults that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company. None of the contracts of the Company contain any provisions that upon a change in control of the Company would have a Material Adverse Effect on the Company. 5.11. No Brokers. Except for financial advisory fees payable to Jefferies & Company, Inc. and Houlihan Lokey Howard & Zukin Capital, no action has been taken by the Company that would give rise to any valid claim against any party hereto for a brokerage commission, finder's fee or other like payment with respect to the transactions contemplated by this Agreement. 5.12. Absence of Undisclosed Liabilities. Except as set forth on the Disclosure Schedule, there are no Liabilities of any kind that would be required to be reflected on, or reserved against in the consolidated Financial Statements of the Company or in the notes thereto, prepared in accordance with GAAP that are not disclosed, reflected or reserved against in the consolidated Financial Statements of the Company and its Subsidiaries, except for such Liabilities incurred (i) since December 31, 1999, in the ordinary course of business, consistent with past practice, (ii) which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, (iii) related to the transactions contemplated by this Agreement, and (iv) payments required as a result of the consummation of the Merger under the terms of the existing employment agreements with the Executive Officers of the Company. A-14 5.13. Employee Benefit Plans. The Company has previously supplied Recap a list which is attached to the Disclosure Schedules of all plans and other arrangements which provide compensation or benefits to officers, directors or consultants or employee benefits to employees of the Company or its Subsidiaries, including, without limitation, all "employee benefit plans" as defined in Section 3(3) of ERISA, and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, and all employment or executive compensation agreements (collectively, the "Company Plans"). All Company Plans comply with and are and have been operated in material compliance with each applicable provision of ERISA, the Code, other federal statutes, state law (including, without limitation, state insurance law) and the regulations and rules promulgated pursuant thereto or in connection therewith. Neither the Company nor any member of the same controlled group of businesses as the Company within the meaning of Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is or ever was a sponsor or obligated to contribute to any plan covered by Title IV of ERISA or Section 412 of the Code, or any "multi- employer plan," within the meaning of Section 3(37) of ERISA. Each Company Plan which is required to comply with the provisions of Sections 4980B and 4980C of the Code, or with the requirements referred to in Section 4980D(a) of the Code, has complied in all material respects, and, except as required by such sections of the Code, no Company Plan which is a "welfare benefit plan," as defined in Section 3(1) of ERISA, provides for post-employment benefits. Notwithstanding any statement or indication in this Agreement to the contrary, there are no Company Plans which the Company or Recap will not be able to terminate (or in which the Company or Recap will not be able to terminate the participation of their Employees) immediately after the Closing in accordance with their terms and ERISA, and without incurring any expenses (including, but not limited to, loads or termination charges imposed with respect to insurance policies or mutual funds used to fund such Company Plans), other than administrative expenses in connection with such termination. Neither the Company, any of its Subsidiaries, nor any ERISA Affiliate has failed to make any material contributions or to pay any material amounts due and owing as required by the terms of any Company Plan. Each of the Company Plans which is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service, and has been operated substantially in accordance with its terms and with the provisions of the Code. No amounts payable under the Company Plans will fail to be deductible for federal income tax purposes by virtue of Sections 162(m) or 280G of the Code. Other than routine claims for benefits under the Company Plans, there are no pending, or, to the best knowledge of the Company, threatened, investigations, proceedings, claims, lawsuits, disputes, actions, audits or controversies involving the Company Plans, or the fiduciaries, administrators, or trustees of any of the Company Plans or the Company or any ERISA Affiliate of either as the employer or sponsor under any Company Plan, with any of the Internal Revenue Service, the Department of Labor, the Pension Benefit Guaranty Corporation, any participant in or beneficiary of any Company Plan or any other Person whomsoever. The Company knows of no reasonable basis for any such claim, lawsuit, dispute, action or controversy. The Company has delivered to Recap true and complete copies of: (i) each of the Company Plans and any related funding agreements thereto (including insurance contracts) including all amendments, all of which are legally valid and binding and in full force and effect and there are no defaults thereunder, (ii) the currently effective Summary Plan Description pertaining to each of the Company Plans, (iii) the three most recent annual reports for each of the Company Plans (including all relevant schedules), (iv) the most recent Internal Revenue Service determination letter for each Company Plan which is intended to constitute a qualified plan under Section 401 of the Code and each amendment to each of the foregoing documents, and (v) financial statements for each funded Company Plan. Neither the Company nor any Subsidiary is a party or subject to any agreement, contract or other obligation which would require the making of any payment, other than payments as contemplated by this Agreement, to any employee of the Company or to any other Person as a result of the consummation of the transactions contemplated herein. 5.14. Labor and Employment Matters. 5.14.1. Neither the Company nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is the Company or any of its Subsidiaries the subject of a proceeding asserting that it or any such Subsidiary has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel the Company or any such Subsidiary to bargain with any labor A-15 organization as to wages or conditions of employment, nor is there any strike involving it or any of its Subsidiaries pending or, to the Company's Knowledge, threatened, nor is the Company aware of any activity during the past three years involving its or any of its Subsidiaries' employees seeking to certify a collective bargaining unit or engaging in other organizational activity. 5.14.2. The Disclosure Schedule contains an accurate list of all employment contracts between the Company and each of the Executive Officers. Except in accordance with the contracts, agreements, plans or programs identified in the Disclosure Schedule, no individual will accrue or receive material additional benefits, service or accelerated rights to payment of benefits as a result of the transactions contemplated by this Agreement (either alone or combined with any other event or transaction). 5.14.3. As of the date hereof, and except as set forth in the Disclosure Schedule, there is no (i) unfair labor practice complaint against the Company pending before the National Labor Relations Board (the "NLRB") or any other federal, state, local or foreign agency; (ii) pending labor strike or lockout affecting the Company; (iii) pending material grievance or unfair dismissal proceeding before the NLRB relating to the Company; (iv) pending representation question or union organizing activities respecting a significant number of the employees of the Company; or (v) to the Knowledge of the Company, threat, investigation, charge or complaint with regard to any of the foregoing relating to the Company. 5.15. Year 2000 Compliance. Except as set forth on the Disclosure Schedule the computer software and related hardware of the Company and its Subsidiaries (the "Company Computer System") used for the storage and processing of data have not suffered any adverse effects from the changing of the year from 1999 to 2000 that has had or would reasonably be expected to have a Material Adverse Effect. 5.16. Environmental Matters. 5.16.1. The Company and each of its Subsidiaries is in compliance with applicable Environmental Laws, except where the failure to so comply would not have or be reasonably expected to have a Material Adverse Effect; (i) to the Knowledge of the Company, no real property (including buildings or other structures) currently or formerly owned, leased or operated by the Company or any of its Subsidiaries has been contaminated with, or has had any release of, any Hazardous Substance that the Company would reasonably be expected to be liable for any potential material investigation, clean up, claim or liability from such real property that would have or be reasonably expected to have a Material Adverse Effect on the Company; (ii) neither the Company nor any of its Subsidiaries is subject to liability for any Hazardous Substance disposal or contamination by their agents or employees on any third party property, except where the failure to so comply would not have or be reasonably expected to have a Material Adverse Effect; (iii) neither the Company nor any of its Subsidiaries has received any notice, demand letter, claim or request for information alleging any current material violation of, or material liability under, any Environmental Law; (iv) neither the Company nor any of its Subsidiaries is subject to any Order or other agreement with any Governmental Entity or any third party relating to any Environmental Law; and (v) the Company has delivered to Recap copies of all environmental reports, studies, sampling data, correspondence, filings and other environmental information in its possession or reasonably available to it relating to the Company, any Subsidiary of the Company and any currently owned, leased or operated property. 5.16.2. As used herein, the term "Environmental Law" means any federal, state or local law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (i) the protection or restoration of the environment, health, safety, or natural resources but specifically excluding worker safety laws such as OSHA and Cal-OSHA, (ii) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (iii) wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance and the term "Hazardous Substance" means any substance in any concentration that is: (i) listed, classified or regulated as hazardous, toxic, infectious or carcinogenic pursuant to any Environmental Law; or (ii) any petroleum product or by-product, asbestos- containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon. A-16 5.17. Tax Matters. 5.17.1. (i) All Tax Returns that are required to be filed (taking into account any extensions of time within which to file) by or with respect to the Company and its Subsidiaries have been duly filed, (ii) all Taxes due have been paid in full or reserved on the Balance Sheet, (iii) all deficiencies asserted or assessments made as a result of such examinations have been paid in full or reserved on the Balance Sheet, (iv) no issues that have been raised by the relevant taxing authority in connection with the examination of any of the Tax Returns referred to in clause (i) are currently pending, and (v) no waivers of statutes of limitation have been given by or requested with respect to any Taxes of the Company or its Subsidiaries. The Company has made available to Recap true and correct copies of the United States federal income Tax Returns filed by the Company and its Subsidiaries for each of the three most recent fiscal years ended on or before December 31, 1998 and has provided the Tax Return for December 31, 1999, if available. Neither the Company nor any of its Subsidiaries has any liability with respect to income, franchise or similar Taxes that accrued on or before the end of the most recent period covered by the SEC Reports filed prior to the date hereof in excess of the amounts accrued with respect thereto that are reflected in the Financial Statements. Neither the Company nor any of its Subsidiaries is a party to any Tax allocation or sharing agreement, is or has been a member of an affiliated group filing consolidated or combined Tax Returns (other than a group the common parent of which is or was the Company) or otherwise has any liability for the Taxes of any person (other than the Company and its Subsidiaries). 5.18. Insurance. The Company has provided a list which is attached to the Disclosure Schedules of the insurance policies, binders, or bonds maintained by the Company or its Subsidiaries ("Insurance Policies"). All the Insurance Policies are in full force and effect; the Company and its Subsidiaries are not in material default thereunder; and all claims thereunder have been filed in due and timely fashion. No material claim by the Company on or in respect of an insurance policy or bond has ever been declined or refused by the relevant insurer or insurers. 5.19. Assets. The Company holds title to or a leasehold, consignment or license in each item of material tangible personal property owned or used by or in the possession of the Company. 5.20. Statements True and Correct. None of the information (including this Agreement) supplied or to be supplied by the Company or any of its Subsidiaries to any Governmental Entity in connection with the transactions contemplated hereby will, at the respective time such documents are supplied, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or omit to state any material fact necessary to correct any statement in any earlier communication to any Governmental Entity. 5.21. Regulatory Approvals. Neither the Company nor any of its Subsidiaries has taken any action or has any knowledge of any fact or circumstance that is reasonably likely to materially impede or delay receipt of any consents of a Governmental Entity necessary in connection with the consummation of the Merger, which if not obtained, individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect on the Company. 5.22. Real Property and Leaseholds. 5.22.1. The Company owns all material parcels of real property currently indicated as owned in fee by the Company on the Financial Statements (the "Owned Real Estate"). The Company holds marketable and legal title to each of the real properties constituting Owned Real Estate, free and clear of all Encumbrances, except for Permitted Encumbrances, and except for Encumbrances the existence of which would not have a Material Adverse Effect. 5.22.2. To the Knowledge of the Company, the Company holds valid and subsisting leasehold interests in all material parcels of real property leased or subleased to the Company (collectively, the A-17 "Leased Real Estate"), free and clear of all Encumbrances, except for Permitted Encumbrances, and except for Encumbrances the existence of which would not have a Material Adverse Effect. 5.23. Company Action. The Company Board has adopted resolutions recommending that this Agreement, the Asset Drop Down and the Merger be approved by its stockholders and directing that this Agreement, the Asset Drop Down and the Merger be submitted for consideration by its stockholders at the Special Meeting. 5.24. Takeover Statutes. Except for Section 203 of the DGCL, no Takeover Statute applicable to the Company is applicable to the Asset Drop Down or the Merger, the Recapitalization or the other transactions contemplated hereby. 5.25. Earn Out Payments. The Disclosure Schedule lists and identifies all earn out cash payments that exceed the payout of $600,000 in the aggregate or earn out equity issuances required by the Company or any of its Subsidiaries. 5.26. Opinion. The Special Committee has received written opinions from Jefferies & Company, Inc. and Houlihan Lokey Howard & Zukin Capital, to the effect that, as of the date of this Agreement, the Per Share Amount to be received in the Merger by the holders of the shares of Common Stock (other than the Rollover Holders) is fair to such holders from a financial point of view. 5.27. Operating Company. As of the date hereof, the authorized capital stock of Operating Company consists solely of 1,000 shares of common stock, of which 1,000 are issued and outstanding. The Company is the sole stockholder of Operating Company. Since its incorporation, Operating Company was not engaged in any activities other than in connection with or as contemplated by this Agreement, the Asset Drop Down, the Merger and the Recapitalization or in connection with arranging any financing required to consummate the transaction contemplated hereby. 5.28. Rights Agreement. The Company and Continental Stock Transfer & Trust Corporation, as Rights Agent, have executed and delivered, or within two (2) days of the signing of this Agreement, will execute and deliver, the Rights Agreement Amendment, pursuant to which, the execution and delivery of and the performance of the transactions contemplated by this Agreement would not result in the creation of an "Acquiring Person" or the occurrence of a "Distribution Date" as defined in the Rights Agreement, dated as of December 30, 1997 between the Company and the Rights Agent (the "Rights Agreement"). As of the date hereof, the Rights Agreement Amendment has not been withdrawn, modified, amended or supplemented and the Company is not aware of facts or circumstances that may reasonably be expected to result in the occurrence of a "Distribution Date" as defined in the Rights Agreement. 5.29. Asset Drop Down. The consummation of the Asset Drop Down as contemplated in this Agreement will not result in a Material Adverse Effect on the Company. ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF RECAP Recap hereby represents and warrants to the Company as follows: 6.1. Organization, Standing And Authority. Recap is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Recap is duly qualified to do business and is in good standing in the states of the United States and any foreign jurisdictions where its respective ownership or leasing of property or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not individually or in the aggregate have a Material Adverse Effect on Recap. Recap has the corporate power and authority and has taken all corporate action necessary in order to execute and deliver this A-18 Agreement and consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Recap and is a valid and legally binding obligation of it, enforceable against Recap in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights or by general equity principles). Since the date of its incorporation, Recap has not engaged in any activities other than in connection with or as contemplated by this Agreement, the Merger, and the Recapitalization or in connection with arranging any financing required to consummate the transactions contemplated hereby. 6.2. Consents And Approvals; No Defaults. 6.2.1. No consents or approvals of, or filings or registrations with, any Governmental Entity or with any third party are required to be made or obtained by Recap in connection with the execution, delivery or performance by Recap of this Agreement or to consummate the Merger except for (i) filings of applications, registrations, statements, reports or notices (and expiration of any applicable notice periods) with the United States Department of Justice, the Federal Trade Commission, NASD, the SEC and state securities authorities, (ii) the requisite approval of this Agreement by the holders of the capital stock of Recap (which approval has been secured), (iii) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL and (iv) consents, approvals, filings, or registrations listed on SCHEDULE 6.2.1 or which would not, individually or in the aggregate, have a Material Adverse Effect on Recap. 6.2.2. Subject to receipt of the approvals referred to in the preceding paragraph, and the expiration of related waiting periods, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and compliance with the provisions hereof do not and will not (i) violate, or conflict with, or result in any breach of the terms, conditions, or provisions of the charter, bylaws or other organizational documents of Recap; (ii) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, modification or acceleration of the performance required by or a loss of a material benefit under, or result in the creation or imposition of (or the obligation to create or impose) any Encumbrance (other than Permitted Encumbrances) upon any of the properties or assets of Recap under, any of the terms, conditions or provisions of any material agreement, indenture, note, bond, mortgage, deed of trust, undertaking, permit, lease, franchise, license or other instrument to which Recap is a party or by which it or any of its properties or assets may be bound or affected; or (iii) to the Knowledge of Recap, violate any Law or Order applicable to Recap, except for any such violation, conflict, breach, default, event, right or Encumbrance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Recap. 6.2.3. Other than the Approvals of Governmental Entities set forth in Section 6.2.1 hereof, that, to the Knowledge of Recap, there are no other Approvals required to be given or obtained by Recap from any and all Governmental Entities in connection with the consummation of the transactions contemplated by this Agreement, except where the failure to be given or to obtain such Approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Recap. 6.2.4. To the Knowledge of Recap, there are no-governmental Approvals required to be given or obtained by Recap from any and all third parties in connection with the consummation of the transactions contemplated by this Agreement, except where the failure to give or obtain such Approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Recap. 6.3. Capitalization. As of the date hereof, the authorized capital stock of Recap consists of 5,000 shares of common stock, $.01 par value per share, of which as of the date hereof 1,000 shares were issued and outstanding and 5,000 shares of preferred stock, $.01 par value per share of which as of the date hereof no shares were outstanding. All outstanding shares of capital stock of Recap have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in the Exchange Agreement and the Stockholder Agreement, there are no preemptive rights or outstanding subscriptions, options, warrants, rights, convertible A-19 securities or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of Recap. 6.4. Regulatory Approvals. Recap has not taken any action and does not have any Knowledge of any fact or circumstance that is reasonably likely to materially impede or delay receipt of any consents of a Governmental Entity or result in the imposition of a condition or restriction with respect to any such consents. 6.5. Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been conducted by Recap and its Affiliates in such manner as not to give rise to, and the consummation of the transactions contemplated hereby will not give rise to, any valid claim against any party hereto or any of their directors, officers, stockholders or other Representatives or Affiliates for a brokerage commission, finder's fee or other like payment to any Person. 6.6. Financing. Recap has received, and has delivered to the Company Board copies of (a) a letter dated March 30, 2000 from Leonard Green & Partners, L.P. pursuant to which such Person has committed, subject to the terms and conditions set forth therein, to purchase equity securities of Recap immediately prior to the Merger for an aggregate amount of at least $152,000,000, (b) (i) a letter dated March 30, 2000 from GS Mezzanine Partners II, L.P. pursuant to which such Person has committed, on its own behalf and on behalf of affiliated investment funds, subject to the terms and conditions set forth therein, to purchase notes from Company and Operating Company in an aggregate amount of $120,000,000, and (ii) a letter dated March 30, 2000 from Goldman Sachs Credit Partners L.P., pursuant to which such Person has committed, subject to the terms and conditions set forth therein, to enter into a credit agreement providing for loans to Operating Company of up to $325,000,000. As used in this Agreement, the aforementioned entities shall hereinafter be referred to as the "Financing Entities." The aforementioned commitments shall be referred to as the "Financing Letters" and the financing to be provided thereunder shall be referred to as the "Financing." The aggregate proceeds of the Financing are in an amount sufficient to pay when due, pursuant to the terms and conditions herein, the full Merger Consideration as provided herein, to make all other necessary payments by Recap and the Surviving Corporation in connection with the Merger (including the repayment of Indebtedness of the Surviving Corporation as contemplated by the Financing Letters and any amounts payable in respect of Dissenting Shares), to provide a reasonable amount of working capital financing and to pay related fees and expenses. As of the date hereof, none of the Financing Letters has been withdrawn and Recap does not know of any facts or circumstances that may reasonably be expected to result in any of the conditions set forth in any of the Financing Letters not being satisfied. The foregoing notwithstanding, the Financing Letters may be superseded at the option of Recap after the date hereof but prior to the Effective Time by letters (the "New Financing Letters") delivered to the Company Board which contemplate a co-investment by a third party, which New Financing Letters shall be otherwise identical in all material respects to the Financing Letters except for changes necessary to reflect that co-investment, provided that the terms of the New Financing Letters shall not have any adverse effect upon the amount of or ability to consummate, or expand upon the conditions precedent to, the Financing as set forth in the Financing Letters. In such event, the term "Financing Letters" as used herein shall be deemed to refer to the New Financing Letters. 6.7. Litigation. There are no Actions pending, or to the knowledge of Recap, claims threatened against Recap, at law or in equity, and there is no investigation or proceeding pending or, to the Knowledge of Recap, threatened before or by any Governmental Entity nor is there any currently effective Order against Recap, except for any such Actions, claims, investigations, proceedings or Orders that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Recap. 6.8. Statements True and Correct. None of the information (including this Agreement) supplied or to be supplied by or on behalf of Recap to any Governmental Entity in connection with the transactions contemplated hereby will, at the respective time such documents are supplied, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the A-20 circumstances under which they were made, not misleading, or omit to state any material fact necessary to correct any statement in any earlier communication to any Governmental Entity. 6.9. No Prior Activities. Recap has not incurred, directly or indirectly, any material liabilities or obligations except those incurred in connection with its organization or with the negotiation and execution of this Agreement and the performance of the transactions contemplated hereby. Except as contemplated by this Agreement or in connection with the Merger, or the Recapitalization, Recap has not engaged, directly or indirectly, in any business or activity of any type or kind, or entered into any agreement or arrangement with any person or entity, and is not subject to or bound by any material obligation or undertaking. 6.10. Fraudulent Transfer Laws. Assuming the Company is not insolvent immediately prior to the Effective Time, and further assuming the representations and warranties of the Company contained in this Agreement are true and accurate, the Surviving Corporation will not be insolvent immediately after the Effective Time, taking into account changes in assets and Liabilities (including the Financing) of the Surviving Corporation as a result of the Merger and the other transactions contemplated hereby. ARTICLE 7. COVENANTS 7.1. Conduct of Business Pending Closing. Except for actions contemplated by subparagraphs below, the Company agrees that on and after the date hereof and prior to the Closing Date, except as otherwise consented to by Recap in writing (which consent shall not be unreasonably withheld, delayed or conditioned), as set forth in the Disclosure Schedule, or as otherwise contemplated by this Agreement (including specifically Section 7.19 hereof): 7.1.1. The Company shall conduct its business in the ordinary course and consistent with past practice in all material respects; 7.1.2. The Company shall use reasonable best efforts to preserve the business organization of the Company intact, to preserve the goodwill of suppliers, customers, employees and others with whom business relationships exist and maintain all Permits and Approvals; 7.1.3. Other than in connection with acquisitions in the ordinary course of business, not to exceed $10,000,000 individually or $17,500,000 in the aggregate in total consideration (including but not limited to cash paid, seller notes, Indebtedness assumed or other such consideration, including earn out obligations) (the "Permitted Acquisitions"), the Company shall not borrow any money, incur any Indebtedness or guarantee any Indebtedness or financial obligation of any Person other than Subsidiaries, other than to finance working capital requirements in the ordinary course of business and consistent with past practice; 7.1.4. Other than in connection with Permitted Acquisitions, the Company shall not issue, sell or dispose of any capital stock or other equity interest in the Company or options, warrants or other rights to purchase any such capital stock or equity interest or any securities convertible into or exchangeable for such capital stock or equity interests or otherwise make or effect any change in the issued and outstanding capitalization of the Company other than pursuant to agreements existing as of the date hereof; 7.1.5. The Company shall not cause or permit any amendment, alteration or modification in the terms of any currently outstanding options, warrants or other rights to purchase any capital stock or equity interest in the Company or any securities convertible into or exchangeable for such capital stock or equity interest, including without limitation any reduction in the exercise or conversion price of any such rights or securities, any change to the vesting or acceleration terms of any such rights or securities, or any change to terms relating to the grant of any such rights or securities other than pursuant to agreements existing as of the date hereof; A-21 7.1.6. The Company shall not declare or pay any dividend or make any other distribution, or transfer any assets, to any stockholders of the Company with respect to the Common Stock, or redeem, repurchase or otherwise reacquire any of its capital stock, except in the ordinary course of business; 7.1.7. Other than Permitted Acquisitions, capital expenditures permitted under this Agreement or agreements to manage practices pursuant to the management agreements and administrative services agreements of the Company with hospitals and professional corporations in accordance with past practice, the Company shall not enter into any contracts or agreements (written or oral) that provide for minimum mandatory payments in the aggregate by any party in excess of $2,000,000 per contract per annum, and to the extent the Company is a party to any such contract or agreement as of the date hereof, the Company shall not amend or waive any material rights under any such contract; 7.1.8. Subject to the provisions of Section 7.5 hereof, other than Permitted Acquisitions, the Company shall not purchase all or any substantial part of the properties or assets of, or otherwise acquire, merge or consolidate with, any Person (or division thereof); 7.1.9. The Company shall not sell, lease, transfer, assign or otherwise dispose of any material portion of its properties or assets, except for sales in connection with any transaction to which the Company is contractually obligated prior to the date hereof or as consistent with past business practice, or as would not reasonably be expected to have a Material Adverse Effect on the Company; 7.1.10. Except pursuant to any agreement in existence on the date hereof, the Company shall not sell, lease, transfer, assign or otherwise dispose of any material Owned Real Estate or Leased Real Estate, and the Company shall not permit any lease or sublease of Leased Real Estate to terminate or expire (except in accordance with its terms), in each case except as otherwise provided in this Agreement or as consistent with past business practices or would not reasonably be expected to have a Material Adverse Effect on the Company; 7.1.11. Except as may be required by law or under any existing agreements heretofore disclosed to Recap, the Company shall not increase the compensation or fringe benefits payable or to become payable by the Company to any of the Executive Officers of the Company, other than routine or customary increases made in the ordinary course of business and consistent with past practice; 7.1.12. Except as set forth in the Disclosure Schedule, the Company shall not make any material change in the character of its business or operations that would, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company; 7.1.13. The Company shall not change its significant accounting principles, methods or practices, other than in the ordinary course of business and/or would have a detrimental impact on the financial condition of the Company, except as required by law or by GAAP; 7.1.14. The Company shall (i) use reasonable best efforts to maintain its existing Permits and Approvals, and (ii) carry on its business in compliance with applicable Law, except for failures to comply that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company; 7.1.15. The Company shall not enter into any agreement or take or commit to take any action with the intent that would, if taken on or before the Closing, result in a breach of any of the foregoing covenants contained in this Section 7.1 or of any representation or warranty of the Company contained in this Agreement; 7.1.16. Subject to the provisions of Section 7.5 hereof, the Company shall not take any action, enter into any agreement, alter any policy or commit to any of the foregoing if such action, agreement or policy would restrict the ability of the Company to consummate the Recapitalization or the Merger, and the transactions contemplated herein; A-22 7.1.17. The Company shall not settle or resolve any litigation, arbitration or other adjudication matter not covered by insurance, if such settlement or resolution would result in a payment in excess of $2,500,000 in the aggregate; and 7.1.18. The Company may not make any aggregate cash payment for or incur any new obligations for capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $15,000,000. 7.2. Access. The Company shall permit Recap and its Representatives to have reasonable access during normal business hours, upon reasonable notice and in such manner as will not unreasonably interfere with the conduct of the Company's business, to all of the directors, officers, employees, agents and Representatives of the Company and all properties, books, records, operating instructions, procedures and Tax Returns of the Company and all other information with respect to the Company, its business and operations and its assets and properties as Recap or its Representatives may from time to time reasonably request, and to make copies of such books, records and other documents. 7.3. Permits and Approvals. The Company and Recap shall use reasonable best efforts to obtain all Permits and Approvals reasonably necessary for the consummation of the transactions contemplated hereby and to permit the Company, following the Closing, to continue to conduct its business in substantially the manner it is being conducted as of the date hereof, except as would not otherwise, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company. The Company shall use reasonable best efforts to obtain all authorizations from any Person as may be required for it to consummate the transactions contemplated hereby in accordance with the terms of this Agreement, and if the Company, despite such efforts, is unable to obtain any such authorizations, the Company shall take, or cause to be taken, all other reasonable actions necessary, proper or advisable in order for it to fulfill its obligations hereunder and to carry out the intentions of the parties expressed herein. 7.4. Litigation. Until the Closing, each of the Company and Recap shall promptly notify the other of any Action which is threatened or commenced that materially relates to or materially affects the Company, its business, its properties or assets, this Agreement or the transactions contemplated hereby. 7.5. Acquisition Proposals. 7.5.1. The Company agrees that neither it nor any of its officers and directors shall, and the Company shall direct and use its reasonable best efforts to cause its Representatives (including, without limitation, any investment bankers, attorneys or accountants) not to, directly or indirectly, initiate, solicit, encourage, enter into or conduct discussions or negotiations with or provide any non-public information to any Person or group (other than Recap and its designees) concerning any Acquisition Proposal; provided, however, that (a) nothing herein shall prevent the Company Board from taking and disclosing to the Company's stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender offer and otherwise complying with such rules, provided that the Company Board shall not recommend that the stockholders of the Company tender their Shares in connection with any such tender offer unless the Company Board, acting upon a recommendation of the Special Committee, and after consultation with legal counsel, determines that there is a substantial likelihood that it is required to do so in order to comply with its fiduciary duties; and (b) if the Company Board, acting upon a recommendation of the Special Committee, and after consultation with legal counsel, determines that there is a substantial likelihood that it is required to do so in order to comply with its fiduciary duties, the Company Board may, and may authorize or permit any of its officers, directors, employees, Representatives or agents to, respond to inquiries from, discuss with, negotiate with, and provide non-public information to, any other Person concerning an Acquisition Proposal. The Company will notify Recap immediately if any such inquiries or proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with the Company, including setting forth the material terms of the proposal and the identity of the party making such proposal, and Company shall promptly notify Recap of the status and any material developments concerning the same, including furnishing copies of any such A-23 written inquiries or proposals. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing and shall make all reasonable efforts to enforce any confidentiality agreements to which it is a party; provided, that the Company may waive the enforcement of any such confidentiality agreement if the Company Board, acting upon recommendations of the Special Committee, and after consultation with legal counsel, determines that there is a substantial likelihood that it is required to do so in order to comply with its fiduciary duties. The Company will take the necessary steps to inform the appropriate individuals or entities referred to in the prior sentence of the obligations undertaken in this Section 7.5. 7.5.2. Except as set forth in this Section 7.5.2, the Company Board shall not withdraw its recommendation of the transactions contemplated hereby or approve or recommend, or cause the Company to enter into any agreement with respect to, any Acquisition Proposal. Notwithstanding the foregoing, if the Company Board, acting upon a recommendation of the Special Committee, and after consultation with legal counsel, determines that there is a substantial likelihood that it is required to do so in order to comply with its fiduciary duties, the Company Board may withdraw its recommendation of the transactions contemplated hereby or approve or recommend a Superior Proposal; provided, however, that the Company shall not be entitled to enter into any agreement with respect to a Superior Proposal unless and until the Company Board provides written notice to Recap (a "Notice of Superior Proposal") advising Recap that the Company Board has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the Person making such Superior Proposal; provided, further, however, that the Company shall not be entitled to enter into any agreement with respect to a Superior Proposal unless and until this Agreement is terminated by its terms pursuant to Section 9.1.3 and the Company has paid all amounts due to Recap pursuant to Section 9.3. For the purposes of this Agreement, "Acquisition Proposal" means the following: (i) the acquisition of the Company by merger or otherwise by any Person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Recap or any Affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than 20% of the total assets of the Company; (iii) the acquisition by a Third Party of more than 20% or more of the outstanding shares of Common Stock (either directly from the Company or from stockholders of the Company); (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; (v) the repurchase by the Company of more than 20% of the outstanding shares of Common Stock; or (vi) the acquisition by the Company by merger, purchase of stock or assets, joint venture or otherwise of a direct or indirect ownership interest or investment in any business the annual revenues, net income or assets of which is equal or greater than 20% of the annual revenues, net income or assets of the Company. For purposes of this Agreement a "Superior Proposal" means any bona fide Acquisition Proposal with terms which the Company Board, acting upon a recommendation of the Special Committee, after taking into consideration advice of a financial adviser of nationally recognized reputation, determines to be more favorable to the Company's stockholders (other than the Rollover Holders) than the Merger. 7.6. HSR Notification. 7.6.1. Filings. As soon as reasonably practicable after the execution of this Agreement, each of the Company and Recap shall file, or cause to be filed, with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the notification and documentary material required in connection with the transactions contemplated hereby. 7.6.2. Cooperation. Recap and the Company shall promptly file any additional information requested as soon as reasonably practicable after receipt of a request for additional information. Recap and the Company shall use their reasonable best efforts to obtain early termination of the applicable waiting period under the HSR Act. The parties hereto will coordinate and cooperate with one another in exchanging such information and providing such reasonable assistance as may be requested in connection with such filings. A-24 7.6.3. Other Actions. The Company agrees that, in order to comply with the HSR Act in connection with the transactions contemplated hereby, Recap shall be entitled, in its sole discretion, to acquiesce to any divestitures, operating restrictions or other constraints imposed or required by any Governmental Entity; provided that such divestitures, operating restrictions or other constraints shall not have any material effect on the terms of the Merger; and provided, further, that such divestitures, operating restrictions or other constraints shall only be consummated or take effect (as the case may be) concurrently with or following the consummation of the Merger. 7.7. Financial Statement Deliveries. As soon as is reasonably practicable and in no event later than thirty-five (35) days from the last day of each fiscal month between the date of this Agreement and the Closing Date, the Company shall prepare and provide to Recap the monthly financial reports routinely prepared for management of the Company, including the profit and loss column reports, same store revenue reports, detail hospital profit and loss and regional consolidated reports, comparative profit and loss reports by region and any other financial reports prepared for management (the "Updated Financial Statements"), utilizing the same format and methodology used in preparing such reports as are provided internally to management. As soon as reasonably practicable between the date of this Agreement and the Closing Date, the Company shall deliver drafts of any Form 10-Q or Form 10-K, including any revisions or amendments thereto, prepared or filed by the Company. 7.8. Covenant to Satisfy Conditions. Each of the Company and Recap will use reasonable best efforts to ensure, and to cause their respective Affiliates to ensure, that the conditions set forth in Article 8 hereof are satisfied, insofar as such matters are within the control of such party. Each such party shall promptly consult with the other with respect to, and provide to the other any legally permitted information and copies of all filings made by such party with any Governmental Entity or any other information supplied by such party to a Governmental Entity (other than confidential personnel information) in connection with this Agreement and the transactions contemplated hereby. Recap and the Company further covenant and agree, with respect to any pending or threatened Action, preliminary or permanent injunction or other Order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of the parties hereto to consummate the transactions contemplated hereby, to use reasonable best efforts to prevent or lift the entry, enactment or promulgation thereof, as the case may be. Upon the request of Recap, the Company agrees that it shall use reasonable best efforts to secure waivers and/or consents from such third parties as may be necessary or desirable in Recap's reasonable judgment in order to consummate the transactions contemplated hereby. 