<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 27, 1996
HOME HEALTH CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2224800 0-26938
(State or other (IRS Employer (Commission File Number)
jurisdiction of Identification No.)
incorporation)
2200 Renaissance Boulevard
Suite 300
King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 272-1717
Exhibit index is located on page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 27, 1996, Home Health Corporation of America, Inc. (the "Company")
acquired from Randy DiSalvo all of the outstanding capital stock of R.S.D.
Management Services, Inc., a provider of primarily Medicare-reimbursed nursing
and related patient services with approximately $18.3 million of net revenues
for the twelve month period ended June 30, 1996 and operations in Massachusetts
and New Hampshire (the "RSD Acquisition"). The consideration paid for the RSD
Acquisition was approximately $11.4 million, consisting of $9.4 million in cash,
which includes repayment of $4.3 million in indebtedness, $1.0 million in notes,
and the balance by the issuance of 91,118 shares of the Company's common stock.
The cash portion of this consideration was paid through borrowings under the
Company's senior credit facility. This acquisition will be accounted for as a
purchase.
ITEM 5. OTHER EVENTS
On December 5, 1996, the Company signed a definitive agreement to acquire
certain assets and assume certain liabilities of LHS Holdings, Inc. and certain
of its subsidiaries and affiliates, providers of primarily Medicare-reimbursed
nursing and related patient services and, to a lesser extent, infusion therapy
services, with $16.0 million in net revenues for the twelve month period ended
June 30, 1996 and operations in Texas (the "LHS Acquisition"). The aggregate
consideration payable for the LHS Acquisition is approximately $9.3 million,
including a contingent amount estimated at $2.7 million based upon four and one-
half times the earnings before interest, taxes, depreciation and amortization of
certain of the companies being acquired in this acquisition. The aggregate
consideration payable for the LHS Acquisition, excluding the contingent amount,
is comprised of approximately $5.1 million in cash, $1.0 million in notes, and
the balance in shares of the Company's common stock. This acquisition will be
accounted for as a purchase.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
(a) Financial Statements
The historical financial statements of the company acquired in the RSD
Acquisition required to be filed with this Form 8-K are not included in this
filing. Such financial statements will be filed as soon as practicable, but not
later than 60 days after the date on which this Form 8-K is required to be
filed.
(b) Unaudited Pro Forma Financial Information
The unaudited pro forma financial information of the company acquired
in the RSD Acquisition required to be filed with this Form 8-K are not included
in this filing. Such pro forma financial information will be filed as soon as
practicable, but not later than 60 days after the date on which this Form 8-K is
required to be filed.
(c) Exhibits
2.1*Stock Purchase Agreement among Home Health Corporation of America,
Inc., Home Health Corporation of Delaware, Inc., Randy DiSalvo,
R.S.D. Management Services, Inc., Nursing Services Home Care,
Inc., Nursing Services Home Care, Ltd., Nursing Services Staffing
of N.H., Inc., and Nursing Services, Inc.
2.2 Amendment 1 to Stock Purchase Agreement among Home Health
Corporation of America, Inc., Home Health Corporation of Delaware,
Inc., Randy DiSalvo, R.S.D. Management Services, Inc., Nursing
Services Home Care, Inc., Nursing Services Home Care, Ltd.,
Nursing Services Staffing of N.H., Inc., and Nursing Services,
Inc.
2.3 Amendment 2 to Stock Purchase Agreement among Home Health
Corporation of America, Inc., Home Health Corporation of Delaware,
Inc., Randy DiSalvo, R.S.D. Management Services, Inc., Nursing
Services Home Care, Inc., Nursing Services Home Care, Ltd.,
Nursing Services Staffing of N.H., Inc., and Nursing Services,
Inc.
2
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2.4 Asset Acquisition Agreement Among Home Health Corporation of
America, Inc. and its Nominees, LHS Holdings, Inc., Liberty Health
Services, Inc., Nurses Today M/C, Inc. and Mark H. O'Brien
2.5 Asset Acquisition Agreement Among Home Health Corporation of
America, Inc. and its Nominees, PDN, Inc., Medical I.V., Inc. and
Mark H. O'Brien
2.6 Indemnification Agreement Among Home Health Corporation of
America, Inc. and its Nominees, LHS Holdings, Inc., Liberty Health
Services, Inc., Nurses Today M/C, Inc., PDN, Inc., Medical I.V.,
Inc. and Mark H. O'Brien
----------------------------
* Incorporated by reference to the Company's Form 10-Q for the
three months ended September 30, 1996, as filed on November 14,
1996.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Home Health Corporation of America, Inc.
Date: December 13, 1996 /s/ Bruce J. Colburn
--------------------------------------------
Name: Bruce J. Colburn,
Title: Chief Financial and Accounting Officer
4
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EXHIBIT INDEX
2.1*Stock Purchase Agreement among Home Health Corporaton of America,
Inc., Home Health Corporation of Delaware, Inc., Randy DiSalvo,
R.S.D. Management Services, Inc., Nursing Services Home Care,
Inc., Nursing Services Home Care, Ltd., Nursing Services Staffing
of N.H., Inc. and Nursing Services, Inc.
2.2 Amendment 1 to Stock Purchase Agreement among Home Health
Corporation of America, Inc., Home Health Corporation of Delaware,
Inc., Randy DiSalvo, R.S.D. Management Services, Inc., Nursing
Services Home Care, Inc., Nursing Services Home Care, Ltd.,
Nursing Services Staffing of N.H., Inc. and Nursing Services, Inc.
2.3 Amendment 2 to Stock Purchase Agreement among Home Health
Corporation of America, Inc., Home Health Corporation of Delaware,
Inc., Randy DiSalvo, R.S.D. Management Services, Inc., Nursing
Services Home Care, Inc., Nursing Services Home Care, Ltd.,
Nursing Services Staffing of N.H., Inc. and Nursing Services, Inc.
2.4 Asset Acquisition Agreement Among Home Health Corporation of
America, Inc. and its Nominees, LHS Holdings, Inc., Liberty Health
Services, Inc., Nurses Today M/C, Inc. and Mark H. O'Brien
2.5 Asset Acquisition Agreement Among Home Health Corporation of
America, Inc. and its Nominees, PDN, Inc., Medical I.V., Inc. and
Mark H. O'Brien
2.6 Indemnification Agreement Among Home Health Corporation of
America, Inc. and its Nominees, LHS Holdings, Inc., Liberty Health
Services, Inc., Nurses Today M/C, Inc., PDN, Inc., Medical I.V.,
Inc. and Mark H. O'Brien
----------------------------------
* Incorporated by reference to the Company's Form 10-Q for the three
months ended September 30, 1996, as filed on November 14, 1996.
5
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STOCK PURCHASE AGREEMENT
AMONG
HOME HEALTH CORPORATION OF AMERICA, INC.
HHCA NEW HAMPSHIRE, INC
RSD MANAGEMENT, INC.
NURSING SERVICES HOME CARE, INC.
NURSING SERVICES HOME CARE, LTD.
NURSING SERVICES STAFFING OF N.H., INC.
NURSING SERVICES, INC.
AND
RANDY DISALVO
OCTOBER 31, 1996
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TABLE OF CONTENTS
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1. Certain Definitions; Purchase and Sale of Shares; Certain Liabilities................. 2
1.1 Certain Definitions..................................................... 2
1.2 Purchase of Shares...................................................... 4
1.3 Assets Owned by Related Parties; Excluded Assets........................ 4
1.4 Loan Repayment and Capitalization....................................... 4
2. Acquisition Price and Closing......................................................... 4
2.1 Acquisition Price....................................................... 4
2.2 Manner of Payment....................................................... 5
2.3 Acquisition Price Adjustment............................................ 7
2.4 Uncollected Accounts Receivable Adjustments............................. 9
2.5 Unbooked Cost Adjustments............................................... 9
2.6 Holdback Amount........................................................ 10
2.7 The Closing............................................................ 10
3. Representations and Warranties of Seller............................................ 10
3.1 Organizational Status.................................................. 10
3.2 Qualification.......................................................... 11
3.3 Authorization; No Conflict............................................. 11
3.4 Financial Statements of Seller......................................... 11
3.5 Compliance with Laws................................................... 12
3.6 Permits................................................................ 13
3.7 Litigation............................................................. 13
3.8 Leased Real Property................................................... 13
3.9 Accounts Receivable.................................................... 14
3.10 Inventory.............................................................. 14
3.11 Personal Property Leases............................................... 14
3.12 Contracts and Other Agreements......................................... 14
3.13 Consents............................................................... 16
3.14 Intellectual Property Rights........................................... 16
3.15 Equipment.............................................................. 16
3.16 Title; Location of Assets.............................................. 16
3.17 Undisclosed Liabilities................................................ 16
3.18 Relationships.......................................................... 17
3.19 Employee Benefit Plans................................................. 17
3.20 Employee Relations..................................................... 18
3.21 Transactions with Related Parties...................................... 18
3.22 No Material Adverse Change; Absence of Certain Changes................. 18
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3.23 Books and Records...................................................... 19
3.24 Insurance.............................................................. 19
3.25 Taxes.................................................................. 20
3.26 No Other Agreements to Sell the Assets or Shares....................... 22
3.27 Environmental.......................................................... 22
3.28 Non-Solicitation....................................................... 23
3.29 No Bankruptcy.......................................................... 23
3.30 Shares................................................................. 23
3.31 Disclosure............................................................. 23
4. Representations and Warranties of Purchaser.......................................... 24
4.1 Organizational Status.................................................. 24
4.2 Qualification.......................................................... 24
4.3 Authorization; No Conflict; Shares..................................... 24
4.4 Compliance with Laws................................................... 25
4.5 Consents............................................................... 25
4.6 Litigation............................................................. 25
4.7 SEC Filings............................................................ 26
4.8 Financial Statements................................................... 26
4.9 Disclosure............................................................. 26
5. Covenants of the Parties............................................................. 26
5.1 Conduct of Business.................................................... 27
5.2 Access to Information.................................................. 30
5.3 Governmental Permits and Approvals; Consents........................... 30
5.4 Assignment of Contracts, Etc. ......................................... 31
5.5 Maintenance of Permits................................................. 31
5.6 Employees; Employee Compensation....................................... 31
5.7 Accounts Receivable.................................................... 31
5.8 Title; Risk of Loss.................................................... 31
5.9 Non-solicitation....................................................... 32
5.10 Regulatory Approvals................................................... 32
5.11 Monthly Financial Statements and Cost Reports.......................... 32
5.12 SEC and NASDAQ Disclosure.............................................. 33
5.13 Current Period Tax Returns............................................. 33
6. Conditions Precedent to the Purchasing Parties' Obligations.......................... 34
6.1 Regulatory Approvals................................................... 34
6.2 Closing Deliveries..................................................... 34
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6.3 Representations and Warranties on Closing Date......................... 34
6.4 Terms, Covenants and Conditions........................................ 35
6.5 Consents, Approvals, Etc. ............................................. 35
6.6 No Material Adverse Change............................................. 35
6.7 Absence of Litigation.................................................. 35
6.8 Absence of Liens; Payment of Loans..................................... 35
6.9 Contribution to Capital; Repayment of HHCA Loan........................ 36
6.10 Subordination Agreement................................................ 36
6.11 Subscription Agreement................................................. 36
6.12 Registration Rights Agreement.......................................... 36
6.13 Employment Agreements.................................................. 36
6.14 Restrictive Covenant Agreement......................................... 36
6.15 Escrow Agreement....................................................... 36
6.16 Stock Certificates and Corporate Records............................... 36
6.17 Opinion of Seller's Counsel............................................ 37
6.18 Additional Documents................................................... 37
6.19 Approval of HHCA Board................................................. 37
6.20 Approval of HHCA's Lenders............................................. 37
6.21 Satisfactory Completion of Due Diligence............................... 37
6.22 Marital Rights......................................................... 37
7. Conditions Precedent to the Selling Parties' Obligations............................. 38
7.1 Closing Deliveries..................................................... 38
7.2 Representations and Warranties on Closing Date......................... 38
7.3 Terms, Covenants and Conditions........................................ 38
7.4 Absence of Litigation.................................................. 38
7.5 Closing Cash Payments and Loan Repayment............................... 39
7.6 Note................................................................... 39
7.7 HHCA Stock............................................................. 39
7.8 Subordination Agreement................................................ 39
7.9 Subscription Agreement................................................. 39
7.10 Registration Rights Agreement.......................................... 39
7.11 Employment Agreements.................................................. 39
7.12 Escrow Agreement....................................................... 39
7.13 Opinion of Purchaser's Counsel......................................... 39
7.14 HHCA Guaranty.......................................................... 39
8. Confidentiality...................................................................... 40
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9. Books and Records; Uses of Names..................................................... 41
10. Survival of Representations and Warranties........................................... 41
11. Indemnification...................................................................... 42
11.1 Obligation to Indemnify by the Selling Parties......................... 42
11.2 Obligation to Indemnify by Purchaser................................... 42
11.3 Losses................................................................. 42
11.4 Procedures for Claims Between the Parties.............................. 43
11.5 Defense of Third-Party Actions......................................... 43
11.6 Limitation of Indemnification.......................................... 44
11.7 Exclusive Remedy....................................................... 45
12. Breaches and Defaults; Termination; Remedies......................................... 45
12.1 Termination............................................................ 45
12.2 Effect of Termination.................................................. 46
12.3 Specific Performance................................................... 46
13. Miscellaneous........................................................................ 47
13.1 Consent to Jurisdiction................................................ 47
13.2 Expenses............................................................... 47
13.3 Further Assurances..................................................... 47
13.4 Indemnification for Brokerage.......................................... 47
13.5 Severability........................................................... 48
13.6 Notices................................................................ 48
13.7 Entire Agreement....................................................... 49
13.8 Disclosure Schedules; Independent Significance......................... 49
13.9 Amendments and Waivers................................................. 50
13.10 Governing Law.......................................................... 50
13.11 Binding Effect; Assignment............................................. 50
13.12 Joint and Several...................................................... 50
13.13 Beneficiaries of Agreement............................................. 50
13.14 Counterparts; Facsimile Signatures..................................... 50
13.15 Exhibits and Schedules................................................. 51
13.16 Formation of Purchaser................................................. 51
13.17 Headings............................................................... 52
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LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
--------
2.2(b)(1) The Note
2.2(b)(2) Escrow Agreement
6.10 The Subordination Agreement
6.11 The Subscription Agreement
6.12 The Registration Rights Agreement
6.13(i)(ii)(iii) The Employment Agreements
SCHEDULES
---------
1.4 Loan Repayment and Capitalization
3.3 Authorization; No Conflict
3.5 Compliance with Laws
3.6 Permits
3.7 Litigation
3.8 Leased Real Property
3.9 Accounts Receivable
3.10 Inventory
3.11 Personal Property Leases
3.12 Contracts and Other Agreements
3.13 Consents
3.14 Intellectual Property Rights
3.15 Equipment
3.16 Title; Location of Assets
3.17 Undisclosed Liabilities
3.19 Employee Benefit Plans
3.20 Employee Relations
3.22 No Material Adverse Change; Absence of Certain Changes
3.24 Insurance
3.25 Taxes
3.27 Environmental
4.3 Authorization; No Conflict; Shares
4.5 Consents
4.6 Litigation
4.7 SEC Filings
5.1 Conduct of Business
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT made this 31st day of October, 1996, among
HHCA NEW HAMPSHIRE, INC., a New Hampshire corporation or its affiliated assignee
("Purchaser"), HOME HEALTH CORPORATION OF AMERICA, INC. a Pennsylvania
corporation ("HHCA")(Purchaser and HHCA are sometimes hereinafter referred to as
the "Purchasing Parties"), RANDY DISALVO, an individual (the "Seller"), RSD
MANAGEMENT, INC., a New Hampshire corporation ("RSD"), NURSING SERVICES HOME
CARE, INC., a New Hampshire corporation ("NSH"), NURSING SERVICES HOME CARE,
LTD., a Massachusetts corporation ("NSL"), NURSING SERVICES STAFFING OF N. H.,
INC.,, a New Hampshire corporation ("NSS"), and NURSING SERVICES, INC. , a
Massachusetts corporation ("NSI") (RSD, NSH, NSL, NSS and NSI are sometimes
hereinafter referred to as the "Selling Companies" and the Selling Companies
together with Seller are sometimes hereinafter referred to as the "Selling
Parties").
W I T N E S S E T H
WHEREAS, Seller is the owner of all of the issued and outstanding capital
stock of RSD and RSD is the owner of all of the issued and outstanding capital
stock of NSH, NSL, NSS and NSI;
WHEREAS, Purchaser is a wholly-owned subsidiary of HHCA;
WHEREAS, the Selling Companies are providers of (i) staffing and related
services to hospitals, nursing homes and other heath care providers and (ii)
nursing and related home health services to patients which include but are not
limited to qualified recipients under Medicaid, Massachusetts Executive Office
of Elder Affairs ("Eldercare") and Medicare programs (the "Business");
WHEREAS, HHCA has loaned Seller the sum of $350,000 pursuant to the terms
of a Promissory Note dated August 8, 1996 (the "HHCA Loan") which loan has been
guaranteed by the Selling Companies pursuant to the terms of a Guarantee and
Security Agreement dated August 8, 1996;
WHEREAS, Seller has loaned the proceeds of the HHCA Loan to RSD (the
"August Seller Loan"); and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
acquire from Seller, all of the issued and outstanding capital stock of RSD in
accordance with the terms and conditions hereinafter set forth.
1
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Definitions; Purchase and Sale of Shares; Certain Liabilities.
-------------------------------------------------------------
1.1 Definitions. For purposes of this Agreement, the following terms
-----------
have the following meanings:
(a) "affiliate", with respect to any person, means any other person
controlling, controlled by or under common control with such person;
(b) "Accounts Receivable" means all accounts and notes receivable
and other claims for money due to the Selling Companies arising from the
rendering of services or the sale of goods or materials, and all negotiable
instruments or other instruments and chattel paper generated in connection with
the conduct of the Business;
(c) "Books and Records" means all of the books and records, manuals,
files and operating data (including without limitation patient and customer
records, referral source records, Medicare, Medicaid, Eldercare and other cost
reports, tax returns, payroll records, employee benefits records, employee
information, accounts payable records, inventory records, maintenance records
and asset history records, patient and customer lists, ledgers, sales and credit
reports, marketing and service records, credit information, distribution
records, economic, demographic and other studies, business plans and other
proposals and any other financial information, and computer software and data in
computer readable and/or machine readable form used to maintain such books and
records, together with the media on which such software and data are stored and
all documentation relating thereto) of the Selling Companies;
(d) "Contracts" means all rights of the Selling Companies under all
contracts, agreements and commitments (including without limitation third party
payor agreements, Medicare, Medicaid, Eldercare and other provider agreements,
the Personal Property Leases and the Real Property Leases and contracts of the
type referred to in Section 3.12(a));
---------------
(e) "Environmental Laws" means all federal, state, county or local
environmental statutes, regulations, ordinances, administrative or judicial
judgments or orders (including without limitation the Resource Conservation
Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Clean Water Act, the Hazardous
Material Transportation Act, the Safe Drinking Water Act, the Federal Water
Pollution Control Act, and the Toxic Substances Control Act and any similar
federal, state or local laws and any regulations under any of the foregoing).
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(f) "Equipment" means all of the Selling Companies' furniture,
fixtures, equipment and machinery, vehicles, supplies, computer hardware and
software (including all documentation relating thereto), office equipment,
improvements, parts and other tangible personal property other than Inventory,
whether or not obsolete, including such equipment used in operating the
Business;
(g) "Excluded Assets" means the life insurance policies owned by any
Selling Company insuring the life of Seller;
(h) "Improvements" means all of the Selling Companies' interest in
Leased Real Property and in all leasehold improvements thereto;
(i) "Intellectual Property Rights" means all of the Selling
Companies' intellectual property rights relating to the Business, including the
right to use computer software programs, patents and applications therefor,
know-how, trade secrets, secret formulas, business and marketing plans,
copyrights and applications therefor, trademarks, service marks, trade names and
all logos, names and slogans used by the Seller Companies in conjunction with
the Business including without limitation the Selling Companies' right to use
their names and any variations thereof, in each case, to the extent that the
Selling Companies possess such rights (collectively, the "Intellectual Property
Rights");
(j) "Inventory" means all inventory of the Selling Companies
(including durable medical equipment used for demonstration purposes, leased,
rented or on consignment);
(k) "Leased Real Property" means all of the Selling Companies'
interest in all buildings, facilities and other structures and improvements
subject to a Real Property Lease;
(l) "Permits" means all of the Selling Companies' certificates of
need, Medicare, Medicaid, Eldercare and other licenses, provider numbers,
permits, franchises, registrations and regulatory approvals used in connection
with the Business to the extent transferable under applicable law or with any
required consent;
(m) "Personal Property Leases" means all leases of personal property
under which any of the Selling Companies is a lessee or lessor;
(n) "Prepaid Expenses" means all of the Selling Companies' prepaid
insurance, rent, taxes and other expenses, advance payments, deferred charges,
rights of offset, security and other deposits deposited by Selling Companies
with third parties with respect to Leased Real Property or otherwise, and claims
for refunds, credits and the like;
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(o) "Real Property Leases" means all leases of real property under
which any of the Selling Companies is a lessee or lessor; and
(p) "Related Party" means (i) any past or present partner,
shareholder or affiliate of the Selling Parties, (ii) any director, officer,
partner or shareholder of any affiliate of the Selling Parties, including
without limitation, NSS and NSI, (iii) any relative or spouse of any such person
or (iv) Seller.
1.2 Purchase of Shares. On the terms and subject to the conditions
------------------
contained in this Agreement, Seller agrees to sell, assign, transfer and deliver
to Purchaser and Purchaser agrees to purchase from Seller, free and clear of all
liens or other encumbrances, all issued and outstanding shares of capital stock
of RSD (collectively referred to herein as the "Shares").
1.3 Assets Owned by Related Parties; Excluded Assets. If any Related
------------------------------------------------
Party owns any assets that are used in the operation of the Business, Seller
shall cause such Related Party to transfer such assets to the Selling Parties
prior to Closing (at no cost to Purchaser). The Excluded Assets shall be
transferred to Seller prior to the Closing.
1.4 Loan Repayment and Capitalization. The Selling Parties
---------------------------------
acknowledge and agree that Schedule 1.4 sets forth a complete and accurate list
------------
of all indebtedness for borrowed money provided to the Selling Companies,
including without limitation, principal and interest under (i) all loans
provided by LINC Financial (the "Linc Indebtedness"), (ii) all loans provided by
Merrill Lynch (the "Merrill Lynch Indebtedness"), (iii) all loans provided by
Elayne and Julian Roberts (the "Roberts Indebtedness"), (vi) the August Seller
Loan and (v) all other loans provided by Seller (the "Seller Indebtedness")(the
Seller Indebtedness shall not include the August Seller Loan). Contemporaneous
with the Closing, (x) Purchaser and HHCA shall cause the Selling Companies to
pay in full the Linc Indebtedness, the Merrill Lynch Indebtedness, the Roberts
Indebtedness and the August Seller Loan and shall provide the Selling Companies
with sufficient funds to enable such payments to be made, (y) Seller shall repay
in full the HHCA Loan, and (z) the Seller Indebtedness shall be contributed to
the capital of RSD and extinguished to the extent necessary to cause the
Consolidated Net Book Value of RSD (hereinafter defined) to equal the Base Net
Book Value (hereinafter defined)(the "Contribution to Capital") and the
remaining Seller Indebtedness, if any (the "Remaining Seller Indebtedness"),
shall be repaid in full by the Selling Companies. Notwithstanding the
foregoing, Seller shall be responsible for any stated prepayment fees and any
other similar fees, if any, incurred in connection with the retirement of the
foregoing obligations.
2. Acquisition Price and Closing.
-----------------------------
2.1 Acquisition Price. The maximum aggregate acquisition price for
-----------------
the Shares shall be Seven Million Seven Hundred Fifty Thousand Dollars
($7,750,000)(the "Preliminary
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Acquisition Price"), subject to adjustment as provided herein (as adjusted, the
"Acquisition Price").
2.2 Manner of Payment. Subject to adjustment as provided in this
-----------------
Agreement, at Closing:
(a) Purchaser and HHCA shall pay to Seller by wire transfer of
immediately available funds to such banks and accounts thereat as shall be
specified in writing by Seller, the aggregate amount of Four Million Two Hundred
Fifty Thousand Dollars ($4,250,000) plus or minus the Estimated Acquisition
Price Adjustment (as hereinafter defined).
