AGREEMENT AND PLAN OF MERGER BY AND BETWEEN FC-GEN ACQUISITION, INC. AND GENESIS HEALTHCARE CORPORATION

 

 

_________________________________________________________________________________________________________________________

 

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

FC-GEN ACQUISITION, INC.

 

AND

GENESIS HEALTHCARE CORPORATION*

 

January 15, 2007

 

* This Agreement will promptly be amended to include a wholly-owned Pennsylvania subsidiary to be formed by FC-Gen Acquisition, Inc., as a constituent party.
_________________________________________________________________________________________________________________________

TABLE OF CONTENTS
						Page
ARTICLE I		DEFINITIONS				1
Section 1.1				Definitions		1
Section 1.2				Terms Generally		9
ARTICLE II		THE MERGER				10
Section 2.1				The Merger		10
Section 2.2				Closing		10
Section 2.3				Effective Time		10
Section 2.4				Effects of the Merger		10
Section 2.5				Organizational Documents		10
Section 2.6				Directors and Officers of Surviving Corporation		11
ARTICLE III		EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
		CONSTITUENT CORPORATIONS				11
Section 3.1				Conversion of Securities		11
Section 3.2				Payment of Cash for Merger Shares		12
Section 3.3				Treatment of Options and Other Awards		14
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF THE COMPANY				14
Section 4.1				Corporate Existence and Power		14
Section 4.2				Corporate Authorization		15
Section 4.3				Governmental Authorization		16
Section 4.4				Non-Contravention		16
Section 4.5				Capitalization		16
Section 4.6				Company Subsidiaries and Joint Ventures		17
Section 4.7				Reports and Financial Statements		18
Section 4.8				Undisclosed Liabilities		19
Section 4.9				Disclosure Documents		19
Section 4.10				Absence of Certain Changes or Events		20
Section 4.11				Litigation		20
Section 4.12				Taxes		20

 

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Section 4.13				ERISA		21
Section 4.14				Compliance with Laws		23
Section 4.15				Finders’ Fees		24
Section 4.16				Opinion of Financial Advisor		24
Section 4.17				Affiliate Transactions		24
Section 4.18				Rights Agreement; Anti-Takeover Provisions		24
Section 4.19				Voting		25
Section 4.20				Contracts		25
Section 4.21				Labor and Employee Matters		27
Section 4.22				Environmental		27
Section 4.23				Property		27
Section 4.24				Intellectual Property; Software		28
Section 4.25				Insurance		29
Section 4.26				Health Regulatory Compliance		30
ARTICLE V		REPRESENTATIONS AND WARRANTIES OF PARENT				30
Section 5.1				Corporate Existence and Power		30
Section 5.2				Corporate Authorization		30
Section 5.3				Governmental Authorization		31
Section 5.4				Non-Contravention		31
Section 5.5				Disclosure Documents		31
Section 5.6				Finders’ Fees		31
Section 5.7				Financing		31
Section 5.8				Certain Arrangements		33
Section 5.9				Capitalization of Merger Sub		33
Section 5.10				Absence of Litigation		33
Section 5.11				Ownership of Company Stock		33
Section 5.12				No Source of Conflicting Interests; Health Regulatory
				Compliance		33
ARTICLE VI		CONDUCT OF BUSINESS PENDING THE MERGER				34
Section 6.1				Conduct of the Company and Subsidiaries		34
Section 6.2				Conduct of Parent and Merger Sub		37
Section 6.3				No Control of Other Party’s Business		37

 

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ARTICLE VII		ADDITIONAL AGREEMENTS				38
Section 7.1				Shareholder Meeting; Proxy Material		38
Section 7.2				Reasonable Best Efforts		39
Section 7.3				Access to Information		41
Section 7.4				No Solicitation		42
Section 7.5				Director and Officer Liability		45
Section 7.6				Takeover Statutes; Rights Agreement		46
Section 7.7				Public Announcements		47
Section 7.8				Notice of Current Events		47
Section 7.9				Employee Matters		47
Section 7.10				Financing		48
Section 7.11				Actions with Respect to Existing Debt		50
Section 7.12				Insurance Matters		52
Section 7.13				Section 16(b)		52
Section 7.14				Resignation of Directors		52
Section 7.15				Capital Expenditures		52
Section 7.16				Other Transactions		52
Section 7.17				Merger Sub		53
ARTICLE VIII		CONDITIONS TO THE MERGER				54
Section 8.1				Conditions to the Obligations of Each Party		54
Section 8.2				Conditions to the Obligations of Parent and Merger Sub		54
Section 8.3				Conditions to the Obligations of the Company		55
ARTICLE IX		TERMINATION				55
Section 9.1				Termination		55
Section 9.2				Termination Fee		57
Section 9.3				Effect of Termination		59
ARTICLE X		MISCELLANEOUS				59
Section 10.1				Notices		59
Section 10.2				Representations and Warranties		60
Section 10.3				Expenses		61
Section 10.4.				Amendment		61

 

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Section 10.5				Waiver		61
Section 10.6				Successors and Assigns		61
Section 10.7				Governing Law		61
Section 10.8				Counterparts; Effectiveness; Third Party Beneficiaries		61
Section 10.9				Severability		62
Section 10.10				Entire Agreement		62
Section 10.11				Remedies		62
Section 10.12				Jurisdiction		62
Section 10.13				Authorship; Interpretation		63
INDEX OF EXHIBITS
Exhibit A		Form of Articles of Incorporation of Merger Sub
Exhibit B		Form of Bylaws of Merger Sub

 

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     This AGREEMENT AND PLAN OF MERGER (as to be amended (the “ Amendment ”) to include a Pennsylvania corporation to be formed and wholly-owned by FC-Gen Acquisition, Inc. (“ Merger Sub ”), as a constituent party, this “ Agreement ”) is made and entered into as of January 15, 2007, by and between GENESIS HEALTHCARE CORPORATION, a Pennsylvania corporation (the “ Company ”) and FC-GEN ACQUISITION, INC., a Delaware corporation (“ Parent ”).

     WHEREAS, the parties intend that Merger Sub be merged with and into the Company upon the terms set forth herein, with the Company surviving the Merger as a wholly owned subsidiary of Parent.

     WHEREAS, the Board of Directors of the Company has (i) determined that it is in the best interests of the Company to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend adoption of this Agreement by the shareholders of the Company.

     WHEREAS, the Board of Directors of Parent has unanimously approved this Agreement and declared it advisable for Parent to enter into this Agreement.

     WHEREAS, the Company, Parent and, from and after the date of the Amendment (the “ Amendment Date ”), Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe certain conditions to the Merger, as set forth herein.

     NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, intending to be legally bound, the parties hereto agree as follows:

      Section 1.1      Definitions .  For purposes of this Agreement, the following terms have the respective meanings set forth below:

     “ 2013 Notes ” has the meaning set forth in Section 7.11(a) .

     “ 2025 Notes ” has the meaning set forth in Section 7.11(a) .

     “ Acceptable Confidentiality Agreement ” has the meaning set forth in Section 7.4(e)(i) .

     “ Affiliate ” means, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, such Person. For purposes of this definition, the term “ control ” (including the correlative terms “ controlling ,” “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

     “ Agreement ” has the meaning set forth in the Preamble.

     “ Amendment ” has the meaning set forth in the Preamble.

     “ Amendment Date ” has the meaning set forth in the Recitals.

     “ Articles of Merger ” has the meaning set forth in Section 2.3 .

     “ Bankruptcy Shares ” has the meaning set forth in Section 4.5(a) .

     “ Break-Up Expenses ” has the meaning set forth in Section 9.2(f) .

     “ Business Day ” means any day other than the days on which banks in New York, New York are not required or authorized to close.

     “ Certificate ” has the meaning set forth in Section 3.1(c) .

     “ Claim ” has the meaning set forth in Section 7.5(b) .