7.9. Proxy Statement. As soon as reasonably practicable after the date hereof, the Company shall prepare and file the draft proxy statement relating to the Special Meeting and such other reports, schedules or other information (including Schedule 13E-3 under the Exchange Act) as may be required with the SEC, respond to comments of the staff of the SEC, if any, file the definitive proxy statement (the "Company Proxy Statement") as soon as practicable, and promptly thereafter mail such Company Proxy Statement to all holders of record (as of the applicable record date) of Existing Shares. The Company and Recap shall cooperate reasonably with each other in the preparation of the proxy statement and such other materials. Recap shall provide, and shall cause its Affiliates to provide, the Company and any of its Affiliates with any information for inclusion in the Company Proxy Statement or any other filings required to be made by the Company or any of its Affiliates with any Governmental Entity in connection with the transactions contemplated by this Agreement which may be required under applicable law and which is reasonably requested by the Company or any of its Affiliates. The Company agrees that Recap shall be given reasonable opportunity to review and comment on the draft proxy statement relating to the Special Meeting and such other materials and to approve such draft proxy statement and such other materials prior to their filing (which approval will not be unreasonably withheld) and thereafter to participate in discussions concerning the comments of the SEC staff and to approve all responses thereto (which approval will not be unreasonably withheld, delayed or conditioned). The Company shall promptly notify Recap of the receipt of the comments of the SEC and of any request from the SEC for amendments or supplements to the Company Proxy Statement or for additional information, and will promptly supply Recap with copies of all correspondence between the Company or its Representatives, on the one hand, and the SEC or members of its staff, on the other hand, with respect to the Company Proxy Statement, the Asset Drop Down, or the Merger. If A-25 at any time prior to the Special Meeting any event should occur which is required by applicable law to be set forth in an amendment of, or a supplement to, the Company Proxy Statement, the Company will promptly inform Recap. In such case, the Company, with the cooperation of Recap, will, upon learning of such event, promptly prepare and mail such amendment or supplement; provided, that prior to such mailing, the Company shall consult with Recap with respect to such amendment or supplement and shall afford Recap reasonable opportunity to comment thereon. The Company will notify Recap at least 24 hours prior to the mailing of the Company Proxy Statement, or any amendment or supplement thereto, to the stockholders of the Company. 7.10. Stockholders' Meeting. The Company shall take all action necessary, in accordance with applicable law and its certificate of incorporation and bylaws, to convene a Special Meeting of the holders of the Existing Shares (the "Special Meeting") as promptly as practicable for the purpose of approving the Asset Drop Down and the Merger. The Company shall through the Company Board recommend at such Special Meeting that the Asset Drop Down and the Merger be approved by its stockholders; provided, however, that the Company Board may withdraw its recommendation in accordance with the provisions of Section 7.5 hereof. 7.11. Financing. Recap agrees to use its reasonable best efforts to obtain, on terms reasonably satisfactory to Recap, all of the financing necessary in connection with the consummation of the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, the Company acknowledges receipt of the "Financing Letters" referred to in Section 6.6 hereof and undertakes to use its reasonable best efforts to fulfill, or cause to be fulfilled, its obligations thereunder and to cooperate in the obtaining of the Financing. 7.12. Disclosure Prior To Closing. In the event that, at any time prior to the Closing, the Company or Recap becomes aware of any matter that, if existing or known as of the date of this Agreement, would have been required to be set forth or described in the Schedules hereto or would otherwise have rendered any representation or warranty false, such party shall promptly provide written notice of such matters to the other party. However, no such notice provided under this Section 7.12 shall be deemed to cure any breach of any representation or warranty made in this Agreement whether for purposes of determining whether or not the conditions set forth in Article 8 hereof have been satisfied or otherwise. In addition, the Company shall promptly provide written notice of any events occurring after the date hereof and prior to the Closing that individually or in the aggregate have had or are reasonably expected to have a Material Adverse Effect on the Company. 7.13. Directors' and Officers' Insurance and Indemnification. The Surviving Corporation will indemnify each person who is now, or has been at any time prior to the date hereof, a director, officer, employee or agent of the Company (including its Subsidiaries) or their successors and assigns (individually an "Indemnified Party" and collectively the "Indemnified Parties"), to the fullest extent permitted (i) by applicable law, (ii) under the certificate of incorporation or bylaws of the Company, or (iii) under any agreement with the Company as in effect immediately prior to the execution of this Agreement, with respect to any claim, Liability, loss, damage, judgment, fine, penalty, amount paid in settlement or compromise, cost or expense, including reasonable fees and expenses of legal counsel (whenever asserted or claimed), based in whole or in part on, or arising in whole or in part out of, any matter, state of affairs or occurrence existing or occurring at or prior to the Effective Time whether commenced, asserted or claimed before or after the Effective Time, including, Liability arising under the Securities Act, the Exchange Act, state law or liability based in whole or in part on or arising in whole or in part out of or pertaining to the Agreement or the transactions contemplated hereby. The Surviving Corporation shall faithfully assume and honor in all respects the obligations of the Company pursuant to the Company's certificate of incorporation, bylaws and any indemnification agreements between the Company and any of the Persons mentioned in the first sentence of this Section 7.13 existing and in force as of the date of this Agreement to the extent permitted under applicable law. The Surviving Corporation will also maintain in effect for not less than six years after the Effective Time the current policies of directors' and officers' liability insurance maintained by the Company on the date hereof (provided that the Surviving Corporation may substitute therefor policies having at least the same coverage, with a comparably rated insurer and containing terms and conditions which are no less advantageous to the persons currently covered by such policies) with respect to matters existing or occurring at or prior to the Effective Time; provided, however, that if the aggregate annual premiums for such A-26 insurance during such period exceed 200% of the per annum rate of the aggregate premium currently paid by the Company for such insurance on the date of this Agreement, then the Surviving Corporation will provide the maximum coverage that will then be available at an annual premium equal to 200% of such rate. The rights under this Section 7.13 are in addition to rights that an Indemnified Party may have under the certificate of incorporation, bylaws or other similar organizational documents of the Company or any Subsidiary or under the DGCL. The rights under this Section 7.13 are contingent upon the occurrence of, and will survive consummation of, the Merger and are expressly intended to benefit each Indemnified Party. Notwithstanding the provisions of the preceding sentence, in the event of any claim (whether arising before or after the Effective Time) that may be subject to indemnification hereunder, upon receipt from the Indemnified Party to whom expenses are advanced of an undertaking to repay such advances to the extent required by law, the Company shall advance expenses to each such Indemnified Party, including the payment of the fees and expenses of counsel selected by such Indemnified Party, which counsel shall be reasonably satisfactory to the Company, promptly after statements therefore are received. Each Indemnified Party (and their respective heirs and estates) is intended to be a third party beneficiary of this Section 7.13 and may specifically enforce its terms. 7.14. Options and Convertible Debentures. The Company shall use its reasonable best efforts to obtain the rollover, the exercise or the cancellation of the Options and Rollover Options as set forth in Section 2.5. The Surviving Corporation shall assume the Rollover Options pursuant to Section 2.2 and in accordance with the respective Stock Option Plan, and the exercise price and number of shares underlying each such option shall be adjusted equitably to reflect the effect of the Merger. The Company shall use its reasonable best efforts to obtain the receipt of any approvals or consents from the holders of the Convertible Debentures, if any, to this Agreement and the transactions contemplated hereby; provided, however, that Recap acknowledges that the consummation of the transactions contemplated hereby will constitute a change of control under the terms of in the Convertible Debentures. 7.15. Antitakeover Statutes. If any Takeover Statute (as defined below) is or may become applicable to the transactions contemplated hereby, the Company Board will grant such approvals and take such actions as are necessary so that the transactions contemplated hereby and thereby may be consummated as promptly as practicable on the terms contemplated hereby and thereby and otherwise act to eliminate the effects of any Takeover Statute on any of the transactions contemplated hereby or thereby. For purposes of this Agreement, a "Takeover Statute" means a "fair price", "moratorium", "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States, including Section 203 of the DGCL. 7.16. Regulatory Applications. 7.16.1. Each of the Company and Recap and their respective Subsidiaries shall cooperate and use their respective reasonable best efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary to consummate the transactions contemplated by this Agreement. Each of the Company and Recap shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable laws relating to the exchange of information, with respect to all material written information submitted to any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party hereto agrees that it will consult with the other parties hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other parties appraised of the status of material matters relating to completion of the transactions contemplated hereby. 7.16.2. Each party agrees, upon request, to furnish the other parties with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably A-27 necessary or advisable in connection with any filing, notice or application made by or on behalf of such other parties or any of their respective Subsidiaries to any third party or Governmental Entity. 7.17. Notices of Certain Events. Each of the parties hereto shall promptly notify the other parties of: 7.17.1. the receipt by such party of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; 7.17.2. the receipt by such party of any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and 7.17.3. any Actions commenced or, to the best of such party's Knowledge, threatened against, or affecting, such party which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to this Agreement or which relate to the consummation of the transactions contemplated by this Agreement. 7.18. Delivery of Opinion of Financial Advisor. The Company agrees to deliver to Recap a true and complete copy of the written opinions of Jefferies & Company, Inc. and Houlihan Lokey Howard & Zukin Capital, promptly following the execution and delivery of this Agreement. 7.19. Asset Drop Down. The Company and Operating Company shall use reasonable best efforts to effect and consummate the Asset Drop Down, necessary for the consummation of the Merger and the transactions contemplated hereby and to permit Recap, to participate in the timing and structuring of the Asset Drop Down. ARTICLE 8. CONDITIONS OF MERGER 8.1. General Conditions. The obligations of the parties to effect the Closing shall be subject to the following conditions unless waived in writing by Recap and the Company: 8.1.1. No Law or Orders. No Law or Order shall have been enacted, entered, issued or promulgated by any Governmental Entity (and be in effect) which prohibits the consummation of the Asset Drop Down, the Merger or the Recapitalization. 8.1.2. HSR. Any applicable waiting period under the HSR Act shall have expired or have been terminated with respect to the transactions contemplated hereby. 8.1.3. Legal Proceedings. No Governmental Entity shall have initiated proceedings to restrain or prohibit the Merger or the Recapitalization or force rescission, unless such Governmental Entity shall have withdrawn and abandoned any such proceedings prior to the time which otherwise would have been the Closing Date and there shall not have been any Law or Order which would require the divestiture by the Company or its Subsidiaries of a material portion of their respective businesses, assets or properties, taken as a whole, or impose any material limitation on the ability of the Company and its Subsidiaries, taken as a whole, to conduct their respective businesses and own their assets and properties, taken as a whole, following the Closing. 8.1.4. Stockholder Approval. The Asset Drop Down and the Merger shall have been approved by the requisite vote of the holders of the outstanding capital stock of the Company entitled to vote thereon at the Special Meeting. 8.1.5. Regulatory Approval. All regulatory approvals or waivers required to consummate the Asset Drop Down, the Merger or the Recapitalization shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired, other than those the failure of A-28 which to be obtained or maintained would not have or reasonably be expected to have a Material Adverse Effect on the Company or Recap, and no such approvals or waivers shall contain any conditions, restrictions or requirements which would (i) following the Effective Time, have a Material Adverse Effect on the Surviving Corporation and its Subsidiaries, taken as a whole or (ii) reduce the benefits of the transactions contemplated hereby to such a degree that Recap would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof. 8.1.6. Third Party Consents. The Company shall have received all requisite consents from third parties (other than Governmental Entities) required by any contract between the Company or any of its Subsidiaries to be obtained prior to the consummation of the Asset Drop Down, the Merger or the Recapitalization, which if not obtained, individually or in the aggregate, would have a Material Adverse Effect. 8.1.7. Permits and Approvals. The Company shall have made or obtained all Permits and Approvals which are legally required to be obtained by the Company or any Subsidiary from any Governmental Entity prior to consummation of the Merger or the Recapitalization, which if not obtained, individually or in the aggregate, would have a Material Adverse Effect. 8.2. Conditions Precedent to the Obligations of the Company. The obligations of the Company to close the transactions contemplated by this Agreement shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions precedent, any of which may be waived by the Company: 8.2.1. Accuracy of Recap's Representations and Performance of Obligations. (a) All representations and warranties made by Recap in this Agreement, any Schedule or any agreement, certificate or instrument to be executed by Recap pursuant hereto shall be true and correct in all material respects on the date when made and on and as of the Closing Date (unless the representations and warranties address matters as of a particular date, in which case they shall remain true and correct in all respects as of such date) with the same effect as if made on and as of the Closing Date (without regard to any amendment or supplement of any such Schedule, agreement or instrument after the date hereof), except where such failures, in each case or in the aggregate, have not had and are not reasonably expected to have a Material Adverse Effect on Recap. (b) Recap shall have performed or complied in all material respects with all covenants contained in this Agreement, or any agreement, certificate or instrument to be executed by Recap pursuant hereto required to be performed or complied with by Recap either at or prior to the Closing. 8.2.2. Recap Deliveries. Recap shall have delivered, or shall have caused to be delivered, to the Company at or prior to the Closing the following: (a) a certified copy of the resolutions duly adopted by the board of directors of Recap authorizing this Agreement and the transactions contemplated hereby and thereby; (b) such other documents, instruments or certificates as shall be reasonably requested by the Company or its counsel; and (c) a certificate of the president or any vice president and secretary or any assistant secretary of Recap certifying to the matters set forth in Sections 8.2.1(a) and (b) above. 8.2.3. Financing. Recap shall have made or obtained all financing necessary in connection with the consummation of the transactions contemplated by this Agreement and the "Financing Letters" referred to in Section 6.6. 8.2.4. Recapitalization. All parties (other than the Company, Operating Company and their respective Affiliates) to the Recapitalization have entered into and delivered to the other parties thereto the agreements contemplated by, and performed all actions required by them, to consummate the Recapitalization. A-29 8.3. Conditions Precedent to Obligations of Recap. The obligations of Recap to close the transactions contemplated by this Agreement shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions precedent, any of which may be waived by Recap: 8.3.1. Accuracy of the Company's Representations and Performance of Obligations. (a) All representations and warranties made by the Company in this Agreement, any Schedule or any agreement, certificate or instrument to be executed by the Company pursuant hereto shall be true and correct in all material respects on the date when made and on and as of the Closing Date (unless the representations and warranties address matters as of a particular date, in which case they shall remain true and correct in all respects as of such date) with the same effect as if made on and as of the Closing Date (without regard to any amendment or supplement of any such Schedule, agreement or instrument after the date hereof), except where such failures, in each case or in the aggregate, have not had and are not reasonably expected to have a Material Adverse Effect on the Company. (b) The Company shall have performed or complied with all covenants contained in this Agreement, or any agreement, certificate or instrument to be executed by the Company pursuant hereto required to be performed or complied with by the Company either at or prior to the Closing, except where such failure to perform or comply with, individually or in the aggregate, has not had, and are not reasonably expected to have a Material Adverse Effect on the Company. 8.3.2. Company Adverse Changes. There shall not have occurred after the date hereof any events which individually or in the aggregate have had or are reasonably expected to have a Material Adverse Effect on the Company. 8.3.3. Deliveries. The Company shall have delivered, or shall have caused to be delivered, to Recap at or prior to the Closing the following: (a) certified copies of the resolutions duly adopted by the Company Board and by the holders of the Existing Shares, authorizing this Agreement and the transactions contemplated hereby; and (b) a certificate of the chief executive officer, president or any vice president and secretary or any assistant secretary of the Company certifying to the matters set forth in Section 8.3.1(a) and (b) above. 8.3.4. Financing. Recap shall have obtained all financing set forth in the "Financing Letters" referred to in Section 6.6, it being acknowledged that if the parties to the Financing Letters or New Financing Letters (other than Parent and Leonard Green & Partners, L.P.) are prepared to perform thereon (or would have been prepared to perform had Parent and Leonard Green & Partners, L.P. performed as contemplated thereby), this condition contained in this Section 8.3.4 shall be deemed to have been satisfied. 8.3.5. Recapitalization. All parties (other than Recap and its Affiliates) to the Recapitalization have entered into and delivered to the other parties thereto the agreements contemplated by, and performed all actions required by them to consummate the Recapitalization. 8.3.6. Accounting Principles. Except as set forth on the Disclosure Schedule, from the fiscal year ended December 31, 1999 and prior to the Effective Time, the Company shall not have altered, modified or amended, or be required in the future to make any alteration, modification or amendment of, any of its material accounting principles, methods or practices, other than (a) such alterations, modifications or amendments that are applicable generally and are not directed specifically to the Company, and (b) such alterations, modifications or amendments that do not, individually or in the aggregate, have a Material Adverse Effect on the Company. 8.3.7. Push-Down Accounting. There shall not have occurred any material change in accounting rules (including but not limited to GAAP), or in the applicable federal and state securities Laws, or any action by the Company or its Subsidiaries, which results in or triggers push-down accounting treatment for the Merger. A-30 8.3.8. Dissenting Shares. The aggregate number of Dissenting Shares shall not equal 15% or more of the Existing Shares outstanding as of the record date for the Special Meeting. 8.3.9. Share Exchange and Subscription. Subject to the terms and conditions of the Exchange Agreement, Robert Antin or assigns shall have transferred and exchanged $2,000,000 worth of Common Stock (133,333 shares) held by him on the date hereof and certain members of management of the Company shall have transferred and exchanged up to a maximum of $2,000,000 worth of value of Common Stock or Rollover Options valued at the Per Share Amount held by them in the aggregate on the date hereof. 