(b) Purchaser and HHCA shall deliver to Citizens Bank or another
financial institution acceptable to the parties (the "Escrow Agent") (i) cash in
the amount of One Million Dollars ($1,000,000)(the "Holdback Amount"), (ii) the
Promissory Note of Purchaser and HHCA payable to Seller in the original
principal amount of One Million Dollars ($1,000,000) in the form of Exhibit
-------
"2.2(b)(1)" hereto (the "Note"), and (iii) stock certificates issued to Seller
- -----------
evidencing ownership of unregistered shares of the common stock of HHCA having a
value (as determined by this Section) of One Million Dollars ($1,000,000)(the
"HHCA Stock"). The HHCA Stock shall be valued on the date of Closing based on
the average of the last transaction prices quoted by the NASDAQ System for a
share of HHCA common stock during a period of ten (10) trading days occurring
immediately prior to the third business day preceding the Closing. The Holdback
Amount, the Note and the HHCA Stock will be held in escrow (the "Escrow") by the
Escrow Agent in accordance with the terms and conditions set forth in the Escrow
Agreement dated the date of Closing among Seller, the Purchasing Parties and the
Escrow Agent substantially in the form of Exhibit 2.2(b)(2) hereto (the "Escrow
-----------------
Agreement").
(c) In the event that Actual Net Revenue (hereinafter defined) for
each of the calendar years set forth below (the "Earnout Period") exceeds the
minimum net revenue for such year set forth below (the "Target Net Revenue"),
Purchaser and HHCA shall pay Seller an amount equal to Three (3) times the
difference between the Actual Net Revenue and the Target Net Revenue for each
such year (the "Earnout Payment"). The aggregate amount of all Earnout Payments
made hereunder shall not exceed Five Hundred Thousand Dollars ($500,000)(the
"Maximum Earnout Amount").
Calendar Year Target Net Revenue
------------- ------------------
1997 $200,000
1998 The greater of $200,000 or prior years Actual Net Revenue
1999 The greater of $200,000 or prior years Actual Net Revenue
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"Eligible Companies" shall mean and be limited to NSS and NSI and shall not
include RSD, HHCA or any of their other subsidiaries.
"Net Revenue" shall mean the Eligible Companies' consolidated net revenue
from the provision of professional nursing and related services to private pay
patients (i.e. without third party reimbursement) and from the provision of
staffing and related services to hospitals, nursing homes and other health care
providers, after deduction of all direct costs and expenses of providing such
services and an allocation of RSD overhead (which allocation shall be based on
the percentage of revenue generated by the Eligible Companies in proportion to
the total revenue generated by the Selling Companies), except for income taxes,
interest expense and allocated HHCA home office expense to RSD or the Eligible
Companies. Net Revenue shall not include revenues and related expenses arising
in connection with (i) the sale or provision of services or goods not provided
or sold by the Eligible Companies prior to the date hereof, or (ii) businesses
acquired after the date hereof. The Purchasing Parties shall endeavor to conduct
such excluded businesses through companies other than the Eligible Companies.
During the Earnout Period, the Purchasing Parties:
(i) shall not distribute or reallocate any revenue attributable to the
Eligible Companies;
(ii) shall manage the Eligible Companies in good faith and not with a
view towards preventing the Eligible Companies from achieving the Target Net
Revenue;
(iii) shall permit Seller and Salvatore DiSalvo to devote a reasonable
amount of time to the Eligible Companies subject to the terms of the Employment
Agreements; and
(vi) shall not materially impair the ability of the Seller to earn the
Maximum Earnout Amount, subject to HHCA Policies and Procedures (as defined in
the Employment Agreement).
Within one hundred twenty (120) days after each calendar year referred to
above (the "Determination Period"), Purchaser and HHCA shall notify Seller in
writing of the Actual Net Revenue from the preceding calendar year and shall
provide supporting work papers. Actual Net Revenue shall be determined in
accordance with GAAP (hereinafter defined), subject to the modifications set
forth herein. Unless there is a disagreement among the parties, the required
Earnout Payment will be made within the Determination Period. If Seller does
not agree with Purchaser's determination of Actual Net Revenue for any calendar
year during the Earnout Period, Seller shall notify Purchaser and HHCA in
writing within 30 days of receipt thereof and Purchaser, HHCA and Seller shall
use reasonable efforts to resolve such dispute. Any dispute between such
parties relating to the required Earnout Payment shall be resolved by Peat
Marwick (the "Independent Accountant") who shall be engaged to provide a final
and conclusive resolution of all unresolved disputes within thirty (30) calendar
days after such engagement. The determination of the Independent Accountant
shall be final and binding on such parties and the
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<PAGE>
fees and expenses of the Independent Accountant shall be borne by the party who,
in the Independent Accountant's determination, submitted a disputed amount which
differs more significantly from the amount finally determined by the Independent
Accountant.
In the event that substantially all of the assets or stock of the Eligible
Companies is sold prior to the end of the Earnout Period, at the closing on such
sale, Purchaser and HHCA shall pay Seller an amount equal to the Maximum Earnout
Amount discounted to present value using a rate of interest equal to eight
percent (8%) less any Earnout Payments previously made to Seller; provided,
however, that such acceleration shall not be triggered by a merger of HHCA where
HHCA is the surviving entity (and Employment Agreements continue in accordance
with the terms thereof) or by a merger where HHCA is not surviving entity so
long as the surviving entity agrees in writing to continue to pay the Earnout
Payments in accordance with the terms hereof and to honor the terms of the
Employment Agreements. In the event that Seller's or Salvatore DiSalvo's
employment under the Employment Agreements (hereinafter defined) is terminated
for any reason, the Earnout Payments, if any, will continue to be made in
accordance with the terms hereof.
2.3 Acquisition Price Adjustment.
----------------------------
(a) The Preliminary Acquisition Price shall be adjusted (the
"Acquisition Price Adjustment") upward or downward on a dollar-for-dollar basis,
as applicable, to the extent that the "Consolidated Net Book Value of RSD" (as
hereinafter defined) reflected on the Closing Date Balance Sheet is greater or
less than Sixty Thousand Dollars ($60,000) (the "Base Net Book Value"). For
purposes of this Agreement, "Consolidated Net Book Value of RSD" shall mean the
aggregate value reflected on the Closing Date Balance Sheet (determined in
accordance with generally accepted accounting principles consistently applied
("GAAP")) of the Selling Companies' (i) cash, (ii) Accounts Receivable (less
allowance for doubtful accounts and reserves for cost report disallowances and
contractual allowances)(the "Closing Date Accounts Receivable"), plus (iii)
Inventory, plus (iv) Prepaid Expenses, plus (v) Equipment and Improvements (net
of accumulated depreciation), plus (vi) the Contribution to Capital, less (vii)
cash overdrafts, less (viii) short term and long term borrowings including the
Linc Indebtedness, the Merrill Lynch Indebtedness, the Roberts Indebtedness, the
August Seller Loan and the Remaining Seller Loan, if any, less (ix) amounts due
to Medicare and other third party payors, less (x) accounts payable, accrued
expenses and other liabilities (the "Accounts Payable and Accrued Expenses") and
less (xi) customer deposits.
(b) For purposes of determining Consolidated Net Book Value of
RSD, (i) the Excluded Assets and the Selling Parties Expenses (hereinafter
defined, which shall be borne entirely by Seller and not the Selling Companies)
shall not be taken into account, (ii) the Linc Indebtedness, the Merrill Lynch
Indebtedness, the Roberts Indebtedness, the August
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<PAGE>
Seller Loan and the Remaining Seller Indebtedness, if any, shall be treated as
if each such loan was still outstanding and (iii) the Contribution to Capital
shall be taken into account.
(c) At least five (5) business days prior to Closing, Seller will
cause Simione & Simione (the "Selling Parties' Accountant") to deliver to
Purchaser a good faith estimate of the Acquisition Price Adjustment (the
"Estimated Acquisition Price Adjustment") as of September 30, 1996 adjusted to
reflect an estimate of the actual balance of any cash and indebtedness as of the
Closing. Purchaser and its accountants shall have the right to participate in
the determination of the Estimated Acquisition Price Adjustment.
(d) As promptly as practicable (but in no event later than ninety
(90) calendar days after the Closing Date) Seller shall cause the Selling
Parties' Accountant to prepare in accordance with GAAP (subject to the
adjustments required by this Agreement) and deliver to Purchaser and its
accountants for their review and comment (i) a consolidated balance sheet for
the Selling Companies dated as of the Closing Date (the "Closing Date Balance
Sheet"), (ii) a consolidated income statement for the Selling Companies dated as
of the Closing date (the "Closing Date Income Statement") and (iii) an
accompanying closing statement (the "Closing Statement") reasonably detailing as
of the Closing Date its final determination of each element of the Acquisition
Price Adjustment. To facilitate the preparation of the foregoing financial
statements, the Purchaser shall provide the Selling Parties' Accountant and
Seller with reasonable and complete access to the Books and Records and to the
Selling Companies' personnel; provided, however that Purchaser and its
accountants shall have the right to participate in the preparation of the
foregoing financial statements and that such access will not unreasonably
interfere with the operations of the Selling Companies. Seller shall cause the
Selling Parties' Accountants to provide Purchaser and its accountants with such
supporting documentation as they shall reasonably request.
(e) If Purchaser objects to any amounts reflected on the Closing
Date Balance Sheet, the Closing Date Income Statement or the Closing Statement,
Purchaser must, within twenty (20) calendar days after Purchaser's receipt of
the Closing Date Balance Sheet, the Closing Date Income Statement and Closing
Statement, give written notice (the "Notice") to Seller specifying in reasonable
detail Purchaser's objections, or the Selling Parties' Accountant's
determination of the Acquisition Price Adjustment and the financial statements
referred to above shall be final, binding and conclusive on the parties. With
respect to any disputed amounts, the parties shall meet in person and negotiate
in good faith during the fifteen (15) calendar day period (the "Resolution
Period") after the date of Seller's receipt of the Notice to resolve any such
disputes. If the parties are unable to resolve all such disputes within the
Resolution Period, then within five (5) business days after the expiration of
the Resolution Period, all disputes shall be submitted to the Independent
Accountant who shall be engaged to provide a final and conclusive resolution of
all unresolved disputes within thirty (30) calendar days after such engagement.
The determination of the Independent Accountant shall be final, binding and
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<PAGE>
conclusive on the parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party who, in the Independent Accountant's
determination, submitted a disputed amount which differs more significantly from
the amount finally determined by the Independent Accountant.
(f) If the Acquisition Price Adjustment (as finally determined in
accordance with the provisions set forth above) is a (i) positive amount, then,
within five (5) business days after such final determination, Purchaser shall
pay to Seller such amount in immediately available funds, or (ii) negative
amount, then, within five (5) business days after such final determination, the
Seller shall pay to Purchaser such amount in immediately available funds. If
Seller fails to pay such amount, the parties shall cause the Escrow Agent to
release to Purchaser from the Escrow such unpaid amount in immediately available
funds. Notwithstanding the foregoing, all undisputed amounts shall be paid
promptly by the party responsible for the payment thereof.
2.4 Uncollected Accounts Receivable Adjustments. In the event
-------------------------------------------
that all of the Closing Date Accounts Receivable (less reserves for bad debts,
cost report disallowances and contractual allowances set forth on the Closing
Date Balance Sheet) are not fully collected by Purchaser within fifteen (15)
months after the Closing (the "Uncollected Accounts Receivable"), the parties
shall cause the Escrow Agent to release to Purchaser in immediately available
funds from the Escrow an amount equal to the Uncollected Accounts Receivable and
Seller shall promptly pay to Purchaser any remaining deficiency. Any
Uncollected Accounts Receivable shall be assigned to Seller without recourse to
Purchasing Parties and to the extent that any such Uncollected Accounts
Receivable are collected by Purchaser or the Selling Companies after such
assignment, they shall be promptly paid over to Seller. Purchaser shall use
commercially reasonable efforts to collect the Closing Date Accounts Receivable
in accordance with its established collection practices and policies; provided,
however, that Purchaser shall not be required to engage a collection firm or to
commence any legal action in connection therewith. Seller may pursue and collect
any Uncollected Accounts Receivable assigned to Seller. Notwithstanding the
foregoing, with respect to the collection of Medicare Uncollected Accounts
Receivable, (i) such amounts shall not be assigned to Seller, (ii) Purchaser
(with the assistance of Seller) shall appeal any such amounts which remain
unpaid after 15 months and (iii) the proceeds thereof, if any, when collected,
less the reasonable costs incurred in the collection thereof, will be paid by
Purchaser promptly to Seller.
2.5 Unbooked Cost Adjustments. In the event that after the Closing
-------------------------
the Selling Companies shall incur or receive any Medicare, Medicaid, Eldercare
or other unbooked cost adjustment or audit (which is not taken into account as
part of the Acquisition Price Adjustment) with respect to any period prior to
the Closing, any such negative cost or audit adjustments shall be promptly
reimbursed by Seller and any such positive cost or audit adjustments shall be
promptly paid to Seller by Purchaser. Purchaser (with the assistance of
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<PAGE>
Seller) shall appeal any audit determinations at Seller's request, and the
proceeds thereof, if any, when collected, less the reasonable costs incurred in
the collection thereof, will be paid by the Purchaser promptly to Seller.
2.6 Holdback Amount. Subject to the provisions of Section 11
--------------- ----------
of this Agreement, as security for the indemnities and other agreements of the
Selling Parties contained in this Agreement, on the Closing Date the Escrow
Agent shall retain the Holdback Amount, the Note and the HHCA Stock in
accordance with the terms of the Escrow Agreement. Nothing in this Section 2.6
-----------
or in the Escrow Agreement shall be construed as limiting the liability of the
Selling Parties under this Agreement to the amount of the Holdback Amount, the
Note or the HHCA Stock nor shall that amount be considered as liquidated damages
for any breach of this Agreement by the Selling Parties.
2.7 The Closing. Unless this Agreement shall have been earlier
-----------
terminated in accordance with the terms hereof, the transactions contemplated by
this Agreement shall be consummated (the "Closing") at the offices of Kleinbard,
Bell & Brecker on the last business day to fall within the ten (10) calendar day
period after receipt by Purchaser of the Regulatory Approvals (as hereinafter
defined), or at such other place or on such other date as Purchaser and Seller
may agree in writing; provided, however, that if Purchaser shall have waived the
condition that the Regulatory Approvals be granted (in accordance with the
provisions of Section 5.10), the Closing shall be consummated on the last
------------
business day to fall within the ten (10) calendar day period after Purchaser
notifies Seller in writing of Purchaser's intention to waive such condition. The
date on which the Closing shall occur is referred to in this Agreement as the
"Closing Date". The Closing shall be deemed to have occurred as of 12:01 a.m. on
the Closing Date.
3. Representations and Warranties of Seller. Selling Parties jointly and
----------------------------------------
severally represent and warrant to Purchasing Parties that:
3.1 Organizational Status. RSD, NSH and NSS are New Hampshire
---------------------
corporations duly organized, validly existing and in good standing under the
laws of the State of New Hampshire and have all requisite corporate power and
authority to own, lease and operate their respective assets, properties, and the
Business, and to carry on the Business as now being conducted. NSL and NSI are
Massachusetts corporations duly organized, validly existing and in good standing
under the laws of the State of Massachusetts and have all requisite corporate
power and authority to own, lease and operate their respective assets,
properties, and the Business, and to carry on the Business as now being
conducted. The copies of the articles of incorporation and bylaws of RSD, NSH,
NSL, NSI and NSS, each as amended to date, which have been heretofore delivered
to Purchaser, are correct and complete and are in full force and effect. The
Seller is the sole stockholder of RSD. RSD does not, directly or indirectly, own
any stock of, or any interest in, any other person, except for NSH, NSL, NSS and
NSI which are each wholly owned subsidiaries of RSD.
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<PAGE>
3.2 Qualification. Each Selling Company is duly qualified to
-------------
do business as a foreign corporation and is in good standing as a foreign
corporation in all states or jurisdictions in which the nature of the Business
as presently operated by it or the character of the property owned or leased by
it with respect to the Business makes such qualification or authorization
necessary, except where the failure to be so qualified would not have a material
adverse effect on the Selling Companies taken as a whole.
3.3 Authorization; No Conflict. Each Selling Company has the
--------------------------
corporate power and authority and the Seller has the legal right and power
required to enter into, execute and deliver this Agreement and the documents and
other agreements required to be executed and delivered hereunder and to perform
fully their obligations hereunder and thereunder. This Agreement has been duly
executed and delivered and constitutes, and each of the other agreements and
documents to be delivered by a Selling Party hereunder when executed and
delivered by such Selling Party will constitute, the valid and binding
obligation of such Selling Party, enforceable in accordance with their
respective terms, except to the extent that enforceability may be limited by the
effect of bankruptcy, reorganization or other similar laws relating to or
affecting the rights of creditors generally. Except as set forth on Schedule
--------
3.3, the execution, delivery and performance of this Agreement and the documents
- ---
and other agreements to be delivered hereunder by the Selling Parties and the
consummation of the transactions contemplated hereby and thereby by the Selling
Parties will not (i) violate any provision of a Selling Companies articles of
incorporation or bylaws, (ii) violate, conflict with or result in the breach of
any of the terms of, result in a material modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
material contract or other agreement to which a Selling Party is a party or by
or to which any of them or any of their respective assets or properties may be
bound or subject, (iii) violate any order, judgment, injunction, award or decree
of any court, arbitrator or governmental or regulatory body by which any Selling
Party or the assets, properties or Business of a Selling Party is bound, which
could reasonably be expected to have a material adverse effect on the Selling
Companies, the Shares or the Business taken as a whole. (iv) violate any
statute, law or regulation, which violation could reasonably be expected to have
a material adverse effect on the Selling Companies, the Shares or the Business
taken as a whole or (v) violate or cause any revocation of or limitation on any
Permit (A) which is necessary to the lawful conduct of the Business or (B) the
violation, revocation or limitation of which could reasonably be expected to
have a material adverse effect on the Selling Companies, the Shares or the
Business taken as a whole.
3.4 Financial Statements of Seller. Selling Parties have
------------------------------
delivered to Purchaser copies of the consolidated and unconsolidated, as
applicable, financial statements of the Selling Companies (including balance
sheets, statements of income and retained earnings, and statements of cash
flows, together with notes thereto) as of June 30, 1996, 1995 and 1994
(collectively, the "Financial Statements"). As used herein the term "Balance
Sheet Date" shall
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<PAGE>
mean June 30, 1996. The Financial Statements were reviewed (except the June 30,
1996 Financial Statements which have been audited) by Simione & Simione
certified public accountants whose report without qualification thereon is
included with such Financial Statements. The Financial Statements (i) fairly
present the financial condition, assets and liabilities of the Selling Companies
at their respective dates and the results of their operations and changes in
their cash flows for the periods covered thereby, (ii) were prepared in
accordance with GAAP, and (iii) were prepared from the books and records of RSD
and its subsidiaries. Selling Parties have also delivered to Purchaser copies of
the consolidated balance sheet of RSD (the "Interim Balance Sheet") as of August
31, 1996 (the "Interim Balance Sheet Date"), and a consolidated statement of
operations of RSD for the period then ended (collectively, the "Interim
Financial Statements"). The Interim Financial Statements (x) fairly present the
financial condition, assets and liabilities as of such date and the results of
operations of the Selling Companies for the period covered thereby, (y) were
prepared in accordance with the same accounting principles used to prepare the
Financial Statements except with respect to the absence of notes thereto and
with respect to customary year-end adjustments consistent with past practices
(which adjustments are not material to the Selling Companies), and (z) were
prepared from the books and records of the Selling Companies.
3.5 Compliance with Laws.
--------------------
(a) Except as otherwise set forth on Section 3.5, the Selling
-----------
Companies are in compliance with all applicable federal, state and local laws,
regulations and ordinances (including those relating to reimbursement, reporting
requirements, certification standards, patient utilization, limitations on
ownership and other financial relationships between a provider and its referral
sources, pharmaceuticals, medical devices and the provision of medical and
related services) and any applicable requirements of any governmental or
regulatory body, court or arbitrator affecting the Business or the assets of the
Selling Companies, except for noncompliance which has not and would not have a
material adverse effect on the Selling Companies or the Business taken as a
whole. Except as otherwise set forth on Section 3.5, the Selling Parties have
-----------
not received notice to the effect that, or otherwise been advised that, the
Selling Companies are not in compliance with any Permits, statutes, regulations,
orders, ordinances or other laws, and have not taken any action or failed to
take any action that is a violation of any such Permits, statutes, regulations,
orders, ordinances or other laws.
(b) The Selling Companies are certified for participation in,
and are parties to provider agreements for payment by federal Medicare and New
Hampshire and Massachusetts Eldercare and Medicaid programs (the "Programs").
All of the cost reports of the Selling Companies, including their home office
cost reports for the Programs for their last three (3) fiscal years, have been
filed when due or within valid extension periods and were prepared in all
material respects in accordance with all applicable laws, regulations and
principles governing reimbursement under the Programs. Except as otherwise
disclosed on Schedule 3.5, there are no
------------
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<PAGE>
pending appeals, judgements, challenges, audits or litigation to reopen cost
reports with respect to the Programs and no notices of intent to the contrary
have been provided to the Selling Companies. Except as otherwise set forth on
Section 3.5, each of the Selling Companies is in good standing with the United
- -----------
States Department of Health and Human Services, to the extent applicable, and
all similar New Hampshire and Massachusetts state agencies where good standing
is so required. The Selling Companies have not, directly or indirectly, offered,
paid, solicited or received any remuneration in return for the referral of
products or services in violation of the Programs, any federal or state laws and
regulations promulgated thereunder, or any requirements imposed by third-party
payors.
3.6 Permits. Schedule 3.6 sets forth all of the Permits
------- ------------
necessary to operate the Business as now operated, and are validly issued in the
name of the Selling Companies. Such Permits are in full force and effect, are
unimpaired by any acts or omissions of the Selling Parties, are valid for the
balance of the current license term, if any, applicable generally to each
such Permit. Except as otherwise set forth on Section 3.6, each Permit is
-----------
transferrable with such consents of third parties as are set forth in Schedule
--------
3.13, and is sufficient in all material respects to permit the continued lawful
- ----
operation of the Business after the Closing as currently conducted.
3.7 Litigation. Except as set forth on Schedule 3.7, there is
---------- ------------
no action, suit, claim, arbitration, investigation or other legal or
administrative proceeding or audit or claim by any insurance company, managed
care organization, third party payor or other third party (collectively,
"Actions") pending or, to the Selling Parties' knowledge, threatened against the
Selling Companies with respect to the Business, any of the their assets, the
Plans or any employee (in his or her capacity as such) of a Selling Company.
There is no outstanding any order, writ, injunction, decree, or judgment of any
court, governmental or regulatory body or arbitration tribunal applicable to any
Selling Party, the Business or their respective assets. There is no pending
Action which has been brought by or on behalf of any Selling Party with respect
to the Business or its assets in any court or before any governmental or
regulatory body or arbitration tribunal.
3.8 Leased Real Property. Schedule 3.8 sets forth a list of
-------------------- ------------
all of the Real Property Leases (together with street addresses). There have
been delivered to Purchaser true and complete copies of all of the Real Property
Leases. All of the Real Property Leases are valid, in full force and effect and
binding upon the Selling Companies, and to the Selling Parties' knowledge, the
other parties thereto, enforceable in accordance with their respective terms;
and, except as set forth on Schedule 3.8, Selling Parties have satisfied in all
------------
material respects all liabilities and obligations thereunder through the date
hereof, are not in default under any of them, nor does any condition exist that,
with notice or lapse of time or both, would constitute such a default. To the
Selling Parties' knowledge, no other party to any Real Property Lease is in
default thereunder, nor, to the Selling Parties' knowledge, does any condition
exist that, with notice or lapse of time or both, would constitute such a
default.
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<PAGE>
3.9 Accounts Receivable. The Accounts Receivable reflected on
-------------------
the Financial Statements, the Interim Financial Statements (and the Accounts
Receivable created thereafter) and the Closing Date Accounts Receivable
reflected on the Closing Date Balance Sheet represent bona fide claims of
Selling Companies against debtors for sales, performance of services or other
transactions in the ordinary course of business. The Accounts Receivable are
subject to no defenses, counterclaims or rights of set-off and are fully
collectible in the ordinary course of business within 15 months after the
Closing, without costs and expenses of collection agents or attorneys in
collection efforts therefor, except to the extent of appropriate reserves for
bad debts, cost report disallowances and contractual allowances, as set forth in
the Financial Statements, the Interim Financial Statements or the Closing Date
Balance Sheet, as applicable. Except as otherwise provided on Schedule 3.9, the
------------
Selling Companies do not maintain a lock box at any location for the collection
of Accounts Receivable.
3.10 Inventory. The Inventory (i) was purchased in the ordinary
---------
course of business and (ii) consists only of new and, subject to the last
sentence of this Section 3.10, complete items of Inventory (i.e., all component
------------
parts are included). All Inventory which is obsolete, discontinued or of below
standard quality was discounted in value to net realizable value on such
Schedule. No write-offs or charges against Inventory have been made since the
Balance Sheet Date, except for charges in the ordinary course of business for
sales of Inventory. None of the Inventory is unusable or not saleable in the
lawful and ordinary course of business because of legal restrictions, failure to
meet specifications, damage, physical deterioration or for any other cause.