     “ Closing ” has the meaning set forth in Section 2.2 .

     “ Closing Date ” has the meaning set forth in Section 2.2 .

     “ Code ” means the Internal Revenue Code of 1986, as amended. “ Common Stock ” has the meaning set forth in Section 3.1(a) . “ Company ” has the meaning set forth in the Preamble.

     “ Company Acquisition Proposal ” has the meaning set forth in Section 7.4(e)(ii) .

     “ Company Benefit Plans ” has the meaning set forth in Section 4.13(a) .

     “ Company Disclosure Letter ” has the meaning set forth in the preamble to Article IV .

     “ Company Employees ” means any current, former or retired employee, officer, consultant, independent contractor or director of the Company or any of its Subsidiaries.

     “ Company Intellectual Property ” has the meaning set forth in Section 4.24(a) .

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     “ Company Joint Venture ” means the joint venture arrangements of the Company set forth under the caption “Company Joint Ventures” in Section 4.1 of the Company Disclosure Letter.

     “ Company Management Agreement ” has the meaning set forth in Section 4.20(b) .

     “ Company Options ” means all options to acquire Shares from the Company granted under the Company Stock Plans outstanding immediately prior to the Effective Time.

     “ Company Property ” means the Owned Real Property and the Leased Real Property.

     “ Company Proxy Statement ” has the meaning set forth in Section 4.9 .

     “ Company Rights ” has the meaning set forth in Section 4.5(a) .

     “ Company Rights Agreement ” has the meaning set forth in Section 4.5(a) .

     “ Company SEC Reports ” has the meaning set forth in Section 4.7(a) .

     “ Company Securities ” has the meaning set forth in Section 4.5(b) .

     “ Company Shareholder Meeting ” has the meaning set forth in Section 7.1(a) .

     “ Company Stock Plans ” means the Company’s Amended and Restated 2003 Stock Incentive Plan, the 2003 Stock Option Plan and the Company’s Deferred Compensation Plan.

     “ Confidentiality Agreement ” means the Confidentiality Agreement between Formation Capital, LLC and Genesis HealthCare Corporation, dated as of December 1, 2006.

     “ Consent Solicitation ” has the meaning set forth in Section 7.11(c) .

     “ Contract ” has the meaning set forth in Section 4.4 .

     “ Copyrights ” has the meaning set forth in Section 4.24(a) .

     “ Current Employee ” has the meaning set forth in Section 7.9(a) .

     “ Current Policy ” has the meaning set forth in Section 7.5(c) .

     “ Damages ” has the meaning set forth in Section 7.5(b) .

     “ Debt Financing ” has the meaning set forth in Section 5.7 .

     “ Debt Financing Commitments ” has the meaning set forth in Section 5.7 .

     “ Debt Tender Offers ” has the meaning set forth in Section 7.11(a) .

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     “ Disclosed Contract ” has the meaning set forth in Section 4.20(c) .

     “ DOJ ” has the meaning set forth in Section 7.2(b) .

     “ Effective Time ” has the meaning set forth in Section 2.3 .

     “ Employee Benefit Plan ” has the meaning set forth in Section 3(3) of ERISA.

     “ End Date ” has the meaning set forth in Section 9.1(b)(i) .

     “ Environmental Claims ” means, in respect of any Person, (i) any and all administrative, regulatory or judicial actions, suits, orders, decrees, demands, directives, Claims, liens, proceedings or written notices of noncompliance or violation by any Governmental Authority alleging any violation of any Environmental Laws or any liability arising out of the Release of, or exposure to, any Hazardous Materials at any location, whether or not owned, operated, leased or managed by such Person, or (ii) any and all indemnification, cost recovery, compensation or injunctive relief resulting from the presence or Release of, or exposure to, any Hazardous Materials.

     “ Environmental Laws ” means all federal, state, local and foreign laws (including international conventions, protocols and treaties), common law, rules, regulations, orders, decrees, judgments, binding agreements or Environmental Permits issued, promulgated or entered into, by or with any Governmental Authority, relating to pollution, the Release of or exposure to Hazardous Materials, natural resources or the protection, investigation or restoration of the environment as in effect on the date of this Agreement.

     “ Environmental Permits ” means all permits, licenses, registrations and other governmental authorizations required under applicable Environmental Laws.

     “ Equity Financing ” has the meaning set forth in Section 5.7 .

     “ Equity Financing Commitment ” has the meaning set forth in Section 5.7 .

     “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

     “ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that would be deemed a “single employer” with the first entity, trade or business by operation of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.

     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “ Facility ” has the meaning set forth in Section 4.23(f) .

     “ Financing ” has the meaning set forth in Section 5.7 .

     “ Financing Commitments ” has the meaning set forth in Section 5.7 .

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     “ FTC ” has the meaning set forth in Section 7.2(b) .

     “ GAAP ” means United States generally accepted accounting principles.

     “ Governmental Authority ” means any nation or government or any agency, public or regulatory authority, instrumentality, department, commission, court, arbitrator, ministry, tribunal or board of any nation or government or political subdivision thereof, in each case, whether foreign or domestic and whether national, supranational, federal, provincial, state, regional, local or municipal.

     “ Governmental Damages ” means (i) any penalties or fines paid by the Company or any of its Subsidiaries to any Governmental Authority or (ii) any restitution paid by the Company or any of its Subsidiaries to a third party, in each case, resulting from the (x) conviction (including as a result of the entry of a guilty plea, a consent judgment or a plea of nolo contendere) of the Company or any of its Subsidiaries of a crime or (y) settlement with any Governmental Authority for the purpose of closing a Governmental Investigation.

     “ Governmental Investigation ” means an investigation by a Governmental Authority for the purpose of imposing criminal sanctions on the Company or any of its Subsidiaries.

     “ Guarantee ” has the meaning set forth in Section 5.7 .

     “ Guarantor ” has the meaning set forth in Section 5.7 .

     “ Hazardous Materials ” means (i) any substance, material or waste that is listed, classified or regulated as hazardous or toxic or a pollutant or contaminant under any Environmental Laws; or (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material, toxic molds or radon.

     “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     “ Indemnified Party ” has the meaning set forth in Section 7.5(b) .

     “ Indenture Amendments ” has the meaning set forth in Section 7.11(c) .

     “ Insurance Amount ” has the meaning set forth in Section 7.5(c) .

     “ Intellectual Property ” has the meaning set forth in Section 4.24(a) .

     “ Intercompany Debt ” means any loan, advance or other obligation solely among the Company and/or any of its wholly owned Subsidiaries.

     “ IP Licenses ” has the meaning set forth in Section 4.24(a) .

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     “ Knowledge ” means the actual knowledge of the Persons set forth in Section 1.1 of the Company Disclosure Letter.

     “ Law ” means applicable statutes, common laws, rules, ordinances, regulations, codes, orders, judgments, injunctions, writs, decrees, governmental guidelines or interpretations having the force of law or bylaws, in each case, of a Governmental Authority.

     “ Leased Real Property ” has the meaning set forth in Section 4.23(b) .

     “ Liens ” means, with respect to any asset or property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset or property.