8.3.10. Management Services Agreement. The Company (and/or the Subsidiaries) shall have executed and delivered the management services agreement prior to the Closing. 8.3.11. Stockholders Agreement. Each of the respective parties to the Stockholders Agreement (other than Parent, Leonard Green & Partners, L.P., or any Affiliate) shall have executed and delivered such agreement prior to the Closing. 8.3.12. Employment Agreements. Each of Robert Antin and Arthur Antin shall have executed and delivered an employment agreement substantially in the forms attached hereto as EXHIBIT C and EXHIBIT D prior to the Closing. 8.3.13. Cancellation of Options. The Company shall have obtained the rollover, the exercise or the cancellation of the Options and Rollover Options as set forth in Section 2.5 and received any necessary agreements, approvals or consents from the holders thereof. 8.3.14. Resignation of Directors. All of the directors of the Company, other than those persons set forth on the Disclosure Schedule, shall have resigned from the Board of Directors effective as of the Closing Date. 8.4. Asset Drop Down. The Company and Operating Company shall have consummated the Asset Drop Down. ARTICLE 9. TERMINATION 9.1. Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Effective Time, whether before or after stockholder approval of the Merger: 9.1.1. Mutual Consent. By mutual written consent of the parties hereto; 9.1.2. By Recap. By Recap, if (i) any of the conditions set forth in Section 8.1 or 8.3 shall have become incapable of fulfillment (other than as a result of a breach of this Agreement by Recap); or (ii) the Company Board or any committee thereof fails to recommend or withdraws or modifies or resolves to withdraw or modify its recommendation of the Merger, whether or not in compliance with Section 7.5 hereof; 9.1.3. By The Company. By the Company, if (i) any of the conditions set forth in Section 8.1 or 8.2 shall have become incapable of fulfillment (other than as a result of a breach of this Agreement by the Company); (ii) the Company Board has approved a Superior Proposal in accordance with the terms of Section 7.5 or (iii) the Company Board withdraws it recommendation of the transactions contemplated hereby in accordance with the terms of Section 7.5; 9.1.4. Failure of Conditions. By Recap or the Company, if the transactions contemplated hereby are not consummated on or before September 30, 2000, but only if the failure to consummate such transactions on or before such date did not result from the breach of any representation, warranty or agreement herein of the party seeking such termination; A-31 9.1.5. Breach of Covenant. By Recap or the Company, if the other party shall be in material breach of any of its covenants contained in this Agreement and such breach either is incapable of cure or is not cured within 20 Business Days after notice from the party wishing to terminate; provided that the party seeking such termination shall not also then be in material breach of this Agreement; provided, further, that any material breach of the provisions of Section 7.5 hereof shall entitle Recap to an immediate right to termination without any notice or cure requirement; 9.1.6. Breach of Representations and Warranties. By Recap or the Company, if the other party shall be in breach of any of its representations or warranties contained in this Agreement, which breach, individually or together with all other breaches, is reasonably expected to have a Material Adverse Effect on the Company or Recap, as applicable, and such breach either is incapable of cure or is not cured within 20 Business Days after notice from the party wishing to terminate; provided, that the party seeking such termination shall not also then be in material breach of this Agreement; or 9.1.7. By the Company or Recap: By either Recap or the Company, if a Governmental Entity shall have issued a non-appealable final order, decree or ruling or taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger or the Recapitalization (provided that (i) if the party seeking to terminate this Agreement pursuant to Section is subject to such order, decree or ruling, it shall have used all reasonable efforts to have such order, decree or ruling removed and (ii) the right to terminate this Agreement under this Section shall not be available to any party who has not complied with its obligations under Sections 7.8 and 7.16 and such noncompliance materially contributed to the issuance of any such order, decree or ruling or the taking of such action). 9.2. Manner and Effect of Termination. Termination shall be effected by the giving of written notice to that effect by the party seeking termination. If this Agreement is validly terminated and the transactions contemplated hereby are not consummated, this Agreement shall become null and void and of no further force and effect and no party shall be obligated to the others hereunder; provided, however, that termination shall not affect (i) the rights and remedies available to a party as a result of the breach by the other party or parties hereunder (provided that, the provisions of Section 9.3 shall constitute the exclusive legal remedy of Recap with respect to a breach by the Company described therein, and the payment by the Company of the Termination Fee and any expenses shall constitute the exclusive legal remedy of Recap for breaches of this Agreement in the event of the Company's acceptance of a Superior Proposal or the withdrawal by the Company Board of its recommendation of the transactions contemplated hereby, each as contemplated by Section 7.5), (ii) the provisions of Sections 5.11, 6.5, 10.1, 10.2, 10.4 and 10.9 hereof, or (iii) the obligations of the Company pursuant to Section 9.3 below. 9.3. Certain Payments Upon Termination. 9.3.1. In the event that: (A) the Company terminates this Agreement under Section 9.1.3(ii) or Section 9.1.3(iii), or (B) Recap terminates this Agreement under Section 9.1.2(ii), the Company shall pay to Recap a termination fee in the amount of $10,000,000 (the "Termination Fee"). 9.3.2. In the event that (A) a Termination Fee is not otherwise payable to Recap pursuant to Section 9.3.1 and (B) (i) Recap terminates this Agreement under Section 9.1.5 or 9.1.6, or (ii) this Agreement is terminated due to a failure of the condition set forth in Section 8.1.4, the Company shall pay to Recap all fees and expenses (including those of counsel, accountants and other advisors and in connection with the Financings) incurred by any of Recap and its Affiliates in connection with the transactions contemplated by this Agreement ("Expenses"); provided, however, such Expenses shall not exceed $1,000,000. All payments required to be made hereunder shall be made by wire transfer of immediately available funds within two (2) Business Days of the event giving rise to the payment of such Expenses. The Company acknowledges that the agreements contained in this Section 9.3 are an integral part of the transactions contemplated by this Agreement and that, without said agreements, Recap would not enter into this Agreement; accordingly, if the Company fails promptly to pay the Termination Fee and Expenses due pursuant to this Section 9.3, and, in order to obtain such payment, Recap commences a suit which results in A-32 a judgment against the Company for the fees and expenses set forth herein, the Company will pay to Recap, its reasonable expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amounts due hereunder at the legal rate determined by the court rendering such judgment. ARTICLE 10. MISCELLANEOUS 10.1. Confidentiality. The Company agrees that from the date hereof until the Closing Date or earlier termination of this Agreement it will not, and will use reasonable best efforts to ensure that none of its directors, officers, Representatives, agents or employees will, without the prior written consent of Recap, submit or disclose to or file with any other Person, or use, any confidential or non-public information relating to the Company or Recap, except for such disclosure as may be required by Law, applicable accounting regulations and as permitted pursuant to the provisions of Section 7.5 hereof. Recap agrees that from the date hereof until the Closing Date or earlier termination of this Agreement it will not, and will use reasonable best efforts to ensure that none of its directors, officers, Representatives, agents or employees will, without the prior written consent of the Company, submit or disclose to or file with any other Person, or use, any confidential or non-public information relating to the Company, except for such disclosure as may be required by Law or applicable accounting regulations. Without limiting the generality of the foregoing, Recap and the Company agree and acknowledge that they will continue to be bound by the Confidentiality Agreement dated November 15, 1999 between the Company and Leonard Green & Partners, L.P. 10.2. Expenses. Except as otherwise specifically provided for herein (including without limitation under Article 9 hereof), each of the Company, on the one hand, and Recap, on the other, shall pay all of its costs and expenses (including attorneys', accountants' and investment bankers' fees) incurred in connection with this Agreement and the transactions contemplated hereby. 10.3. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if delivered personally or sent by facsimile transmission (receipt of which is confirmed) or by courier service promising overnight delivery (with delivery confirmed the next day) or three (3) Business Days after sent by registered or certified mail (postage prepaid, return receipt requested). Notices shall be addressed as follows: To The Company: Veterinary Centers of America, Inc. 12401 West Olympic Boulevard Los Angeles, California 90064 Attention: Chief Executive Officer Facsimile: (310) 584-6701 With a copy to: Troop Steuber Pasich Reddick & Tobey, LLP 2029 Century Park East, Twenty-Fourth Floor Los Angeles, California 90067 Attention: C.N. Franklin Reddick III, Esq. Facsimile: (310) 728-2304 A-33 To Recap: Vicar Recap, Inc. 11111 Santa Monica Blvd. Los Angeles, California 90025 Attention: John Baumer Facsimile: 310-954-0404 With a copy to: Irell & Manella LLP 333 S. Hope Street, Suite 3300 Los Angeles, California 90071 Attention: Ed Kaufman Facsimile: 213-229-0515 To the Special Committee: c/o Veterinary Centers of America, Inc. 12401 West Olympic Boulevard Los Angeles, California 90064 Attention: John Chickering Facsimile: (310) 584-6701 With a copy to: Latham & Watkins LLP 633 West Fifth Street, Suite 4000 Los Angeles, California 90071 Attention: Paul Tosetti, Esq. Facsimile: 213-891-8763 Either party may from time to time change its address for the purpose of notices by a similar notice specifying the new address but no such change shall be effective as against any Person until such Person shall have actually received it. 10.4. Entire Agreement. This Agreement contains the final and entire agreement between the parties with respect to the transactions contemplated hereby and supersedes all written or verbal representations, warranties, commitments and other understandings prior to the date hereof, other than the Confidentiality Agreement, dated November 15, 1999. No reference shall be made to any draft of this Agreement for purposes of interpretation or resolution of ambiguity or otherwise. All Schedules referred to herein, are hereby incorporated in and made a part of this Agreement as if set forth in full herein. 10.5. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 10.6. Severability. If any provision hereof shall be held to be unenforceable or invalid by any court of competent jurisdiction or as a result of future legislative action, such holding or action shall be strictly construed and shall not alter the enforceability, validity or effect of any other provision hereof. 10.7. Assignability. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any right or obligation hereunder may be assigned by either party without the prior written consent of the other to be given in the other party's sole discretion. A-34 10.8 Captions. The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 10.9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 10.10. Specific Performance. The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof (without requirement to post bond), in addition to any and all other remedies at law or in equity. 10.11. Amendment and Waiver. This Agreement may be amended, modified or supplemented at any time, whether before or after stockholder approval only by an instrument in writing signed by all parties hereto; provided, however, this Agreement may not be amended, modified or supplemented following approval of the Merger by the holders of the Company's outstanding capital stock entitled to vote thereon without the further approval of such stockholders if such amendment, modification or supplement would adversely affect such stockholders and the further approval of the Special Committee if such amendment, modification or supplement would adversely affect the Company. No waiver by any party of any of the provisions hereof shall be effective unless set forth in writing and executed by the party so waiving. Any waiver or failure to insist upon strict compliance with any obligation, covenant, agreement, provision, term or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure to comply. 10.12. Actions by the Company. Any action requiring the approval of the Company Board which is to be taken or which is made or required to be taken or made by or for the benefit of the Company pursuant to, in connection with, or in furtherance of this Agreement shall, prior to the Effective Time, be made or taken, as applicable, upon the recommendation of and with the approval of the Special Committee. 10.13. Further Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, whether under applicable laws and regulations or otherwise, to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement. 10.14. Publicity. Except as hereinafter provided, the Company and Recap shall not, and each of them shall use reasonable best efforts to cause their respective directors, officers, employees, Representatives and agents not to, discuss publicly or make any public statement with respect to this Agreement or the transactions contemplated hereby without the other party's approval. Before making any such public announcements, the parties hereto shall use good faith efforts to agree upon the text of a joint announcement to be made by the parties hereto or use good faith efforts to obtain the other party's approval of the text of any public announcement to be made solely on behalf of such party. If the parties hereto are unable to agree on or approve such a public statement or announcement and legal counsel for a party is of the opinion that such statement or announcement is required by law or the rules of any stock exchange on which the parties' securities are traded or the NASD, then such party may make or issue the legally required statement or announcement. 10.15. Force Majeure. Anything to the contrary in this Agreement notwithstanding, no party hereto shall be liable to the other parties hereto for any loss, injury, delay, damages or other casualty suffered or incurred by such other party hereto due to strikes, riots, storms, fires, explosions, acts of God, war, governmental action, or any other cause similar thereto which is beyond the reasonable control of such parties, and any failure or delay by any party hereto in performance of any of its obligations under this Agreement due to one or more of the foregoing causes shall not be considered as a breach of this Agreement. In the event that performance of any of the material obligations under this Agreement shall be suspended due to one or more of the foregoing causes and such suspension shall have a material adverse impact on consummation of the transactions as contemplated A-35 in this Agreement or on the operations or financial conditions or prospects of the Company, then the aggrieved party which shall be materially and adversely affected thereby may terminate this Agreement. 10.16. Attorneys' Fees. In any suit or proceeding arising out of this Agreement or to interpret or enforce any provision of this Agreement, the prevailing party shall be entitled to all reasonable out-of-pocket expenses and reasonable attorneys' fees incurred by such party in connection with such suit or proceeding. 10.17. Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. VETERINARY CENTERS OF AMERICA, INC., a Delaware corporation By: /s/ Robert Antin -------------------------------- Name: Robert Antin Title: Chief Executive Officer VICAR RECAP, INC., a Delaware corporation By: /s/ John Danhakl -------------------------------- Name: John Danhakl Title: President VICAR OPERATING, INC., a Delaware corporation By: /s/ Robert Antin -------------------------------- Name: Robert Antin Title: Chief Executive Officer A-36 EX-7.2 3 0003.txt LETTER DATED MARCH 30, 2000 - GOLDMAN SACHS Exhibit 7.2 GOLDMAN SACHS CREDIT PARTNERS L.P. 85 BROAD STREET NEW YORK, NEW YORK 10004 PERSONAL AND CONFIDENTIAL - ------------------------- March 30, 2000 Green Equity Investors III, L.P. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Boulevard Suite 2000 Los Angeles, California 90025 Attention: Mr. John G. Danhakl Mr. John Baumer Re: Veterinary Centers of America, Inc. ----------------------------------- Ladies and Gentlemen: We are pleased to confirm the arrangements under which Goldman Sachs Credit Partners L.P. ("GSCP") is exclusively authorized by Green Equity Investors III, L.P. (the "Sponsor") to act as Sole Lead Arranger and Sole Syndication Agent in connection with, and commits to provide the financing for, certain loans described herein, in each case on the terms and subject to the conditions set forth in this letter, the attached Annex A and the attached Annex B (together, the "Commitment Letter"). You have advised us that the Sponsor intends to consummate a leveraged acquisition (the "Acquisition") of Veterinary Centers of America, Inc. (the "Company"). While the structure and certain terms of the Acquisition have yet to be finally determined, you have also advised us that you propose to finance the Acquisition (which includes the refinancing of the Company's and its subsidiaries existing indebtedness), including transaction costs, and provide financing for the Company's subsidiaries' working capital and general corporate needs after the consummation of the Acquisition with the proceeds of (i) up to $325.0 million of senior secured credit facilities (the "Facilities") to be made available to Vicar Operating, Inc. ("OpCo"), which will be a wholly owned subsidiary of the Company as the surviving corporation after the merger with Vicar Recap, Inc. ("HoldCo"), (ii) a private placement by OpCo of $50.0 million of subordinated unsecured debt securities (the "OpCo Subordinated Debt"), (iii) a private placement by HoldCo of $70.0 million of pay-in-kind (for the first five years) senior unsecured debt securities (the "HoldCo Debt") and (iv) common and pay-in-kind preferred cash equity contributions by Sponsor sad its affiliates of at least $152 million (the "Sponsor Equity") and "rollovers" by existing management of Company (the "Rollover Equity") of their equity interests or options valued at least $3.5 million; provided that, in no event will the -------- aggregate of the Sponsor Equity and the Rollover Equity be less than $156 million. Upon consummation of the Acquisition, Sponsor will own not less than 71.75% of the fully diluted common stock of HoldCo. Green Equity Investors III, L.P. March 30, 2000 Page 2 GSCP is pleased to confirm its commitment to act as Sole Lead Arranger to provide you and the Company with structuring advice in connection with the Facilities and as Sole Syndication Agent to provide you and the Company with syndication advice in connection with the Facilities and to provide the Company the full $325.0 million of the Facilities, in each case on the terms and subject to the conditions contained in this Commitment Letter. Our fees for such services are set forth in a separate fee letter (the "Fee Letter") entered into by the Sponsor and GSCP on the date hereof. GSCP's commitment is subject, in its reasonable discretion, to the following conditions: (i) there shall not have been, since December 31, 1999, any material adverse change in or affecting the business, financial condition, results of operations or prospects of the Company and its subsidiaries, taken as a whole, in each case other than pursuant to or disclosed in the Agreement and Plan of' Merger (the "Agreement and Plan of Merger") with respect to the Company dated as of even date herewith, (ii) there shall not have been any disruption or adverse change in the financial or capital markets generally, or in the market for loan syndications in particular, which in any such case under clause (i) or (ii) GSCP, in its reasonable judgment, deems material and (iii) the Facilities being assigned a credit rating by two nationally recognized rating agencies (which agencies must be acceptable to GSCP). GSCP's commitment is also subject, in its reasonable discretion, to the satisfactory negotiation, execution and delivery of appropriate loan documents relating to the Facilities, including, without limitation, a credit agreement, guaranties, security agreements, pledge agreements, real property security agreements, opinions of counsel and other related definitive documents (collectively, the "Loan Documents") to be based upon and substantially consistent with the terms set forth in this Commitment Letter. In addition, GSCP's commitment is subject, in its reasonable discretion, to its being satisfied with the results of its confirmatory due diligence with respect to the tax, accounting, legal and regulatory issues relevant to the Acquisition and the Company and its subsidiaries, which confirmatory due diligence shall be completed no later than five business days after the date of this letter. The terms of this Commitment Letter are intended as an outline of certain or the material terms of the Facilities, but do not include all of the terms, conditions, covenants, representations, warranties, default clauses and other provisions that will be contained in the Loan Documents. The Loan Documents shall include, in addition, provisions that are customary or typical for financings of this type and other provisions that GSCP may reasonably determine to be appropriate in the context of the proposed transactions. GSCP intends and reserves the right to syndicate the Facilities to the Lenders (as defined in the attached Annex B). In consultation with you, GSCP shall select the Lenders with your consent, not to be unreasonably withheld. GSCP and the Sponsor will identify a Lender reasonably