3.11 Personal Property Leases. Set forth on Schedule 3.11 is a
------------------------ -------------
true and complete list of all material Personal Property Leases, copies of which
have been previously delivered to Purchaser. Each Personal Property Lease is
valid, binding and enforceable against the Selling Companies in accordance with
its terms. Except as set forth on Schedule 3.11, Selling Parties have satisfied
-------------
in all material respects all liabilities and obligations thereunder through the
date hereof, are not in default under any of them, nor does any condition exist
that, with notice or lapse of time or both, would constitute such a default. To
the Selling Parties' knowledge, no other party to any Personal Property Lease is
in default thereunder, nor, to the Selling Parties' knowledge, does any
condition exist that, with notice or lapse of time or both, would constitute
such a default.
3.12 Contracts and Other Agreements.
------------------------------
(a) Schedule 3.12 sets forth all written or oral contracts
-------------
and other agreements to which a Selling Party is a party or by or to which it
is or any of its assets are bound or subject, including without limitation:
(i) contracts and agreements with any labor union or association representing
any employee; (ii) contracts and agreements (including barter
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<PAGE>
arrangements) for the purchase or sale of materials, supplies, merchandise,
equipment or services; (iii) contracts and agreements for the sale of any of
the assets or properties of the Business (except for the sale of medical
equipment in the ordinary course of business) or for the grant to any person
of any preferential rights to purchase any of the assets or properties relating
to the Business; (iv) joint marketing, joint venture and partnership agreements;
(v) contracts and agreements under which a Selling Party agrees to indemnify any
party or to share any tax liability of any party; (vi) contracts and other
agreements with suppliers for the rebating of charges or other similar
arrangements; (vii) contracts and agreements containing covenants of a Selling
Party not to compete in any line of business or with any person in any
geographical area or covenants of any other person not to compete with a Selling
Party in any line of business or in any geographical area; (viii) contracts and
other agreements relating to the acquisition by a Selling Party of any operating
business or the capital stock of or other interest in any other person; (ix)
options for the purchase of any asset, tangible or intangible; (x) contracts and
agreements requiring the payment to any person of a royalty, override or similar
commission or fee; (xi) contracts and agreements relating to the borrowing of
money; (xii) any guaranty, performance or completion bond or surety contract or
agreement; (xiii) contracts and agreements for the development, display or
promotion of any products or services; (xiv) contracts and agreements for the
employment for any period of time whatsoever or in regard to the employment, or
restricting the employment, of any salaried employee of a Selling Party employed
in the Business; (xv) outstanding powers of attorney executed on behalf of a
Selling Party; (xvi) third-party payor agreements (including provider agreements
for the Programs), managed care agreements, and agreements relating to the
provision of health care, pharmaceuticals, goods and services and (xvii) any
other material contract or agreement whether or not made in the ordinary course
of business.
(b) There have been delivered to Purchaser true and complete copies
of all of the contracts and agreements set forth or required to be set forth on
Schedules 3.8, 3.11 and 3.12 or on any other Schedule, and there are no other
- ----------------------------
material terms of such contracts or other agreements except as set forth on such
copies. Except as disclosed on Schedule 3.12 or on the respective Schedule to
-------------
which it pertains, all of such contracts and other agreements are valid, in full
force and effect, binding upon the Selling Parties, and, to the Selling Parties'
knowledge, the other parties thereto and enforceable against the Selling Parties
in accordance with their respective terms; and the Selling Parties have
satisfied in all material liabilities and obligations thereunder through the
date hereof, are not in default in any material respect under any of them, nor,
to the Selling Parties' knowledge, does any condition exist which, with notice
or lapse of time or both, would constitute such a material default. To the
Selling Parties' knowledge, no other party to any such contract or other
agreement is in default thereunder, nor, to the Selling Parties' knowledge, does
any condition exist which, with notice or lapse of time or both, would
constitute such a default thereunder.
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<PAGE>
3.13 Consents. Except for the consents of such third parties as
--------
are separately identified on Schedule 3.13, no approval, consent or
-------------
authorization of, or registration or filing with any person is required in
connection with the execution and delivery of this Agreement by the Selling
Parties or the consummation of the transactions contemplated hereby by the
Selling Parties (including with respect to any Personal Property Lease, Real
Property Lease, Intellectual Property Right or any other Contract).
3.14 Intellectual Property Rights. All Intellectual Property
----------------------------
Rights owned or licensed by or to the Selling Parties relating to the Business
are listed and described on Schedule 3.14. To Selling Parties' knowledge, all
-------------
such Intellectual Property Rights are valid, uncontested and in good standing
subject to no liens or other encumbrances, and the Selling Parties own or
possess adequate and enforceable rights to use any of the foregoing in the
manner currently being used with no conflict with or infringement by the Selling
Parties of the asserted rights of others.
3.15 Equipment. Set forth on Schedule 3.15 is a true, correct
--------- -------------
and complete list of all material items of Equipment (including parts and
supplies and all Equipment which is not currently being used in the operation of
the Business), which list sets forth the Equipment by type of Equipment and
which lists all individual items of Equipment with a book value in excess of
$1,000. The Selling Companies have maintained the Equipment materially in
accordance with all warranties provided by the vendors or manufacturers thereof.
All agreements pursuant to which the Selling Companies may hold or use any
interest owned or claimed by the Selling Companies (including options) in or to
Equipment are in full force and effect and, to the Selling Parties's knowledge,
there is no material default or event which, with notice or lapse of time or
both, would constitute such a default. Schedule 3.15 lists all motor vehicles
-------------
and other Equipment for which a certificate of title or origin has been issued
to a Selling Company.
3.16 Title; Location of Assets. Except as otherwise disclosed
-------------------------
on Schedule 3.16, each Selling Company has good and marketable title (fee or
-------------
leasehold) to all of its assets and properties (tangible and intangible).
Except as set forth on Schedule 3.16 with respect to leased property, the
-------------
Selling Companies will at Closing have good and marketable title to all of its
assets, in each case free and clear of any lien or other encumbrance, assuming
that the Linc Indebtedness and the Merrill Lynch Indebtedness is repaid in
accordance with the terms of this Agreement. All of Seller's assets are located
within the states of New Hampshire and Massachusetts.
3.17 Undisclosed Liabilities. The Selling Companies do not (as
-----------------------
of the Balance Sheet Date) have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise, known or unknown to a Selling Party (individually a
"Liability" and collectively, the "Liabilities"), except (i) Liabilities
reflected and fully reserved against in the Interim Balance Sheet which have not
been paid or discharged since
-16-
<PAGE>
the date thereof, (ii) Liabilities disclosed on Schedule 3.17 and (iii) liabili-
-------------
ties incurred since the date of such balance sheet in the ordinary course of
business (and not in violation of this Agreement) and consistent with past
practice, which liabilities will be fully reflected as liabilities on the
Closing Date Balance Sheet, except for Liabilities which, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the Business or the assets of the Selling Companies taken as a whole.
3.18 Relationships. The Selling Parties have no knowledge that
-------------
any material supplier, referral source, third party payor of the Business or
party to an agreement with a Selling Company intends to cancel or otherwise
modify its relationship in a material adverse respect with a Selling Company or
the Business or to materially decrease or limit its purchases, services,
supplies or materials from or to a Selling Company or the Business. The Selling
Parties make no representation or warranty as to the effect of the transactions
contemplated by this Agreement on any such person or its relationship with the
Business or any Selling Party.
3.19 Employee Benefit Plans.
----------------------
(a) Schedule 3.19 contains a true and complete list of any
-------------
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, phantom stock, stock appreciation right, incentive compensation,
bonus, vacation, severance, disability, hospitalization, medical insurance or
other employee benefit plan or program which a Selling Company maintains or to
which a Selling Company has any present or future obligation to contribute (the
"Plans"). The Selling Parties have delivered or made available to Purchaser true
and complete copies of all material documents relating to the Plans. The Selling
Companies do not have any contract or understanding, whether legally binding or
not, to create any additional Plan. Accurate and complete copies of all
favorable determination letters from the Internal Revenue Service ("IRS"), the
most recent annual return on Form 5500 for each Plan, if applicable, and all
applicable actuarial or valuation reports (reporting correctly the value of the
assets in the fund as of the date thereof) for each Plan have been delivered to
Purchaser.
(b) The Selling Companies do not maintain or contribute to
any employee pension benefit plan as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(c) Neither the Selling Companies nor any affiliate is (nor
were any of their respective affiliated predecessors) obligated to contribute to
any multi-employer plan as defined in ERISA Section 3(37) in which any employee
of the Business is a participant. Neither the Selling Companies nor any
affiliate has ever (nor had any of their respective affiliated predecessors)
completely or partially withdrawn (within the meaning of the Multi-employer
Pension Plan Amendments Act of 1980) from any multi-employer plan.
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<PAGE>
3.20 Employee Relations.
------------------
(a) The Selling Companies have not experienced any attempt by
organized labor or its representatives to make a Selling Company conform to the
demands of organized labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of a Selling
Company. The Selling Companies have not at any time during the last three (3)
years had, nor, to the Selling Parties' knowledge, is there now threatened, (i)
a strike, picket, work stoppage or work slowdown relating to the Business or
(ii) any unfair labor practice complaint against a Selling Company before the
National Labor Relations Board.
(b) Except for statutory and other legal constraints imposed
upon employers generally, there are no agreements, arrangements or
understandings that would restrict the ability of a Selling Company to terminate
the employment of any or all of its employees for any lawful reason or for no
reason at all, without penalty or liability, except for accrued but unpaid
compensation and COBRA benefits.
(c) Set forth in Schedule 3.20 is the name, past twelve
-------------
months' salary and most recent bonus of each salaried employee of a Selling
Company.
3.21 Transactions with Related Parties. No Related Party has
---------------------------------
(i) borrowed money from or loaned money to a Selling Company which remains
outstanding, except as reflected on Schedule 1.4, (ii) any contractual or other
------------
claims, express or implied, of any kind whatsoever against a Selling Company
(except as otherwise disclosed on Schedule 1.4 and except with respect to
------------
(x) indemnification rights provided under the articles or bylaws of a Selling
Company and similar rights provided under applicable law and (y) employment
compensation and related benefits), (iii) any interest in any property or assets
used by the Selling Companies or the Business, or (iv) been a director, officer,
or employee of, or had any direct or indirect interest in, any entity which has
done business with a Selling Company.
3.22 No Material Adverse Change; Absence of Certain Changes.
------------------------------------------------------
(a) Except as set forth on Schedule 3.22, since the Balance
-------------
Sheet Date, there has been no material adverse change in the business,
prospects, operations or condition (financial or otherwise) of the Business or
in the assets of the Selling Companies and, to the knowledge of the Selling
Parties, no such change is threatened. Since the Balance Sheet Date, the Selling
Parties have conducted the Business only in the ordinary course and there has
been no damage, destruction or loss adversely affecting the business, operations
or condition (financial or otherwise) of the Business or the assets of the
Selling Companies, in any material adverse respect, whether or not covered by
insurance. Since such date, there has been no loss or
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<PAGE>
interruption in the use of any Permit which has not been fully disclosed to
Purchaser and remedied.
(b) Since the Balance Sheet Date, except as set forth in
Schedule 3.22, the Selling Companies have not: (i) mortgaged, pledged or
- -------------
subjected to any lien or other encumbrance any of their respective assets; (ii)
acquired or disposed of (including through sale, lease, license or other
transfer, or through abandonment) any assets or properties except in the
ordinary course of business; (iii) forgiven or canceled any debts or claims or
waived any rights arising under or in connection with any asset, except with
respect to Accounts Receivable that have not been collectible in the ordinary
course of business; (iv) adopted, canceled, terminated or amended in any respect
any material agreement (including any third-party payor agreement) related to
the conduct of the Business; (v) incurred or assumed any debt, obligation or
liability (whether absolute or contingent and whether or not currently due and
payable) except in the ordinary course of business; (vi) made any wage or salary
increase or bonus, or increase in any other direct or any indirect compensation
or any severance or termination pay, for or to any employees, consultants,
agents or other representatives, or any accrual for or commitment or agreement
to make or pay the same, except for annual increases in compensation of
employees made in the ordinary course consistent with past practices; (vii)
entered into any agreement with any labor union or association representing any
employee or adopted, entered into or amended any employee benefit plan except as
necessary to comply with ERISA or other applicable legal requirements; (viii)
entered into any lease affecting Real Property or any other lease that requires
or involves annual lease payments of $2,500 or more; (ix) except for inventory
or equipment acquired in the ordinary course of business, made any acquisition
of all or any part of the assets, properties, capital stock or business of any
other person; (x) incurred any material Liability other than in the ordinary
course of business; (xi) entered into any merger, consolidations,
recapitalization or other business combination or reorganization; (xii) made any
loans, advances or capital contributions to or investments in any person; (xiii)
done anything to affect adversely the relationship of a Selling Company with
clients, customers, providers, referral sources, third-party payors or any
material suppliers or with any governmental or regulatory body; (xiv) made any
change in any method of accounting practice; (xv) made any payment or
distribution on account of capital stock; or (xvi) entered into any other
material contract or other agreement or other transaction respecting the
Business or their assets (whether or not with a Related Party).
3.23 Books and Records. The Selling Companies have made and
-----------------
kept (and have given Purchaser access to) the Books and Records.
3.24 Insurance. Set forth on Schedule 3.24 is a list and
--------- -------------
description (including coverage) of all insurance policies or binders of
insurance which relate to the Business, correct and complete copies of which
have been delivered to Purchaser. No notice of reduction in coverage, increase
in premium, or cancellation or non-renewal with respect to, or disallowance of
any material claim under, any such policy or binder has been received by the
Selling Parties. All
-19-
<PAGE>
such policies provide coverage to the extent and in the manner (i) customary for
the home health care industry and for the Businesses of the size and nature
conducted by the Selling Companies and (ii) required by law and all agreements
to which a Selling Company is a party or otherwise bound. The Selling Companies
are not in default under any of such policies or binders, and to the knowledge
of Selling Parties, no event has occurred which, with notice or lapse of time or
both, would constitute such a default. The Selling Parties have not failed to
give any notice or to present any claim under any such policy or binder in a due
and timely fashion. Except as set forth on Schedule 3.24, there are no outstan-
-------------
ding unpaid claims under any such policies or binders.
3.25 Taxes.
-----
(a) Except as set forth on Schedule 3.25, the Selling
-------------
Parties have timely filed or caused to be filed with the appropriate taxing
authorities all true, correct and complete tax returns for federal, state,
municipal, payroll, withholding, excise, income, sales, use, unemployment
compensation, personal property, use and occupancy, business and occupation,
mercantile, real estate, franchise and other taxes (all the foregoing taxes,
including interest and penalties thereon and estimated taxes, being hereinafter
collectively referred to as "Taxes") required to be filed by it or them so as to
prevent any lien or other encumbrance on any of the Shares or the assets of the
Selling Companies. The Selling Parties have delivered or made available to
Purchaser complete and accurate copies of all of the Selling Companies' federal,
state and local tax returns for the three most recent complete tax years
together with copies of all significant correspondence between a Selling Party
and any taxing authorities since inception.
(b) All Taxes, in respect of periods beginning before the
Closing Date, have been timely paid or an adequate reserve has been established
therefor in the Financial Statements or will be established on the Closing Date
Balance Sheet, and the Selling Companies do not have any liability for Taxes in
excess of the amounts so paid or reserves so established or otherwise for
periods prior to the Closing Date.
(c) The tax returns of the Selling Parties have not been
audited by the Internal Revenue Service or any state, local or other relevant
taxing authority within the past five (5) years. No deficiencies for Taxes have
been claimed, proposed or assessed by any taxing or other governmental authority
against a Selling Party within such period. Except as set forth on Schedule
--------
3.25, within the past five (5) years, there have been no and, as of the date
- ----
hereof, there are no pending or, to the best of the Selling Parties' knowledge,
threatened audits, investigations or claims for or relating to any additional
liability in respect of Taxes in any jurisdiction, and there are no matters
under discussion between any Selling Party and any governmental or regulatory
body with respect to Taxes that in the reasonable judgment of the Selling
Parties is likely to result in an additional liability for Taxes. No extension
of a statute of limitations relating to Taxes is in effect with respect to the
Selling Parties.
-20-
<PAGE>
(d) None of the Selling Parties have (i) filed any consent under
Section 341(f) of the Code, (ii) executed or been affected by a waiver or
consent extending any statute of limitation for federal income or other Tax
liability which remains outstanding, (iii) applied for a Tax ruling that has
continuing effect (or been affected by a Tax ruling directed to an affiliated
corporation which has continuing effect), (iv) entered into or been affected by
a closing agreement with any taxing authority that has continuing effect, (v)
filed an election under Section 338(g) or Section 338(h)(10) of the Code or
caused or been the subject of a deemed election under Section 338(e) thereof,
(vi) made or been affected by a deemed dividend election under Section 1.1502-32
of the Treasury Regulations or a consent dividend election under Section 565
of the Code, (vii) made an election, or been required, to treat any asset of a
Selling Company as owned by another person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code, (viii) agreed to make,
nor been required to make any adjustment under Section 481(a) of the Code, or
(ix) participated in an international boycott under Section 999 of the Code.
(e) Except as otherwise disclosed on Schedule 3.25, the Selling
-------------
Companies have at all times been members of an affiliated group of corporations
(which included only the Selling Companies, NSS and NSI) within the meaning of
Section 1504 of the Code of which RSD was or is, as the case may be, the common
parent.
(f) None of the Selling Companies has made or become obligated to
make, or will, as a result of any event connected with the acquisition of the
Stock by Purchaser or any other transaction contemplated herein, make or become
obligated to make, any payment that would be not be deductible under Section
280G of the Code (without regard to subsection b(4) thereof).
(g) No Selling Party is a "foreign person" for purposes of Section
1445 of the Code.
(h) None of the assets of any Selling Company directly or indirectly
secures the payment of debt the interest on which is tax-exempt under the Code.
(i) Except as set forth in Schedule 3.25, none of the Selling
-------------
Companies currently is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made to any Selling Company by an
authority in a jurisdiction where any Selling Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
liens, encumbrances or security interests on any of the assets of any of the
Selling Companies that arose in connection with any failure (or alleged failure)
to pay any Taxes.
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<PAGE>
(j) Except as set forth on Schedule 3.25, each Selling Company has
-------------
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or third party.
(k) Except as set forth on Schedule 3.25, there is no dispute or claim
-------------
concerning any Tax liability of any Selling Company either: (i) claimed or posed
in writing; or (ii) as to which any Selling Party has knowledge based upon
personal contact with any agent of such authority.
(l) No Selling Party has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
3.26 No Other Agreements to Sell the Assets or Shares. The Selling Parties
------------------------------------------------
and any Related Party do not have any commitment or legal obligation, absolute
or contingent, to any other person other than Purchaser to sell, assign,
transfer or effect a sale of any of the Shares or the assets of the Selling
Companies (other than inventory in the ordinary course of business and the
factoring of accounts receivable to Linc), to sell or effect a sale of any
interest in the Selling Companies, to effect any merger, consolidation,
liquidation, dissolution or other reorganization of the Selling Companies, or to
enter into any agreement or cause the entering into of an agreement with respect
to any of the foregoing.
3.27 Environmental. Except as set forth on Schedule 3.27:
------------- -------------
(a) To the knowledge of the Selling Parties, none of the properties
leased by the Selling Companies has underground or above ground storage tanks,
or has had any leak, spill, disposal, discharge, or release (collectively,
"Release") of any hazardous material or pollutant. Selling Parties have not been
responsible for any Release of any "hazardous waste", "hazardous substance" or
"toxic substances" (as defined in or regulated by the applicable Environmental
Laws (hereinafter defined) in violation of any applicable Environmental Law.
(b) To the knowledge of the Selling Parties, there are no electrical
transformers, fluorescent light fixtures with ballasts, or other equipment
containing PCB's in excess of legal requirements on properties leased by Selling
Companies.
(c) No Selling Company has generated "hazardous waste" or "hazardous
substances" or "toxic substances", nor have any of such properties been used by
a Selling Company for the use, treatment, transportation, storage, handling or
disposal of any "hazardous waste" or "hazardous substance" or "toxic substance"
in violation of an Environmental Law. No Selling Party has ever received any
notice or claim from the Federal or any state or local government or agency
concerning the alleged or threatened Release of any such waste or substance.
-22-
<PAGE>
(d) There have been no environmental audits or assessments which have
been conducted at any Real Property site since the date of a Selling Parties'
occupancy thereof, either by a Selling Party or any attorney, environmental
consultant or engineer engaged by a Selling Party or, to the Selling Parties'
knowledge, by any other person for such purpose.
(e) The Selling Parties have not released any other person from any
claim under any Environmental Law or waived any rights of which they are aware
concerning any environmental condition.
3.28 Non-Solicitation. Since July 26, 1996, neither the Selling Parties
----------------
(nor any of their shareholders, employees, representatives or agents, as
appropriate) nor any Related Party has, directly or indirectly, solicited,
initiated, encouraged or participated in negotiations in any manner with respect
to, or furnished or caused or permitted to be furnished any information to any
person (other than Purchaser or Purchaser's representatives, including Advest),
in connection with, any inquiry or offer for any purchase or sale of the assets
of a Selling Company, the Business, or the Shares, or any portion thereof, or
any acquisition, combination or similar transaction involving a Selling Company
or any substantial part of the assets of a Selling Company or the Business (a
"Third-Party Proposal"). Since such date, a Third-Party Proposal has not
occurred.
3.29 No Bankruptcy. The Selling Parties are not subject to any voluntary
-------------
or involuntary proceedings in bankruptcy, reorganization, dissolution or
liquidation or to any assignment for the benefit of creditors, and no trustee,
receiver or liquidator has been appointed for any Selling Party or any of their
respective properties.
3.30 Shares. The Shares constitute all of the issued and outstanding
------
capital stock of RSD and are owned by Seller free and clear of all liens, claims
and encumbrances. RSD owns all of the issued and outstanding capital stock of
NSH, NSL, NSS and NSI free and clear of all liens, claims and encumbrances. No
subscriptions, calls, commitments, options, warrants, rights or agreements to
acquire shares of capital stock of any Selling Company have been authorized or
issued or are outstanding. There are no securities convertible or exchangeable,
actually or contingently, into capital stock of any Selling Company. The Shares
have been duly authorized, are validly issued and outstanding and are fully paid
and non-assessable. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Selling Company.
3.31 Disclosure. No representation or warranty of a Selling Party
----------
contained in this Agreement, in any Schedule or Exhibit, or any certificate
delivered under this Agreement or in connection herewith contains or will
contain any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein and therein not mis-
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<PAGE>
leading. Copies of all documents furnished by or on behalf of a Selling Party or
a Related Party to Purchaser are complete and accurate in all material respects.
4. Representations and Warranties of Purchaser. The Purchasing Parties
-------------------------------------------
jointly and severally represent and warrant to the Selling Parties as follows:
4.1 Organizational Status. HHCA is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Hampshire. Each of the
Purchasing Parties has all requisite corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its business as
now being and as heretofore conducted.
4.2 Qualification. Each of the Purchasing Parties is duly qualified
-------------
to do business as a foreign corporation and is in good standing in all states or
jurisdictions in which the nature of its business as presently operated by it or
the character of the property owned or leased by it with respect to its business
makes such foreign qualification or authorization necessary.
4.3 Authorization; No Conflict; Shares.
----------------------------------
(a) Each of the Purchasing Parties has the full legal right and
all power and authority required to enter into, execute and deliver this
Agreement and the documents and other agreements required to be delivered
hereunder and to perform fully its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and each of the agreements
and documents contemplated hereby by the Purchasing Parties have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Purchasing Parties and constitutes, and each of
the other agreements and documents to be delivered by the Purchasing Parties
hereunder when executed and delivered by the Purchasing Parties will constitute,
the valid and binding obligation of the Purchasing Parties enforceable in
accordance with their respective terms, except to the extent that enforceability
may be limited by the effect of bankruptcy, reorganization or other similar laws
relating to or affecting the rights of creditors generally.
(b) Except as set forth on Schedule 4.3, the execution, delivery
------------
and performance of this Agreement by the Purchasing Parties and the documents
and other agreements to be delivered hereunder by the Purchasing Parties and the
consummation of the transactions contemplated hereby and thereby by the
Purchasing Parties will not (i) violate any provision of the Purchasing Parties'
articles of incorporation or bylaws, (ii) violate, conflict with or result in
the breach of any of the terms of, result in a material modification of the
effect of, otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default under,
any material contract or other agreement to
-24-
<PAGE>
which any of the Purchasing Parties is a party or by or to which it or any of
their respective assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which any of the Purchasing Parties, or the
assets, properties or business of the Purchasing Parties are bound, (iv) violate
any statute, law or regulation which violation could reasonably be expected to
have a material adverse effect on the Purchasing Parties taken as a whole, or
(v) violate or cause any revocation of or limitation on any permit (A) that is
necessary to the lawful conduct of their respective businesses or (B) the
violation, revocation or limitation of which could reasonably be expected to
have a material adverse effect on their respective businesses taken as a whole.