     “ Material Adverse Effect on the Company ” means any event, state of facts, circumstance, development, change, effect or occurrence (an “ Effect ”) that is materially adverse to the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole, other than any Effect (i) resulting from or relating to changes in general economic or political conditions or the securities, credit or financial markets in general; (ii) generally affecting the industries in which the Company and its Subsidiaries operate; (iii) occurring after the date hereof in Laws applicable to the Company or any of the Company’s Subsidiaries or any of their respective properties or assets, or in applicable accounting regulations or principles or interpretations thereof; (iv) resulting from any outbreak or escalation of hostilities or war or any act of terrorism (other than any of the foregoing that causes any damage or destruction to or renders unusable any facility or property of the Company or any of its Subsidiaries, in which case the Effect may be considered in determining whether there is a Material Adverse Effect on the Company); (v) resulting from or related to any failure to meet internal or published projections, forecasts or revenue or earning predictions for any period (provided that the underlying causes of such failure may be considered in determining whether there is a Material Adverse Effect on the Company); (vi) resulting from the announcement or the existence of, or compliance with the requirements of, this Agreement and the transactions contemplated hereby; or (vii) resulting from any action taken by the Company at the request or with the prior written consent of Parent, except, in the case of the foregoing clauses (i), (ii), (iii) or (iv), to the extent such Effect has a materially disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to other for profit participants in the industries and in the geographic markets in which the Company conducts its businesses after taking into account the size of the Company relative to such other for profit participants.

     “ Material Subsidiaries ” means the Subsidiaries of the Company set forth under the caption “Material Subsidiaries” in Section 4.1 of the Company Disclosure Letter.

     “ Merger ” has the meaning set forth in Section 2.1 .

     “ Merger Consideration ” has the meaning set forth in Section 3.1(c) .

     “ Merger Shares ” has the meaning set forth in Section 3.1(c) .

     “ Merger Sub ” has the meaning set forth in the Preamble.

     “ Multiemployer Plan ” has the meaning set forth in Section 4.13(e) .

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     “ New Financing Commitments ” has the meaning set forth in Section 7.10(b) .

     “ Notes ” has the meaning as set forth in Section 7.11(a) .

     “ Offer Documents ” has the meaning set forth in Section 7.11(d) .

     “ Option Amount ” has the meaning set forth in Section 3.3(a) .

     “ Order ” has the meaning set forth in Section 8.1(b) .

     “ Other Antitrust Laws ” means any Law, other than the HSR Act, enacted by any Governmental Authority relating to antitrust matters or regulating competition.

     “ Owned Real Properties ” or “ Owned Real Property ” has the meaning set forth in Section 4.23(a) .

     “ Parent ” has the meaning set forth in the Preamble.

     “ Parent Affiliate ” means any Affiliate of Parent or Merger Sub.

     “ Parent Fee ” means $50 million.

     “ Parent Material Adverse Effect ” means any Effect that prevents or materially delays the performance by Parent or Merger Sub of its respective obligations hereunder or the consummation by Parent or Merger Sub of the Merger or the other transactions contemplated by this Agreement.

     “ Parent Parties ” has the meaning set forth in Section 9.2(e) .

     “ Patents ” has the meaning set forth in Section 4.24(a) .

     “ Paying Agent ” has the meaning set forth in Section 3.2(a) .

     “ PBCL ” has the meaning set forth in Section 2.1 .

     “ Permits ” means any licenses, franchises, permits, certificates, consents, approvals or other similar authorizations of, from or by a Governmental Authority possessed by or granted to or necessary for the ownership of the material assets or conduct of the business of the Company or its Subsidiaries.

     “ Permitted Liens ” means (i) Liens for Taxes, assessments and governmental charges or levies not yet due and payable or that are being contested in good faith and by appropriate proceedings; (ii) mechanics’, carriers’, workmen’s, repairmen’s, materialmen’s or other Liens or security interests that arise in the ordinary course of business or that are being contested in good faith and by appropriate proceedings; (iii) leases, subleases and licenses (other than capital leases and leases underlying sale and leaseback transactions); (iv) Liens imposed by applicable Law; (v) pledges or deposits to secure obligations under workers’ compensation Laws or similar legislation or to secure public or statutory obligations; (vi) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance

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bonds and other obligations of a similar nature, in each case in the ordinary course of business; (vii) easements, covenants and rights of way (unrecorded and of record) and other similar restrictions of record, and zoning, building and other similar restrictions, in each case that do not adversely affect in any material respect the current use of the applicable property owned, leased, used or held for use by the Company or any of its Subsidiaries; (viii) Liens the existence of which are specifically disclosed in the notes to the consolidated financial statements of the Company included in any Company SEC Report filed prior to the date of this Agreement; and (ix) any other Liens that do not secure a liquidated amount, that have been incurred or suffered in the ordinary course of business and that would not, individually or in the aggregate, have a Material Adverse Effect on the Company.

     “ Person ” means any individual, corporation, company, limited liability company, partnership, association, trust, joint venture or any other entity or organization, whether incorporated or unincorporated, including any government or political subdivision or any agency or instrumentality thereof.

     “ Pre-Acquisition Reorganization ” has the meaning set forth in Section 7.16 .

     “ Pre-Closing Directors ” means any Persons who are directors of the Company or any Subsidiary of the Company at any time prior to the Effective Time.

     “ Preferred Stock ” has the meaning set forth in Section 4.5(a) .

     “ Proceeding ” has the meaning set forth in Section 4.11 .

     “ Real Property Lease ” has the meaning set forth in Section 4.23(b) .

     “ Recommendation ” has the meaning set forth in Section 7.1(a) .

     “ Recommendation Withdrawal ” has the meaning set forth in Section 7.1(a) .

     “ Release ” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment.

     “ Representatives ” has the meaning set forth in Section 7.4(a) .

     “ Requisite Consent ” has the meaning set forth in Section 7.11(c) .

     “ Requisite Shareholder Vote ” has the meaning set forth in Section 4.2(a) .

     “ Restricted Share ” has the meaning set forth in Section 3.3(b) .

     “ SEC ” means the United States Securities and Exchange Commission.

     “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “ Shares ” has the meaning set forth in Section 3.1(a) .

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     “ Software ” has the meaning set forth in Section 4.24(a) .

     “ Subsidiary ,” with respect to any Person, means any other Person of which the first Person owns, directly or indirectly, securities or other ownership interests having voting power to elect a majority of the board of directors or other persons performing similar functions (or, if there are no such voting interests, more than 50% of the equity interests of the second Person).

     “ Superior Proposal ” has the meaning set forth in Section 7.4(e)(iii) .

     “ Surviving Corporation ” has the meaning set forth in Section 2.1 .

     “ Surviving Corporation Plan ” has the meaning set forth in Section 7.9(c) .

     “ Takeover Statute ” has the meaning set forth in Section 4.18 .

     “ Tax ” means all federal, state, local, foreign and other taxes (including withholding and estimated taxes), customs, duties, imposts and other similar governmental charges of any kind or nature whatsoever, together with any related interest, penalties, additions to tax or additional amounts.

     “ Tax Return ” means any return, declaration, report, statement, information statement or other document (including any corresponding schedules, and attachments) filed or required to be filed with a Governmental Authority with respect to Taxes, including any claims for refunds of Taxes, any information returns or reports, and any amendments of or supplements to any of the foregoing.

     “ Termination Fee ” means $50 million.

     “ Trademarks ” has the meaning set forth in Section 4.24(a) .

     “ Trade Secrets ” has the meaning set forth in Section 4.24(a) .

      Section 1.2      Terms Generally .  The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” unless the context expressly provides otherwise. All references herein to Sections, paragraphs, subparagraphs, clauses, Exhibits or Schedules shall be deemed references to Sections, paragraphs, subparagraphs or clauses of, or Exhibits or Schedules to this Agreement, unless the context requires otherwise. Unless otherwise expressly defined, terms defined in this Agreement have the same meanings when used in any Exhibit or Schedule hereto, including the Company Disclosure Letter. Unless otherwise specified, the words “this Agreement,” “herein,” “hereof,” “hereto” and “hereunder” and other words of similar import refer to this Agreement as a whole (including the Schedules, Exhibits and the Company Disclosure Letter) and not to any particular provision of this Agreement. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” Any Contract, instrument or Law defined or referred to herein

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or in any Contract or instrument that is referred to herein means such Contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of Contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

      Section 2.1      The Merger .  On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Pennsylvania Business Corporation Law of 1988, as amended (the “ PBCL ”), at the Effective Time, Merger Sub will merge with and into the Company (the “ Merger ”), the separate corporate existence of Merger Sub will cease and the Company will continue its corporate existence under the PBCL as the surviving corporation in the Merger (the “ Surviving Corporation ”).