acceptable to the Sponsor to act as collateral agent and administrative agent for the Lenders (the "Administrative Agent"). GSCP will lead the syndication, including determining the timing of all offers to potential Lenders, any title of agent or similar designations awarded to any Lender and the acceptance of commitments, the amounts offered and the compensation provided to each Lender from the amounts to be paid to GSCP pursuant to the terms of this Commitment Letter and the Fee Letter. GSCP will determine the final commitment allocations and will notify the Sponsor of such determinations. To ensure an orderly and effective syndication of the Facilities, you agree that, until the later of the termination of the syndication as determined by GSCP and 90 days following the 2 Green Equity Investors III, L.P. March 30, 2000 Page 3 date of initial funding under the Facilities, you will not, and will not permit any of your affiliates (including HoldCo, the Company and its subsidiaries) to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt security of HoldCo, the Company or any of its subsidiaries (other than the Facilities and other indebtedness contemplated hereby), including any renewals or refinancings of any existing debt facility or debt security, without the prior written consent of GSCP. You also agree that GSCP shall be entitled, but not obligated, after consultation with you, to change the terms, conditions, pricing and/or structure of the Facilities if GSCP determines in its reasonable discretion that such changes are advisable to insure the successful syndication of all of the Facilities; provided that (i) the total aggregate amount of the Term -------- Facilities as defined below) remains unchanged, (ii) the total amount of the Revolving Facility (as defined below) remains unchanged, (iii) the pricing with respect to loans made under the Facilities shall not be increased by more than 0.50% per annum in excess of the rates set forth in Annex B and (iv) the fee's set forth in the accompanying Fee Letter shall not change. You agree to cooperate and to cause the Company to cooperate with GSCP in connection with (i) the preparation of an information package regarding the business, operations and prospects of OpCo and HoldCo including, without limitation, the delivery of all information relating to the transactions contemplated hereunder prepared by or on behalf of the Sponsor, OpCo or HoldCo deemed reasonably necessary by GSCP to complete the syndication of the facilities and (ii) the presentation of such information package in bank meetings and other communications with prospective Lenders in connection with the syndication of the Facilities. The Company shall be solely responsible for the contents of any such information package and presentation and you acknowledge that GSCP will be using and relying upon the information contained in such information package and presentation without independent verification thereof. In addition, you represent and covenant that all information about the Sponsor, HoldCo or OpCo provided by you to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading; and that to the best of your knowledge all information provided by or about the Company to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. We acknowledge that projections or other forward looking statements do not constitute "information" and that you represent and covenant that such projections and other forward looking statements will have been prepared in good faith based on assumptions believed by you to he reasonable. In connection with arrangements such as this, it is our firm policy to receive indemnification. You agree to the provisions with respect to our indemnity and other matters set forth in Annex A which is incorporated by reference into this Commitment Letter. GSCP agrees that your obligations and liabilities under this Commitment Letter, including Annex A hereto, and the Fee Letter shall terminate to the extent that both the Acquisition has been consummated and the Company has assumed such obligations and liabilities. 3 Green Equity Investors III, L.P. March 30, 2000 Page 4 Please note that this Commitment Letter, the Fee Letter and any written or oral advice provided by GSCP in connection with this arrangement is exclusively for your information and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent, except, after providing written notice to GSCP, pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial, administrative or legislative body or committee. In addition, we hereby consent to your disclosure of (i) such advice to your officers, directors, agents and advisors who are directly involved in the consideration of the Facilities to the extent such persons are obligated to hold such advice in confidence, and (ii) upon your acceptance of this Commitment Letter and the Fee Letter, this Commitment Letter (but not the Fee Letter) or the information contained herein (but not in the Fee Letter) to the Company and the Company's financial and legal advisors to the extent you notify such persons of their obligations to keep such material confidential. As you know, GSCP may from time to time effect transactions, for its own account or the account of customers, and hold positions in loans or options on loans of HoldCo., OpCo and other companies that may be the subject of this arrangement. In addition, Goldman, Sachs & Co. is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of HoldCo, OpCo and other companies that may be the subject of this arrangement. In addition, GSCP may employ the services of its affiliates in providing certain services hereunder and may exchange with such affiliates information concerning HoldCo and the Company and other companies that may be the subject of this arrangement, and such affiliates shall be entitled to the benefits afforded to GSCP hereunder. GSCP's commitment hereunder shall terminate on September 30, 2000 unless the closing of the Facilities, on the terms and subject to the conditions contained herein, shall have been consummated. [Remainder of page intentionally left blank] 4 Green Equity Investors III, L.P. March 30, 2000 Page 5 Please confirm that the foregoing is in accordance with your understanding by signing and returning to GSCP the enclosed copy of this Commitment Letter, together, if not previously executed and delivered, with the Fee Letter, on or before the close of business on the third business day following the date of this letter, whereupon this Commitment Letter and the Fee Letter shall become binding agreements between us. If not signed and returned as described in the preceding sentence by such date, this offer will terminate on such date. We look forward to working with you on this assignment. Very truly yours, GOLDMAN SACHS CREDIT PARTNERS L.P. By: ------------------------------- Authorized Signatory AGREED AND ACCEPTED: GREEN EQUITY INVESTORS III, L.P. By: GEI CAPITAL III, LLC, Its General Partner By: -------------------------------- Name: -------------------------- Title: -------------------------- 5 Annex A ------- In the event that GSCP becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders or other owners of the Sponsor, HoldCo or the Company, in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letter (together, the "Letters"), the Sponsor periodically will reimburse GSCP for its reasonable and documented legal and other expenses (including the reasonable and documented cost of any investigation and preparation) incurred in connection therewith. The Sponsor also will indemnify and hold GSCP harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of GSCP in performing the services that are the subject of the Letters; provided, however, that if it is found in any such action, proceeding or investigation that any loss, claim, damage or liability of GSCP has resulted from the gross negligence or bad faith of GSCP in performing the services which are the subject of this Letter, GSCP shall repay such portion of the reimbursed amounts that is attributable to expenses incurred in relation to the act or omission of GSCP which is the subject of such finding. If for any reason the foregoing indemnification is unavailable to GSCP or insufficient to hold it harmless, then the Sponsor shall contribute to the amount paid or payable by GSCP as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Sponsor and its stockholders or other owners on the one hand and GSCP on the other hand in the matters contemplated by the Letters as well as the relative fault of the Sponsor and GSCP with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Sponsor under this paragraph shall be in addition to any liability which the Sponsor may otherwise have, shall extend upon the same terms and conditions to any affiliate of GSCP and the partners, directors, agent, employees and controlling persons (if any), as the case may be, of GSCP and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Sponsor, HoldCo, Company, GSCP, any such affiliate and any such person. The Sponsor also agrees that neither GSCP nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Sponsor or any person asserting claims on behalf of or in right of the Sponsor or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Sponsor result from the gross negligence or bad faith of GSCP in performing the services that are the subject of the Letters; provided, however, that in no event shall such indemnified party or such other parties have any liability for any indirect, consequential or punitive damages in connection with or as a result of such indemnified party's or such other parties' activities related to the Letters. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto. Except as expressly provided in the Commitment Letter to which this Annex A is attached, the provisions of this Annex A shall survive any termination or completion of the arrangement provided by the Letters, and this Commitment Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. A-1 Annex B ------- VETERINARY CENTERS OF AMERICA, INC. Summary of Terms and Conditions of Facilities This Summary of Terms and Conditions outlines certain terms of the Facilities referred to in the Commitment Letter, of which this Annex B is a part. Certain capitalized terms used herein are defined in the Commitment Letter. Borrower: Vicar Operating Inc. a wholly owned direct subsidiary of Veterinary - -------- Centers of America, Inc. as the surviving corporation after its merger with Vicar Recap, Inc. ("HoldCo"), which shall directly and through its wholly owned direct and indirect subsidiaries own all the operating assets and subsidiaries of the Company. Guarantors: HoldCo and each of the Borrower's subsidiaries (other than any foreign - ---------- subsidiaries to the extent such guaranties would result in material adverse tax consequences) shall guaranty all obligations under the Facilities; provided that, notwithstanding the foregoing, any subsidiary of the Borrower providing any guaranty of any of the HoldCo Debt (defined below), the OpCo Subordinated Debt (defined below) or any refinancings of any of the foregoing, shall guaranty the Facilities. Sole Lead Arranger Goldman Sachs Credit Partners L.P. ("GSCP", and in such capacities, the - ------------------ "Arranger"). and Sole Syndication - -------------------- Agent: - ----- Administrative Agent: A Lender to be identified by GSCP and the Sponsor and reasonably - -------------------- acceptable to the Sponsor (such Lender, in such capacity, the "Administrative Agent"). Lenders: GSCP and/or other financial institutions selected by GSCP in - ------- consultation with, and with the consent (not to be unreasonably withheld) of, the Sponsor (each a "Lender" and collectively, the "Lenders"). Amount of Senior Up to $325.0 million of senior secured bank financing (the Facilities: "Facilities'') to include: - ---------------- (i) $100.0 million senior term loan facility (the "Term Facility A"); (ii) $150.0 million senior term loan facility (the "Term Facility B"; and together with Term Facility A, the "Term Facilities"): and (iii) $75.0 million senior revolving credit facility (the "Revolving Facility").
B-1 Availability: Term Facilities: One drawing may be made under the Term Facilities on - ------------- the Closing Date. Revolving Facility: Amounts available under the Revolving Facility may be borrowed, repaid and reborrowed on and after the Closing Date until the maturity date of the Revolving Facility. Purpose/Use of Term Facilities: To be used in full to finance the Acquisition, to - -------------- repay the Company's and its subsidiaries outstanding indebtedness and Proceeds: to pay related fees and expenses. - -------- Revolving Facility: To be used to finance the working capital and general corporate needs (including permitted acquisitions) of the Borrower and its subsidiaries. In addition, a portion of the Revolving Facility to be determined may be utilized to finance a portion of the Acquisition, provided that, after giving effect to the incurrence of any such indebtedness the ratio of total senior debt to pro forma EBITDA for the fiscal quarter period most recently ended shall not exceed 3.9:l.0. Maturities: Term Facility A: 6th anniversary of the Closing Date - ---------- Term Facility B: 8th anniversary of the Closing Date Revolving Facility: 6th anniversary of the Closing Date Closing Date: The date on or before September 30, 2000, on which the initial - ------------ borrowings under the Facilities are made.
B-2 Amortization: Term Facility A: The outstanding principal amount of the Term Facility - ------------ A will be payable in equal quarterly amounts as follows: Year 1: $ 2,000,000 Year 2: $ 7,000,000 Year 3: $13,000,000 Year 4.: $18,000,000 Year 5: $25,000,000 Year 6: $35,000,000 Term Facility B: The outstanding principal amount of the Term Facility B will be payable in equal quarterly amounts to be determined (it being understood that only minimal amortization will be required with respect to Term Facility B prior to the sixth anniversary of the Closing Date). Revolving Facility: The entire outstanding principal of the Revolving Facility will be due on the sixth anniversary of the Closing Date. Revolving Facility: The entire outstanding principal of the Revolving Facility will be due on the sixth anniversary of the Closing Date. Letters of Credit: At the Borrower's option, a portion of the Revolving Facility to be - ----------------- determined will be made available for the issuance of letters of credit ("Letters of Credit"). Swingline Facility: At the Borrower's option, a portion of the Revolving Facility to be - ------------------ determined will be made available to the Borrower pursuant to a swingline facility. Interest Rate: All borrowings under the Facilities shall bear interest, at the - ------------- Borrower's option, as follows with respect to all loans made under the Facilities: (i) for Term Facility A and the Revolving Facility: (A) at the Base Rate plus 2.25% per annum; or (B) at the reserve adjusted Eurodollar Rate plus 3.25% per annum; and (ii) for Term Facility B: (A) at the Base Rate plus 2.75% per annum; or (B) at the reserve adjusted Eurodollar Rate plus 3.75% per annum.
B-3 On and after the six-month anniversary of the Closing Date and the delivery of quarterly reports of the Borrower evidencing the calculation of total debt to EBITDA, the Term Facility A and the Revolving Facility will bear interest at the Base Rate or the reserve adjusted Eurodollar Rate, as the case may be, plus in each case an applicable margin, based upon a performance pricing grid to be determined. As used herein, the terms "Base Rate" and "reserve adjusted Eurodollar Rate" shall have meanings customary and appropriate for financings of this type, and the basis for calculating accrued interest and the interest periods for loans bearing interest at the reserve adjusted Eurodollar Rate shall be customary and appropriate for financings of this type. Interest on outstanding amounts following the occurrence and during the continuance of an Event of Default shall accrue at a rate equal to the rate on loans bearing interest at the rate determined by reference to the Base Rate plus an additional two percentage points (2.00%) per annum and shall be payable on demand. Interest Payments: Quarterly for loans bearing interest with reference to the Base Rate; - ----------------- on the last day of selected interest periods (which shall be one, two, three and six months) for loans bearing interest with reference to the reserve adjusted Eurodollar Rate (and at the end of every three months, in the case of interest periods of longer than three months); and upon prepayment, in each case payable in arrears and computed on the basis of a 360-day year. Interest Rate Within 90 days after the Closing Date, the Borrower will obtain - ------------- interest rate protection through interest rate swaps, caps or other Protection: agreement reasonably satisfactory to the Arranger and the - ---------- Administrative Agent against increases in the interest rates with respect to a notional amount equal to not less than 25% of the Term Facilities for a period of not less than 2 years. Funding Protection: Customary for transactions of this type, including breakage costs, - ------------------ gross-up for withholding, compensation for increased costs and compliance with capital adequacy and other regulatory restrictions. Commitment Fees: Commitment fees on the daily average unused portion of the Revolving - --------------- Facility (reduced by the amount of letters of credit issued and outstanding) shall accrue from the Closing Date at the rate of (y) 0.75% per annum with respect to any period during which less than 50% of the commitments under the Revolving Facility have been utilized and (z) otherwise, .50% per annum, and shall be payable quarterly in arrears.
B-4 Letters of Credit The letter of credit fee shall be a percentage per annum equal to the - ----------------- applicable margin for Eurodollar Rate loans under the Revolving Fees: Facility, which shall be shared by all Lenders under the Revolving - ---- Facility, and an additional fronting fee of a percentage per annum to be mutually agreed upon with the Administrative Agent, which shall be retained by the Lender issuing the letter of credit, in each case based upon the applicable percentage multiplied by the amount available from time to time for drawing under such letter of credit. In addition, certain customary fees assessed by the issuing Lender shall be payable. Voluntary Prepayments: The Facilities may be prepaid in whole or in part without premium - ---------------------- (except to the extent described below under the heading "Call Protection") or penalty (provided that loans bearing interest with reference to the reserve adjusted Eurodollar Rate shall be prepayable only on the last day of the related interest period unless the Borrower pays any related "broker funding" costs). Voluntary prepayments shall be applied among the Facilities as determined by the Borrower; provided that any voluntary prepayments of the Term Facility A or Term Facility B, as the case may be, shall be further applied to the remaining scheduled amortization payments of such Term Facility on a pro rata basis. Mandatory Prepayments: The Borrower shall make the following mandatory prepayments (subject to - --------------------- certain basket amounts to be mutually agreed upon in the definitive Loan Documents): 1. Asset Sales - prepayments in the amount of all of the net after-tax ----------- cash proceeds of the sale or other disposition of any property or assets of HoldCo, the Borrower or any of its subsidiaries, other than net cash proceeds (y) of sales or other dispositions of inventory or other assets in the ordinary course of business, and (z) reinvested in long-term productive assets of the Borrower or its subsidiaries within 270 days of receipt of such net cash proceeds; 2. Insurance/Condemnation Proceeds - prepayments in the amount of all ------------------------------- of the net cash proceeds received under any casualty insurance maintained by HoldCo, the Borrower or any of its subsidiaries or pursuant to the power of eminent domain or condemnation, other than permitted reimbursements to be mutually agreed upon in the definitive Loan Documents; 3. Equity Offerings - prepayments in an amount equal to 75% of the net ---------------- cash proceeds received from the issuance of equity securities of HoldCo, the Borrower or any of its subsidiaries;
B-5 4. Proceeds of Debt Issuances - prepayments in the amount of all of -------------------------- the net cash proceeds received by any of HoldCo, Borrower or its subsidiaries from issuances of debt securities by HoldCo, the Borrower or any of its subsidiaries (other than indebtedness permitted under the Loan Documents); 5. Excess Cash Flow - prepayments in an amount equal to 75% of excess ---------------- cash flow (to be defined), payable within one hundred (100) days of each fiscal year-end commencing with the fiscal year ending December 31, 2001. All such prepayments shall he applied without premium or penalty (except for breakage costs, if any) to repay, first, outstanding loans under the Term Facilities as set forth in the next sentence and, second, outstanding loans (and to the permanent reduction of commitments) under the Revolving Facility. All mandatory prepayments of the Term Facilities shall be applied to scheduled amortization prepayments of the Term Facilities pro rata between the Term Facilities and further applied pro rata to the remaining scheduled amortization payments thereon; provided that any Lender under Tam Facility B may, so long as there is a corresponding principal mount outstanding under the Term Facility A, decline to accept any such prepayment, in which case the amount of such declined payment shall be applied to the further prepayment of Term Facility A. Security: The Facilities and each guarantee thereof will be secured by first - -------- priority security interests in substantially all assets, including without limitation, all personal, real and mixed property of the Borrower and the guarantors (except as otherwise agreed to by the Arranger and the Administration Agent). In addition, the Facilities shall be secured by a first priority security interest in 100% of the stock of the Borrower and each of its subsidiaries (other than certain exceptions for foreign subsidiaries to the extent such pledge would result in material adverse tax consequences) and all intercompany debt. All security arrangements shall be in form and substance reasonably satisfactory to the Arranger and the Administrative Agent (collectively, the "Agents"). Representations and Customary and appropriate including, without limitation, due - ------------------- organization and authorization, execution, delivery and enforceability Warranties: of the Loan Documents, financial condition, no material adverse change, - ---------- title to properties, liens, litigation, payment of taxes, compliance with laws, environmental and ERISA matters, consents and approvals and full disclosure.