(c) The HHCA Stock to be issued to Seller at Closing has been
duly authorized, will be validly issued and outstanding and fully paid and non-
assessable when issued in accordance with the terms hereof. The HHCA Stock will
be issued to Seller in compliance with all applicable federal and New Hampshire
securities laws pursuant to valid exemptions from the registration; provided,
however that the representations and warranties made by Seller in the
Subscription Agreement (hereinafter defined) shall be true and correct in all
material respects.
4.4 Compliance with Laws. Each of the Purchasing Parties has
--------------------
operated in, compliance with all applicable federal, state and local laws,
regulations and ordinances and any applicable requirements of any governmental
or regulatory body, court or arbitrator affecting its business or its assets,
except for noncompliance which would not reasonably be expected to have a
material adverse effect on a Purchasing Party.
4.5 Consents. Except for the consents set forth on Schedule 4.5, no
-------- ------------
approval, consent or authorization of, or registration or filing with any person
is required in connection with the execution and delivery of this Agreement or
the consummation of the other transactions contemplated hereby.
4.6 Litigation. Except as set forth on Schedule 4.6, there is no
---------- ------------
Action pending or, to the Purchasing Parties' knowledge, threatened against the
Purchasing Parties or any of their assets, which could reasonably be expected to
have a material adverse effect on Purchasing Parties taken as a whole. There is
no outstanding order, writ, injunction, decree, or judgment of
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<PAGE>
any court, governmental or regulatory body or arbitration tribunal applicable to
any Purchasing Party or their respective assets, which could reasonably be
expected to have a material adverse effect on Purchasing Parties taken as a
whole.
4.7 SEC Filings.
-----------
(a) HHCA has filed or caused to be filed all registration
statements, reports or statements, and any amendments thereto required to be
filed by it pursuant to the Securities Exchange Act of 1934 and has heretofore
furnished to the Selling Parties copies of: (i) HHCA's annual report on form 10-
K for the most recent fiscal year; (ii) HHCA's definitive proxy statement for
the current fiscal year; and (iii) HHCA's quarterly reports on Form 10-Q for
each quarter since its most recent fiscal year (collectively, the "SEC
Filings").
(b) The SEC Filings were in all material respects prepared
in accordance with the requirements of the Securities Exchange Act of 1934 and
the rules and regulations thereunder. Set forth on Schedule 4.7 is a description
------------
of each event which has occurred since the latest SEC Filing which renders any
information contained therein misleading or untrue in any material respect.
4.8 Financial Statements. HHCA has delivered to Selling Parties
--------------------
copies of its consolidated financial statements (including balance sheets,
statements of earnings, statements of stockholders' equity and statements of
cash flows, together with notes thereto) as of June 30, 1996 and 1995
(collectively, "HHCA's Financial Statements"). HHCA's Financial Statements were
audited by Coopers & Lybrand, independent certified public accountants, whose
report without qualification thereon is included with such Financial Statements.
HHCA's Financial Statements (i) fairly present the financial condition, assets
and liabilities of HHCA at their respective dates and the results of operations
and changes in cash flows for the periods covered thereby, (ii) were prepared in
accordance with generally accepted accounting principles, and (iii) were
prepared from the books and records of HHCA.
4.9 Disclosure. No representation, warranty or statement of a
----------
Purchasing Party contained in this Agreement, in any Schedule or Exhibit, or any
agreement or document delivered under this Agreement or in connection herewith
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein and
therein not misleading.
5. Covenants of the Parties. The Selling Parties and the Purchasing
------------------------
Parties covenant and agree with the other as follows:
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<PAGE>
5.1 Conduct of Business. Except as otherwise disclosed on
-------------------
Schedule 5.1, from the date hereof until the Closing Date, the Selling Parties
- -------------
agree that they will, unless otherwise consented to in writing by Purchaser:
(a) cause the Selling Companies to carry on the Business in, and
only in, the usual, regular and ordinary course in substantially the same manner
as heretofore carried on; preserve intact the Permits and the present business
organization of the Business; use best efforts to keep available the services of
the present employees of the Business (except as provided in Section 5.6);
-----------
encourage such employees to continue their employment with the Selling
Companies; maintain insurance; perform obligations; comply with applicable laws;
maintain complete and accurate records; pay all taxes when due; and use best
efforts to preserve its relationships with clients, providers, suppliers and
others having business dealings with the Business to the end that its goodwill
and ongoing business shall be conducted on substantially the same basis on the
Closing Date as on the date hereof;
(b) maintain, in accordance with the Selling Companies' past
practices and in accordance with any vendor or manufacturer warranties, the
Improvements, Equipment and other personal property of the Business in the same
condition as on the date hereof, except for depletion, depreciation, ordinary
wear and tear and damage by unavoidable casualty;
(c) keep in full force and effect insurance of the same type and
in amounts at least equal to that carried by the Selling Companies with respect
to the Business and the Purchased Assets on the date hereof;
(d) perform all of their obligations under all contracts and
other agreements relating to the Business, including the discharge of all
accounts payable of the Business according to the terms and conditions of all
invoices therefor except when the amount thereof is being contested in good
faith, by appropriate proceedings and with adequate reserves therefor being set
aside on the Books and Records (and if still being contested as of the Closing
Date, on the Closing Date Balance Sheet);
(e) maintain true, correct and complete books of account and
records relating to the Business;
(f) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the conduct of the Business;
(g) promptly upon its knowledge thereof, advise Purchaser in
writing of the termination or resignation of any key employee and, to their
knowledge, the circumstances therefor;
-27-
<PAGE>
(h) not amend their respective articles of incorporation or by-laws
(or comparable constitutive documents);
(i) not declare, set aside or pay any dividend or make any
distribution on, with respect to or in exchange for shares of their capital
stock;
(j) not issue, grant, sell or pledge any shares of, or rights of
any kind to acquire any shares of, its capital stock, or purchase, redeem or
otherwise acquire any shares of their capital stock;
(k) not acquire any assets or properties, other than in the
ordinary course of business consistent with past practice;
(l) not sell, lease, transfer, dispose of, encumber or mortgage any
assets or properties, other than in the ordinary course of business consistent
with past practice, except for the Excluded Assets;
(m) not enter into any merger, consolidation, recapitalization or
other business combination, reorganization or acquisition;
(n) not create, incur or assume any indebtedness for borrowed money
except in the ordinary course of business consistent with past practice (and in
any event not in an amount exceeding $50,000), or prepay any part of the
principal or interest of any existing indebtedness before the due date thereof;
(o) not assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person or entity except endorsements of negotiable instruments in the
ordinary course of business consistent with past practice;
(p) not sell, transfer, license or otherwise dispose of any
material asset, it being expressly agreed and understood that all material
assets shall continue to be assets of the Selling Companies and shall not be
liquidated, transferred or sold until after the Closing;
(q) not waive, release, grant or transfer any rights of value or
modify or change in any material respect any existing license, lease, contract
or other documents other than in the ordinary course of business consistent with
past practice;
(r) not make aggregate capital expenditures and commitments
therefor, which, when taken together with all other capital expenditures and
commitments of the Selling Parties existing or made during such period, would
exceed $50,000;
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<PAGE>
(s) not make any change in any method of accounting or accounting
practice, except as may be required by law or by GAAP and after written notice
to the Purchaser;
(t) not increase the compensation payable or to become payable to any
of their employees except for normal periodic increases in the ordinary course
of business that are made in accordance with established compensation policies
of the Selling Parties;
(u) not make any payment or provision with respect to any Benefit
Plan, except in the ordinary course of the administration of such plans
consistent with the established compensation policies of the Selling Parties;
(v) not enter into any employment agreement or other contract or
arrangement with respect to the performance of personal services which is not
terminable without liability by the Selling Parties on not more than 30 days'
notice;
(w) not adopt any new employee benefit plan or program or amend to
increase the compensation or benefits payable under any of the Benefit plans, or
grant any severance or termination pay or benefit otherwise than pursuant to
policies of the Selling Parties in effect on the date hereof;
(x) not make any payment of, discharge or satisfy any material
liability or obligation (whether accrued, absolute, contingent or otherwise) of
any Selling Party, except in the ordinary course of business in accordance with
the terms thereof, or to cure defaults disclosed on Schedule 5.1;
------------
(y) not enter into any contract or commitment providing for payments
in excess of $25,000 in any fiscal year, except in the ordinary course of
business after consultation with Purchaser;
(z) not take or permit to be taken any action that is represented and
warranted in Section 3.22(b) not to have been taken since the Balance Sheet
---------------
Date;
(aa) not fail to pay when due all taxes, assessments, governmental
charges or levies imposed upon them or their income, profits or assets or
otherwise required to be paid by them, or fail to pay when due any liability or
charge that, if unpaid, might become a lien or other encumbrance upon any of
their assets;
(bb) not file any tax returns or amendments thereto, make, change, or
revoke any tax election or make any agreement or settlement with any taxing
authority or file any tax returns without Purchaser's written consent;
-29-
<PAGE>
(cc) not make any payments to or enter into or modify any existing
agreement or arrangement with any Related Party; and
(dd) promptly upon its knowledge thereof, advise Purchaser in writing
of: (i) any material adverse change in the financial condition or operations of
the Business; (ii) any event, condition or circumstance occurring from the date
hereof until the Closing Date that would constitute a violation or breach of any
representation, warranty, covenant, agreement or provision contained in this
Agreement (provided, however, that such disclosure shall not be deemed to cure
-------- -------
any violation or breach of any such representation, warranty, covenant,
agreement or provision), or (iii) any event, occurrence, transaction or other
item that would have been required to have been disclosed on any Schedule
delivered hereunder, had such event, occurrence, transaction or item existed on
the date hereof.
5.2 Access to Information. From and after the date hereof, at reasonable
---------------------
times and upon reasonable notice to Seller, the Purchasing Parties shall be
entitled, through its employees and representatives, to make such investigation
of the assets, properties, facilities, personnel, business and operations of the
Selling Companies and the Business and such examination of the books, records
and financial condition of the Selling Companies and the Business as Purchaser
reasonably requests. No investigation by the Purchasing Parties shall diminish,
obviate or constitute a waiver as to the enforcement of any of the
representations, warranties, covenants or agreements of the Selling Parties
under this Agreement and all related agreements executed at the Closing. There
are no other representations, warranties, covenants or agreements among the
parties. The Selling Parties shall furnish the representatives of the Purchasing
Parties during such period with all information and copies of documents
concerning the affairs of the Business as such representatives may reasonably
request and shall cause the appropriate officers, employees, consultants,
agents, accountants and attorneys of the Selling Parties to cooperate fully with
such representatives in connection with such review and examination and to make
full disclosure to the Purchasing Parties of all material facts affecting the
financial condition and business operations of the Selling Parties. Neither such
investigation by the Purchasing Parties nor the delivery of such information or
documents shall affect the Purchasing Parties' right to rely on any
representation or warranty made by the Selling Parties or relieve the Selling
Parties of any obligation hereunder as the result of a breach of their
representations and warranties.
5.3 Governmental Permits and Approvals; Consents. The Selling Parties
--------------------------------------------
shall use their reasonable best efforts (with the reasonable assistance of the
Purchasing Parties to the extent required to obtain such approvals) to obtain
promptly (i) all permits and approvals from any governmental or regulatory body
required to be obtained by the Selling Parties for lawful consummation of the
Closing, (ii) the consents set forth or required to be set forth on Schedule
--------
3.13, and (iii) appropriate estoppel representation letters in form and
- ----
substance reasonably satisfactory to the Purchasing Parties from the lessors
under the Real Property Leases.
-30-
<PAGE>
5.4 Assignment of Contracts, Etc. To the extent that the sale
----------------------------
of the Shares constitutes an assignment under the terms of any of the Contracts
(including the Real Property Leases) or the Permits which requires the consent
of another party, the Selling Parties agree to use their reasonable best efforts
(with the reasonable assistance of the Purchasing Parties to the extent
necessary to obtain such consents) to obtain the consent of such other party to
an assignment in all cases in which consent is required or novation agreements
to contracts, licenses, permits or approvals not so assignable.
5.5 Maintenance of Permits. The Selling Parties shall at all
----------------------
times prior to the Closing Date, cause the Selling Companies to preserve and
maintain each of the Permits free and clear of all liens and other encumbrances.
The Selling Parties shall not take any action or permit the Selling Companies to
take any action which would cause any governmental or regulatory body to
institute proceedings regarding any of the Permits or take any other action
which would result in a Selling Company being in noncompliance in any material
respect with the require ments of any other governmental or regulatory body
having jurisdiction thereof.
5.6 Employees; Employee Compensation.
--------------------------------
(a) Except as other wise provided herein with respect to
a specific employee, nothing contained in this Agreement shall confer upon any
such employee any right with respect to continued employment by the Selling
Companies. No provision of this Agreement shall create any third-party rights in
any such employee, or any beneficiary or dependent thereof, with respect to the
compensation, terms and conditions of employment and benefits that may be
provided to such employee by the Selling Companies or under any benefit plan
that the Selling Companies may maintain after the Closing.
(b) The Selling Parties agree to cause the Selling
Companies to discharge when due all compensation and benefits to any employee
under all pay and compensation practices applicable to the Business and under
any employment agreements payable in the ordinary course of business, except to
the extent otherwise reflected on the Closing Date Balance Sheet. The Selling
Parties shall pay all severance costs in respect of employees severed prior to
the Closing Date.
5.7 Accounts Receivable. Between the date hereof and the
-------------------
Closing Date, the Selling Parties will use prudent credit and collection
procedures in order to collect the Accounts Receivable so as not to jeopardize
Purchaser's future customer, patient, provider, referral source and third-party
payor relations.
5.8 Title; Risk of Loss. Legal title and risk of loss with
-------------------
respect to the assets of the Selling Companies and the Shares shall not pass to
Purchaser until the Shares are transferred at Closing. If prior to the Closing
Date any of the assets of the Selling Parties are destroyed or
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<PAGE>
damaged by fire or other casualty, Purchaser may, at its option, if the amount
of such destruction or damage is in excess of $100,000, terminate this
Agreement. In the event that Purchaser elects not to terminate this Agreement,
the amount any insurance proceeds shall not be taken into account in connection
with the determination of any Purchase Price Adjustment.
5.9 Non-solicitation.
----------------
(a) From the date hereof until the earlier of the Closing
Date or the Outside Date (hereinafter defined), the Selling Parties (and any
Related Party and any of their respective employees, representatives or agents)
will not, directly or indirectly, solicit, initiate, encourage or participate in
negotiations in any manner with respect to, or furnish or cause or permit to be
furnished any information to any person (other than Purchaser or Purchaser's
representatives) in connection with, any Third-Party Proposal. During such
period, the Selling Parties shall promptly inform Purchaser of the occurrence of
a Third-Party Proposal and the terms thereof (including the identity of the
prospective purchaser or soliciting party).
(b) If a Selling Party (or any Related Party or any of
their respective employees, representatives or agents) breaches or threatens to
commit a breach of, any of the provisions of this Section 5.9, Purchaser shall
-----------
have the right (in addition to any other rights and remedies available to
Purchaser at law or in equity) to equitable relief (including injunctions)
against such breach or threatened breach, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable harm to Purchaser
and that money damages would not be an adequate remedy to Purchaser. The Selling
Parties agree that they will not seek, and hereby waives any requirement for,
the securing or posting of a bond or proving actual damages in connection with
Purchaser's seeking or obtaining such relief.
5.10 Regulatory Approvals. The parties agree that in order to
--------------------
consummate the transactions contemplated hereby, all applicable federal, state
and local governmental or regulatory approvals (collectively, the "Regulatory
Approvals") must be obtained, subject to Purchasing Parties' right to waive this
condition in writing on behalf of the parties; provided, however that in the
event of such written waiver, so long as the Selling Parties are not responsible
for the failure to obtain the Regulatory Approvals, the Selling Parties shall
incur no liability for failing to obtain such Regulatory Approvals.
5.11 Monthly Financial Statements and Cost Reports. From the
---------------------------------------------
date hereof until the Closing Date, the Selling Parties will deliver to
Purchaser, as soon as possible but in any event within twenty (20) calendar days
after the end of each month, a balance sheet, statement of earnings and
statement of cash flows for such month and for the part of the fiscal year
ending with such month, certified by an executive officer of the Selling
Companies that such financial statements fairly present the financial position,
results of operations and changes in cash flows as of the end of such month and
for such period and that such financial statements have been
-32-
<PAGE>
prepared in accordance with GAAP. Selling Parties shall promptly deliver to
Purchaser copies of all Medicare, Medicaid, Eldercare and other cost reports for
the period ended June 30, 1996 all of which to Seller's knowledge shall be true
and correct in all material respects.
5.12 SEC and NASDAQ Disclosure. The Selling Parties shall
-------------------------
furnish promptly to HHCA and its counsel for inclusion in any report filed with
the Securities and Exchange Commission or the NASDAQ System in a form reasonably
satisfactory to HHCA and its counsel, such information concerning each of the
Selling Companies, its respective operations, capitalization, stock ownership,
financial statements, businesses, assets and other matters as HHCA or its
counsel may reasonably request in connection with such filing.
5.13 Current Period Tax Returns.
--------------------------
(a) The Selling Parties shall be responsible for
preparing and filing all Tax Returns of any Selling Company relating to the
current fiscal year or other current reporting period ending prior to the date
of Closing (including, without limitation, federal and state income tax returns
for the fiscal year ended June 30, 1996 and the interim period ending on the
Closing Date), which may be due after the Closing Date (a "Current Return").
Purchasing Parties shall be responsible for remitting all Taxes due with any
Current Return to the extent that the same are accrued on the Closing Date
Balance Sheet and are taken into account in determining the Consolidated Net
Book Value of RSD. The Selling Parties will be responsible for remitting all
Taxes (including any interest and penalties) due with any Current Return to the
extent that such Taxes exceed the amount accrued on the Closing Date Balance
Sheet (each a "Tax Deficiency").
(b) The procedures set forth in this Section 5.13(b)
---------------
shall apply to each Current Return, which shall also include any estimated tax
return filed or estimated tax payment made after the date hereof that relates to
a Current Return. The Selling Parties shall submit a draft of each such Current
Return to the Purchasing Parties for their review and comment as soon as
reasonably practicable, but in any event not less than Thirty (30) days prior to
the date on which the return or payment is due. The parties will cooperate in
the preparation of each Current Return. In the event that the Purchasing Parties
shall disagree with or dispute the accuracy of any Current Return, the
Purchasing Parties shall notify the Selling Parties in writing of such dispute
within thirty (30) days of the delivery of the Current Return. In connection
with the review of the Current Return, the Selling Parties shall cause the
Selling Parties' Accountants to make all work papers available to the Purchasing
Parties. In the event of such a dispute, the Selling Parties and the Purchasing
Parties shall attempt to reconcile their differences and any resolution by them
of any disputed amounts shall be final, binding and conclusive on the parties.
If the parties are unable to reach a resolution to such effect within twenty
(20) days of the delivery of the Purchasing Parties' written notice of the
dispute to the Selling Parties, the items
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<PAGE>
remaining in dispute (the "Unresolved Disputes") shall be submitted to the
Independent Accountant, which shall, within thirty (30) days after such
submission, issue a report resolving all Unresolved Disputes, and such report
shall be final, binding and conclusive on the parties. The fees and
disbursements of the Independent Accountant shall be allocated to the party
whose determination of the Unresolved Disputes differs the most from the
Independent Accountant's determination. The Selling Parties shall cause the
Escrow Agent to release promptly from the Escrow the amount of any Tax
Deficiency and fees and disbursements of the Independent Accountant for which
the Selling Parties are liable hereunder.
(c) Each Selling Party shall provide Purchasing Parties
an affidavit stating, under penalties of perjury, the transferor's United States
taxpayer identification number and that the transferor is not a foreign person
pursuant to section 1445(b)(2) of the Code.
6. Conditions Precedent to the Purchasing Parties' Obligations. The
-----------------------------------------------------------
obligation of the Purchasing Parties to consummate the transactions contemplated
hereby is subject to the satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in writing by the Purchasing
Parties:
6.1 Regulatory Approvals. All Regulatory Approvals shall have
--------------------
been received in accordance with the provisions of Section 5.10.
------------
6.2 Closing Deliveries. All documents required to be delivered by
------------------
the Selling Parties to the Purchasing Parties at Closing hereunder shall have
been delivered to the Purchasing Parties, including officers' certificates,
dated as of the Closing Date, certifying (i) as to incumbency and the
resolutions adopted by the shareholders and the boards of directors of the
Selling Companies duly authorizing the execution, delivery and performance by
the Selling Companies of this Agreement and the execution, delivery and
performance by the Selling Companies of all instruments and documents
contemplated hereby, (ii) that except for changes between the date of this
Agreement and the Closing Date permitted by this Agreement or waived by
Purchaser in writing, all of the representations and warranties of the Selling
Parties contained in this Agreement are true and correct in all material
respects (except for representations and warranties which are already qualified
as to materiality, which shall be true and correct in all respects), (iii) that
the Selling Parties have performed in all respects all of the obligations and
covenants to be performed by them hereunder, (iv) all of the conditions
precedent to the obligations of the Selling Parties hereunder have been waived
by the Selling Parties or satisfied, and (v) that since the date of this
Agreement, there has not been any material adverse change in the business,
prospects, operation or condition (financial or otherwise) of the Business or in
the assets of the Selling Companies except as otherwise stated therein.
6.3 Representations and Warranties on Closing Date. All
----------------------------------------------
representations and warranties of the Selling Parties made in this Agreement or
in any document or certificate
-34-
<PAGE>
delivered by the Selling Parties to the Purchasing Parties pursuant hereto shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though such representations and warranties were
made on and as of the Closing Date, or if made as of a specific date, as of such
date (except for representations and warranties which are already qualified as
to materiality, which shall be true and correct in all respects).
6.4 Terms, Covenants and Conditions. All the terms, covenants
-------------------------------
and conditions of this Agreement to be complied with and performed by the
Selling Parties on or prior to the Closing Date shall have been complied with
and performed in all material respects unless waived in writing by the
Purchasing Parties.
6.5 Consents, Approvals, Etc. The Selling Parties shall have
------------------------
obtained and delivered to the Purchasing Parties all required consents and
approvals of third parties, including consents and approvals of third parties
under the Real Property Leases (containing appropriate estoppel representations
in form and substance reasonably satisfactory to Purchaser), the Personal
Property Leases and the other Contracts for which such consent is required as
indicated on Schedule 3.13.
-------------
6.6 No Material Adverse Change. On the Closing Date, there
--------------------------
shall have been no material adverse change in the business, prospects, operation
or condition (financial or otherwise) of the Business or in the assets of the
Selling Companies.
6.7 Absence of Litigation. No Action shall have been instituted
----------------------
before any court or governmental or regulatory body by any person (other than
Purchaser or any of its affiliates), or instituted or threatened by any
governmental or regulatory body, to restrain or modify, in any respect which is
materially adverse to the Purchasing Parties, the Selling Parties, the Business
or the assets of the Selling Companies, to prevent the carrying out of the
transactions contemplated hereby, or to seek damages or a discovery order in
connection with such transactions, or that has or, if adversely determined,
would reasonably be expected to have a materially adverse effect on the business
prospects, operation or condition (financial or otherwise) of the Business or
the assets of the Selling Companies.
6.8 Absence of Liens; Payment of Loans. At or prior to the
----------------------------------
Closing, Purchaser shall have received a Uniform Commercial Code ("UCC") search
report issued by the New Hampshire and Massachusetts Secretaries of State and
any applicable local offices indicating that there are no filings under the UCC
on file with such Secretary of State and such local office which name any
Selling Company as debtor or otherwise indicating any lien or other encumbrance
on the assets of any Selling Company or the Shares or, if any such liens or
other encumbrances exist, such liens or other encumbrances shall be extinguished
and removed at Closing. Notwithstanding the foregoing, (i) liens encumbering
leased property in favor of the lessors thereof need not be released and (ii)
the Purchasing Parties shall be responsible for
-35-
<PAGE>
providing the Selling Companies with sufficient funds to pay in full at the
Closing, the Linc Indebtedness, the Merrill Lynch Indebtedness, the Roberts
Indebtedness, the August Seller Loan and the Remaining Seller Indebtedness, if
any, as reflected on the Closing Date Balance Sheet, and any liens securing the
Linc Indebtedness and Merrill Lynch Indebtedness may be removed of record
promptly after the Closing so long as there is a written commitment to do so
upon payment such indebtedness. Purchaser shall utilize its reasonable best
efforts to cause Seller and her husband to be released from any guarantees of
executory liabilities under the Contracts after the Closing.