      Section 2.2      Closing .  Unless otherwise mutually agreed in writing by the Company and Merger Sub, the closing of the Merger (the “ Closing ”) will take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 W. 52 ^nd St., New York, New York, at 10:00 a.m. on the fifth Business Day after the satisfaction or waiver of the conditions set forth in Article VIII (excluding conditions that, by their terms, cannot be satisfied until the Closing but subject to the satisfaction or waiver of such conditions at the Closing), or at such other place, date and time as the Company and Parent may agree in writing. The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.”

      Section 2.3      Effective Time .  Subject to the provisions of this Agreement, at the Closing, the Company will cause articles of merger (the “ Articles of Merger ”) to be executed, acknowledged and filed with the Department of State of the Commonwealth of Pennsylvania in accordance with the PBCL. The Merger will become effective at such time as the Articles of Merger have been duly filed with the Department of State of the Commonwealth of Pennsylvania or at such later date or time as may be agreed by the Company and Merger Sub in writing and specified in the Articles of Merger in accordance with the PBCL (the effective time of the Merger being hereinafter referred to as the “ Effective Time ”).

      Section 2.4      Effects of the Merge r .  The Merger shall have the effects set forth in this Agreement and the applicable provisions of the PBCL. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Corporation.

      Section 2.5      Organizational Documents .  At the Effective Time, (a) the Articles of Incorporation of the Surviving Corporation shall be amended to read in their entirety as the Articles of Incorporation of Merger Sub read immediately prior to the Effective Time, in the form attached hereto as Exhibit A, except that the name of the Surviving Corporation shall be Genesis Healthcare Corporation and the provision in the Articles of Incorporation of Merger Sub

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naming its incorporator shall be omitted and (b) the bylaws of the Surviving Corporation shall be amended so as to read in their entirety as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, in the form attached hereto as Exhibit B, until thereafter amended in accordance with applicable Law, except that the references to Merger Sub’s name shall be replaced by references to Genesis Healthcare Corporation.

      Section 2.6      Directors and Officers of Surviving Corporation .  The directors of Merger Sub and the officers of the Company (other than those who Merger Sub determines shall not remain as officers of the Surviving Corporation), in each case, as of the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, 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 Articles of Incorporation or bylaws of the Surviving Corporation.

ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS

      Section 3.1      Conversion of Securities .  At the Effective Time, pursuant to this Agreement and by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holders of the Shares:

     (a)      Each share of common stock, par value $.01 per share, of the Company (the “ Common Stock ” or the “ Shares ”) held by the Company as treasury stock (other than Shares held by the rabbi trust under the Company’s Deferred Compensation Plan) or owned by Parent or Merger Sub immediately prior to the Effective Time shall be, automatically and without the need for any action on the part of the holders thereof, canceled and retired and shall cease to exist, and no payment or distribution shall be made or delivered with respect thereto. Each Share owned by any wholly owned Subsidiary of Parent (other than Merger Sub) or any wholly owned Subsidiary of the Company shall remain outstanding after the Effective Time.

     (b)      Each share of common stock, par value $.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.

     (c)      Except as otherwise provided in Section 3.1(a) , each Share (including any Restricted Shares and Bankruptcy Shares) issued and outstanding immediately prior to the Effective Time, shall be, automatically and without the need for any action on the part of the holder thereof, canceled and converted into the right to receive $63 in cash, without interest (the “ Merger Consideration ”), payable to the holder thereof upon surrender of the stock certificate formerly representing such Share (a “ Certificate ”) in the manner provided in Section 3.2 . Such Shares, other than those to be canceled or that remain outstanding pursuant to Section 3.1(a) , sometimes are referred to herein as the “ Merger Shares .”

     (d)      If between the date of this Agreement and the Effective Time the number of outstanding Shares is changed into a different number of shares or a different class, by reason

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of any stock dividend, subdivision, reclassification, recapitalization, split-up, combination, exchange of shares or the like, other than pursuant to the Merger, the amount of Merger Consideration payable per Share shall be correspondingly adjusted.

     Section 3.2      Payment of Cash for Merger Shares .

     (a)      Prior to the Closing Date, the Company shall (i) designate a bank or trust company that is reasonably satisfactory to Parent (the “ Paying Agent ”) and (ii) enter into a paying agent agreement, in form and substance reasonably satisfactory to Parent, with such Paying Agent, to serve as the Paying Agent for the Merger Consideration and payments in respect of the Company Options, unless another agent is designated as provided in Section 3.3(a) . Prior to or concurrent with the Effective Time, Parent shall deposit or cause to be deposited with the Paying Agent, for the benefit of the holders of Merger Shares and Company Options, cash in an aggregate amount sufficient to pay the aggregate Merger Consideration in respect of all Merger Shares outstanding immediately prior to the Effective Time plus the aggregate Option Amounts in respect of all Company Options outstanding immediately prior to the Effective Time. Pending distribution of the cash deposited with the Paying Agent, such cash shall be held in trust for the benefit of the holders of Merger Shares and Company Options outstanding immediately prior to the Effective Time and shall not be used for any other purposes; provided , however , that the Surviving Corporation may direct the Paying Agent to invest such cash in (A) obligations of or guaranteed by the United States of America or any agency or instrumentality thereof, (B) money market accounts, certificates of deposit, bank repurchase agreements or banker’s acceptances of, or demand deposits with, commercial banks having a combined capital and surplus of at least $1,000,000,000 (based on the most recent financial statements of such bank which are then publicly available), or (C) commercial paper obligations rated P-1 or A-1 or better by Standard & Poor’s Corporation or Moody’s Investor Services, Inc. Any profit or loss resulting from, or interest and other income produced by, such investments shall be for the account of the Surviving Corporation.

     (b)      As promptly as practicable after the Effective Time (and in any event within two Business Days thereafter), the Surviving Corporation shall send, or cause the Paying Agent to send, to each record holder of Merger Shares entitled to receive the Merger Consideration a letter of transmittal and instructions for exchanging such holder’s Merger Shares for the Merger Consideration payable therefor. The letter of transmittal will be in customary form and will specify that delivery of Certificates (or effective affidavits of loss in lieu thereof) will be effected, and risk of loss and title will pass, only upon delivery of the Certificates (or effective affidavits of loss in lieu thereof) to the Paying Agent. Upon surrender of a Certificate or Certificates (or effective affidavits of loss in lieu thereof) to the Paying Agent together with a properly completed and duly executed letter of transmittal and any other documentation that the Paying Agent may reasonably require, the record holder thereof shall be entitled to receive the Merger Consideration payable in exchange therefor, less any amounts required to be deducted and withheld under any applicable Tax Law. Until so surrendered and exchanged, each such Certificate shall, after the Effective Time, be deemed to represent only the right to receive the Merger Consideration, and until such surrender and exchange, no cash shall be paid to the holder of such outstanding Certificate in respect thereof.

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     (c)      If payment is to be made to a Person other than the registered holder of the Merger Shares formerly represented by the Certificate or Certificates surrendered in exchange therefor, it shall be a condition to such payment that the Certificate or Certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Paying Agent any applicable stock transfer taxes required as a result of such payment to a Person other than the registered holder of such Merger Shares or establish to the reasonable satisfaction of the Paying Agent that such stock transfer taxes have been paid or are not payable.

     (d)      After the Effective Time, there shall be no further transfers on the stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time other than to settle transfers of Shares that occurred prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent, such shares shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article III .