B-6 Covenants: Customary and appropriate affirmative and negative covenants, - --------- including, without limitation, financial covenants related to minimum fixed charge coverage, minimum interest coverage, maximum capital expenditures and senior and total leverage tests. Other covenants will include, without limitation, financial and other reporting requirements, and, subject to customary exceptions and baskets, limitations on other indebtedness, liens, negative pledge, investments, guarantees, restricted junior payments (dividends, redemptions and payments on subordinated debt and junior capital), mergers and acquisitions (it being understood that certain acquisitions, within parameters to be mutually agreed upon, will be permitted; provided that, in any event, any `seller paper" issued in connection with an acquisition shall be fully subordinated to the Facilities, shall be issued by HoldCo and shall be subject to cash pay debt service restrictions to be agreed upon), sales or transfers of assets, sales and leasebacks, transactions with affiliates, including exceptions and baskets to mutually agreed upon. Events of Default: Customary and appropriate including, without limitation, failure to - ----------------- make payments when due, defaults under other agreements or instruments of indebtedness, noncompliance with covenants, breaches of representations and warranties, bankruptcy, uninsured judgments in excess of specified amounts, ERISA. impairment of security interests in collateral, invalidity of guarantees, and "changes of control" (to be defined in a mutually agreed upon manner). Conditions Precedent 1. Satisfactory Documentation. The definitive Loan Documents and the - -------------------- -------------------------- to Initial other documentation evidencing the Facilities shall be prepared by - ---------- counsel to the Arranger and shall be in form and substance reasonably Borrowings: satisfactory in the Agents and the Lenders. - ---------- 2. Acquisition Structure and Documentation. The structure utilized to --------------------------------------- consummate the Acquisition, the terms thereof, the pro forma capitalization of HoldCo, and the Borrower after giving effect to the Acquisition, and the definitive documentation relating thereto (the "Definitive Acquisition Documents") shall be in form and substance reasonably satisfactory to the Agents (it being understood and agreed that the form of Agreement and Plan of Merger provided to us on March 29, 2000 is satisfactory), and the Definitive Acquisition Documents shall be in full force and effect on the Closing Date. 3. Consummation of Acquisition. Prior to the initial borrowing under --------------------------- Facilities or simultaneously therewith, the Acquisition shall have been consummated pursuant to the Definitive Acquisition Documents, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of the Agents.
B-7 4. Equity Contributions. Prior to the initial borrowing under the -------------------- Facilities or simultaneously therewith, (i) the Sponsor shall have consummated the purchase of at least $152 million of common and/or pay-in-kind preferred equity (the "Sponsor Equity") of the Company and at least $3.5 million of additional common and/or pay-in-kind preferred equity (the "Rollover Equity") shall have been provided through "rollovers" by existing management shareholders of the Company; provided that, in no event shall the aggregate of the Sponsor Equity and the Rollover Equity be less than $156 million, and (ii) the terms and provisions of the Sponsor Equity and the Rollover Equity shall be reasonably satisfactory to the Agents. 5. Issuance of Senior Debt, Preferred Stock and Subordinated Debt. -------------------------------------------------------------- Prior to the initial borrowing under the Facilities or simultaneously therewith (i) the Borrower shall have received the proceeds of (y) a private placement by HoldCo of $70.0 million of pay-in-kind (for the first five years) unsecured debt securities (the "HoldCo Debt"), and (z) a private placement by the Borrower of $50.0 million of subordinated unsecured debt securities (the "OpCo Subordinated Debt"); (ii) the terms and provisions of the HoldCo Debt and the OpCo Subordinated Debt shall be reasonably satisfactory to the Agents; and (iii) the proceeds of the HoldCo Debt and the OpCo Subordinated Debt shall have been applied in full to finance the Acquisition, repay existing indebtedness of the Company and its subsidiaries and to pay related fees and expenses. 6. Discharge of Existing Debt. Concurrently with the consummation -------------------------- of the Acquisition, substantially all pre-existing indebtedness (including, without limitation, any earnout obligations and seller paper) of the Company and its subsidiaries shall have been repaid or repurchased in full, all commitments relating thereto shall have been terminated, and all liens or security interests related thereto shall have been terminated or released, in each case on terms reasonably satisfactory to the Agents. 7. Security. The Administrative Agent, for the benefit of the -------- Lenders, shall have been granted perfected first priority security interests in all assets to the extent described above under the heading "Security" in form and substance reasonably satisfactory to the Agents. 8. Payments of Amounts Due. On the Closing Date, all costs, fees, ----------------------- expenses and other compensation contemplated hereby payable to the Agents or the Lenders shall have been paid to the extent due.
B-8 9. Capital Structure; Related Agreements. All agreements (other than ------------------------------------- the Definitive Acquisition Documents, which are provided for at paragraph 2 of the Conditions Precedent to Initial Borrowings) relating to the corporate structure of the Borrower and the guarantors, all organizational documents of such entities and the employment contracts of key employees and executives shall be reasonably satisfactory to the Agents. 10. Solvency. The Lenders shall have received an opinion from an -------- independent valuation consultant or appraiser reasonably satisfactory to the Agents and a certificate of the chief financial officer of the Borrower, in each case in form and substance reasonably satisfactory to the Agents, supporting the conclusions that, after giving effect to the Acquisition and the related transactions contemplated hereby, the Borrower will not be insolvent or be rendered insolvent by the indebtedness incurred in connection therewith, or be left with unreasonably small capital with which to engage in its businesses, or have incurred debts beyond its ability to pay such debts as they mature. 11. Environmental Matters. The Lenders shall have received reports and --------------------- other information in form, scope and substance reasonably satisfactory to the Agents concerning any environmental liabilities. 12. Consents and Approvals. All necessary governmental and third ---------------------- party approvals and consents in connection with the Facilities, the Acquisition and the other transactions contemplated by the Facilities shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any applicable authority. 13. Litigation, etc. There shall not exist any action, suit, --------------- investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that materially impairs the Acquisition, the financing thereof or any of the other transactions contemplated hereby, or that could have a material adverse effect on HoldCo, the Borrower, the Acquisition, the financing thereof or any of the transactions contemplated hereby.
B-9 14. Financial Statements and Performance. The Lenders shall have ------------------------------------ received the unaudited financial statements for the most recently concluded quarterly periods and copies of the monthly reporting package to be provided under the Agreement and Plan of Merger. The Lenders shall have received pro forma consolidated financial statements satisfactory to the Agents with respect to the Company for the fiscal year eared December 31, 1999 and with respect to the most recently concluded fiscal quarter and month, reflecting the Acquisition and all other acquisitions and divestitures occurring during such periods and any other recent or pending acquisitions or divestitures, as of the beginning of such periods. Such financial statements shall confirm that (y) pro forms EBITDA (to be calculated on a mutually satisfactory basis) for the Company and its subsidiaries for the twelve month period ending March 31, 2000 (or, if later, the most recently ended calendar quarter prior m the Closing Date for which financial statements are available, which financial statements shall in any event be prepared within thirty (30) days after fiscal quarter end) shall not be leas than $63.0 million and (z) the ratio of (i) total senior debt as of March 31, 2000 (determined on a pro forma basis for the Company and its subsidiaries giving effect to the Acquisition and the transactions contemplated in connection therewith) to (ii) pro forma EBITDA (to be calculated on a mutually satisfactory basis) for the twelve month period ending March 31, 2000 was not greater than 3.9:1.0. 15. Customary Closing Documents. All documents required to be --------------------------- delivered under the Loan Documents, including customary legal opinions, corporate records and documents from public officials and officers' certificates, shall have been delivered and shall be reasonably satisfactory to Agents. Conditions to All The conditions to all borrowings will include requirements relating to - ----------------- prior written notice of borrowing, the accuracy of representations and Borrowers: warranties, and the absence of any default or potential event of - --------- default, and will otherwise be customary and appropriate for financings of this type.
B-10 Assignments and The Lenders may assign all, or in an amount of not less than (y) $5 - --------------- million with respect to the Revolving Facility and (z) $2.5 million Participations: with respect to the Term Facility A or Term Facility B any part of, - -------------- their respective shares of the Facilities to their affiliates or one or more banks, financial institutions or other entities that are eligible assignees (to be described in the Loan Documents) which, in the case of assignments with respect to the Revolving Facility (other than the case of assignments made by or to GSCP), are acceptable to the Administrative Agent and (except during the existence of an Event of Default) the Borrower, each such consent not to be unreasonably withheld. Upon such assignment, such affiliate, bank, financial institution or entity shall become a Lender for all purposes under the Loan Documents; provided, assignments made to affiliates and other Lenders shall not be subject to the above described consent or minimum assignment amount requirements. The Administrative Agent will receive a processing fee of $2,000 payable by the assignor or assignee, in connection with each assignment; provided, for any assignments made to affiliates, other Lender's or made by or to GSCP, the processing fee shall be $500. The Lenders will also have the right to sell participations, subject to customary limitations on voting rights, in their respective shares of the Facilities. Requisite Lenders: Lenders holding more than 50% of total commitments or exposure under - ----------------- the Facilities, except that (x) any amendment which would disproportionately affect the obligation of the Borrower to make payment of the loans under the Revolving Facility or either of the Term Facilities shall not be effective without the approval of holders of more than 50% of such class of loans and (y) with respect to certain matters relating to the interest rate, maturity, amortization, collateral issues and the definition of Requisite Lenders, Requisite Lenders will be defined as Lenders holding 100% of total commitments or exposure of the Facilities affected thereby. Taxes, Reserve All payments are to be made free and clear of any taxes (other than - -------------- franchise taxes and taxes on overall net income), imposts, assessments, Requirements and withholdings or other deductions whatsoever. Foreign Lenders shall - ---------------- furnish to the Administrative Agent appropriate certificates or other Indemnities: evidence of exemption from U.S. federal tax withholding. - ----------- The Borrower will indemnify the Lenders against all increased costs of capital resulting from reserve requirements or otherwise imposed, in each case subject to customary increased costs, capital adequacy and similar provisions to the extent not taken into account in the calculation of the Base Rate or the Eurodollar Rate. Indemnity: Customary and appropriate provisions relating to indemnity and related - --------- matters in a form reasonably satisfactory to the Arranger, the Administrative Agent and the Lenders.
B-11 Governing Law and The Borrower and the guarantors will submit to the non-exclusive - ----------------- jurisdiction and venue of the federal and state courts of the State of Jurisdiction: New York and shall waive any right to trial by jury. New York law shall - ------------ govern the Loan Documents.
The foregoing is intended to summarize certain basic terms of the Facilities. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Facilities. B-12 EX-7.3 4 0004.txt VOTING AGREEMENT DATED MARCH 30, 2000 Exhibit 7.3 VOTING AGREEMENT VOTING AGREEMENT, dated as of March 30, 2000 (this "Agreement"), by and between Vicar Recap, Inc., a Delaware corporation ("Recap"), and Robert L. Antin, an individual (the "Stockholder"). WHEREAS, Recap, Veterinary Centers of America, Inc., a Delaware corporation (the "Company"), and Vicar Operating, Inc., a Delaware corporation and a wholly owned subsidiary of Company ("Operating Company"), are entering into that certain Agreement and Plan of Merger, dated as of this date (as may be modified or amended from time to time in a manner not adverse to the Stockholder, the "Merger Agreement"), which provides, among other things, that prior to the Merger Company shall contribute all of its assets, properties, business operations, and liabilities to Operating Company (the "Asset Drop Down"), followed by the merger of Recap with and into the Company with the Company as the surviving corporation (the "Merger"); WHEREAS, in connection with the Merger Agreement, Recap has requested that the Stockholder make certain agreements with respect to certain shares of capital stock of the Company (the "Shares") beneficially owned by the Stockholder, upon the terms and subject to the conditions of this Agreement; WHEREAS, in connection with the Merger Agreement, Recap and certain stockholders are entering into Exchange and Subscription Agreements (the "Exchange Agreements"), which provide, among other things, for such stockholders to exchange shares of capital stock of the Company for shares of capital stock of Recap prior to the closing of the Merger; and WHEREAS, the Stockholder is willing to make certain agreements with respect to the Subject Shares (as defined below). NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth in this Agreement, the parties agree as follows: 1. Voting Agreements. For so long as this Agreement is in effect, at any meeting of the stockholders of the Company, and in any action by consent of the stockholders of the Company, the Stockholder shall vote, or, if applicable, give consents with respect to, all of the Subject Shares that are held by the Stockholder on the record date applicable to the meeting or consent (i) in favor of the Merger Agreement and the Merger and the Asset Drop Down contemplated by the Merger Agreement; (ii) against any competing Acquisition Proposal (as defined in the Merger Agreement) or other proposal inconsistent with the Merger Agreement or which may delay or adversely affect the likelihood of the completion of the Merger or the Asset Drop Down; (iii) against any change in a majority of the persons who constitute the board of directors of the Company inconsistent with the Merger Agreement, the Merger or the Asset Drop Down; (iv) against any change in the capitalization of the Company or any amendment of the Company's Certificate of Incorporation or Bylaws inconsistent with the Merger Agreement, the Merger or the Asset Drop Down; and (v) in favor of any other matter necessary for consummation of the transactions contemplated by the Merger Agreement which is considered at any such meeting or in any such consent. Such Stockholder shall not enter into any agreement or understanding with any person the effect of which would be inconsistent with or violate the provisions of agreements contained in this Section 1. The Stockholder shall use his reasonable best efforts to cast the Stockholder's vote or give the Stockholder's consent in accordance with the procedures communicated to the Stockholder by the Company relating thereto so that the vote or consent shall be duly counted for purposes of determining that a quorum is present and for purposes of recording the results of that vote or consent. 2. Subject Shares. The term "Subject Shares" shall mean the Shares set forth on Schedule A hereto, together with any shares of capital stock of the Company acquired by the Stockholder after the date hereof over which the Stockholder has the power to vote or the power to direct the voting thereof. D-1 3. Stockholder Capacity. If the Stockholder is or becomes during the term of this Agreement a director or officer of the Company or Operating Company, the Stockholder shall not be deemed to have made any agreement or understanding herein in his or her capacity as such director or officer, and no action taken by the Stockholder in his capacity as an officer or director of the Company or Operating Company shall be deemed a breach of this Agreement. The Stockholder signs solely in Stockholder's capacity as the beneficial owner of the Stockholder's Subject Shares and nothing herein shall limit or affect any actions taken by the Stockholder in any capacity as an officer or director of the Company or Operating Company to the extent specifically permitted by the Merger Agreement. Nothing in this Agreement shall be deemed to constitute a transfer of the beneficial ownership of the Subject Shares by the Stockholder. 4. Covenants. For so long as this Agreement is in effect, except as otherwise contemplated by the Merger Agreement or the Exchange Agreements, the Stockholder agrees not to (i) sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition (each such disposition or contract, a "Transfer"), of any Subject Shares or Shares the Stockholder then has or will have the right to acquire pursuant to options, warrants, convertible securities or other such rights to purchase Shares granted to the Stockholder by the Company; (ii) grant any powers of attorney, consents, or proxies with respect to any shares that then constitute Subject Shares, deposit any of the Subject Shares into a voting trust, enter into a voting or option agreement with respect to any of the Subject Shares inconsistent with the Merger Agreement or this Agreement, or otherwise restrict or take any action adversely affecting the ability of the Stockholder freely to exercise all voting rights with respect to the Subject Shares; (iii) subject to Section 3, directly or indirectly, solicit, initiate, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to an Acquisition Proposal (as defined in the Merger Agreement) or engage in any negotiation concerning, or provide any confidential information or data to, or have any discussions with any person relating to an Acquisition Proposal; and the Stockholder shall notify Recap immediately if any such inquiries or proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with the Stockholder; or (iv) permit, cause, or take any action, or fail to take any action, which would make any representation, warranty, covenant, or other undertaking of the Stockholder in this Agreement untrue or incorrect or prevent, burden or materially delay the consummation of the transactions contemplated by this Agreement; provided, however, that nothing in the foregoing provisions of this Section 4 shall prohibit the Stockholder from effecting any transfer of Subject Shares pursuant to any bona fide charitable gift or by will or applicable laws of descent and distribution, or for estate planning purposes, if the transferee agrees in writing to be bound by the provisions of this Agreement. As used in this Agreement, "person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended. 5. Waiver of Dissenters' Rights. The Stockholder hereby waives any rights to dissent from the Merger or the Asset Drop Down. 6. Representations and Warranties of the Stockholder. The Stockholder represents and warrants to Recap that: (a) Capacity; No Violations. The Stockholder has the legal capacity to enter into this Agreement and to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by the Stockholder and constitutes a valid and binding agreement of the Stockholder enforceable against the Stockholder in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and general principles of equity (whether considered in a proceeding in equity or at law). The execution, delivery and performance by the Stockholder of this Agreement will not (i) conflict with, require a consent, waiver or approval under, or result in a breach or default under, any of the terms of any contract, commitment or other obligation to which the Stockholder is a party or by which the Stockholder is bound, (ii) violate any order, writ, injunction, decree or statute, or any law, rule or regulation applicable to the Stockholder or the Subject Shares; or (iii) result in the creation of, or impose any obligation on the Stockholder to create, any Lien upon the Subject Shares that would prevent the Stockholder from voting the D-2 Subject Shares. In this Agreement, "Lien" shall mean any lien, pledge, security interest, claim, third party right or other encumbrance. (b) Subject Shares. The Stockholder has the power to vote or direct the voting of the Subject Shares. The Subject Shares are the only shares of any class of capital stock of the Company which the Stockholder has the right, power or authority (sole or shared) to sell or vote, and, the Stockholder does not have any right to acquire, nor is it the beneficial owner of, any other shares of any class of capital stock of the Company or any securities convertible into or exchangeable or exercisable for any shares of any class of capital stock of the Company. The Stockholder is not a party to any contracts (including proxies, voting trusts or voting agreements) that would prevent the Stockholder from voting the Subject Shares or conflict with the provisions of this Agreement. (c) Title to Shares. Except as set forth on Schedule B, the Stockholder is the sole record and beneficial owner of the Subject Shares, free and clear of any pledge, Lien, security interest, mortgage, charge, claim, equity, option, proxy, voting restriction, voting trust or agreement, understanding, arrangement, right of first refusal, limitation on disposition, adverse claim of ownership or use or encumbrance of any kind, other than restrictions imposed by the securities laws or pursuant to this Agreement or the Merger Agreement. (d) No Finder's Fees. Except as disclosed in the Merger Agreement, no broker, investment banker, financial advisor, or other person is entitled to any broker's, finder's, financial advisor's, or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder the payment of which could become the obligation of the Company, Operating Company or Recap. The Stockholder, on behalf of itself and its affiliates, hereby acknowledges that it is not entitled to receive any broker's, finder's, financial advisor's, or other similar fee or commission in connection with the transactions contemplated hereby or by the Merger Agreement. 