6.9 Contribution to Capital; Repayment of HHCA Loan. Seller
-----------------------------------------------
shall have made the Contribution to Capital and provided Purchaser with evidence
thereof in form and substance reasonably acceptable to Purchaser. Seller shall
have repaid the HHCA Loan in full.
6.10 Subordination Agreement. Seller shall have executed and
-----------------------
delivered to Purchaser at Closing, a Subordination Agreement in the form of
Exhibit 6.10 hereto (the "Subordination Agreement").
- ------------
6.11 Subscription Agreement. Seller shall have executed and
----------------------
delivered to HHCA the Subscription Agreement in the form of Exhibit 6.11 hereto
------------
(the "Subscription Agreement").
6.12 Registration Rights Agreement. Seller shall have executed
-----------------------------
and delivered to HHCA the Registration Rights Agreement in the form of Exhibit
-------
6.12 hereto (the "Registration Rights Agreement").
- ----
6.13 Employment Agreements. Seller and Salvatore DiSalvo shall
---------------------
have executed and delivered to Purchaser the Employment Agreements in the form
of Exhibits 6.13(i), 6.13(ii) and 6.13(iii) hereto, as applicable (the
----------------------------------------
"Employment Agreements").
6.14 Restrictive Covenant Agreement. Elayne Roberts and Julian
------------------------------
Roberts shall have executed and delivered to Purchaser the Restrictive Covenant
Agreement in a form reasonably acceptable to the Purchaser (the "Restrictive
Covenant Agreement"); provided that such restrictions shall not exceed the
restrictions set forth in the Employment Agreements.
6.15 Escrow Agreement. Seller and the Escrow Agent shall have
----------------
executed and delivered to Purchaser the Escrow Agreement.
6.16 Stock Certificates and Corporate Records. Seller shall
----------------------------------------
have delivered to Purchaser (i) original stock certificates for all issued and
outstanding shares of capital stock of each Selling Company accompanied by stock
powers for the Shares duly endorsed in blank for transfer; (ii) resignations of
such officers and directors of the Selling Companies as may be
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<PAGE>
requested by Purchaser and (iii) stock books and minute books for each Selling
Company. Seller shall have executed and delivered to the Escrow Agent, stock
powers duly endorsed in blank for transfer for all HHCA Stock.
6.17 Opinion of Seller's Counsel. Purchaser shall have received
---------------------------
the opinions of counsel to the Selling Parties, in form and substance reasonable
acceptable to Purchaser ("Seller's Opinion").
6.18 Additional Documents. Purchaser shall have received such
--------------------
other certificates, documents and instruments as Purchaser shall reasonably
request in connection with the consummation of the transactions contemplated by
this Agreement.
6.19 Approval of HHCA Board. HHCA shall have received from its Board
----------------------
of Directors their approval of the this Agreement and the transactions
contemplated hereby (the "Board Approval"); provided, however that this
condition to close shall expire on November 13, 1996. If the Board Approval is
not obtained, Purchaser must give Seller written notice thereof prior to the
date set forth in this Section 6.19.
------------
6.20 Approval of HHCA's Lenders. HHCA shall have received from its
--------------------------
senior lenders their approval of the this Agreement and the transactions
contemplated hereby (the "Lender Approval"); provided, however that this
condition to close shall expire on November 22, 1996. If the Lender Approval is
not obtained, Purchaser must give Seller written notice thereof prior to the
date set forth in this Section 6.20.
------------
6.21 Satisfactory Completion of Due Diligence. Purchaser shall have
----------------------------------------
completed its due diligence investigation of the Selling Parties (the "Due
Diligence Investigation"); provided, however that this condition to close shall
expire on November 30, 1996. If the results of Purchaser's Due Diligence
Investigation are not satisfactory to Purchaser for any reason, Purchaser must
give Seller written notice thereof prior to the date set forth in this Section
-------
6.21.
- ----
6.22 Marital Rights. Seller shall cause Salvatore DiSalvo to
--------------
execute an agreement in form and substance reasonably acceptable to Purchaser
acknowledging and agreeing that (i) any payments or other consideration Seller
or he shall receive under this Agreement or any other related agreement
(excluding payments to him under his Employment Agreement) shall be subject to
any claims for indemnification asserted by the Purchasing Parties hereunder;
(ii) to the extent that he receives such consideration he shall be responsible
for any indemnification claims asserted by Purchasing Parties hereunder.
Salvatore DiSalvo's property as of the date hereof and any additional property
acquired after the date hereof except as
-37-
<PAGE>
otherwise provided above with respect to the consideration payable hereunder
shall not be utilized to satisfy claims for indemnification hereunder.
7. Conditions Precedent to Selling Parties' Obligations. The obligation
----------------------------------------------------
of Selling Parties to consummate the transactions contemplated hereby is subject
to the satisfaction on or prior to the Closing Date of the following conditions,
any of which may be waived in writing by Selling Parties (provided that if any
condition shall not have been satisfied due to the action or inaction of the
Selling Parties or any Related Party, such condition shall be deemed to have
been satisfied or waived by the Selling Parties and the Purchasing Parties shall
incur no further obligation with respect thereto):
7.1 Closing Deliveries. All documents required to be delivered
------------------
by the Purchasing Parties to the Selling Parties shall have delivered to the
Selling Parties, including officers certificates dated as of the Closing Date,
certifying (i) as to incumbency and the resolutions adopted by the board of
directors of the Purchasing Parties duly authorizing the execution, delivery and
performance of this Agreement and the execution, delivery and performance of all
instruments and documents contemplated hereby to which a Purchasing Party is a
party, (ii) that except for changes between the date of this Agreement and the
Closing Date permitted by this Agreement or waived by the Selling Parties in
writing, all of the representations and warranties of the Purchasing Parties
contained in this Agreement are true and correct in all material respects
(except for representations and warranties which are already qualified as to
materiality, which shall be true and correct in all respects), (iii) that the
Purchasing Parties have performed in all respects all of their obligations and
covenants to be performed by them hereunder, and (iv) that all of the conditions
precedent to the obligations of the Purchasing Parties hereunder have been
waived by Purchaser or satisfied.
7.2 Representations and Warranties on Closing Date. All
----------------------------------------------
representations and warranties of the Purchasing Parties contained in this
Agreement or in any document or certificate delivered by the Purchasing Parties
to the Selling Parties pursuant hereto shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties were made on and as of the Closing Date, or
if made as of a specific date, as of such date (except for representations and
warranties which are already qualified as to materiality, which shall be true
and correct in all respects).
7.3 Terms, Covenants and Conditions. All the terms, covenants
-------------------------------
and conditions of this Agreement to be complied with and performed by the
Purchasing Parties on or prior to the Closing Date shall have been complied with
and performed in all respects unless waived in writing by the Selling Parties.
7.4 Absence of Litigation. No Action shall have been instituted
---------------------
before any court or governmental or regulatory body by any person (other than
the Selling Parties or any
-38-
<PAGE>
Related Party) or instituted or threatened by any governmental or regulatory
body, to prevent the carrying out of the transactions contemplated hereby.
7.5 Closing Cash Payments and Loan Repayment. The Purchasing
----------------------------------------
Parties shall have (i) delivered the Closing Cash Payment to Seller; (iii)
delivered the Holdback Amount to the Escrow Agent and (iii) caused the Selling
Companies to pay in full the Linc Indebtedness, the Merrill Lynch Indebtedness,
the Roberts Indebtedness, the August Seller Loan and the Remaining Seller
Indebtedness, if any, as reflected on the Closing Date Balance Sheet.
7.6 Note. The Purchasing Parties shall have executed and
----
delivered the Note to the Escrow Agent.
7.7 HHCA Stock. HHCA shall duly issued the HHCA Stock to
----------
Seller and duly endorsed and delivered certificates representing the HHCA Stock
to the Escrow Agent.
7.8 Subordination Agreement. The Purchasing Parties and their
-----------------------
affiliates shall have executed and delivered to Seller at Closing, the
Subordination Agreement.
7.9 Subscription Agreement. HHCA shall have executed and
----------------------
delivered to Seller the Subscription Agreement.
7.10 Registration Rights Agreement. HHCA shall have executed
-----------------------------
and delivered to Seller the Registration Rights Agreement.
7.11 Employment Agreements. HHCA shall have executed and
---------------------
delivered to Seller and Salvatore DiSalvo, as applicable, the Employment
Agreements.
7.12 Escrow Agreement. HHCA and the Escrow Agent shall have
----------------
executed and delivered to Seller the Escrow Agreement.
7.13 Opinion of Purchaser's Counsel. Seller shall have received
------------------------------
the opinions of counsel to Purchasing Parties, in form and substance reasonable
acceptable to Seller ("Purchaser's Opinion").
7.14 HHCA Guaranty. HHCA shall execute and deliver to Seller
-------------
and Salvator DiSalvo a guaranty of all of Purchaser's obligations under
Employment Agreements in form and substance reasonably acceptable to Seller.
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<PAGE>
8. Confidentiality.
---------------
(a) As used in this Agreement, the term "Confidential
Information" shall mean all confidential and proprietary material considered to
be confidential by any of the parties and knowledge and information not readily
available to the public heretofore or hereafter conceived, learned or disclosed
(including all documents, writings, memoranda, business plans, computer
software, reports, pricing, cost and sales information, financial statements or
condition, customer, patient, provider, referral source and supplier lists,
trade secrets, and marketing strategies, plans and techniques).
(b) From and after the date hereof, the Selling Parties shall
(and shall use their best efforts to cause the Related Parties to) keep secret
and retain in strictest confidence, and shall not, without Purchasing Parties'
express prior written consent, directly or indirectly, disclose, disseminate,
publish, reproduce, retain, use (for their benefit or for the benefit of others
after Closing), or otherwise make available in any manner whatsoever, any
Confidential Information regarding the Selling Companies or the Purchasing
Parties (or this Agreement or the transactions contemplated hereby) to anyone
except (i) to their representatives (who shall be informed of the confidential
nature of such information and who shall agree to keep such information
confidential), (ii) to Purchasing Parties and its affiliates or representatives,
(iii) as otherwise required by law, (iv) as required by the Selling Parties to
enforce their rights under this Agreement, or (v) as required to obtain the
Regulatory Approvals. Notwithstanding the foregoing the Selling Companies shall
be permitted to utilize their respective Confidential Information in the conduct
of the Business in the ordinary course.
(c) From and after the date hereof and continuing until the
Closing Date, the Purchasing Parties shall keep secret and retain in strictest
confidence, and shall not, without Seller's express prior written consent,
directly or indirectly, disclose, disseminate, publish, reproduce, retain, use
(for its benefit or for the benefit of others) or otherwise make available in
any manner whatsoever, any Confidential Information regarding the Selling
Parties (or this Agreement or the transactions contemplated hereby) to anyone
except (i) to its representatives (who shall be informed of the confidential
nature of such information and who shall agree to keep such information
confidential), (ii) as otherwise required by law, including securities laws,
(iii) as required by its lenders, (iv) as required by the Purchasing Parties to
enforce their rights under this Agreement, or (v) as required to obtain the
Regulatory Approvals.
(d) If any party (the "Disclosing Party") breaches, or
threatens to commit a breach of, any of the provisions of this Section 8.1, the
-----------
other party (the "Non-Disclosing Party") shall have the right (in addition to
any other rights and remedies available to the Non-Disclosing Party at law or in
equity) to equitable relief (including injunctions) against such breach or
threatened breach, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to the Non-Disclosing Party and
that money
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<PAGE>
damages would not be an adequate remedy to the Non-Disclosing Party. The
Disclosing Party agrees that it will not seek, and hereby waives any requirement
for, the securing or posting of a bond or proving actual damages in connection
with the Non-Disclosing Party's seeking or obtaining such relief.
9. Books and Records; Use of Names.
-------------------------------
(a) Each party agrees that it will cooperate with and make
available to the other party, during normal business hours, all books and
records relating to the Business, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
which are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such books and records, information or employees for any
reasonable business purpose. All information received pursuant to this Section
-------
9(a) shall be subject to the confidentiality provisions of Section 8.
- ---- ---------
(b) Cooperation and Records Retention. The parties shall (i)
---------------------------------
each provide the other with such assistance as may reasonably be requested by
either of them in connection with the preparation of any return, audit, or other
examination by any taxing or any other authority or judicial or administrative
proceedings relating to any liability, (ii) for a reasonable period of time,
each retain and provide the other with any records or other information that may
be relevant to such return, audit or examination, proceeding or determination,
and (iii) each provide the other with any final determination of any such audit
or examination, proceeding, or determination that affects any amount required to
be shown on any tax return or other documents of the other for any period.
Without limiting the generality of the foregoing, the parties shall each retain,
until the applicable statutes of limitations (including any extensions) has
expired, copies of all tax returns, supporting work schedules, and other records
or information that may be relevant to such returns for all tax periods or
portions thereof ending on or before the Closing Date and shall, during such
period, provide the other party with a reasonable opportunity to review and copy
the same. The parties shall also make reasonably available financial and other
information concerning the Selling Companies, as a party may from time to time
reasonably request.
(c) After the Closing Date, Seller shall not permit any Related
Party to conduct business in any location under a name confusing similar to the
name of any Selling Company.
10. Survival of Representations and Warranties. Any disclosures contained
------------------------------------------
in any Schedule or any certificate delivered pursuant to this Agreement by any
party hereto shall constitute a representation and warranty of such party. The
representations and warranties of the Selling Parties and the Purchasing Parties
contained herein shall survive the consummation of the
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<PAGE>
transactions contemplated hereby and the Closing Date, without regard to any
investigation made by any of the parties hereto, and shall expire three (3)
years after the Closing Date; provided, however, that the representations and
-------- -------
warranties (and all claims and causes of action with respect thereto) in
Sections 3.16, 3.19, and 3.25 and claims based on fraud and obligations under
- -----------------------------
Sections 2.4 and 2.5 hereof shall survive the Closing Date until the expiration
of the applicable statute of limitations. The termination of the representations
and warranties provided herein shall not affect the rights of a party seeking
indemnification under this Agreement, provided that such party shall have given
written notice to the other party, prior to the expiration of the applicable
survival period provided above, of a claim for indemnification.
11. Indemnification.
---------------
11.1 Obligation to Indemnify by Selling Parties. Subject to the
------------------------------------------
terms of Section 10, Selling Parties prior to the Closing and the Seller after
----------
the Closing, agree to indemnify, defend and hold harmless Purchasing Parties and
the Selling Companies (and their shareholders, affiliates, and their directors,
officers, stockholders and employees), from and against all losses, Taxes,
liabilities, damages, lawsuits, deficiencies, claims, demands, costs or
expenses, including interest, penalties and reasonable attorneys' fees and
disbursements ("Losses"), based upon, incurred in connection with, arising out
of or otherwise in respect of (i) any breach of any representation or warranty
of the Selling Parties contained in this Agreement or in any agreement attached
as an exhibit hereto delivered pursuant to this Agreement, (ii) any breach of
any covenant or agreement of the Selling Parties contained in this Agreement or
in any agreement attached as an exhibit hereto delivered pursuant to this
Agreement, (iii) any liability or obligation of the Selling Companies which is
not reflected and adequately reserved for on the Closing Date Balance Sheet,
except for executory liabilities under Contracts with respect to periods after
the Closing Date, or (iv) Tax Deficiencies.
11.2 Obligation to Indemnify by Purchaser. Subject to the terms of
------------------------------------
Section 10, the Purchasing Parties agree to indemnify, defend and hold harmless
- ----------
Seller from and against all Losses based upon, incurred in connection with,
arising out of or otherwise in respect of (i) any breach of any representation
or warranty of the Purchasing Parties contained in this Agreement or in any
agreement attached as an exhibit hereto, (ii) any breach of any covenant or
agreement of the Purchasing Parties contained in this Agreement or in any
agreement attached as an exhibit hereto, (iii) any liability or obligation of
the Selling Companies to the extent reflected and adequately reserved for on the
Closing Date Balance Sheet, (iv) executory liabilities under Contracts with
respect to periods after the Closing Date or (v) any liability or obligation of
the Selling Companies arising solely out of Purchaser's operation of the
Business after the Closing.
11.3 Losses. The term "Losses" as used herein (i) is not limited to
------
matters asserted by third parties against the Selling Parties or the Purchasing
Parties and includes Losses incurred or sustained in the absence of third-party
claims, (ii) includes Losses incurred through
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<PAGE>
and after the date of the claim for indemnification (including any
Losses related thereto and suffered after the end of any applicable survival
period provided that a claim for indemnification was timely given pursuant to
Section 10), (iii) does not include any decline in value of the HHCA Stock and
- ----------
(iv) does not include consequential damages (unless awarded to a third party).
11.4 Procedures for Claims Between the Parties. If a claim (a
-----------------------------------------
"Claim") is to be made by the party claiming indemnification (the "Claimant")
against the other party (the "Indemnifying Party"), the Claimant shall give
written notice (a "Claim Notice") to the Indemnifying Party as soon as
practicable after the Claimant becomes aware of the facts, condition or event
which may give rise to Losses for which indemnification may be sought under this
Section 11. The Claim Notice shall specify in reasonable detail the nature and
- ----------
extent of the Claim. Following receipt of the Claim Notice from the Claimant,
the Indemnifying Party shall have thirty (30) calendar days to make such
investigation of the Claim as the Indemnifying Party deems necessary or
desirable; provided, however, that if Claimant reasonably determines that it
-------- -------
will be materially prejudiced by affording the Indemnifying Party such period of
time for investigation, the Claimant shall so notify the Indemnifying Party and
the Indemnifying Party and the Claimant shall agree promptly on the appropriate
period of time for such investigation. For the purposes of such investigation,
the Claimant agrees to make available to the Indemnifying Party and/or its
authorized representative(s) the information relied upon by the Claimant to
substantiate the Claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of said thirty (30) day period (or any mutually agreed
upon period or extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall pay promptly to the Claimant the agreed upon amount of
such Claim. If the Claimant and the Indemnifying Party do not agree within said
period (or any mutually agreed upon period or extension thereof), the Claimant
may seek appropriate legal remedy subject to this Section 11.
----------
11.5 Defense of Third-Party Actions. If any lawsuit or enforcement
------------------------------
action (a "Third Party Action") is filed against a Claimant entitled to the
benefit of indemnity hereunder, written notice thereof (the "Third-Party Action
Notice") shall be given by Claimant to the Indemnifying Party as promptly as
practicable (and in any event within fifteen (15) calendar days after the
service of the citation or summons or other manner of process). The failure of
any Claimant to give notice timely hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnifying Party
demonstrates actual damage caused by such failure. After such notice, the
Indemnifying Party shall be entitled, if it so elects, (i) to take control of
the defense and investigation of such Third-Party Action, (ii) to employ and
engage attorneys reasonably satisfactory to the Claimant to handle and defend
the same, at the Indemnifying Party's cost, risk and expense, and (iii) to
compromise or settle such Third-Party Action, which compromise or settlement
shall be made only with the written consent of the Claimant, such consent not to
be unreasonably withheld, conditioned or delayed. If the Indemnifying Party
fails to assume the defense of such Third-Party Action at its cost within
fifteen (15) calendar days after receipt of the Third-Party Action Notice, the
Claimant will (upon
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<PAGE>
delivering notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the defense, compromise
or settlement of such Third-Party Action on behalf of and for the account and
risk of the Indemnifying Party; provided, however, that such Third-Party Action
-------- -------
shall not be compromised or settled, nor shall an entry of judgment be agreed
to, without (i) the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld, conditioned or delayed and (ii) an
unconditional release of the Claimant and the Indemnifying Party. In the event
the Claimant assumes the defense of the Third-Party Action, the Claimant will
keep the Indemnifying Party reasonably informed of the progress of any such
defense, compromise or settlement. The Indemnifying Party shall be liable for
any settlement of any Third-Party Action effected pursuant to and in accordance
with this Section 11 and for any final judgment (subject to any right of
----------
appeal), and the Indemnifying Party agrees to indemnify and hold harmless
Claimant from and against any Losses by reason of such settlement or judgment.
11.6 Limitation of Indemnification. The Indemnifying Party's
-----------------------------
obligations to indemnify the Claimant pursuant to this Section 11 shall be
----------
subject to the following limitations:
(a) No indemnification shall be required to be made by the
Indemnifying Party until the aggregate amount of the Claimant's Losses (which
Losses shall include Losses relating to any representation or warranty qualified
by reference to materiality or to a material adverse change even if such Loss
does not in and of itself result in a breach of such representation or warranty)
exceeds $100,000 (the "Basket"), and then indemnification shall only be required
by the Indemnifying Party to the extent of such excess. Notwithstanding the
foregoing, the limitation imposed by the Basket shall not apply to (i) the
Acquisition Price Adjustment, or (ii) breaches of the provisions of Sections
--------
2.4, 2.5 or 13.4.
- ----------------
(b) No indemnification shall be required to be made by the
Indemnifying Party under this Section 11 for the amount of the Claimant's Losses
----------
that are in excess of $2,000,000, except with respect to (i) breaches of the
provisions of Sections 2.4 or 2.5 which will be subject to a separate limitation
-------------------
in the amount of the Closing Date Accounts Receivable (less allowance for
doubtful accounts, and reserves for cost report disallowances and contractual
allowances reflected on the Closing Date Balance Sheet) which amount shall be
reduced by Accounts Receivable actually collected by the Purchaser after the
Closing, (ii) the Acquisition Price Adjustment which is not subject to a
limitation, and (iii) Losses incurred in connection with undisclosed liabilities
which are subject to a separate limitation in the amount of $3,500,000 for
Claims asserted during the first 15 months after Closing and $2,000,000 for
Claims asserted thereafter.
(c) The indemnification obligation of an Indemnifying Party
shall be adjusted so as to give effect to any net reduction in federal, state,
local or foreign income or franchise tax liability actually realized at any time
by the Claimant in connection with the
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<PAGE>
satisfaction by the Indemnifying Party of a Claim with respect to which
indemnification is sought hereunder. Any Claims payable by the Indemnifying
Party to the Claimant hereunder shall also include the federal, state, local or
foreign income or franchise tax liability that the Claimant will incur upon the
receipt of payment in respect of such Claims (taking into account any net
operating loss, capital loss or credit carryover of the Claimant); however, with
respect to any Claims for which the Claimant (but for the operation of this
sentence) is entitled to indemnification hereunder, there shall be disregarded
any tax liabilities arising by reason of (i) any reduction or disallowance of
deductions from taxable income in one taxable year, but only to the extent such
reduction or disallowance actually results in a corresponding increase in
allowable deductions from income in another year, (ii) the shifting of items of
income from one taxable year to another, or (iii) the capitalization of amounts
that were expended, but only if such capitalized amounts are subject to
amortization or depreciation or recovery in costs of goods sold, inventory or
materials, except insofar as such reduction, disallowance, shifting or
capitalization would only result in the increase of any unutilized net operating
loss, capital loss or carryover. The indemnification obligation of an
Indemnifying Party with respect to any Claim shall also be adjusted to take into
account the amount, if any, of any insurance proceeds recovered by the Claimant
as a result of such Claim, after the deduction of all costs incurred to obtain
such proceeds.
11.7 Exclusive Remedy. The remedies provided under this Agreement
----------------
shall constitute the sole and exclusive remedy of the parties hereto for any
breach of representation or warranty contained in this Agreement or in any of
the agreements attached as Exhibits hereto or for any breach or covenant of or
failure to perform any covenant contained in this Agreement or in any of the
agreements attached as Exhibits hereto and the parties waive any other remedy
which they or any other person entitled to indemnification hereunder may have at
law or in equity with respect thereto; provided, however that this exclusion
shall not apply to Claims based on fraud.
12. Breaches and Defaults; Termination; Remedies.
--------------------------------------------
12.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing as follows:
(a) by mutual written agreement of the parties hereto;
(b) provided the Purchasing Parties are not then in breach of
this Agreement, at the election of the Purchasing Parties (pursuant to a written
notice to the Selling Parties), (i) if any one or more of the conditions to the
Purchasing parties' obligations to close has not been fulfilled in any material
respect as of the Closing Date, (ii) if the conditions set forth in Sections
--------
6.19 (Board Approval), 6.20 (Lender Approval) or 6.21(Due Diligence
- -------------------------------------------------------------------
Investigation) are not satisfied; provided, however, that these conditions shall
- --------------
expire as provided therein, (iii) if
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<PAGE>
any of the Selling Parties have breached in any material respect any
representation, warranty, covenant or agreement contained in this Agreement or
in any other agreement or document delivered pursuant hereto, or (iii) if the
Closing shall not have taken place by December 31, 1996 (the "Outside Date")
(unless any of the foregoing events shall have resulted primarily from the
Purchasing Parties breaching any representation, warranty, covenant or agreement
contained in this Agreement);
(c) provided the Selling Parties are not then in breach of this
Agreement, at the election of the Selling Parties (pursuant to a written notice
to the Purchasing Parties), (i) if any one or more of the conditions to the
Selling Parties' obligations to close has not been fulfilled in any material
respect as of the Closing Date, (ii) if the Purchasing Parties have breached in
any material respect any representation, warranty, covenant or agreement
contained in this Agreement or in any other agreement or document delivered
pursuant to hereto, or (iii) if the Closing shall not have taken place by the
Outside Date (unless any of the foregoing events shall have resulted primarily
from the Selling Parties' breach of any representation, warranty, covenant or
agreement contained in this Agreement); and
(d) in accordance with the terms of Sections 5.8 or 13.8.