     (e)      If any cash deposited with the Paying Agent remains unclaimed 12 months after the Effective Time, such cash shall be returned to the Surviving Corporation upon demand, and any holder who has not surrendered such holder’s Certificates in exchange for the Merger Consideration prior to that time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration. Notwithstanding the foregoing, none of the Merger Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any holder of Certificates for any amount paid to a public official pursuant to any applicable unclaimed property laws. Any amounts remaining unclaimed by holders of Certificates as of a date immediately prior to such time that such amounts would otherwise escheat to or become property of any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation on such date, free and clear of any claims or interest of any Person previously entitled thereto.

     (f)      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.

     (g)      From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, other than the right to receive the Merger Consideration as provided in this Agreement.

     (h)      In the event that any Certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, in addition to the posting by such holder of any bond in such reasonable amount as the Surviving Corporation or the Paying Agent may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the proper amount of the Merger Consideration in respect thereof entitled to be received pursuant to this Agreement.

     (i)      Parent, the Surviving Corporation and the Paying Agent shall be entitled to deduct and withhold from the Merger Consideration and the Option Amounts payable

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hereunder any amounts required to be deducted and withheld under any applicable Tax Law. To the extent any amounts are so withheld and timely paid to the applicable Tax authority, such amounts shall be treated for all purposes as having been paid to the holder from whose Merger Consideration or Option Amount, as the case may be, such amounts were so deducted and withheld.

     Section 3.3      Treatment of Options and Other Awards .

     (a)      As of the Effective Time, except as otherwise agreed by Parent and a holder of Company Options with respect to such holder’s Company Options, each Company Option will vest and be converted into, and from and after the Effective Time shall represent solely, the right to receive an amount in cash equal to the product of (i) the number of Shares subject to such Company Option and (ii) the excess (if any) of (A) the Merger Consideration over (B) the exercise price per Share subject to such Company Option (such amount, the “ Option Amount ”), without interest and less any amounts required to be deducted and withheld under any applicable Tax Law. All payments with respect to Company Options shall be made by the Paying Agent (or such other agent reasonably acceptable to Parent as the Company shall designate prior to the Effective Time) as promptly as reasonably practicable after the Effective Time from funds deposited by or at the direction of the Surviving Corporation to pay such amounts in accordance with Section 3.2(a) .

     (b)      As of the Effective Time, except as otherwise agreed by Parent and a holder of Restricted Shares with respect to such holder’s Restricted Shares, each Share (including each award of a Restricted Share for which no certificate has been issued) outstanding immediately prior to the Effective Time subject to vesting or other lapse restrictions pursuant to any Company Stock Plan or any applicable restricted stock award agreement (each a “ Restricted Share ”) shall vest and become free of such restrictions as of the Effective Time and shall, as of the Effective Time, be canceled and converted into the right to receive the Merger Consideration in accordance with Section 3.1(c) .

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth in the disclosure letter (the “ Company Disclosure Letter ”) delivered to Parent by the Company concurrently with entering into this Agreement (it being understood that any information set forth in one section or subsection of the Company Disclosure Letter shall be deemed to apply to and qualify the section or subsection of this Agreement to which it corresponds in number and each other section or subsection of this Agreement to which the relevance of such disclosure is reasonably apparent) or as disclosed (excluding any “forward-looking” statement or risk factor disclosure) in the Company SEC Reports filed prior to the date of this Agreement, the Company hereby represents and warrants to Parent and Merger Sub that:

      Section 4.1      Corporate Existence and Power .  Set forth in Section 4.1 of the Company Disclosure Letter under the captions “Material Subsidiaries” and “Company Joint Ventures,” respectively, is a list of all Material Subsidiaries and all Company Joint Ventures, together with their respective jurisdictions of formation and the Company’s percentage of ownership interest in such Material Subsidiaries and Company Joint Ventures. Except as set

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forth in Section 4.1 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries directly or indirectly owns any equity interest in, or any interest, security or right convertible into or exchangeable or exercisable for any equity in, any Person. Each of the Company and each Material Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (with respect to jurisdictions that recognize the concept of good standing), except, in the case of the Material Subsidiaries, where the failure to be so organized, validly existing and in good standing has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Each of the Company, each Material Subsidiary and, to the Knowledge of the Company, each Company Joint Venture has all corporate or similar powers and authority required to own, lease and operate its respective properties and assets and to carry on its business as now conducted, except, in the case of the Material Subsidiaries and the Company Joint Ventures, where the failure to have such power and authority has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Each of the Company and each Material Subsidiary is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such qualification necessary, except where the failure to be so licensed or qualified has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Neither the Company nor any Material Subsidiary nor, to the Company’s Knowledge, any Company Joint Venture, is in violation of its organizational or governing documents in any material respect.

     Section 4.2      Corporate Authorization .

     (a)      The Company has the corporate power and authority to execute and deliver this Agreement and, subject to the adoption of this Agreement by the affirmative vote of the holders of a majority of the votes cast by all holders of shares of Common Stock entitled to vote thereon as of the record date of the Company Shareholder Meeting (the “ Requisite Shareholder Vote ”), to consummate the Merger and the other transactions contemplated hereby and to perform each of its obligations hereunder. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated hereby other than, with respect to the Merger, the Requisite Shareholder Vote and the filing of appropriate merger documents as required by PBCL. The Board of Directors of the Company, at a duly called and duly held meeting has (i) determined that it is in the best interests of the Company and its shareholders (other than holders of Shares that are Affiliates of Parent) to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend that the shareholders of the Company approve the adoption of this Agreement and directed that such matter be submitted for consideration of the shareholders of the Company at the Company Shareholder Meeting.

     (b)      This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid execution and delivery of this Agreement by Parent

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and Merger Sub, constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms.

      Section 4.3      Governmental Authorization .  The execution, delivery and performance by the Company of this Agreement and the consummation of the Merger by the Company do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to any Governmental Authority, other than (i) the filing of the Articles of Merger; (ii) compliance with the applicable requirements of the HSR Act; (iii) compliance with the applicable requirements of the Exchange Act, including the filing of the Company Proxy Statement; (iv) compliance with the rules and regulations of NASDAQ; (v) compliance with any applicable foreign or state securities or blue sky laws; (vi) the consents, approvals and notices set forth in Section 4.3 of the Company Disclosure Letter and (vii) any such consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not, (A) individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or (B) reasonably be expected to prevent or materially delay the consummation of the Merger.

      Section 4.4      Non-Contravention .  Assuming compliance with the matters referenced in Section 4.3 and the receipt of the Requisite Shareholder Vote, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby do not and will not (i) contravene or conflict with the organizational or governing documents of (A) the Company or (B) any of its Material Subsidiaries; (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the Company or any of its Subsidiaries, or any of their respective properties or assets; or (iii) require the consent, approval or authorization of, or notice to or filing with any third party with respect to, result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of any right or obligation of the Company or any of its Subsidiaries, or result in the creation of any Lien on any of the properties or assets of the Company or its Subsidiaries under, any loan or credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation (each, a “ Contract ”) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or its or any of their respective properties or assets are bound, except, in the case of clauses (ii) and (iii) above, as would not (A) individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or (B) reasonably be expected to prevent or materially delay the consummation of the Merger.

     Section 4.5      Capitalization .