7. Expenses. Recap shall pay its own expenses incurred in connection with this Agreement. 8. Specific Performance. The Stockholder acknowledges and agrees that if Stockholder fails to perform any of Stockholder's obligations under this Agreement, immediate and irreparable harm or injury would be caused to Recap for which money damages would not be an adequate remedy. Accordingly, the Stockholder agrees that Recap shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. If Recap should institute an action or proceeding seeking specific enforcement of the provisions of this Agreement, the Stockholder hereby waives the claim or defense that Recap has an adequate remedy at law and hereby agrees not to assert in that action or proceeding the claim or defense that a remedy at law exists. The Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any equitable relief. 9. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made as of the date of receipt and shall be delivered personally or mailed by registered or certified mail (postage prepaid, return receipt requested), sent by overnight courier or sent by telecopy, to the applicable party at the following addresses or telecopy numbers (or at any other address or telecopy number for a party as shall be specified by like notice): If to Recap, to: Vicar Recap, Inc. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Boulevard, Suite 2000 Los Angeles, California 90025 Attention: John Baumer Telephone: (310) 954-0444 Facsimile: (310) 954-0404 D-3 With a copy to: Irell & Manella LLP 333 South Hope Street, Suite 3300 Los Angeles, California 90071-3042 Attention: Ed Kaufman, Esq. Telephone: (213) 229-0500 Facsimile: (213) 229-0515 If to the Stockholder: at the address and telephone number set forth on the signature page With a copy to: Troop Steuber Pasich Reddick & Tobey, LLP 2029 Century Park East, 24th Floor Los Angeles, California 90067 Attention: C.N. Franklin Reddick III, Esq. Telephone: (310) 728-3204 Facsimile: (310) 728-2204 10. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns; provided, however, that any successor in interest or assignee shall agree to be bound by the provisions of this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any person other than Recap, the Stockholder or their successors or assigns, any rights or remedies under, or by reason, of this Agreement. 11. Entire Agreement; Amendments. Other than the Merger Agreement, the Exchange Agreements and the transactions contemplated therein, this Agreement contains the entire agreement between the Stockholder and Recap with respect to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to these transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 12. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party to this Agreement, except that (a) Recap may assign its rights and obligations under this Agreement to Parent (as defined in the Merger Agreement) or any of Parent's or Recap's direct or indirect wholly owned subsidiaries or affiliates, and (b) the Stockholder may transfer the Subject Shares to the extent permitted by Section 4 of this Agreement. 13. Headings. The section headings in this Agreement are for convenience only and shall not affect the construction of this Agreement. 14. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. 16. Termination. This Agreement shall terminate automatically and without further action on behalf of any party at the earlier of (i) the Effective Time (as defined in the Merger Agreement) and (ii) the date the Merger Agreement is terminated pursuant to and in accordance with its terms. [Signature page follows] D-4 IN WITNESS WHEREOF, Recap and the Stockholder have caused this Agreement to be duly executed and delivered on the day and year first above written. VICAR RECAP, INC. a Delaware corporation By /s/ John Danhakl ___________________________________ Name: John Danhakl Title: President STOCKHOLDER /s/ Robert L. Antin _____________________________________ Robert L. Antin Address: c/o Veterinary Centers of America, Inc. 12401 West Olympic Boulevard Los Angeles, California 90064 Telephone Number: (310) 584-6500 Facsimile Number: (310) 584-6701 D-5 SCHEDULE A SHARES OWNED 919,259 shares of Common Stock of the Company D-6 SCHEDULE B TITLE TO SHARES Exchange and Subscription Agreement, dated as of March 30, 2000, by and between Stockholder and Recap. D-7 EX-7.4 5 0005.txt EXCHANGE AND SUBSCRIPTION AGREEMENT Exhibit 7.4 THE SHARES OF COMMON STOCK SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED THEREUNDER OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. TRANSFER OF SUCH SHARES IS ALSO RESTRICTED BY THE TERMS OF THIS AGREEMENT AND BY THE TERMS OF THE VOTING AGREEMENT WITH VICAR RECAP, INC. EXCHANGE AND SUBSCRIPTION AGREEMENT This EXCHANGE AND SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of March 30, 2000, is entered into by and between Robert L. Antin, an individual (the "Investor"), and Vicar Recap, Inc., a Delaware corporation (the "Company"). WHEREAS, Investor is currently a stockholder in Veterinary Centers of America, Inc., a Delaware corporation ("VCA"), and is the owner of the number of shares set forth opposite Investor's name under the caption "Rollover Shares" in Schedule 1 attached hereto (the "Rollover Shares"). WHEREAS, in connection with that certain Agreement and Plan of Merger, dated contemporaneously herewith (the "Merger Agreement"), by and among the Company, VCA, and Vicar Operating, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("Operating Company"), VCA, prior to the Merger, shall contribute all of its assets, properties, business operations, and liabilities to Operating Company, following which Company shall merge with and into VCA, with VCA as the surviving corporation (the "Merger"). WHEREAS, subject to the terms and conditions in this Agreement, Investor desires to contribute the Rollover Shares in exchange (the "Exchange") for newly issued shares of capital stock of the Company (the "Shares"), in the amounts set forth under the caption "Common Exchange Shares" in Schedule 1 attached hereto. NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows. 1. Contribution of the Rollover Shares. 1.1. Contribution of the Rollover Shares in Subscription for the Shares. On the terms and conditions set forth herein, Investor agrees to subscribe for and the Company agrees to issue to Investor the Shares of the Company set forth under the caption "Common Exchange Shares" in Schedule 1 in exchange for the Rollover Shares set forth in Schedule 1. 1.2. Closing. The closing (the "Closing") of the Exchange shall occur immediately prior to the closing of the Merger; provided that the Company shall provide at least three (3) business days notice of such time and date to Investor. The Closing shall take place at the offices of Troop Steuber Pasich Reddick and Tobey, LLP 2029 Century Park East, Los Angeles, California 90067 or such other place determined by the parties. 1.3. Failure to Consummate the Merger. In the event that after the contribution and exchange of the Shares for the Rollover Shares as set forth in Section 1.1, the Merger fails to be consummated for any reason whatsoever and the Merger Agreement is terminated, the parties hereto agree that concurrently with the termination of the Merger Agreement, regardless of the price at which the common stock of VCA is quoted to be at that time on NASDAQ or any other national securities exchange on which the common stock of E-1 VCA is listed, the Company shall return to Investor the Rollover Shares and Investor shall return to the Company the Shares of the Company. 1.4. Conditions to Closing. The Closing of the Exchange shall be subject to the following conditions unless waived in writing by the parties hereto: (a) Merger Agreement Conditions. The conditions to the Merger Agreement shall have been satisfied or waived and the parties to the Merger Agreement shall have represented that they intend to consummate the Merger upon consummation of the Exchange. (b) Representations and Warranties. All representations and warranties in this Agreement by Investor and the Company shall be true and correct in all material respects on the date when made and on and as of the Closing date with the same effect as if made on and as of the Closing date. (c) Covenants and Agreements. Investor and the Company shall have performed or complied in all material respects with all covenants and conditions contained in this Agreement or in any agreement, certificate or instrument to be executed pursuant hereto which are required to be performed or complied with at or prior to the Closing. (d) Stockholders Agreement. The parties to the Stockholders Agreement of the Company shall have executed and delivered such. 1.5. Company Deliveries. At the Closing, the Company shall deliver to Investor stock certificates representing the Shares to be received by Investor. 1.6. Investor Deliveries. At the Closing, Investor shall deliver to the Company the following: (a) an executed Investment Qualification Questionnaire in the form attached hereto; and (b) certificate(s) evidencing the Rollover Shares together with duly executed stock powers thereof. 2. Representations and Warranties of the Company. The Company hereby represents and warrants to Investor as follows. 2.1. Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, having full power and authority to own its properties and to carry on its business as conducted. 2.2. Authority. The Company has the requisite corporate power and authority to deliver this Agreement, perform its obligations herein, and consummate the transactions contemplated hereby. The Company has duly executed and delivered this Agreement. This Agreement is a valid, legal and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or at equity). 2.3. Shares Duly Authorized. All of the Shares to be issued to Investor pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable. 3. Representations and Warranties of the Investor. Investor hereby represents and warrants to the Company as follows. 3.1. Organization. Investor, if an entity, is duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization, having full power and authority to own its properties and to carry on its business as conducted. Investor, if a natural person, is of legal age, competent to enter into a contractual obligation, and a citizen of the United States of America. The principal place of business or principal residence of Investor is as shown on the signature page of this Agreement. E-2 3.2. Ownership of the Rollover Shares. Investor is the sole record and beneficial owner of the Rollover Shares set forth opposite Investor's name in Schedule 1 hereto, free and clear of any claim, lien, security interest, mortgage, deed of trust, pledge, charge, conditional sale or other title retention agreement, lease, preemptive right, right of first refusal, option, restriction, tenancy, easement, license or other encumbrance of any kind. Neither Investor nor any of its affiliates is a party to, or bound by, any arrangement, agreement, instrument or order (i) relating to the sale, repurchase, assignment, or other transfer of any capital stock or equity securities of VCA, (ii) relating to the receipt of dividends, proxy rights, or voting rights of any capital stock or other equity securities of VCA, or (iii) relating to rights to registration under the Securities Act of 1933 or the Securities Exchange Act of 1934 of any capital stock or equity securities of VCA. 3.3. Authority. Investor has the requisite power and authority to deliver this Agreement, perform Investor's obligations herein, and consummate the transactions contemplated hereby. Investor has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform Investor's obligations herein and to consummate the transactions contemplated hereby. This Agreement is a valid, legal and binding obligation of Investor enforceable against Investor in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or at equity). 3.4. Investor Intent. Unless Investor is acting in a fiduciary capacity as provided in Section 3.5 below, Investor is acquiring the Shares for Investor's own account as principal, for investment purposes only, not for any other person or entity and not for the purpose of resale or distribution. 3.5. Fiduciary Capacity. If Investor is subscribing for the Shares from the Company in a fiduciary capacity, Investor makes these representations and warranties on behalf of the person(s) or entity(ies) for whom Investor will contribute and exchange the Rollover Shares for the Company's Shares. 3.6. Financial Status. Investor, alone or together with its Purchase Representative (as defined in Rule 501(h) of Regulation D), if applicable, has such knowledge and experience in financial and business matters as will enable Investor to evaluate the merits and risks of an investment in the Company. Investor, if a natural person, has adequate means of providing for his or her current financial needs and personal contingencies, and has no need for liquidity in the investment in the Shares, understands that he or she may not be able to liquidate his or her investment in the Company in an emergency, if at all, and can afford a complete loss of the investment. 3.7. Accredited Investor or Purchaser Representative. Investor (alone or acting together with a Purchaser Representative) is an Accredited Investor, as defined by Rule 501 of Regulation D of the Securities Act. If Investor is a natural person, (i) Investor's individual net worth or joint net worth with Investor's spouse at the time of the execution of this Agreement is in excess of $1,000,000; or (ii) Investor had an individual income in excess of $200,000 in each of the two (2) most recent years or joint income with Investor's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. 3.8. No General Solicitation. Investor has received no general solicitation or general advertisement in connection with the Exchange or an investment in the Company. Investor has received no other representations or warranties from the Company or any other person acting on behalf of the Company, other than those contained in this Agreement. 3.9. Accuracy of Information. As of the date hereof and as of the Closing, the representations and warranties of Investor contained herein and all information provided by Investor to the Company concerning Investor, its financial position and its knowledge of financial and business matters including, but not limited to, the information set forth in the Investment Qualification Questionnaire, is correct and complete, and if E-3 there should be any changes in that information prior to Investor receiving the Shares, Investor will immediately provide the Company with the correct information. 4. Agreements and Acknowledgements of Each Investor. Investor hereby agrees and acknowledges to the Company as follows. 4.1. No Registration. Investor understands that the Shares being acquired by Investor have not been registered under the Securities Act, in reliance on an exemption therefrom for transactions not involving any public offering, that such Shares have not been approved or disapproved by the Securities and Exchange Commission or by any other federal or state agency, and that no such agency has passed on the accuracy or adequacy of disclosures made to Investor by the Company. No federal or state governmental agency has passed on or made any recommendation or endorsement of the Shares or an investment in the Company. 4.2. Limitations on Disposition and Resale. Investor understands that the Shares cannot be sold, transferred or otherwise disposed of unless the Shares have been registered by the Company pursuant to the Securities Act of 1933 and any applicable state securities laws, unless an exemption therefrom is available. Investor understands that it may not be possible for Investor to liquidate the investment in the Company; and Investor agrees not to sell, transfer or otherwise dispose of the Shares unless the Shares have been so registered or an exemption from the requirement of registration is available under the Securities Act of 1933 and any applicable state securities laws. Investor recognizes that there will not be any public trading market for the Shares and, as a result, Investor may be unable to sell or dispose of its interest in the Company. 4.3. Newly Formed Entity. Investor recognizes that the Company was only recently formed and, accordingly, has no financial or operating history and that the investment in the Company is extremely speculative and involves a high degree of risk. 4.4. Compliance with Agreement. Investor agrees to execute any and all further documents necessary to become a stockholder of the Company. Investor agrees to execute and deliver any and all further documents and writings, and to perform such other actions, as may be or become reasonably necessary or expedient to effect and carry out the terms of this Agreement. 4.5. Irrevocable Subscription and Cancellation. Each of Investor and the Company understands that this subscription is irrevocable, except as expressly provided herein or otherwise provided in any applicable federal or state law governing this Agreement and the transactions contemplated herein. 4.6. Purchaser Representative. If Investor used or will use the services of a Purchaser Representative in connection with the Exchange, such Purchaser Representative has disclosed or will disclose, by submitting to the Company a Purchaser Representative Questionnaire in the form given Investor by the Company, any material relationship which now exists between each Purchaser Representative or its affiliates and the Company and its affiliates, or which is mutually understood to be contemplated, or which has existed at any time during the previous two (2) years, and further setting forth any compensation received or to be received as a result of such relationship. 5. Attorney's Fees. In the event of any litigation or other legal proceeding involving the interpretation of this Agreement or enforcement of the rights or obligations of the parties hereto, the prevailing party or parties shall be entitled to recover reasonable attorney's fees and costs as determined by a court or other adjudicator. 6. Governing Law. This Agreement is governed by and shall be construed in accordance with the law of the State of Delaware, excluding any conflict-of- laws rule or principle that might refer the governance or construction of this Agreement to the law of another jurisdiction. If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby, and that provision shall be enforced to the greater extent permitted by law. 7. Assignment. Investor shall have neither the right nor the power to assign or delegate any provision of this Agreement except (i) to any existing stockholder of VCA who is also employed as part of the management E-4 thereof who agrees in writing to subscribe to all or some of the shares of the Company on the same terms and conditions as provided herein as if it were a signatory hereto, provided, however, that such shares shall qualify for recapitalization accounting treatment in the Merger, and such assignment shall not materially adversely affect Recapitalization (as defined in the Merger Agreement), or (ii) with the prior written consent of the Company. Except as provided in the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties' respective successors, assigns, executors and administrators. 8. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same document. 9. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only in a writing executed by the party to be bound thereby. 10. Termination of Agreement. This Agreement may be terminated: (i) by the mutual written consent of the parties hereto; (ii) by the Company or Investor if a condition set forth in Section 1.4 hereof is not satisfied or otherwise waived by the parties hereto; or (iii) by either party if the Merger Agreement is terminated for any reason whatsoever. 11. Further Assurances. Subject to the terms and conditions provided herein, each party hereto agrees to use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, whether under applicable laws and regulations or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement. [The remainder of this page is blank] E-5 IN WITNESS WHEREOF, the parties have hereby executed this Exchange and Subscription Agreement as of the date set forth above. INDIVIDUAL INVESTOR Robert Antin ------------------------------------- Name (Print or Type) /s/ Robert Antin ------------------------------------- Signature _____________________________________ Signature of Spouse 12401 West Olympic Boulevard ------------------------------------- (Street Address) Los Angeles, CA 90064 ------------------------------------- (City and State) (Zip Code) (310) 584-6500 ------------------------------------- Telephone Number _____________________________________ Social Security Number or Taxpayer Identification Number E-6 ACCEPTANCE The foregoing subscription is hereby accepted, subject to the terms and conditions hereof, as of the date set forth above. VICAR RECAP, INC. a Delaware corporation By: /s/ John Danhakl --------------------------------- Name: John Danhakl Title: President E-7 SCHEDULE 1
Common Investor Aggregate Value Rollover Shares Exchange Shares - -------- --------------- --------------- --------------- Robert L. Antin................. $2,000,000 133,333 133,333