--------------------
12.2 Effect of Termination. In the event of any termination of
---------------------
this Agreement, all obligations of the parties hereto under this Agreement shall
terminate as of such date of termination and this Agreement shall thereafter
become void and be of no further force and effect, and upon such termination no
party hereto shall be liable to the other party; provided however, that (i) the
obligations contained in Sections 8 and 11 shall survive any termination hereof,
-----------------
and (ii) the foregoing provisions shall not limit or restrict the availability
of specific performance (as provided in Section 12.3) or other injunctive relief
------------
to the extent that specific performance or such other relief would otherwise be
available to a party hereunder.
12.3 Specific Performance. The Selling Parties agree that the Shares
--------------------
and the Business are unique assets that cannot be readily obtained on the open
market and that the Purchasing Parties will be irreparably injured if this
Agreement is not specifically enforced. Therefore, notwithstanding anything to
the contrary contained herein or otherwise, prior to the consummation of the
Closing, the Purchasing Parties shall have the right to enforce specifically the
Selling Parties' performance under this Agreement, and the Selling Parties waive
any defense in any such suit that the Purchasing Parties have an adequate remedy
at law and to interpose no opposition, legal or otherwise, as to the propriety
of specific performance as a remedy. The remedies described in this Section 12.3
------------
shall be in addition to, and not in lieu of, any other remedies that the
Purchasing Parties may elect to pursue.
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<PAGE>
13. Miscellaneous.
-------------
13.1 Consent to Jurisdiction. In order to enforce the provisions
-----------------------
hereof, each of the parties hereto (i) submits and consents to the personal
jurisdiction of any Massachusetts state or federal court with respect to any
suit, action or proceeding relating to this Agreement or any of the transactions
contemplated hereby, (ii) waives any objection which such party may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought in any such court, and waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum,
(iii) waives the right to object that any such court does not have personal
jurisdiction over such party, and (iv) consents to the service of process in any
such suit, action or proceeding upon the receipt through the United States mail
of copies of such process to such party by certified mail to the addresses
indicated herein or at such other addresses of which the other parties shall
have received written notice. Nothing herein shall pre clude any party from
bringing suit or taking other legal action in any other jurisdiction or from
serving legal process in any other manner permitted by law or in equity.
13.2 Expenses. The parties to this Agreement shall bear their
--------
respective expenses incurred in connection with the preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including all fees and expenses of agents, representatives, consultants,
counsel and accountants. The Selling Parties shall pay in full all such expenses
at or prior to the Closing (the "Selling Parties' Expenses"). Notwithstanding
the foregoing, at the Closing the Purchasing Parties shall pay the audit
expenses incurred by the Selling Companies for services performed by the Selling
Parties' Accountant solely with respect to the audit of the Selling Companies'
financial statements for the year ended June 30, 1996 (excluding the audit
expense incurred in auditing NSL's June 30, 1996 financial Statements) and the
preparation of the Closing Date Balance Sheet, the Closing Date Income Statement
and the Closing Statement, which in each case, will not be considered to be
Selling Parties' Expenses.
13.3 Further Assurances. Each of the parties shall execute such
------------------
agreements and documents and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions to the Closing, including
the execution and delivery of any other agreement or document, the execution and
delivery of which are conditions precedent to the Closing.
13.4 Indemnification for Brokerage. The Selling Parties agree to
-----------------------------
indemnify and save the Purchasing Parties harmless from any claim or demand for
commissions or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of the Selling
Parties and to bear the cost of legal fees and expenses incurred in defending
against any such claim. The Purchasing Parties agree to indemnify and save the
Selling Parties harmless from any claim or demand for commissions or other
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<PAGE>
compensation by any broker, finder, agent or similar intermediary claiming to
have been employed by or on behalf of the Purchasing Parties and to bear the
cost of legal fees and expenses incurred in defending against such claim. The
Selling Parties shall pay any commission due to Advest.
13.5 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. If any court determines
that any covenant, or any part of any covenant is invalid or unenforceable, such
covenant shall be enforced to the extent permitted by such court, and all other
covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.
13.6 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given when received if delivered personally against receipt; when transmission
is confirmed, if transmitted by telecopy, electronic or digital transmission
method; the next day if sent for next day delivery by a nationally recognized
overnight courier service; or upon receipt if sent by certified, registered or
express mail, return receipt requested, postage prepaid. In each case notice
shall be sent as follows:
(a) if to Purchaser, to:
Home Health Corporation of America, Inc.
2200 Renaissance Boulevard, Suite 300
King of Prussia, Pennsylvania 19406
Telecopy No.: 610-272-3131
Attention: Mr. Bruce J. Feldman
with a copy (which shall not constitute notice) to:
Kleinbard Bell & Brecker
1900 Market Street / Suite 700
Philadelphia, Pennsylvania 19103
Telecopy No.: 215-568-0140
Attention: Howard J. Davis, Esquire
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<PAGE>
(b) if to Seller, to:
4 Ivy Street
Windham, NH 03087
Attention: Ms. Randy DiSalvo
with a copy (which shall not constitute notice) to:
Brown, Rudnick, Freed & Gesmer
1 Financial Center
Boston, MA 02111
Telecopy No.: (617) 856-8201
Attention: Gordon R. Penman, Esquire
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
13.7 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits) and the agreements, certificates and other documents delivered
hereunder contain the entire agreement between the parties with respect to the
transactions described herein, and supersede all prior agreements, written or
oral, with respect thereto.
13.8 Disclosure Schedules; Independent Significance.
----------------------------------------------
(a) The parties acknowledge and agree that (i)the parties have
not yet completed the Schedules to this Agreement; and (ii) the failure to
complete the Schedules prior to signing this Agreement shall not constitute a
waiver of any parties' right to require that the Schedules be completed and
attached. Selling Parties shall as promptly as possible complete the Schedules
and submit the same to the Purchasing Parties for their review on or before 5:00
P.M. on Tuesday, November 5, 1996.
(b) In the event that any of the Schedules delivered to the
Purchasing Parties pursuant to this Section are not acceptable to the Purchasing
Parties, the Purchasing Parties shall have the right to terminate this Agreement
by giving Seller written notice thereof within 5 days after receipt of
Schedules.
(c) Nothing in any Schedule hereto shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Schedule identifies the exception with reasonable particularity. The parties
intend that each representation, warranty, covenant and agreement contained
herein shall have independent significance; accordingly, if any party has
breached any representation, warranty, covenant or agreement, the fact that
there
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<PAGE>
exists another representation, warranty, covenant or agreement relating to
the same subject matter which such party has not breached shall not detract from
or mitigate the fact that the party is in breach of the first representation,
warranty, covenant or agreement.
13.9 Amendments and Waivers. This Agreement may be modified or
----------------------
amended, and the terms hereof may be waived, only by a written instrument signed
by the parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege.
13.10 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to principles of conflicts of law or any rule of interpretation
or construction as to which party drafted this Agreement, except with respect to
matters of law concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this Agreement (as to those matters of
law, the jurisdiction under which the respective entity derives its powers shall
govern).
13.11 Binding Effect; Assignment. Neither this Agreement nor any of
--------------------------
the rights or obligations hereunder may be assigned (including by operation of
law) by any party without the prior written consent of the other party, except
that Purchaser may, without such consent, assign any and all such rights and
obligations to any affiliate, provided that Purchasing Parties shall remain
liable for the discharge of such obligations. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
13.12 Joint and Several. HHCA hereby guarantees all of the
-----------------
obligations of Purchaser under the Employment Agreements. Notwithstanding
anything to the contrary herein contained or otherwise, the obligations of each
Selling Party, on the one hand, and each Purchasing Party, on the other hand,
under this Agreement, shall be joint and several.
13.13 Beneficiaries of Agreement. The representations, warranties,
--------------------------
covenants and agreements expressed in this Agreement are for the sole benefit of
the other party hereto and are not intended to benefit, and may not be relied
upon or enforced by, any other party as a third party beneficiary or otherwise,
except with respect to any third party who acquires substantially all of the
stock or assets of Purchaser or HHCA.
13.14 Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same
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<PAGE>
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
Facsimile signatures on this Agreement and any of the agreements and documents
executed in connection herewith shall be deemed original signatures.
13.15 Exhibits and Schedules. The Exhibits and Schedules are a
----------------------
part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require.
13.16 Formation of Purchaser. As promptly as possible after the
----------------------
date hereof, HHCA shall cause Articles of Incorporation to be filed for the
Purchaser and shall take such other action as may be required to cause the
formation of Purchaser as a corporation in the State New Hampshire. The
representations and warranties regarding the Purchaser shall take effect as of
the date of the Purchaser's incorporation
-51-
<PAGE>
13.17 Headings. The headings in this Agreement are for reference
--------
only, and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PURCHASING PARTIES:
HHCA New Hampshire, Inc.
By:______________________________________
Name:
Title:
Home Health Corporation of America, Inc.
By:______________________________________
Name:
Title:
SELLING PARTIES:
RSD Management, Inc.
By:______________________________________
Name: Randy DiSalvo
Title: President
Nursing Services Home Care, Inc.
By:______________________________________
Name: Randy DiSalvo
Title: President
Signatures Continued on Next Page
-52-
<PAGE>
Nursing Services Home Care, Ltd.
By:______________________________________
Name: Randy DiSalvo
Title: President
Nursing Services Staffing of N. H., Inc.
By:______________________________________
Name: Randy DiSalvo
Title: President
Nursing Services, Inc.
By:______________________________________
Name: Randy DiSalvo
Title: President
_________________________________________
Randy DiSalvo, individually
-53-
<PAGE>
Exhibit 2.2
HOME HEALTH CORPORATION OF AMERICA, INC.
2200 RENAISSANCE BLVD. STE 300
KING OF PRUSSIA, PENNSYLVANIA 19046
November 8, 1996
PRIVATE AND CONFIDENTIAL
VIA FACSIMILE
- -------------
Ms. Randy DiSalvo
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N. H., Inc.
Nursing Services, Inc.
7 Stiles Road
Salem, New Hampshire 03079
RE: Amendment to Stock Purchase Agreement and Promissory Note
Dear Randy:
Reference is made to (i) that certain "Stock Purchase Agreement" dated
October 31, 1996 among each of the parties listed above, Home Health Corporation
of America, Inc. ("HHCA") and HHCA New Hampshire, Inc. and (ii) that certain
"Promissory Note" dated August 8, 1996 given by Randy DiSalvo in favor of HHCA.
Capitalized terms not otherwise defined herein shall have the meanings given
such terms in the Stock Purchase Agreement. The purpose of this Amendment is to
memorialize our entire agreement and understanding concerning the amendment of
the Stock Purchase Agreement and the Promissory Note which is as follows:
1. The parties have agreed to provide the Purchasing Parties with
additional time in which to review and accept the schedules to the Stock
Purchase Agreement. Accordingly, in Section 13.8(b) of the Stock Purchase
Agreement, the phrase "within 5 days after receipt of the Schedules" is hereby
deleted and replaced with the phrase "on or before 5:00 P.M. on Friday, November
15, 1996".
2. The parties have agreed to amend the maturity date of the Promissory
Note. In Section 3(ii) of the Promissory Note, the phrase "Letter of Intent" is
hereby deleted and replaced with the phrase "Stock Purchase Agreement dated
October 31, 1996 among Creditor, Debtor and Guarantors". The Selling Parties
acknowledge their obligations under the Promissory Note which will be repaid in
accordance with its terms.
3. Creditor waives any defaults under the Promissory Note caused by
defaults by a Selling Party under its third party loan agreements; provided,
however, that such defaults do not result in the acceleration of a material
portion of such obligations and the election by such third party to pursue any
---
remedy against a Selling Party that would have a material adverse effect on a
Selling Party or their ability to repay the Promissory Note.
4. The Stock Purchase Agreement and Promissory Note as modified by this
Amendment are hereby ratified and confirmed. In the event of any conflict
between this Amendment and the terms of the Stock Purchase Agreement or the
Promissory Note, the terms of this Amendment shall govern and
<PAGE>
Ms. Randy DiSalvo
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N. H., Inc.
Nursing Services, Inc.
November 8, 1996
Page -2-
control.
Please acknowledge your agreement to be legally bound by this Amendment by
signing the enclosed copy where indicated below and returning the same to the
undersigned.
Very truly yours,
Home Health Corporation of America, Inc.
By:
-----------------------------
Agreed to accepted by:
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N. H., Inc.
Nursing Services, Inc.
By:
----------------------
Randy DiSalvo
----------------------
Randy DiSalvo
<PAGE>
Exhibit 2.3
HOME HEALTH CORPORATION OF AMERICA, INC.
2200 RENAISSANCE BLVD. STE 300
KING OF PRUSSIA, PENNSYLVANIA 19046
November 27, 1996
PRIVATE AND CONFIDENTIAL
VIA FACSIMILE
- -------------
Ms. Randy DiSalvo
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N.H., Inc.
Nursing Services, Inc.
7 Stiles Road
Salem, New Hampshire 03079
RE: Second Amendment to Stock Purchase Agreement
Dear Randy:
Reference is made to (i) that certain "Stock Purchase Agreement" dated
October 31, 1996 among each of the parties listed above, Home Health
Corporation of America, Inc. ("HHCA") and a subsidiary of HHCA, as amended by an
amendment dated November 8, 1996 (as amended the "Stock Purchase Agreement").
Capitalized terms not otherwise defined herein shall have the meanings given
such terms in the Stock Purchase Agreement. The purpose of this Amendment is to
memorialize our entire agreement and understanding concerning the amendment of
the Stock Purchase Agreement which is as follows:
1. The parties have agreed to provide the Purchasing Parties with
additional time in which to review and accept the schedules to the Stock
Purchase Agreement. Accordingly, in Section 13.8(b) of the Stock Purchase
Agreement, the date "November 15, 1996" is hereby replaced with the date
"November 26, 1996".
2. The parties have agreed to provide the Purchasing Parties with
additional time in which to obtain Lender Approval. Accordingly, in Section
6.20 of the Stock Purchase Agreement, the date "November 22, 1996" is hereby
replaced with the date "November 27, 1996".
3. The parties have agreed to provide the Purchasing Parties with
additional time in which to complete their Due Diligence Investigation.
Accordingly, in Section 6.21 of the Stock Purchase Agreement, the date "November
30, 1996" is hereby replaced with the date "December 4, 1996".
4. All references to HHCA New Hampshire, Inc., a New Hampshire
corporation are replaced with Home Health Corporation of Delaware, Inc., a
Delaware corporation, which by virtue of its execution hereof, assumes all of
the obligations of Purchaser under the Stock Purchase Agreement.
5. After the Closing, the Purchasing Parties shall provide Seller (i) on
a monthly basis with documentation showing the Closing Date Accounts Receivable
which have been collected during the
<PAGE>
Ms. Randy DiSalvo
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N.H., Inc.
Nursing Services, Inc.
November 27, 1996
Page -2-
previous month and (ii) with reasonable access to books and records pertaining
to the Closing Date Accounts Receivable and any reports generated with respect
thereto. Closing Date Accounts Receivable will be processed by RSD until such
time as RSD has been provided with a computer terminal providing it with the
collection information and receivable runs.
6. After the Closing, Seller will pay the premiums for malpractice
insurance currently maintained by the Selling Companies until such policies
expire in the Spring of 1997. Immediately prior to the expiration of such
policies, Seller will obtain at Seller's expense continuing malpractice
insurance coverage (known as tail coverage) for the preceding three year period.
7. The Stock Purchase Agreement as modified by this Amendment is hereby
ratified and confirmed. In the event of any conflict between this Amendment and
the terms of the Stock Purchase Agreement, the terms of this Amendment shall
govern and control.
8. In the event that Closing occurs on a date other than November 30,
1996, the parties acknowledge and agree that for financial reporting purposes,
the Closing will be considered to have occured as of the close of business on
November 30, 1996 and the Closing Date Balance Sheet, the Closing Date Income
Statement, the Closing Statement and the Purchase Price Adjustment shall be
determined as of such date. In all other respects, the Closing shall been deemed
to have occurred on the actual date of Closing.
Please acknowledge your agreement to be legally bound by this Amendment by
signing the enclosed copy where indicated below and returning the same to the
undersigned.
Very truly yours,
Home Health Corporation of America, Inc.
By:
-----------------------------
Home Health Corporation of Delaware, Inc.
By:
-----------------------------
Agreed to accepted by:
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N. H., Inc.
Nursing Services, Inc.
<PAGE>
Ms. Randy DiSalvo
RSD Management, Inc.
Nursing Services Home Care, Inc.
Nursing Services Home Care, Ltd.
Nursing Services Staffing of N.H., Inc.
Nursing Services, Inc.
November 27, 1996
Page -3-
By:
----------------------
Randy DiSalvo
----------------------
Randy DiSalvo
<PAGE>
Exhibit 2.4
================================================================================
ASSET ACQUISITION AGREEMENT
AMONG
HOME HEALTH CORPORATION OF AMERICA, INC.
AND ITS NOMINEES,
LHS HOLDINGS, INC.,
LIBERTY HEALTH SERVICES, INC.,
NURSES TODAY M/C, INC.,
AND
MARK H. O'BRIEN
December 4, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Certain Definitions; Purchase and Sale of Assets; Assumption of Certain Liabilities......... 1
-----------------------------------------------------------------------------------
1.1 Certain Definitions........................................................... 1
-------------------
1.2 Purchased Assets.............................................................. 2
----------------
1.3 Excluded Assets............................................................... 3
---------------
1.4 Assumption of Certain Liabilities by Purchaser................................ 3
----------------------------------------------
1.5 Excluded Liabilities.......................................................... 3
-------------------
1.6 No Expansion of Third-Party Rights............................................ 4
----------------------------------
1.7 Assets Owned by Related Parties............................................... 4
-------------------------------
2. Acquisition Price and Closing............................................................... 5
-----------------------------
2.1 Acquisition Price............................................................. 5
-----------------
2.2 Manner of Payment............................................................. 5
-----------------
2.3 The Closing................................................................... 5
-----------
2.4 Closing Date Minimum Assets; Adjustment of Acquisition Price.................. 5
------------------------------------------------------------
2.5 Closing Costs; Transfer Taxes & Fees.......................................... 6
------------------------------------
3. Representations and Warranties of the Selling Parties....................................... 6
-----------------------------------------------------
3.1 Organizational Status......................................................... 6
---------------------
3.2 Qualification................................................................. 7
-------------
3.3 Authorization; No Conflict.................................................... 7
--------------------------
3.4 Financial Statements of Seller; Undisclosed Liabilities....................... 7
-------------------------------------------------------
3.5 Compliance with Laws.......................................................... 8
--------------------
3.6 Permits....................................................................... 8
-------
3.7 Litigation.................................................................... 9
----------
3.8 Real Property; Contracts...................................................... 9
------------------------
3.9 [INTENTIONALLY DELETED].......................................................10
-----------------------
3.10 Inventory.....................................................................10
---------
3.11 Consents......................................................................10
--------
3.12 Intellectual Property Rights..................................................10
----------------------------
3.13 Equipment.....................................................................10
---------
3.14 Title; Sufficiency and Location of Assets.....................................10
-----------------------------------------
3.15 Certain Relationships.........................................................11
---------------------
3.16 Employee Benefit Plans........................................................11
----------------------
3.17 Employee and Independent Contractor Relations.................................11
---------------------------------------------
3.18 Transactions with Related Parties.............................................12
---------------------------------
3.19 No Material Adverse Change; Absence of Certain Changes........................12
------------------------------------------------------
3.20 Books and Records.............................................................13
-----------------
3.21 Taxes.........................................................................13
-----
3.22 No Other Agreements to Sell the Assets........................................13
--------------------------------------
3.23 Environmental.................................................................14
-------------
3.24 Solvency......................................................................14
--------
3.25 Insurance.....................................................................14
---------
3.26 Non-Solicitation..............................................................15
----------------
3.27 Disclosure....................................................................15
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
4. Representations and Warranties of Purchasing Parties........................................15
----------------------------------------------------
4.1 Organizational Status.........................................................15
---------------------
4.2 Qualification.................................................................15
-------------
4.3 Authorization; No Conflict....................................................15
--------------------------
4.4 Consents......................................................................16
--------
4.5 Financial Statements of HHCA; Undisclosed Liabilities.........................16
-----------------------------------------------------
4.6 Litigation....................................................................16
----------
4.7 No Material Adverse Change....................................................17
--------------------------
4.8 Disclosure....................................................................17
----------
5. Covenants of the Parties....................................................................17
------------------------
5.1 Continuance of Business.......................................................17
-----------------------
5.2 Access to Information.........................................................18
---------------------
5.3 Governmental Permits and Approvals; Consents..................................18
--------------------------------------------
5.4 Maintenance of Permits........................................................18
----------------------
5.5 Employees; Employee Compensation..............................................18
--------------------------------
5.6 Accounts Receivable...........................................................19
-------------------
5.7 Title; Risk of Loss...........................................................19
-------------------
5.8 Regulatory Approvals..........................................................19
--------------------
5.9 Refunding to Seller of Certain Prepaid Expenses...............................19
-----------------------------------------------
5.10 Disclosure Schedules..........................................................19
--------------------
6. Conditions Precedent to Purchasing Parties' Obligations.....................................20
-------------------------------------------------------
6.1 Regulatory Approvals..........................................................20
--------------------
6.2 Representations and Warranties on Closing Date................................20
----------------------------------------------
6.3 Terms, Covenants and Conditions...............................................20
-------------------------------
6.4 No Material Adverse Change....................................................20
--------------------------
6.5 Absence of Litigation.........................................................20
---------------------
6.6 Absence of Liens..............................................................21
----------------
6.7 Due Diligence.................................................................21
-------------
6.8 Closing Deliveries............................................................21
------------------
7. Conditions Precedent to the Selling Parties' Obligations....................................21
--------------------------------------------------------
7.1 Representations and Warranties on Closing Date................................21
----------------------------------------------
7.2 Terms, Covenants and Conditions...............................................21
-------------------------------
7.3 Absence of Litigation.........................................................21
---------------------
7.4 Closing Deliveries............................................................22
------------------
8. Deliveries at the Closing...................................................................22
-------------------------
8.1 Selling Parties' Deliveries...................................................22
---------------------------
8.2 Purchasing Parties' Deliveries................................................23
------------------------------
9. Miscellaneous...............................................................................24
-------------
9.1 Further Assurances............................................................24
------------------
9.2 Access to Records.............................................................24
-----------------
9.3 Severability..................................................................24
------------
9.4 Notices.......................................................................24
-------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.5 Entire Agreement..............................................................25
----------------
9.6 Amendments and Waivers; Non-Contractual Remedies..............................25
------------------------------------------------
9.7 Governing Law.................................................................26
-------------
9.8 Binding Effect; Assignment....................................................26
--------------------------
9.9 Joint and Several.............................................................26
-----------------
9.10 Beneficiaries of Agreement....................................................26
--------------------------
9.11 Counterparts; Facsimile Signatures............................................26
----------------------------------
9.12 Exhibits and Schedules........................................................26
----------------------
9.13 Holidays......................................................................26
--------
9.14 Headings......................................................................27
--------
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
--------
5.5 Forms of Employment Agreement
8.1(h) Form of Opinion of Selling Parties' Counsel
8.2(f) Form of Opinion of Purchasing Parties'Counsel
SCHEDULES
---------
1.3 Excluded Assets
3.5(b) Medicare/Medicaid Compliance
3.6 Permits
3.7 Litigation
3.8(b) Real Property Leases
3.8(c) Personal Property Leases
3.8(d) Contracts
3.10 Inventory
3.11 Selling Party Consents
3.12 Intellectual Property Rights
3.13 Equipment
3.15 Certain Relationships
3.16 Employee Benefit Plans
3.17(b) Employment Agreements
3.17(c) Employees/Independent Contractors
3.18 Related Party Transactions
3.19 Certain Changes
3.21 Taxes
3.23 Environmental
3.25 Insurance
4.4 Purchasing Parties' Consents
5.9 Prepaid Expenses to be Refunded to Seller
<PAGE>
ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT ("Agreement") is made as of December 4,
1996, by and among HOME HEALTH CORPORATION OF AMERICA, INC., a Pennsylvania
corporation ("HHCA"), and its nominees ("Purchaser"), LHS HOLDINGS, INC., a
Kentucky corporation ("Holdings"), LIBERTY HEALTH SERVICES, INC., a Texas
corporation and wholly-owned subsidiary of Holdings ("LHS"), NURSES TODAY M/C,
INC., a Texas corporation and wholly-owned subsidiary of LHS ("Nurses" and
together with Holdings and LHS, "Seller"), and MARK H. O'BRIEN, an individual
and sole shareholder of Holdings ("Shareholder"). Purchaser and HHCA are
sometimes collectively referred to herein as the "Purchasing Parties". Seller
and the Shareholder are sometimes collectively referred to herein as the
"Selling Parties".