     (a)      The authorized share capital of the Company consists of 45,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock (the “ Preferred Stock ”). As of January 12, 2007, there were (i) (A) 19,776,288 shares of Common Stock issued and outstanding (including all vested Restricted Shares), (B) 437,180 Restricted Shares that have not vested and for which no certificates have been issued and (C) 131,545 shares of Common Stock that are in escrow for the benefit of unsecured claimants in connection with the joint plan of reorganization of Genesis Health Ventures, Inc. and Multicare AMC, Inc., dated as of July 6, 2001 and

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confirmed by the Bankruptcy Court on September 20, 2001 (the “ Bankruptcy Shares ”), and (B) no shares of Preferred Stock issued and outstanding, (ii) 1,000,000 shares of Company Preferred Stock were reserved for issuance in connection with the rights (the “ Company Rights ”) issued pursuant to the Rights Agreement dated as of November 13, 2003, between the Company and StockTrans, Inc., as Rights Agent (as amended from time to time, the “ Company Rights Agreement ”), and (iii) Company Options to purchase an aggregate of 1,018,963 shares of Common Stock, with a weighted average exercise price of $32.20 per share, issued and outstanding. All outstanding Shares are duly authorized, validly issued, fully paid and non-assessable, and are not subject to and were not issued in violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right. No Subsidiaries of the Company own any Shares or any other equity securities of the Company. The Company has paid in full all dividends accrued and payable on or prior to the date hereof with respect to all outstanding shares of capital stock of the Company.

     (b)      Except as set forth in this Section 4.5 , there have not been reserved for issuance, and there are no outstanding (i) shares of capital stock or other voting securities of the Company; (ii) securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company or its Subsidiaries, other than Company Options and the 2025 Notes; (iii) Company Options or other rights or options to acquire from the Company or its Subsidiaries, or obligations of the Company or its Subsidiaries to issue, any shares of capital stock, voting securities or securities convertible into or exchangeable for shares of capital stock or voting securities of the Company or such Subsidiary, as the case may be; or (iv) equity equivalent interests in the ownership or earnings of the Company or its Subsidiaries (the items in clauses (i) through (iv) collectively, “ Company Securities ”). There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company Securities. There are no preemptive rights of any kind which obligate the Company or any of its Subsidiaries to issue or deliver any Company Securities. The Company has made available to Parent a complete and correct copy of the Company Rights Agreement, as amended to the date of this Agreement.

     (c)      Other than (i) the issuance of Shares upon exercise of Company Options or (ii) the repurchases by the Company of Shares set forth in Section 4.5(c) of the Company Disclosure Schedule, since June 30, 2006, the Company has not declared or paid any dividend or distribution in respect of any Company Securities, and neither the Company nor any of its Subsidiaries has issued, sold, repurchased, redeemed or otherwise acquired any Company Securities, and their respective Boards of Directors have not authorized any of the foregoing.

     (d)      As of the date hereof, neither the Company nor any of its Subsidiaries has entered into any commitment, arrangement or agreement, or are otherwise obligated, to contribute capital, loan money or otherwise provide funds or make additional investments in any Company Joint Venture or any other Person, other than (i) Intercompany Debt, (ii) any such commitment, arrangement or agreement in the ordinary course of business consistent with past practice and (iii) any such commitment, arrangement or agreement with an aggregate principal amount not in excess of $5 million individually and $20 million in the aggregate.

     Section 4.6      Company Subsidiaries and Joint Ventures .  All equity interests of any Subsidiary of the Company and the Company Joint Ventures held by the Company or any

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other Subsidiary of the Company are validly issued, fully paid and non-assessable and were not issued in violation of any preemptive or similar rights, purchase option, call, or right of first refusal or similar rights, except for any failures to be validly issued, fully paid and non-assessable, or any issuances in violation of the aforementioned rights, that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. All such equity interests are free and clear of any Liens or any other limitations or restrictions on such equity interests (including any limitation or restriction on the right to vote, pledge or sell or otherwise dispose of such equity interests) other than Permitted Liens and restrictions contained in the joint venture agreements of the Company Joint Ventures. The Company has provided or made available to Parent complete and correct copies of the organizational documents of each Material Subsidiary of the Company and the joint venture agreements of the Company Joint Ventures.

     Section 4.7      Reports and Financial Statements .

     (a)      The Company has filed all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed by it with the SEC pursuant to the Exchange Act or other applicable United States federal securities Laws since January 1, 2004 (all such forms, reports, statements, certificates and other documents filed since January 1, 2004, with any amendments thereto, collectively, the “ Company SEC Reports ”), each of which, including any financial statements or schedules included therein, as finally amended prior to the date of this Agreement, has complied as to form in all material respects with the applicable requirements of the Securities Act and Exchange Act as of the date filed with the SEC. None of the Company’s Subsidiaries is required to file periodic reports with the SEC. None of the Company SEC Reports contained, when filed with the SEC or, if amended, as of the date of such amendment, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. To the Company’s Knowledge, no investigation by the SEC with respect to the Company or any of its Subsidiaries is pending or threatened.

     (b)      Each of the consolidated financial statements of the Company and its Subsidiaries included (or incorporated by reference) in the Company SEC Reports (including the related notes and schedules, where applicable) fairly presents (subject, in the case of the unaudited statements, to the absence of notes and normal year-end audit adjustments as permitted by the rules related to Quarterly Reports on Form 10-Q promulgated under the Exchange Act), in all material respects, the results of the consolidated operations and changes in shareholders’ equity and cash flows and consolidated financial position of the Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth. Each of such consolidated financial statements (including the related notes and schedules, where applicable) complies in all material respects with applicable financial accounting requirements and with the published rules and regulations of the SEC with respect thereto and each of such financial statements (including the related notes and schedules, where applicable) were prepared in accordance with GAAP consistently applied during the periods involved, except in each case as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by the rules related to Quarterly Reports on Form 10-Q promulgated under the Exchange Act.

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     (c)      As of the date hereof, there are no outstanding or unresolved comment letters from the SEC with respect to any of the Company SEC Reports.

     (d)      Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company, the management of the Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) and such controls and procedures are reasonably designed to ensure that all material information relating to the Company, including its consolidated Subsidiaries, is made known on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC by others within those entities and (ii) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors of the Company (x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (y) any fraud within the Company’s Knowledge that involves management or other Company Employees who have a significant role in the Company’s internal controls over financial reporting.

     (e)      To the Company’s Knowledge, from October 1, 2005 through the date of this Agreement, neither the Company nor any of its Subsidiaries or any of their respective directors, officers, or independent auditors has received or otherwise had or obtained Knowledge of any material written complaint, allegation, assertion or Claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company, any of its Subsidiaries or their respective internal accounting controls relating to periods after October 1, 2005 (except for any of the foregoing that have been resolved without any material adverse impact on the Company and its Subsidiaries, taken as a whole, and except for any of the foregoing which have no reasonable basis).

      Section 4.8      Undisclosed Liabilities .  Except (i) for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company (including the notes thereto) included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2006, (ii) for liabilities incurred in the ordinary course of business consistent with past practice since September 30, 2006, (iii) for liabilities that have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business consistent with past practice, (iv) for liabilities incurred in connection with the transactions contemplated hereby and (v) for liabilities that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company, neither the Company nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued or contingent or otherwise and whether due or to become due).

      Section 4.9      Disclosure Documents .  The proxy statement (the “ Company Proxy Statement ”) relating to the Merger and the other transactions contemplated hereby, to be filed by the Company with the SEC in connection with seeking the adoption of this Agreement by the shareholders of the Company will not, at the time it is filed with the SEC or at the time it is first mailed to the shareholders of the Company or at the time of the Company Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact

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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 will cause the Company Proxy Statement and all related SEC filings to comply as to form in all material respects with the requirements of the Exchange Act applicable thereto as of the date of such filing. Anything to the contrary contained herein notwithstanding, no representation is made by the Company with respect to statements made in the Company Proxy Statement based on information supplied, or required to be supplied, by Parent, Merger Sub or any Parent Affiliate specifically for inclusion or incorporation by reference therein.

      Section 4.10      Absence of Certain Changes or Events .  Since September 30, 2006, (a) no Effect has occurred which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and (b) to the date of this Agreement, the Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business.