E-8 CONFIDENTIAL INVESTMENT QUALIFICATION QUESTIONNAIRE VICAR RECAP, INC. A Delaware Corporation SPECIAL INSTRUCTIONS In order to establish the availability under federal and state securities laws of an exemption from registration or qualification requirements for the proposed Exchange, you are required to represent and warrant, and by executing and delivering this questionnaire will be deemed to have represented and warranted, that the information stated herein is true, accurate and complete to the best of your knowledge and belief, and may be relied on by the Company. Further, by executing and delivering this questionnaire you agree to notify the Company and supply corrective information promptly if, prior to the consummation of your exchange of the Rollover Shares for the Shares, any such information becomes inaccurate or incomplete. Your execution of this questionnaire does not constitute any indication of your intent to subscribe for the Shares. A subscriber who is a natural person must complete each Question except for 2 and 5. A subscriber that is an entity other than a trust must complete each Question except for 3 and 5. A subscriber that is a trust must complete each Question except for 3. GENERAL INFORMATION 1. All Subscribers. a. Name(s) of prospective investor(s): __________________________________ b. Address: _____________________________________________________________ c. Telephone Number: ( )________________________________________________ 2. Subscribers That Are Entities. a. Type of entity: ___ Trust ___ Corporation ___ Partnership Other: ___________________________________________________________ b. State and date of legal formation: ___________________________________ c. Nature of Business: __________________________________________________ d. Was the entity organized for the specific purpose of acquiring the Shares in this Exchange? Yes ___ No ___ e. Federal tax identification number: ___________________________________ E-9 3. Subscribers Who Are Individuals. a. State where registered to vote: ______________________________________ b. Social Security Number: ______________________________________________ c. Please state the subscriber's education and degrees earned: __________
Degree School Year ------ ------ ---- --- --------------------------------------------------- --- --- --------------------------------------------------- ---
d. Current occupation (if retired, describe last occupation): Employer: _______________________________________________________________ Nature of Business: _____________________________________________________ Position: _______________________________________________________________ Business Address: _______________________________________________________ Telephone Number: ( )___________________________________________________ 4. Accreditation. Does the subscriber satisfy one or more of the following accredited investor requirements? Contact the Company if none of the following is applicable. Investor is: [_] A natural person whose net worth (or joint net worth with my spouse) is in excess of $1,000,000 as of the date hereof. [_] A natural person whose income in the prior two years was, and whose income in the current year is reasonably expected to be in excess of $200,000 or whose joint income with my spouse in the prior two years was, and is reasonably expected to be in the current year in excess of $300,000. [_] A director or executive officer of VICAR Recap, Inc. [_] A trust with total assets in excess of $5,000,000, not formed for the specific purpose of investing in the Shares of VICAR Recap, Inc., whose purchases are directed by a sophisticated person, who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of an investment in the Shares of VICAR Recap, Inc. [_] A "bank", "savings and loan association", or "insurance company" as defined in the Securities Act of 1933. [_] A broker/dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. [_] An investment company registered under, or a "business development company" as defined in Section 2(a)(48) of the Investment Company Act of 1940. [_] A Small Business Investment Company licensed by the U.S. Small Business Administration under the Small Business Investment Act of 1958. E-10 [_] A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and having total assets in excess of $5,000,000. [_] An "employee benefit plan" as defined in the Employee Retirement Income Security Act of 1974 (a "Plan") which has total assets in excess of $5,000,000. [_] A Plan whose investment decisions, including the decision to subscribe for the Shares of VICAR Recap, Inc., are made solely by (i) a "plan fiduciary" as defined in Section 3(21) of the Employee Retirement Income Security Act of 1974, which includes a bank, a savings and loan association, an insurance company or a registered investment adviser, or (ii) an "accredited investor" as defined under Rule 501(a) of the Securities Act of 1933. [_] A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940. [_] Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business Trust, or partnership, not formed for the specific purpose of investing in the Shares and having total assets in excess of $5,000,000. [_] Any entity in which all of the equity owners meet one of the above descriptions. 5. Trusts. Does the trust meet the following tests: a. Has total assets in excess of $5,000,000? Yes ___ No ___ b. Was formed for the purpose of the investment in the Shares in this Exchange? Yes ___ No ___ c. Are the purchases by the Trust directed by a sophisticated investor who, alone or with his or her subscriber representative, understands the merits and risks of the investment in the Shares? Yes ___ No ___ [The remainder of this page is blank] E-11 INDIVIDUAL(S) SIGN HERE: _____________________________________ (Signature) _____________________________________ (Print Name) _____________________________________ (Address) Social Security Number: _____________ Spouse of Subscriber: _____________________________________ (Signature) ORGANIZATIONS SIGN HERE: _____________________________________ (Print Name of Organization) By: _________________________________ (Signature) _____________________________________ (Print Name and Title) _____________________________________ (Address) Federal ID Number: __________________ E-12 CONFIDENTIAL PURCHASER REPRESENTATIVE QUESTIONNAIRE VICAR RECAP, INC. A Delaware Corporation 1. Has the subscriber relied on the advice of a Purchaser Representative in connection with evaluating the merits and risks of the Purchase of the Shares in the Exchange? Yes ___ No ___ If yes, please give the name, address and telephone number of the person who is acting as the Purchaser Representative. Name: ______________________________________________________________________ Address: ___________________________________________________________________ Telephone number: ( ) _____________________________________________________ 2. How often does the subscriber invest in securities? Often Occasionally Never 3. Please list below the subscriber's most recent investments (up to three):
Name of Amount of Investment Investment ---------- ---------- ---- ---- ----
4. Does the subscriber, either alone or together with its Purchaser Representative identified above, have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares in the Exchange? Yes ___ No ___ 5. Does the subscriber, either alone by reason of its business or financial experience or together with its Purchaser Representative, have the capacity to protect its own interests in connection with the contribution of the Rollover Shares in exchange for the Shares in the Exchange? Yes ___ No ___ 6. Is the subscriber (or the trust beneficiary for which it is the fiduciary) able to bear the economic risk of the Investment, including a complete loss of the investment in the Shares? Yes ___ No ___ 7. Does the subscriber have any other investments or contingent liabilities which could cause the need for sudden cash requirements in excess of cash readily available to the subscriber? Yes ___ No ___ E-13 If Yes, explain: ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 8. Does the subscriber have a net worth or joint net worth with his or her spouse which is at least five times as great as the fair market value of the Shares subscribed for in the Exchange? Yes ___ No ___ 9. If 25% or more of the subscriber's total assets are represented by investments in the subscriber's own company or real estate, are all liabilities associated with them included as personal liabilities? Yes ___ No ___ If No, what is the dollar amount of each such liability? 10. Has the subscriber ever been subject to bankruptcy, reorganization or debt restructuring? Yes ___ No ___ If Yes, provide details: ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 11. Is the subscriber involved in any litigation which, if an adverse decision occurred, would adversely affect the subscriber's financial condition? Yes ___ No ___ If Yes, provide details: ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 12. Does the subscriber confirm that neither the subscriber nor the subscriber's broker nor Purchaser Representative became aware of or was introduced to the Company by means of any general advertisement? Yes ___ No ___ 13. Does the subscriber confirm that the foregoing statements are complete and accurate to the best of its knowledge and belief, and that it undertakes to notify the Company regarding any material change in the information set forth above prior to the Closing of the Exchange? Yes ___ No ___ [The remainder of this page is blank] E-14 INDIVIDUAL(S) SIGN HERE: _____________________________________ (Signature) _____________________________________ (Print Name) _____________________________________ (Address) Social Security Number: _____________ Spouse of Subscriber: _____________________________________ (Signature) ORGANIZATIONS SIGN HERE: _____________________________________ (Print Name of Organization) By: _________________________________ (Signature) _____________________________________ (Print Name and Title) _____________________________________ (Address) Federal ID Number: __________________ E-15 EX-7.5 6 0006.txt STOCK PURCHASE AGREEMENT DATED MARCH 30, 2000 Exhibit 7.5 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of March 30, 2000, by and between Robert L. Antin, an individual (the "Seller"), and Green Equity Investors III, L.P., a Delaware limited partnership (the "Purchaser"). WHEREAS, Veterinary Centers of America, Inc., a Delaware corporation (the "Company"), Vicar Operating, Inc., a Delaware corporation and wholly owned subsidiary of Company ("Operating Company"), and Vicar Recap, Inc., a Delaware corporation ("Recap"), are entering into an Agreement and Plan of Merger, dated as of March 30, 2000, (as may be modified or amended from time to time, the "Merger Agreement"), which provides, among other things, that prior to the Merger the Company will contribute all of its assets, properties, business operations, and liabilities to Operating Company, followed by the merger of Recap with and into Company with Company as the surviving corporation (the "Merger"); WHEREAS, subject to the consummation of the Merger, the Seller desires to sell, and the Purchaser desires to purchase, all of the shares (not to exceed 919,259 shares) (the "Shares") of the common stock, $.001 par value per share, of the Company (the "Common Stock") beneficially held by Seller at the time of the Closing hereunder (other than shares which Seller is obligated to transfer to Recap pursuant to the terms and conditions set forth in that certain Exchange and Subscription Agreement dated as of the date hereof) for the consideration and on the terms set forth in this Agreement; NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements contained herein, the Purchaser and the Seller hereby agree as follows: 1. Purchase of the Shares. ---------------------- 1.1 The Purchase. Upon the terms and subject to the conditions set ------------ forth herein, the Purchaser agrees to purchase from the Seller, and the Seller agrees to sell to the Purchaser (the "Purchase"), all of the Seller's right, title and interest in the Shares at a price of $15.00 per share (the "Purchase Price"). 1.2 The Closing. The closing of the Purchase of the Shares and the ----------- other transactions contemplated by this Agreement (the "Closing") shall take place immediately prior to the closing of the Merger. At the Closing of the Purchase, the Seller shall deliver to the Purchaser certificates evidencing all of the Shares together with stock powers separate from certificate with signatures guaranteed sufficient to cause the Shares to be transferred to the name of the Purchaser, and the Purchaser shall deliver to the Seller immediately available funds as payment by wire transfer of the Purchase Price for such Shares to an account designated by the Seller. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date." 2. Representations, Warranties and Covenants of Seller. The Seller --------------------------------------------------- represents, warrants and covenants to the Purchaser as follows: 2.1 Competency. The Seller is an individual with principal residence ---------- in the State of California. The Seller is of legal age, competent to enter into a contractual obligation, and a citizen of the United States of America. 2.2 Title; No Encumbrances. The Seller has and on the Closing Date: ---------------------- (a) is the exclusive owner of the Shares and is entitled to all rights evidenced thereby; and (b) has the full right, power and authority to sell, assign, transfer and deliver such Shares hereunder, free and clear of any and all claims, liens, pledges, charges, restrictions, encumbrances, security interests or other rights or interests of any person whatsoever. Upon the transfer of the Shares to the Purchaser pursuant to this Agreement, the Purchaser will receive valid, good and marketable title to the Shares, free and clear of any and all claims, liens, pledges, charges, restrictions, encumbrances, security interests or other rights or interests of any person whatsoever. 2.3 Successors and Assigns. Seller acknowledges and represents that ---------------------- all authority conferred or agreed to be conferred in this Agreement shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the Seller and this Agreement shall not be affected by, and shall survive, the death or incapacity of the Seller. 2.4 No Conflict. The execution and delivery of this Agreement by the ----------- Seller do not, and the consummation and performance by the Seller of this Agreement and the transactions contemplated hereby will not, (i) conflict with or violate any foreign, federal, state or local law, statute, treaty, ordinance, rule, regulation, order, writ, injunction, decree or judgment applicable to the Seller or by which any of his properties or assets is bound or affected, or (ii) require any consent, approval, authorization or permit of, or filing with or notification to, (a) any governmental or regulatory authority, either domestic or foreign ("Governmental Entities"), or (b) any third party. 2.5 No Litigation. There is no claim, action, suit, litigation, ------------- proceeding, or arbitration or investigation of any kind, at law or in equity, (including actions or proceedings seeking injunctive relief) pending or, to the knowledge of the Seller, threatened against, affecting or involving the Seller which seeks to prevent or challenge the transactions contemplated hereby, or which seeks to challenge the record and/or beneficial ownership of the Shares by the Seller. The Seller is not subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or continuing investigation by, any Governmental Entity, or any judgment, order, writ, injunction, rule, decree or award of any Governmental Entity or arbitrator (collectively, "Orders") including, without limitation, cease-and-desist or other orders, except for Orders that do not prevent or challenge the transactions contemplated hereby and do not challenge the record and/or beneficial ownership of the Shares by the Seller. 2.6 No Broker. No broker, finder or investment banker is entitled to --------- any brokerage, finder's or other fee or commission in connection with the Purchase based upon arrangements made by or on behalf of the Seller. 3. Conditions to the Obligations of the Parties. -------------------------------------------- -2- 3.1 Merger Agreement Conditions. The conditions to the Merger --------------------------- Agreement shall have been satisfied or waived and the parties to the Merger Agreement shall have represented that they intend to consummate the Merger upon consummation of the Purchase and Exchange. 3.2 Legal Proceedings. No Governmental Entity shall have notified ----------------- either party to this Agreement that it intends to commence proceedings to restrain or prohibit the transactions contemplated hereby or force rescission, unless such Governmental Entity shall have withdrawn such notice and abandoned any such proceedings prior to the time which otherwise would have been the Closing Date. 3.3 Representations and Warranties. All representations and ------------------------------ warranties in this Agreement by the Seller shall be true and correct in all material respects on the date when made and on and as of the Closing Date with the same effect as if made on and as of the Closing Date. 3.4 Covenants and Agreements. The Seller shall have performed or ------------------------ complied in all material respects with all covenants and conditions contained in this Agreement or in any agreement, certificate or instrument to be executed pursuant hereto required to be performed or complied with at or prior to the Closing. 4. Miscellaneous. ------------- 4.1 Additional Agreements. --------------------- (a) Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws or regulations to consummate and make effective all of the transactions contemplated by this Agreement. In case at any time after the Closing of the transactions contemplated by this Agreement any further action is necessary to carry out the purposes of this Agreement, to vest the Purchaser with full title to all of the Shares, or to transfer record and beneficial ownership of the Shares to the Purchaser and to have a certificate representing the Shares issued in the name of the Purchaser, the Seller shall take all such necessary action as may be requested by the Purchaser. (b) In the event that after the Closing, the Merger fails to be consummated for any reason whatsoever and the Merger Agreement terminated, the parties hereto agree that concurrently with the termination of the Merger Agreement, regardless of the price at which the Common Stock of the Company is quoted to be at that time on NASDAQ or any other national securities exchange on which the Common Stock of the Company is listed, the Purchaser shall deliver to the Seller certificates evidencing all of the Shares together with stock powers separate from certificate with signatures guaranteed sufficient to cause the Shares to be transferred to the name of the Seller, and the Seller shall deliver to the Purchaser immediately available funds as payment by wire transfer of the Purchase Price to an account designated by the Purchaser. 4.2 Successors and Assigns. This Agreement shall be binding upon, ---------------------- inure to the benefit of, and be enforceable by, the parties hereto and their respective -3- successors and permitted assigns; provided, however, that neither this Agreement nor any right or obligation hereunder may be assigned by either party without the prior written consent of the other party. 4.3 Governing Law. This Agreement has been negotiated and entered ------------- into in the State of Delaware and all questions with respect to this Agreement and the rights and liabilities of the parties shall be governed by the laws of the State of California, regardless of the choice of law provisions of California or of any other jurisdiction. 4.4 Headings. The article and section headings in this Agreement -------- are inserted only as a matter of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of any particular article or section. 4.5 Counterparts. This Agreement may be executed simultaneously in ------------ two counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. 4.6 Complete Agreement. This Agreement and any documents referred to ------------------ herein or executed contemporaneously herewith constitute the parties' entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings. 4.7 Waiver. No waiver of any breach or default hereunder shall be ------ considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. 4.8 Severability. If any provision of this Agreement shall be ------------ invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein. 4.9 Survival of Representations and Warranties and Agreements. --------------------------------------------------------- All of the representations, warranties, covenants and agreements in this Agreement and in any other instrument or document delivered in connection herewith or in any instrument delivered pursuant to this Agreement shall be true on the date hereof and on the Closing Date and shall survive the Closing. 4.10 Legal Fees. If any action is brought to enforce or interpret the ---------- terms, conditions or provisions of this Agreement, the prevailing party in such action shall be entitled to its reasonable attorneys' fees, costs and necessary disbursements incurred in connection therewith, in addition to any other relief to which such party may be entitled. 4.11 Specific Performance. Each of the parties hereto acknowledges -------------------- and agrees that the other party hereto would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties hereto agrees that each shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this agreement and the terms and provisions hereof in -4- any action instituted in any court of the United States or any state thereof having subject matter jurisdiction, in addition to any other remedy to which such party may be entitled, at law or in equity. [NEXT PAGE IS SIGNATURE PAGE] -5- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth hereinabove. PURCHASER GREEN EQUITY INVESTORS III, L.P. By: GEI Capital III, LLC Its general partner By: /s/ John Danhakl ---------------------------- Name: John Danhakl Title: Manager SELLER /s/ Robert L. Antin -------------------------------- Robert L. Antin -6- EX-7.6 7 0007.txt JOINT FILING AGREEMENT DATED MAY 26, 2000 Exhibit 7.6 AGREEMENT REGARDING JOINT FILING OF STATEMENT ON SCHEDULE 13D In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, each of the persons named below agrees to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, par value $.001 per share, of Veterinary Centers of America, Inc., a Delaware corporation, and further agrees that this Joint Filing Agreement be included as an exhibit to such filings provided that, as contemplated by Section 13d-1(k)(l)(ii), no person shall be responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. Dated: As of May 26, 2000 GREEN EQUITY INVESTORS III, L.P. By: GEI Capital III, L.L.C. its general partner By: /s/ John Danhakl ------------------------- Name: John Danhakl Title: Manager VICAR RECAP, INC. By: /s/ John Danhakl ------------------------------ Name: John Danhakl Title: President -----END PRIVACY-ENHANCED MESSAGE-----