Background. Seller is engaged in the business of providing Medicare and
----------
Medicaid-reimbursed home nursing services, private duty home nursing services
and related services in the home health care industry in Texas (the "Business").
The Purchasing Parties and their affiliates are engaged in the States of
Pennsylvania, New Jersey, Delaware, Maryland and Florida in the business of: (i)
providing private duty or Medicare-reimbursable nursing and related health care
services and equipment to home-bound patients (including without limitation
bedside care and treatment, infusion therapy, pharmaceutical and rehabilitative
services); (ii) providing mobile diagnostic services; (iii) selling durable
medical equipment; and (iv) the providing of respiratory services and related
equipment. Seller desires to sell to Purchaser, and Purchaser desires to
acquire from Seller, all of the Purchased Assets (as hereinafter defined) and
Business in accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Background and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Certain Definitions; Purchase and Sale of Assets; Assumption of Certain
-----------------------------------------------------------------------
Liabilities.
- -----------
1.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
have the following meanings unless the context otherwise requires:
(a) "affiliate", with respect to any person, means any other person
controlling, controlled by or under common control with such person. For
purposes of this definition, the term "control" shall mean 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 capital
stock, by contract or otherwise.
(b) "business day" means any day other than a Saturday, Sunday, legal
holiday in the Commonwealth of Pennsylvania or other day of the year on which
banks are authorized or required by law to close.
(c) "governmental or regulatory body" means any government or
political subdivision thereof, whether federal, state, or local, or any agency
or instrumentality of any such government or political subdivision.
<PAGE>
(d) "herein", "hereby", "hereunder", "hereof" or other equivalent
words refer to this Agreement and not solely to the particular section or
portion of this Agreement in which any such word is used.
(e) "includes", "including" or other equivalent words mean
"including, without limitation".
(f) "lien or other encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any stockholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(g) "person" means any individual, corporation, limited liability
company, partnership, limited liability partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
(h) "Related Party" means (A) any past or present affiliate of Seller
or (B) any director, officer, or partner of any affiliate of Seller, (C) the
Shareholder or (D) any relative or spouse of any such person or entity.
1.2 Purchased Assets. On the terms and subject to the conditions
----------------
contained in this Agreement, Seller agrees to sell, assign, transfer and deliver
to Purchaser, free and clear of all liens or other encumbrances, all assets,
properties and rights in existence, of whatever kind or nature, real, personal
or mixed, tangible and intangible, wherever situated and located, of Seller,
that are used or useful in, or accounted for as part of, the Business, whether
or not reflected on the books and records of Seller (collectively referred to
herein as the "Purchased Assets"), except for the Excluded Assets (as
hereinafter defined). The Purchased Assets include all of Seller's right, title
and interest in and to the following: (a) all inventory and supplies
(collectively, "Inventory"); (b) all furniture, fixtures, equipment and
machinery, durable medical equipment (whether or not used for demonstration
purposes), vehicles, computer hardware and software, improvements, parts and
other tangible personal property other than Inventory (collectively,
"Equipment"); (c) all those certain lots and pieces of ground together with the
buildings, structures and improvements erected thereon, and together with all
easements, rights and privileges appurtenant thereto (the "Owned Real
Property"); (d) all leasehold interests created by all leases of personal
property (the "Personal Property Leases") or real property (the "Real Property
Leases") under which Seller is a lessee or lessor; (e) all of Seller's interest
in all buildings, structures and improvements located on any real property
subject to a Real Property Lease ("Leased Real Property"), together with
Seller's interest in all fixtures, equipment and leasehold improvements; (f) all
prepaid expenses, advance payments, deferred charges, rights of offset, deposits
and claims for refunds, credits and the like (collectively, "Prepaid Expenses");
(g) all licenses, permits, franchises, registrations, approvals and operating
rights to the extent transferable under applicable law or with any required
consent, including all licenses, certificates of need, permits and
authorizations, occupancy and other permits and licenses used in connection with
the Business (collectively, "Permits"); (h) all intellectual property rights of
Seller, including the right to use computer software programs, patents and
applications therefor, know-how, trade secrets, business and marketing plans,
copyrights and applications therefor, trademarks, service marks, trade names and
all logos, names and slogans used by Seller in conjunction with the Business
(collectively, "Intellectual Property Rights");
-2-
<PAGE>
(i) all rights of Seller under all contracts, agreements and commitments
(including employment agreements, independent contractor agreements, provider
and managed care agreements and contracts and other agreements relating to the
provision of home health care related services, the Real Property Leases and the
Personal Property Leases) (collectively, the "Contracts"); (j) copies of all
books and records, manuals, files and operating data, as required by the
Purchasing Parties (including payroll records, employee benefits records,
employee information, accounts payable records, inventory records, maintenance
records and asset history records, patient and provider lists, referral source
lists, credit reports, marketing and service records, credit information, any
financial information, any nurse registries, and computer software and data in
computer readable and/or machine readable form used to maintain such books and
records, together with the media on which such software and data are stored and
all documentation relating thereto) (collectively, "Books and Records"); (k)
all of Seller's claims, causes of action, and rights of recovery arising out of,
or relating to, events or occurrences involving Seller prior to the Closing Date
(as hereinafter defined), whether asserted or commenced before, on or after the
Closing Date; (l) all telephone and facsimile numbers used by Seller in
connection with the Business; and (m) all other assets, properties and rights of
every kind and nature owned or held by Seller on the Closing Date with respect
to the ownership or operation of the Business (including all associated
goodwill), whether or not referred to specifically in this Section 1.2.
-----------
1.3 Excluded Assets. The Purchased Assets shall exclude the following
---------------
(collectively, the "Excluded Assets"): (a) all cash and cash equivalents; (b)
all accounts receivable, billed and unbilled, generated in the conduct of the
Business prior to the Closing Date (collectively, "Accounts Receivable") and
records with respect thereto (provided that Purchaser shall be provided with
copies of all such records); (c) the minute books, stock record books and tax
returns of Seller; (d) the capital stock of LHS and Nurses; (e) Seller's rights
under this Agreement; and (f) those assets set forth on Schedule 1.3.
------------
1.4 Assumption of Certain Liabilities by Purchaser. In partial
----------------------------------------------
consideration of the sale of the Purchased Assets hereunder, on the Closing
Date, Purchaser shall assume and agree to discharge and perform those
liabilities and obligations accruing on and after the Closing Date solely under
the executory portion of any Contract to which Seller is a party that is listed
on Schedules 3.8(b), 3.8(c) or 3.8(d) and is a Purchased Asset (collectively,
----------------------------------
the "Assumed Liabilities").
1.5 Excluded Liabilities. Except for the Assumed Liabilities,
--------------------
Purchaser does not and shall not assume or in any way undertake to pay, perform,
satisfy or discharge any liabilities or obligations of Seller, and Seller agrees
to pay and satisfy when due any such liabilities and obligations not expressly
assumed by Purchaser (except where such liabilities or obligations are being
contested in good faith by Seller), including the following liabilities and
obligations (whether asserted before, on or after the Closing Date) (the
"Excluded Liabilities"): (a) Seller's third party accounts payable and accrued
expenses ("Accounts Payable and Accrued Expenses"); (b) any obligations of
Seller to any Related Party other than leases or contracts with a Related Party
set forth on Schedules 3.8(b), 3.8(c) or 3.8(d) (unless it is noted on any such
----------------------------------
schedule that Purchaser is not assuming any such contract); (c) subject to any
other agreement among the parties, any liabilities for legal, accounting and
other professional fees and expenses incurred by Seller in connection with the
preparation of, negotiation of, and performance under, this Agreement; (d) any
liabilities for taxes of any nature; (e) any liabilities to pay severance
benefits, if any, to employees of Seller accrued prior to the Closing Date or
whose
-3-
<PAGE>
employment is terminated by Seller in connection with this Agreement; (f) any
liabilities arising out of claims, suits or proceedings arising out of events or
conditions existing prior to the Closing Date as a result of any environmental
pollution or any noncompliance with any federal, state or local statute,
ordinance or promulgated rule or regulation, any judicial or administrative
order or judgment, any duties imposed by common law and any provision or
condition of any permit, license or other operating authorization
("Environmental Laws") relating to (i) the protection of the environment or the
public welfare from actual or potential exposure (or the effects of exposure) to
any actual or potential release, discharge, disposal or emission (whether past
or present) of any Regulated Substance (as hereinafter defined) or (ii) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling or any Regulated Substance; as used herein, the term
"Regulated Substance" shall mean any substance that is identified (by listing or
characteristic) and regulated (or the clean-up of which can be required) by any
Environmental Law; (g) any liability for deferred compensation, commissions or
fees payable to employees or consultants or independent contractors of the
Business and attributable to services provided to Seller prior to the Closing
Date, and any liabilities under any Employee Benefit Plan (as hereinafter
defined); (h) any liabilities of Seller as a borrower, co-borrower or guarantor
under any loan agreements or other credit facilities; (i) any liability in
respect of claims or litigation (whether asserted or commenced before, on or
after the Closing Date) arising out of or relating to the conduct of the
Business prior to the Closing Date; (j) any liabilities under insurance
policies, permits, licenses and governmental orders, directives and agreements;
(k) any liabilities for (i) medical, dental, disability income, life insurance,
accidental death benefits, whether insured or self-insured, for claims incurred
or for disabilities occurring prior to the Closing Date, or (ii) workers'
compensation (both long-term and short-term) benefits, whether insured or self-
insured, to the extent accruing or based upon exposure to conditions prior to
the Closing Date, or for claims incurred or for disabilities occurring prior to
the Closing Date, which liabilities described in (k)(i) or (k)(ii) above arise
by virtue of an employment, consulting or other similar relationship at any time
with Seller; and (l) without limitation by the specific enumeration of the
foregoing, all liabilities of Seller not expressly assumed by Purchaser pursuant
to the provisions of Section 1.4.
-----------
1.6 No Expansion of Third-Party Rights. The assumption by Purchaser of
----------------------------------
the Assumed Liabilities shall in no way expand the rights or remedies of any
third party against Purchaser as compared to the rights and remedies that such
third party would have had against Seller had Purchaser not assumed the Assumed
Liabilities. Without limiting the generality of the preceding sentence, the
assumption by Purchaser of the Assumed Liabilities shall not create any third-
party beneficiary rights.
1.7 Assets Owned by Related Parties. If any Related Party owns any assets
-------------------------------
that are used or were used within the last year in the operation of the Business
and such assets are not reflected on Schedules 3.8(b), 3.8(c) or 3.8(d), or
----------------------------------
necessary to allow Purchaser to continue to operate the Business as it is
presently operated, Seller shall cause such Related Party to transfer any such
assets not reflected on Schedules 3.8(b), 3.8(c), or 3.8(d) to Seller prior to
-----------------------------------
the Closing Date (at no cost to Purchaser), and such assets shall become
Purchased Assets. To the extent that Seller or any Related Party owns any
assets that are useful to the Business, but which do not constitute Purchased
Assets, Seller shall, if requested by Purchaser, grant (or, with respect of any
Related Party, cause any such Related Party to grant) Purchaser an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferable license to utilize
such assets in connection with the operation of the Business after the Closing
Date.
-4-
<PAGE>
2. Acquisition Price and Closing.
-----------------------------
2.1 Acquisition Price. The aggregate acquisition price for the
-----------------
Purchased Assets shall be Two Million Dollars ($2,000,000) plus assumption of
the Assumed Liabilities (the "Preliminary Acquisition Price"), subject to
adjustment as provided herein (as so adjusted, the "Acquisition Price").
2.2 Manner of Payment. Subject to adjustment as provided in Section
----------------- -------
2.4, at the Closing:
- ---
(a) Purchaser shall assume the Assumed Liabilities by written
instrument of assumption; and
(b) Purchaser shall pay to Seller the aggregate amount (the "Closing
Cash Payment") of Two Million Dollars ($2,000,000) less the Estimated Minimum
Assets Deficiency (as hereinafter defined), if any.
2.3 The Closing. Unless this Agreement shall have been earlier terminated
-----------
in accordance with the terms of any other agreement among the parties, the
transactions contemplated by this Agreement shall be consummated (the "Closing")
at the offices of Kleinbard, Bell & Brecker, 1900 Market Street, Suite 700,
Philadelphia, Pennsylvania 19103, on the later to occur of (i) January 2, 1997
and (ii) the fifth (5th) business day after Purchaser provides written notice to
Seller that the Regulatory Approvals (as hereinafter defined) relating to the
transfer of the Purchased Assets have been received in accordance with the terms
of Section 5.9. The date on which the Closing shall occur is referred to in this
-----------
Agreement as the "Closing Date". The Closing shall be deemed to have occurred
as of 12:01 a.m. on the Closing Date.
2.4 Closing Date Minimum Assets; Adjustment of Acquisition Price.
------------------------------------------------------------
(a) The Preliminary Acquisition Price shall be decreased to the
extent (the "Minimum Assets Deficiency") that the "Closing Date Minimum Assets"
(as hereinafter defined) of Seller (as reflected on the Closing Date Balance
Sheet (as hereinafter defined)) is less than $50,000 (the "Required Closing Date
Minimum Assets"). The term "Closing Date Minimum Assets" shall mean the
aggregate value (determined in accordance with generally accepted accounting
principles consistently applied ("GAAP")) of LHS's and Nurses' (on a
consolidated basis) and Holdings' (on an unconsolidated basis): (1) Inventory
meeting the standards set forth in Section 3.10, plus (2) Equipment (net of
------------
accumulated depreciation) meeting the standards set forth in Section 3.13, plus
------------
(3) Prepaid Expenses (but only to the extent that Purchaser is: (i) able to
utilize and receive the benefits thereof after the Closing and (ii) not required
to refund them pursuant to Section 5.10).
------------
(b) At least two (2) business days prior to the Closing, Seller will
deliver to Purchaser a good faith estimate of the Minimum Assets Deficiency, if
any (the "Estimated Minimum Assets Deficiency"), such estimate to be deducted
from the Preliminary Acquisition Price at the Closing.
-5-
<PAGE>
(c) As promptly as practicable (but in no event later than ninety
(90) calendar days after the Closing Date), Purchaser shall deliver to Seller
(i) a combined balance sheet of LHS, Nurses and Holdings (on an unconsolidated
basis) dated as of the opening of business on the Closing Date (the "Closing
Date Balance Sheet") and (ii) an accompanying closing statement (the "Closing
Statement") reasonably detailing Purchaser's determination of the Minimum Assets
Deficiency, if any, and Purchaser's allocation of the Acquisition Price among
the Purchased Assets. Seller must, within five (5) business days after Seller's
receipt of the Closing Date Balance Sheet and Closing Statement, give written
notice (the "Notice") to Purchaser specifying in reasonable detail Seller's
objections, if any, with respect thereto or Purchaser's determination of the
Closing Date Balance Sheet, the Minimum Assets Deficiency, if any, and the
Acquisition Price allocation shall be final, binding and conclusive on the
parties. With respect to any disputed amounts, the parties shall meet in person
and negotiate in good faith during the five (5) business day period (the
"Resolution Period") after the date of Purchaser's receipt of the Notice to
resolve any such disputes. If the parties are unable to resolve all such
disputes within the Resolution Period, then within five (5) business days after
the expiration of the Resolution Period, all disputes shall be submitted to
Ernst & Young, L.L.P. or any other nationally-recognized accounting firm
mutually acceptable to the parties (the "Independent Accountant") who shall be
engaged to provide a final and conclusive resolution of all unresolved disputes
within twenty (20) business days after such engagement. The determination of the
Independent Accountant shall be final, binding and conclusive on the parties
hereto, and the fees and expenses of the Independent Accountant shall be borne
by the party that the Independent Accountant determines is the non-prevailing
party.
(d) If the Minimum Assets Deficiency, if any, is greater than the
Estimated Minimum Assets Deficiency, Seller shall pay such shortfall (together
with interest at the rate of eight percent (8%) from the Closing Date) to
Purchaser within five (5) days after its final determination pursuant to this
Section 2.4. Seller and Purchaser agree not to assert, in connection with any
- -----------
tax return, tax audit or similar proceeding, any allocation of the Acquisition
Price that differs from that determined pursuant to this section.
2.5 Closing Costs; Transfer Taxes and Fees. Seller and Purchaser shall
--------------------------------------
each pay one-half of the amount of any documentary and transfer taxes and any
sales, use, incremental franchise or other taxes imposed by the transfers of
Purchased Assets and any deficiency, interest or penalty asserted with respect
thereto. Purchaser shall pay: (i) any fees and costs of recording or filing all
applicable conveyancing instruments described in Sections 8.1(a), and (ii) all
---------------
application and filing costs of applying for new Permits and obtaining the
transfer of existing Permits that may be lawfully transferred.
3. Representations and Warranties of the Selling Parties. Each of the Selling
-----------------------------------------------------
Parties represents and warrants to Purchaser as follows:
3.1 Organizational Status. Holdings is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of Kentucky.
Each of LHS and Nurses is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Each of
-6-
<PAGE>
Holdings, LHS and Nurses has all requisite power and authority to own, lease and
operate its assets, properties, and the Business, and to carry on the Business
as now being and as heretofore conducted.
3.2 Qualification. Each of Holdings, LHS and Nurses is duly qualified
-------------
to do business and is in good standing in all states or jurisdictions in which
the nature of the Business as presently operated by it or the character of the
property owned or leased by it with respect to the Business makes such
qualification or authorization necessary, unless the failure to do so would not
have a material adverse effect on the Business or the Purchased Assets.
3.3 Authorization; No Conflict.
--------------------------
(a) Seller has the full legal right and all power and authority
required to enter into, execute and deliver this Agreement and the documents and
other agreements required to be executed and delivered hereunder and to perform
fully its obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by the Selling Parties and constitutes, and each of the
other agreements and documents to be delivered by the Selling Parties hereunder
when executed and delivered by the Selling Parties will constitute, the valid
and binding obligation of the Selling Parties, enforceable in accordance with
their respective terms.
(b) The execution, delivery and performance of this Agreement by the
Selling Parties and the documents and other agreements to be delivered hereunder
by the Selling Parties and the consummation of the transactions contemplated
hereby and thereby by the Selling Parties will not (i) violate any provision of
the articles of incorporation or bylaws of Holdings, LHS or Nurses, (ii)
violate, conflict with or result in the breach of any of the terms of, result in
a material modification of the effect of, otherwise give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any contract or other agreement to which any
of the Selling Parties is a party or by or to which they or any of their
respective assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which any of the Selling Parties, or the
assets, properties or Business of Seller is bound, (iv) violate any statute, law
or regulation, or (v) violate or cause any revocation of or limitation on any
Permit (A) that is necessary to the lawful conduct of the Business or (B) the
violation, revocation or limitation of which could reasonably be expected to
have a material adverse effect on the Purchased Assets or the Business.
3.4 Financial Statements of Seller; Undisclosed Liabilities.
-------------------------------------------------------
(a) Seller has delivered to Purchaser copies of Seller's audited
annual balance sheet and income statement as of December 31, 1995 and unaudited
interim balance sheet and income statement as of June 30, 1996 (collectively,
the "Financial Statements"). As used herein, the term "Balance Sheet Date" shall
mean December 31, 1995. The Financial Statements (i) fairly present the
financial condition, assets and liabilities of Seller as of their respective
dates and the results of operations for the periods then ended, (ii) were
prepared in accordance with GAAP, and (iii) were prepared from the books and
records of Seller.
-7-
<PAGE>
(b) Seller does not have any liabilities or obligations except (i)
liabilities reflected and reserved against in the balance sheet as of the
Balance Sheet Date that have not been paid or discharged since the date thereof,
and (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business and consistent with past practice and none of which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on the Business or the Purchased Assets.
3.5 Compliance with Laws.
--------------------
(a) Seller is in, and has operated in, compliance with all applicable
federal (including 42 U.S.C. (S) 1320a-7b(b) et seq. and 42 U.S.C. (S) 1395nn et
-- --- --
seq.), state and local laws, regulations and ordinances (including those
- ---
relating to reimbursement, reporting requirements, certification standards,
limitations on ownership and other financial relationships between a provider
and its referral sources, pharmaceuticals, medical devices, and the provision
of medical and related services) and any applicable requirements of any
governmental or regulatory body, court or arbitrator affecting the Business or
the Purchased Assets.
(b) Seller is certified for participation in, and is a party to valid
provider agreements for payment by, federal Medicare and Texas Medicaid programs
(the "Programs"). Except as set forth on Schedule 3.5(b): (i) all of the cost
---------------
reports of Seller, including Seller's home office cost reports for the Programs
for their last three (3) fiscal years, have been filed when due and were
prepared in all material respects in accordance with all applicable laws,
regulations and principles governing reimbursement under the Programs; (ii)
there are no pending appeals, judgments, challenges, audits, litigation or
notices with respect to the Programs; and (iii) Seller has not, directly or
indirectly, offered, paid, solicited or received any remuneration in return for
the referral of products or services in violation of the Programs, any federal
or state laws and regulations promulgated thereunder, or any requirements
imposed by third-party payors.
3.6 Permits. Schedule 3.6 sets forth all of the Permits necessary to
------- ------------
operate the Business as now operated, and such Permits are validly issued in the
name of Seller. Such Permits are in full force and effect, are unimpaired by
any acts or omissions of Seller, are valid for the balance of the current
license term, if any, applicable generally to each such Permit, are
transferrable by Seller to Purchaser with such consents of third parties as are
set forth in Schedule 3.11, if permitted under applicable law and regulations,
-------------
and are sufficient in all material respects to permit the continued lawful
operation of the Business by Purchaser.
-8-
<PAGE>
3.7 Litigation. Except as set forth on Schedule 3.7, there is no action,
---------- ------------
suit, claim, arbitration, investigation or other legal or administrative
proceeding or audit or claim by any insurance company or managed care
organization (collectively, "Actions") pending or, to the Selling Parties'
knowledge, threatened against Seller, any of the Purchased Assets, or any
employee of Seller; nor, to their knowledge, are there any facts upon which any
such Action may reasonably be expected to be based. There is not outstanding
any order, writ, injunction, decree, or judgment of any court, governmental or
regulatory body or arbitration tribunal applicable to Seller, the Business or
the Purchased Assets.
3.8 Real Property; Contracts.
------------------------
(a) Seller has no Owned Real Property.
(b) Schedule 3.8(b) sets forth a list of the Real Property Leases.
---------------
(c) Schedule 3.8 (c) sets forth a list of all of the Personal
----------------
Property Leases.
(d) Schedule 3.8(d) sets forth a list of all of the following
---------------
Contracts (written or oral) relating to the Business to which Seller is a party
or by or to which Seller is or the Purchased Assets are bound or subject: (i)
contracts and other agreements for the sale of any of the assets or properties
of the Business (except for the sale of inventory in the ordinary course of
business) or for the grant to any person of any preferential rights to purchase
any of the assets or properties relating to the Business; (ii) contracts and
other agreements containing covenants of Seller not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with Seller in any line of business or in any geographical
area; (iii) contracts and other agreements (including options) relating to the
acquisition by Seller of any operating business or the capital stock of or other
interest in any other person; (iv) contracts (including options) for the
purchase of any asset, tangible or intangible; (v) contracts and other
agreements requiring the payment to any person of a royalty, override or similar
commission or fee; (vi) contracts and other agreements relating to the borrowing
of money; (vii) contracts and other agreements for the employment, or
restricting the employment, of any salaried employee of Seller, or for the
engagement of independent contractors by Seller; (viii) third-party payor
agreements (including provider agreements for the Programs), managed care
agreements, and agreements relating to the provision of health care, nursing,
pharmaceuticals, goods and services; (ix) all insurance policies or binders of
insurance that relate to the Business (including malpractice insurance); and (x)
any other material contract or other agreement whether or not made in the
ordinary course of business.
(e) There have been delivered to Purchaser true and complete copies
of all of the Contracts (including the Real Property Leases and the Personal
Property Leases). All of the Contracts are valid, in full force and effect and
binding upon Seller, and to Seller's knowledge, the other parties thereto,
enforceable in accordance with their respective terms; and Seller has satisfied
in full or provided for all liabilities and obligations thereunder through the
date hereof, is not in material default under any of them, nor, to Seller's
knowledge, does any condition exist that, with notice or lapse of time or both,
would constitute such a default. To Seller's knowledge, no other party to any
Contract
-9-
<PAGE>
is in default thereunder, nor, to Seller's knowledge, does any condition exist
that, with notice or lapse of time or both, would constitute such a default.