      Section 4.11      Litigation .  Neither the Company, nor any of its Subsidiaries is a party to, nor is any Owned Real Property subject to, any, and there are no pending or, to the Company’s Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations (a “ Proceeding ”) of any nature against the Company or any of its Subsidiaries or any Owned Real Property, except for any Proceeding which has not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Neither the Company, its Subsidiaries, nor any of their respective businesses, properties (including Owned Real Property) or assets are subject to or bound by any injunction, order, judgment, decree or regulatory restriction of any Governmental Authority specifically imposed upon the Company, its Subsidiaries or their respective properties (including Owned Real Property) or assets, except for any injunction, order, judgment, decree or regulatory restriction which has not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

      Section 4.12      Taxes .  The representations and warranties contained in this Section 4.12 and in Section 4.13 are the only representations and warranties in this Agreement with respect to Tax matters. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Company:

     (a)      All Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been timely filed, and all such Tax Returns are true, correct and complete.

     (b)      The Company and its Subsidiaries (i) have timely paid all Taxes due and payable (whether or not shown to be due on the Tax Returns referred to in Section 4.12(a) ), except for Taxes for which adequate reserves have been established in accordance with GAAP, and (ii) have made adequate provision in the applicable financial statements, in accordance with GAAP, for all Taxes not yet due and payable with respect to taxable periods, or portions thereof, for which no Tax Return has yet been filed.

     (c)      As of the date hereof, (i) no audit or other proceeding by any Governmental Authority is pending or threatened in writing with respect to any Taxes of the

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Company or any of its Subsidiaries, and (ii) there are no agreements in effect to extend the period of limitations for assessment or collection of any Tax for which the Company or any of its Subsidiaries may be liable.

     (d)      There are no Tax sharing, allocation, or indemnification agreements (or similar agreements) under which the Company or any of its Subsidiaries may be liable for Taxes of any other Person (other than the Company or any or its Subsidiaries).

     (e)      Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying or intended to qualify for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

     (f)      None of the Company or any of its Subsidiaries has participated in a “listed transaction” that has given rise to a disclosure obligation under Section 6011 of the Code and the Treasury Regulations promulgated thereunder and that has not been disclosed in the relevant Tax Return of the Company or relevant Subsidiary.

     (g)      None of the Company or any of its Subsidiaries has any liability for Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation §1.1502 -6 (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise.

     (h)      There are no Liens for Taxes upon the assets of the Company or any of its Subsidiaries, other than Permitted Liens.

     Section 4.13      ERISA .

     (a)      Each Employee Benefit Plan and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, sponsored, maintained or contributed to by the Company or any of its Subsidiaries or under which the Company or any of its Subsidiaries has any obligation to contribute (the “ Company Benefit Plans ”), has been maintained in accordance with its terms and applicable Law, except for matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. No nonexempt “prohibited transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code) or “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived)) has occurred with respect to any Company Benefit Plan which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

     (b)      Neither the Company nor any Subsidiary has incurred any liability to the Pension Benefit Guaranty Corporation (the “ PBGC ”) (other than non-delinquent premium payments) or otherwise under Title IV of ERISA (including any withdrawal liability).

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     (c)      Since the last annual report, there has been no amendment to, announcement by the Company or any of its Subsidiaries relating to, or change in employee participation or coverage under, any Company Benefit Plan that would increase materially the annual expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year. No Company Benefit Plan or Company Stock Plan exists that could (i) result in the payment to any Company Employee of any money or other property, (ii) accelerate or provide any other rights or benefits (including funding of compensation or benefits through a trust or otherwise) to any Company Employee, or (iii) limit or restrict the ability of the Company or its Subsidiaries to merge, amend or terminate any Company Benefit Plan, in each case, as a result of the execution of this Agreement or otherwise related in any way to the transactions contemplated by this Agreement; and no such payment would reasonably be expected to constitute a parachute payment within the meaning of Code Section 280G. Neither the Company nor any Subsidiary or any ERISA Affiliate maintains, sponsors, contributes to or participates in any plan, program or arrangement that provides for retiree medical benefits.

     (d)      Any Company Benefit Plan that is intended to be qualified under Code Section 401(a) and exempt from Tax under Code section 501(a) has been determined by the appropriate Governmental Authority to be so qualified, and such determination remains in effect and has not been revoked. Nothing has occurred since the date of any such determination that is reasonably likely to affect adversely such qualification or exemption and that would have, or would be reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

     (e)      (i)  Except as set forth on Section 4.13(e) of the Company Disclosure Letter, none of the Company, any Subsidiary or any ERISA Affiliate has, at any time in 2007 or during the last six completed calendar years, maintained, sponsored or contributed to (or been required to contribute), a defined benefit plan subject to Title IV of ERISA.

   (ii)      With respect to any Company Benefit Plan subject to Title IV of ERISA, other than a Multiemployer Plan (as defined below) (A) all premiums due to the PBGC by the Company or any ERISA Affiliate have been fully paid on a timely basis, (B) no "reportable event" within the meaning of Section 4043(c) of ERISA for which the 30-day notice requirement has not been waived has occurred or, except as would not have a Material Adverse Effect on the Company, is expected to occur. No proceeding has been or, except as would not have a Material Adverse Effect on the Company, is expected to be initiated that would reasonably be expected to result in the termination of any Company Benefit Plan (other than a Multiemployer Plan) subject to Title IV of ERISA.

   (iii)      With respect to each Employee Benefit Plan that is or was a “multiemployer plan” (within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) that the Company or any of its ERISA Affiliates has, within the last six complete calendar years, contributed to or been obligated to contribute to (each, a “ Multiemployer Plan ”), except as would not reasonably be expected to have a Material Adverse Effect on the Company: (1) neither the Company nor any ERISA Affiliate (or any of their respective predecessors) has, within the last six complete calendar years, incurred any withdrawal liability; (2) no event has occurred which, with

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the giving of notice, could reasonably be expected to result in any liability under Section 4201 of ERISA as a result of a complete withdrawal (within the meaning of Section 4203 of ERISA) or a partial withdrawal (within the meaning of Section 4205 of ERISA); (3) neither the Company nor any ERISA Affiliate (or any of their respective predecessors) has received any written notice of any claim or demand for complete or partial withdrawal; (4) neither the Company nor any ERISA Affiliate (or any of their respective predecessors) has received any written notice that such Multiemployer Plan is in "reorganization" (within the meaning of Section 4241 of ERISA), that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, or that the Multiemployer Plan is or may become "insolvent" (within the meaning of Section 4241 of ERISA); (5) none of the Company or any of its Subsidiaries has received any written notice that the PBGC has instituted proceedings against any Multiemployer Plan; and (6) neither the Company nor any ERISA Affiliate (nor any of their respective predecessors) has, in the past six years, engaged in, or entered into any agreement with respect to, a transaction described in Section 4204 or 4212 of ERISA. Section 4.13(e)(iii) of the Company Disclosure Schedule sets forth a list of each Multiemployer Plan that is subject to Title IV of ERISA.

     (f)       Schedule 4.13(f) of the Company Disclosure Letter sets forth a list of all Company Benefit Plans other than Multiemployer Plans. The Company has made available to Parent true and complete copies of all material Company Benefit Plans.

     (g)      All Company Options have been granted in accordance with the terms of the applicable Company Stock Plan and applicable Law (including Section 409A of the Code), with an exercise price at least equal to the fair market value of the underlying Common Stock on the date of any such grant, except for such failures, if any, to be so granted which would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company.

     (h)      Schedule 4.13(h) of the Company Disclosure Letter sets forth a complete and accurate description of the Company’s severance policy, which is consistent with the Company’s past practice.

     Section 4.14      Compliance with Laws .

     (a)      The Company, and each of its Subsidiaries is, and at all times since September 30, 2005 has been, in compliance with all Laws (including, for purposes of this paragraph, billing requirements of any health care benefit program as defined in U.S.C. §24(b), including the Medicare program and any relevant state Medicaid program) applicable to the Company, its Subsidiaries, and their respective businesses, activities, properties and assets, except for such noncompliance that has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

     (b)      Except as set forth in Section 4.14(b) of the Company Disclosure Letter, as of the date hereof, neither the Company nor any of its Subsidiaries has received written notice from a Governmental Authority or is otherwise aware that it or its respective properties and assets is a target of, or the subject of, any action, proceeding, suit, investigation or sanction by or

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on behalf of any Governmental Authority or any other person brought pursuant to any Law, nor, to the Knowledge of the Company, has any such action, proceeding, suit, investigation or sanction been threatened in writing, except for any such notice, action, proceeding, suit, investigation or sanction as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Since September 30, 2005 through the date hereof, (i) neither the Company nor any of its Subsidiaries has made or has been ordered to make any payment in respect of any Governmental Damages and (ii) neither the Company nor any of its Subsidiaries has made any material voluntary disclosure to any Governmental Authority with respect to any alleged act or omission, including arising under or relating to a contract, subcontract or any other agreement with a Governmental Authority.

     (c)      The Company and each Subsidiary of the Company has and maintains in full force and effect, and is in compliance with, all Permits and all orders from Governmental Authorities necessary for the Company and each Subsidiary to carry on their respective businesses as currently conducted, except where the failure to have or maintain in full force and effect, or to be in compliance with, such Permits and orders has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

      Section 4.15      Finders’ Fees .  No agent, broker, investment banker, financial advisor or other firm or person except Goldman, Sachs & Co. is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement based upon Contracts made by or on behalf of the Board of Directors or any committee of the Board of Directors, the Company or any of its Subsidiaries. The Company has disclosed to Parent all material terms of the engagement of Goldman, Sachs & Co., including the amount of such fees and any right of first offer or other “tail” provisions and has heretofore delivered to Parent a correct and complete copy of the Company’s engagement letter with Goldman, Sachs & Co.

      Section 4.16      Opinion of Financial Advisor .  Goldman, Sachs & Co. has delivered to the Board of Directors of the Company an opinion to the effect that, as of the date of this Agreement, the consideration to be received by holders of Shares in the Merger is fair, from a financial point of view, to such holders.

      Section 4.17      Affiliate Transactions .  Except for this Agreement and the Merger, there are no transactions, or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions, or series of related transactions, between the Company and/or any of its Subsidiaries, on the one hand, and the Company’s or any such Subsidiary’s respective directors, managers, members, stockholders, partners, officers or Affiliates (other than Subsidiaries of the Company and the Company Joint Ventures), on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act as currently applicable to the Company.

      Section 4.18      Rights Agreement; Anti-Takeover Provisions .  The Board of Directors of the Company has resolved to, and the Company promptly after the execution of this Agreement will, take all action necessary to render the Company Rights Agreement inapplicable to this Agreement, the Merger and the other transactions contemplated hereby. The Board of

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Directors of the Company has taken all necessary action so that the provisions of Sections 2538 through 2588 inclusive of the PBCL and any other similar anti-takeover statute or regulation enacted under U.S. state or federal Laws applicable to the transactions contemplated by this Agreement (each, a “ Takeover Statute ”) will not apply to this Agreement, the Merger or the other transactions contemplated hereby.

     Section 4.19      Voting .

     (a)      Assuming the accuracy of the representations of Parent set forth in Section 5.11 , the Requisite Shareholder Vote is the only vote of the holders of any class or series of the capital stock of the Company or any of its Subsidiaries necessary to approve and adopt this Agreement and approve the Merger and the other transactions contemplated thereby.

     (b)      There are no voting trusts, proxies or similar agreements, arrangements or commitments to which the Company or any of its Subsidiaries is a party with respect to the voting or registration of any shares of capital stock of the Company or any of its Subsidiaries. To the Company’s Knowledge, there are no third party arrangements or understandings with respect to the voting of any shares of capital stock of the Company or any of its Subsidiaries. Other than the 2025 Notes, there are no bonds, other debentures, notes or other instruments of indebtedness of the Company or any of its Subsidiaries that have the right to vote, or that are convertible or exchangeable into or exercisable for securities or other rights having the right to vote, on any matters on which shareholders of the Company may vote.

     Section 4.20      Contracts .

     (a)      As of the date of this Agreement, except for Contracts set forth in Section 4.20(a) of the Company Disclosure Letter or filed as exhibits to or incorporated by reference in the Company SEC Reports, neither the Company nor any of its Subsidiaries is a party to or bound by any Contract: (i) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated under the Securities Act) to be performed in full or in part after the date of this Agreement; (ii) which is a joint venture or similar agreement for a Company Joint Venture; (iii) which constitutes a contract or commitment relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of $2,500,000, other than trade payables incurred in the ordinary course of business that are not past due and any such contract or commitment solely between or among any of the Company and its Subsidiaries; (iv) which constitutes a Contract, other than those contracts or commitments described in (iii) above, that by its terms calls for aggregate payments by the Company or any of its Subsidiaries under such Contract of more than $10 million over the remaining term of such Contract or commitment, (v) which creates any material partnership, limited liability company agreement, joint venture or other similar agreement entered into with any third party; (vi) which contains any provision that would restrict or limit, in any material respect, the ability of the Company, any of its Subsidiaries, any Affiliate of the Company other than the Company, any of its Subsidiaries or any director, officer or employee of the Company or any of its Subsidiaries to conduct any business after the Effective Time; (vii) which provides for the purchase, sale or exchange of, or option to purchase, sell or exchange, any Company Property or any asset that if purchased by the Company or any of its Subsidiaries would be a Company Property; (viii) which is (A) a contract

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or agreement pursuant to which the Company or any of its Subsidiaries agrees to indemnify or hold harmless any director or executive officer of the Company or any of its Subsidiaries (other than the organizational documents for the Company or any of its Subsidiaries) or (B) a contract entered into outside the ordinary course of business that has a continuing indemnification obligation to any third party which is material to the Company and its Subsidiaries taken as a whole; (ix) which is a voting agreement or registration rights agreement; or (x) which is a commitment or agreement to enter into any of the foregoing.

     (b)      Section 4.20(b) of the Company Disclosure Letter sets forth a true and correct list of each Contract to which the Company or any of its Subsidiaries is a party that provides for the management or operation, by the Company or any of its Subsidiaries, of any Facility that is not Company Property (each, a “ Company Management Agreement ”), including the names of each such Facility and the counterparty to such Company Management Agreement.

     (c)      The Contracts of the types set forth in subsections (i)-(iv) of Section 4.20(a) and in Section 4.20(b) are collectively referred to herein as the “ Disclosed Contracts .” (For purposes of clarification, each “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement, whether or not filed with the SEC, is a Disclosed Contract.) The Company has heretofore made available to Parent complete and correct copies of each Disclosed Contract in existence as of the date hereof, together with any and all material amendments and material supplements thereto and material “side letters” and similar material documentation relating thereto, other than any such Contracts, amendments, supplements, side letters and similar documentation that are filed as exhibits to or incorporated by reference in the Company SEC Reports filed prior to the date hereof.

     (d)      (i)  Each Disclosed Contract is valid and binding on the Company and any of its Subsidiaries that is a party thereto, as applicable, and, to the Company’s Knowledge, each third party that is a party thereto, and in full force and effect, other than any such Disclosed Contract that expires or is terminated after the date hereof in accordance with its terms or amended by agreement with the counterparty thereto (provided that if any such Disclosed Contract is so amended in accordance with its terms after the date hereof (provided such amendment is not prohibited by the terms of this Agreement), then to the extent the representation and warranty contained in this sentence is made or deemed made as of any date that is after the date of such amendment, the reference to “Disclosed Contract” in the first clause of this sentence shall be deemed to be a reference to such contract as so amended), except where the failure to be valid, binding and in full force and effect would not reasonably be expected to have a Material Adverse Effect on the Company, (ii) the Company and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Disclosed Contra