3.9 [INTENTIONALLY DELETED.]
----------------------
3.10 Inventory. The Inventory was purchased in the ordinary course of
---------
business and consists only of new and complete items of Inventory (i.e., all
component parts are included). All Inventory that is obsolete, discontinued or
of below standard quality was discounted in value to net realizable value on
such Schedule. None of the Inventory is unusable or not saleable in the lawful
and ordinary course of business because of legal restrictions, failure to meet
specifications, damage, physical deterioration or for any other cause. Set
forth on Schedule 3.10 is a detailed list of the Inventory on the date hereof.
-------------
3.11 Consents. Except for the consent of such third parties as are
--------
separately identified on Schedule 3.11, no approval, consent or authorization
-------------
of, or registration or filing with any person is required in connection with the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby (including with respect to any Permit,
Intellectual Property Right, or any Contract).
3.12 Intellectual Property Rights. All Intellectual Property Rights are
----------------------------
listed and described on Schedule 3.12 and are valid, uncontested and in good
-------------
standing subject to no liens or other encumbrances, and, to Seller's knowledge,
Seller owns or possesses adequate and enforceable rights to use all of the
foregoing with no conflict with or infringement by Seller of the asserted rights
of others. To Seller's knowledge, there is no infringement by any party
whatsoever of any of such Intellectual Property Rights and no event has occurred
that constitutes, or with notice or lapse of time or both that may constitute, a
default by Seller or any other party of any of the Intellectual Property Rights.
Seller possesses and will convey to Purchaser all rights, licenses or other
authority to use all Intellectual Property Rights without payment of any
royalties or other consideration. Seller uses no trade names other than "LHS",
"Liberty Health Services" and "Nurses Today".
3.13 Equipment. To Seller's knowledge, the Equipment was purchased in
---------
bona fide third party transactions for fair market value, is in good operating
condition and repair, useable for the purposes for which it is intended,
reasonable wear and tear excepted, and is in compliance with all manufacturers'
specifications and industry standards and regulations. Seller has maintained
the Equipment in accordance with all warranties provided by the vendors or
manufacturers thereof. All leases, conditional sales contracts, franchises or
licenses pursuant to which Seller may hold or use any interest owned or claimed
by Seller (including options) in or to Equipment are in full force and effect
and, to Seller's knowledge, there is no default or event that, with notice or
lapse of time or both, would constitute such a default. Set forth on Schedule
--------
3.13 is a detailed list of the Equipment on the date hereof. Schedule 3.13 also
- ---- -------------
lists all motor vehicles and other Equipment for which a certificate of title or
origin is required in order to transfer title from Seller to Purchaser.
3.14 Title; Sufficiency and Location of Assets. Seller has good and
-----------------------------------------
marketable title to all of the Purchased Assets and each of LHS, Holdings and
Nurses will at the Closing convey to Purchaser good and marketable title to all
of the Purchased Assets, in each case free and clear of any
-10-
<PAGE>
lien or other encumbrance. The Purchased Assets constitute all of the assets
and properties used or held for use in the Business, except for the Excluded
Assets. All of Seller's assets are located within the State of Texas.
3.15 Certain Relationships. Except as set forth on Schedule 3.15,
--------------------- -------------
Seller has no knowledge that any referral source, material supplier of the
Business or party to an agreement (including any third-party payor agreement)
with Seller intends to cancel or otherwise modify its relationship with Seller
or the Business or to decrease materially or limit its referrals, purchases,
services, supplies or materials from or to Seller or the Business.
3.16 Employee Benefit Plans.
----------------------
(a) Schedule 3.16 contains a true and complete list of any pension,
-------------
profit sharing, deferred compensation, commission, incentive compensation,
bonus, vacation, severance, disability, hospitalization, medical insurance or
other employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or program that
Seller maintains or to which Seller has any present or future obligation to
contribute (the "Employee Benefit Plans"). Seller has delivered to Purchaser
true and complete copies of all documents relating to the Employee Benefit
Plans, including annual reports on Form 5500 and actuarial and valuation
reports. Seller does not have any contract or understanding, whether legally
binding or not, to create any additional Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan described on Schedule
--------
3.16, (i) Seller has accrued for or has made all payments required to be made by
- ----
it, and (ii) Seller has operated and currently operates such plans in compliance
with the plan documents and, to the extent applicable, ERISA and the Code.
(c) Seller does not maintain or contribute to any employee pension
benefit plan as defined in Section 3(2) of ERISA. Neither Seller nor any
affiliate are (nor were any of their respective predecessors) obligated to
contribute to any multi-employer plan as defined in Section 3(37) of ERISA in
which any employee of the Business is a participant. Neither Seller nor any
affiliate have ever (nor had any of their respective predecessors) completely or
partially withdrawn (within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980) from any multi-employer plan.
3.17 Employee and Independent Contractor Relations.
---------------------------------------------
(a) Seller has not experienced any attempt by organized labor or its
representatives to make Seller conform to the demands of organized labor
relating to employees or to enter into a binding agreement with organized labor
that would cover the employees of Seller. Seller has not at any time during the
last three (3) years had, nor, to Seller's knowledge, is there now threatened,
(i) a strike, picket, work stoppage or work slowdown relating to the Business or
(ii) any unfair labor practice complaint against Seller before the National
Labor Relations Board.
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<PAGE>
(b) Except as set forth on Schedule 3.17(b), there are no agreements,
----------------
arrangements or understandings that would restrict the ability of Seller to
terminate the employment of any or all of Seller's employees for any lawful
reason or for no reason at all, without penalty or liability.
(c) Set forth on Schedule 3.17(c) is (i) the name, past twelve
----------------
months' salary and most recent bonus of each salaried employee of Seller and
(ii) the name and past twelve months' remuneration of each independent
contractor of Seller.
3.18 Transactions with Related Parties. Except as set forth on Schedule
--------------------------------- --------
3.18, no Related Party has (i) borrowed money from or loaned money to Seller
- ----
that remains outstanding, (ii) any contractual or other claims, express or
implied, of any kind whatsoever against Seller, (iii) any interest in any
property or assets used by or useful to Seller or the Business except as
reflected on Schedules 3.8(b), 3.8(c) or 3.8(d), or (iv) been a director,
----------------------------------
officer, or employee of, or had any direct or indirect interest in, any entity
that has done business with Seller or the Business.
3.19 No Material Adverse Change; Absence of Certain Changes.
------------------------------------------------------
(a) Since the Balance Sheet Date, there has been no material adverse
change in the business, operations, condition (financial or otherwise), or
prospects of the Business or in the Purchased Assets, and, to the knowledge of
Seller, no such change is threatened. Since the Balance Sheet Date, Seller has
conducted the Business only in the ordinary course and there has been no damage,
destruction or loss materially adversely affecting the business, prospects,
operations or condition (financial or otherwise) of the Business or the
Purchased Assets, whether or not covered by insurance. Since such date, there
has been no loss or interruption in the use of any material Permit.
(b) Since the Balance Sheet Date, except as set forth in Schedule
--------
3.19, Seller has not: (i) mortgaged, pledged or subjected to any lien or other
- ----
encumbrance any of the Purchased Assets except in the ordinary course of
business; (ii) acquired or disposed of any Purchased Assets or properties except
in the ordinary course of business; (iii) forgiven or canceled any debts or
waived any rights arising under or in connection with any of the Purchased
Assets; (iv) adopted, canceled, terminated or amended any material agreement
(including any third-party payor agreement); (v) incurred or assumed any debt,
obligation or liability except in the ordinary course of business; (vi) made any
wage or salary increase or bonus, or increase in any other direct or any
indirect compensation or any severance or termination pay, for or to any
employees, consultants, agents or other representatives, or any accrual for or
commitment or agreement to make or pay the same, except for annual increases in
compensation of employees made in the ordinary course consistent with past
practices; (vii) entered into any agreement with any labor union or association
representing any employee or adopted, entered into or amended any employee
benefit plan except as necessary to comply with ERISA or other applicable legal
requirements; (viii) entered into any lease that requires or involves annual
lease payments of $2,500 or more; (ix) except for inventory or equipment
acquired in the ordinary course of business, made any acquisition of all or any
part of the assets, properties, capital stock or business of any other person;
(x) entered into any merger, consolidations, recapitalization or other business
combination or reorganization; (xi) made any loans, advances or capital
contributions to or investments in any person; (xii) done anything to affect
adversely the relationship of Seller with patients, independent contractors,
clients, customers, providers, referral
-12-
<PAGE>
sources, third-party payors or any material suppliers or with any governmental
or regulatory body; (xiii) made any change in any method of accounting practice;
(xiv) made any payment or distribution on account of capital stock; or (xv)
entered into any other contract or other agreement or other transaction
respecting the Business or the Purchased Assets other than in the ordinary
course of business consistent with past practices.
3.20 Books and Records. Seller has made and kept its Books and Records
-----------------
that are complete and correct in all material respects and, in reasonable
detail, accurately and fairly reflect the activities of Seller and all material
transactions of the Business.
3.21 Taxes. Except as set forth on Schedule 3.21:
----- -------------
(a) Seller has timely filed with the appropriate taxing authorities
all true, correct and complete tax returns for federal, state, municipal,
payroll, withholding, excise, income, sales, use, unemployment compensation,
personal property, use and occupancy, business and occupation, mercantile, real
estate, franchise and other taxes (all the foregoing taxes, including interest
and penalties thereon and estimated taxes, being hereinafter collectively
referred to as "Taxes") required to be filed so as to prevent any lien or other
encumbrance on any of the Purchased Assets. Seller has delivered to Purchaser
complete and accurate copies of all Seller's federal, state and local tax
returns for the past three (3) years, together with copies of all significant
correspondence between Seller and any taxing authorities during such period.
Seller is not and has not been a member of any consolidated group for tax
purposes.
(b) All Taxes have been timely paid or an adequate reserve has been
established therefor in the Financial Statements, and Seller does not have any
liability for Taxes in excess of the amounts so paid or reserves so established.
(c) The income tax returns of Seller have not been audited by the
Internal Revenue Service ("IRS") or any other relevant taxing authority within
the past five (5) years. No deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against Seller or the
Shareholder (with respect to matters pertaining to the Business) within such
period. Within the past five (5) years, there have been no pending or, to the
best of Seller's knowledge, threatened audits, investigations or claims for or
relating to any additional liability in respect of Taxes in any jurisdiction,
and there are no matters under discussion with any governmental or regulatory
body with respect to Taxes that are likely to result in an additional liability
for Taxes. No extension of a statute of limitations relating to Taxes is in
effect with respect to Seller.
3.22 No Other Agreements to Sell the Assets. Neither Seller nor any
--------------------------------------
Related Party has any commitment or legal obligation to any other person other
than Purchaser to sell, assign, transfer or effect a sale of any of the
Purchased Assets (other than inventory in the ordinary course of business), to
sell or effect a sale of any of the capital stock of Seller, to effect any
merger, consolidation, liquidation, dissolution or other reorganization of
Seller, or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
-13-
<PAGE>
3.23 Environmental. Except as set forth on Schedule 3.23:
------------- -------------
(a) None of the properties included in the Purchased Assets or to be
leased by Purchaser has underground or above ground storage tanks, or has had
any leak, spill, disposal, discharge, or release (collectively, "Release") of
any Regulated Substance.
(b) There are no asbestos-containing materials on or in the Purchased
Assets or any buildings or facilities thereon or to be leased to Purchaser, nor
are there any electrical transformers, fluorescent light fixtures with ballasts,
or other equipment containing PCB's in excess of legal requirements on such
properties.
(c) None of the properties included in the Purchased Assets has
generated "hazardous waste" or "hazardous substances" or "toxic substances" (as
defined in applicable Environmental Laws), nor have any of such properties been
used by Seller for the use, treatment, transportation, storage, handling or
disposal of any "hazardous waste" or "hazardous substance" or "toxic substance".
To Seller's knowledge, none of the properties included in the Purchased Assets
or to be leased by Purchaser has ever appeared on any Federal or state list or
registry of hazardous or toxic waste disposal sites (active or inactive), nor
has Seller ever received any notice or claim from the Federal or any state or
local government or agency concerning the alleged or threatened Release of any
such waste or substance.
(d) There have been no environmental audits or assessments that have
been conducted at any Real Property site since the dates of Seller's occupancy
thereof, either by Seller or any attorney, environmental consultant or engineer
engaged by Seller or, to Seller's knowledge, by any other person for such
purpose.
(e) Seller has not released any other person from any claim under any
Environmental Law or waived any rights concerning any environmental condition.
3.24 Solvency. Seller is, and after giving effect to the transactions
--------
contemplated hereby will be, solvent and is not subject to any voluntary or
involuntary proceedings in bankruptcy, reorganization, dissolution or
liquidation or to any assignment for the benefit of creditors, and no trustee,
receiver or liquidator has been appointed for Seller or any of its properties.
3.25 Insurance. Set forth on Schedule 3.25 is a list and description
--------- -------------
(including coverages) of all insurance policies or binders of insurance that
relate to the Business (including malpractice insurance), correct and complete
copies of which have been delivered to Purchaser. All of the insurable
properties of Seller is insured by such policies. No notice of reduction in
coverage, increase in premium, or cancellation or non-renewal with respect to,
or disallowance of any material claim under, any such policy or binder has been
received by Seller. All such policies provide coverage with insurers of
recognized responsibility to the extent and in the manner (i) customary for the
home health care industry and (ii) required by law and all agreements to which
Seller is a party or otherwise bound. All such policies provide coverage on an
"occurrence", rather than a "claims made", basis. Seller has not failed to give
any notice or to present any claim under any such policy or binder in a due and
timely fashion. There are no outstanding unpaid claims under any such policies
or binders.
-14-
<PAGE>
3.26 Non-Solicitation. Since October 9, 1996, Seller has not (nor has any
----------------
Related Party), directly or indirectly, solicited, initiated, encouraged,
entertained or participated in discussions or negotiations, entered into any
agreements relating to, or consummated any transaction with respect to any offer
for purchase or sale of any interest in Seller, or any acquisition, combination
or similar transaction involving Seller, the Business or Seller's assets, stock
or employees (a "Third-Party Proposal") with any person other than Purchaser or
Purchaser's representatives.
3.27 Disclosure. No representation, warranty or statement of the
----------
Selling Parties contained in this Agreement, in any Schedule or Exhibit, or any
agreement or document delivered under this Agreement or in connection herewith
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein and
therein not misleading. Copies of all documents furnished by or on behalf of
the Selling Parties to Purchaser are complete and accurate in all material
respects. There is no fact that Seller has not disclosed to Purchaser that
could reasonably be expected to have a material adverse effect on the Business,
its prospects, financial condition, results of operations, assets or liabilities
or could reasonably be expected to have a material and adverse effect on the
ability of the Selling Parties to perform this Agreement.
4. Representations and Warranties of the Purchasing Parties. The Purchasing
--------------------------------------------------------
Parties hereby represent and warrant to the Selling Parties as follows:
4.1 Organizational Status. HHCA is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Purchaser, when formed, will be duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation. Each of
the Purchasing Parties has (or will have, in the case of Purchaser) all
requisite power and authority to own, lease and operate its assets, properties
and business and to carry on its business as now being and as heretofore
conducted.
4.2 Qualification. Each of the Purchasing Parties is duly qualified (or
-------------
will be duly qualified, in the case of Purchaser) to do business and is in good
standing (or will be in good standing, in the case of Purchaser) in all states
or jurisdictions in which the nature of its business as presently operated by it
or the character of the property owned or leased by it with respect to its
business makes such qualification or authorization necessary.
4.3 Authorization; No Conflict.
--------------------------
(a) Each of the Purchasing Parties has (or will have, in the case of
Purchaser) the full legal right and all power and authority required to enter
into, execute and deliver this Agreement and the documents and other agreements
required to be delivered hereunder and to perform fully its obligations
hereunder and thereunder. This Agreement has been duly executed and delivered
by HHCA and constitutes, and each of the other agreements and documents to be
delivered by each of the Purchasing Parties hereunder when executed and
delivered by each of the Purchasing Parties will constitute, the valid and
binding obligation of each of the Purchasing Parties enforceable in accordance
with their respective terms.
-15-
<PAGE>
(b) The execution, delivery and performance of this Agreement by HHCA
and the documents and other agreements to be delivered hereunder by each of the
Purchasing Parties and the consummation of the transactions contemplated hereby
and thereby by each of the Purchasing Parties will not (i) violate any provision
of HHCA's or Purchaser's articles of incorporation or bylaws (or other
organizational documents), (ii) violate, conflict with or result in the breach
of any of the terms of, result in a material modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
contract or other agreement to which any of the Purchasing Parties is a party or
by or to which any of them or any of their respective assets or properties may
be bound or subject, (iii) violate any order, judgment, injunction, award or
decree of any court, arbitrator or governmental or regulatory body by which any
of the Purchasing Parties, or any of their respective assets, properties or
business are bound, (iv) violate any statute, law or regulation, or (v) violate
or cause any revocation of or limitation on any permit (A) that is necessary to
the lawful conduct of the business of any of the Purchasing Parties or (B) the
violation, revocation or limitation of which could reasonably be expected to
have a material adverse effect on the business of any of the Purchasing Parties.
4.4 Consents. Except for the consent of such third parties as are
--------
separately identified on Schedule 4.4, no approval, consent or authorization of,
------------
or registration or filing with any person is required in connection with the
execution and delivery of this Agreement by any of the Purchasing Parties or the
consummation of the other transactions contemplated hereby.
4.5 Financial Statements of HHCA; Undisclosed Liabilities.
-----------------------------------------------------
(a) HHCA has delivered to Seller copies of HHCA's audited balance
sheet and income statement as of June 30, 1996 (collectively, the "Financial
Statements"). As used herein, the term "HHCA Balance Sheet Date" shall mean June
30, 1996. The Financial Statements (i) fairly present the financial condition,
assets and liabilities of HHCA as of the HHCA Balance Sheet Date and the results
of operations for the period then ended, (ii) were prepared in accordance with
GAAP, and (iii) were prepared from the books and records of HHCA.
(b) HHCA does not have any liabilities or obligations except (i)
liabilities reflected and reserved against in the balance sheet as of the HHCA
Balance Sheet Date that have not been paid or discharged since the date thereof,
and (ii) liabilities incurred since the HHCA Balance Sheet Date in the ordinary
course of business and consistent with past practice and none of which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on the ability of the Purchasing Parties to
consummate the transactions hereunder.
4.6 Litigation. There are no Actions pending or, to the Purchasing
----------
Parties' knowledge, threatened against any of the Purchasing Parties, or any of
their respective employees; nor, to their knowledge, are there any facts upon
which any such Action may reasonably be expected to be based, except for such
Actions that have not had and would not reasonably be expected to have a
material adverse effect on the business of the Purchasing Parties. There is not
outstanding any order, writ, injunction, decree, or judgment of any court,
governmental or regulatory body or arbitration tribunal applicable to the
Purchasing Parties or their businesses.
-16-
<PAGE>
4.7 No Material Adverse Change. Since the HHCA Balance Sheet Date,
--------------------------
there has been no material adverse change in the business, operations, condition
(financial or otherwise), or prospects of the Purchasing Parties and, to the
knowledge of Purchasing Parties, no such change is threatened. Since the HHCA
Balance Sheet Date, the Purchasing Parties have conducted their respective
businesses only in the ordinary course and there has been no damage, destruction
or loss materially adversely affecting the business, operations or condition
(financial or otherwise) of the Purchasing Parties, whether or not covered by
insurance.
4.8 Disclosure. No representation, warranty or statement of the
----------
Purchasing Parties contained in this Agreement, in any Schedule or Exhibit, or
any agreement or document delivered under this Agreement or in connection
herewith contains or will contain any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
and therein not misleading. Copies of all documents furnished by or on behalf
of the Purchasing Parties to Seller are complete and accurate in all material
respects. There is no fact that the Purchasing Parties have not disclosed to
Seller that could reasonably be expected to have a material adverse effect on
the ability of the Purchasing Parties to perform this Agreement.
5. Covenants of the Parties. The Selling Parties and Purchasing Parties
------------------------
covenant and agree with each other as follows:
5.1 Continuance of Business. From the date hereof until the Closing
-----------------------
Date, Seller agrees that it will, unless otherwise consented to in writing by
Purchaser: (a) carry on the Business in the usual, regular and ordinary course
in substantially the same manner as heretofore carried on; (b) preserve intact
the Permits and the present business organization of the Business; (c) use best
efforts to keep available the services of the present employees and independent
contractors of the Business (except as provided in Section 5.5); (d) encourage
-----------
such employees to accept employment with Purchaser (if such employment is
offered); (e) use best efforts to preserve its relationships with patients,
customers, clients, providers, referral sources (including physicians and other
health care providers), suppliers and others having business dealings with the
Business to the end that its goodwill and ongoing business shall be conducted on
substantially the same basis on the Closing Date as on the date hereof; (f)
perform all of its obligations under all contracts and other agreements relating
to the Business, including the discharge of all tax obligations and accounts
payable of the Business according to the terms and conditions of all invoices
therefor; (g) maintain true, correct and complete books of account and records
relating to the Business; (h) comply with all statutes, laws, ordinances, rules
and regulations applicable to the conduct of the Business; (i) promptly upon its
knowledge thereof, advise Purchaser in writing of the termination or resignation
of any employee whose cash compensation is in excess of an annual rate of
$50,000 or independent contractor whose cash compensation is in excess of an
annual rate of $50,000 and, to its knowledge, the circumstances therefor; (j)
not take or permit to be taken any action that is represented and warranted in
Section 3.19(b) not to have been taken since the Balance Sheet Date; (k) not
- ---------------
make, change, or revoke any tax election or make any agreement or settlement
with any taxing authority; (l) not make any payments to or enter into or modify
any existing agreement or arrangement with any Related Party; (m) not hire any
employees (except in the ordinary course of business to replace employees of
Seller whose employment with Seller is terminated); (n) keep in full force and
effect insurance of the same type and in amounts at least equal to that carried
by Seller with respect to the Business on the date hereof; (o) maintain
sufficient levels of Inventory
-17-
<PAGE>
in the ordinary course of business; (p) maintain the Equipment in at least the
same condition as such exists on the date hereof, normal wear and tear excepted;
and (q) promptly upon its knowledge thereof, advise Purchaser in writing of: (i)
any material adverse change in the financial condition, prospects or operations
of the Business; (ii) any event, condition or circumstance occurring from the
date hereof until the Closing Date that would constitute a material violation or
breach of any representation, warranty, covenant, agreement or provision
contained in this Agreement (provided, however, that such disclosure shall not
-------- -------
be deemed to cure any violation or breach of any such representation, warranty,
covenant, agreement or provision), or (iii) any event, occurrence, transaction
or other item that would have been required to have been disclosed on any
Schedule delivered hereunder, had such event, occurrence, transaction or item
existed on the date hereof.
5.2 Access to Information. From and after the date hereof, the
---------------------
Purchasing Parties shall be entitled, through their employees and
representatives, to make such investigation of the assets, properties,
facilities, personnel, business and operations of the Business and such
examination of the books, records and financial condition of the Business as
Purchaser reasonably requests, and Seller shall fully cooperate with Purchaser
in connection with such investigation. No investigation by Purchaser shall
diminish, obviate, constitute a waiver as to the enforcement of, or affect
Purchaser's right to rely on, any of the representations, warranties, covenants
or agreements of Seller under this Agreement.
5.3 Governmental Permits and Approvals; Consents. Seller shall use its
--------------------------------------------
best efforts to obtain promptly (a) all permits and approvals from any
governmental or regulatory body required to be obtained by Seller for lawful
consummation of the Closing, (b) the consents set forth or required to be set
forth on Schedule 3.11 and (c) appropriate estoppel representation letters in
-------------
form and substance reasonably satisfactory to Purchaser from the lessors under
the Real Property Leases. The Purchasing Parties will fully cooperate in
connection with Seller's obtaining of such permits, approvals, consents and
estoppel letters, including without limitation, by providing any necessary
documents and information.
5.4 Maintenance of Permits. Seller shall at all times prior to the
----------------------
Closing Date preserve and maintain each of the material Permits free and clear
of all liens and other encumbrances. Seller shall not take any action that
would cause any governmental or regulatory body to institute proceedings
regarding any material Permit or take any other action that would result in
Seller being in noncompliance in any material respect with the requirements of
or any governmental or regulatory body having jurisdiction thereof that would
impair Seller's qualifications to be the assignor of such Permits or Purchaser's
rights with respect thereto.
5.5 Employees; Employee Compensation.
--------------------------------
(a) Purchaser has informed Seller that Purchaser may offer employment
on an "at will" basis to certain employees of LHS, Holdings and Nurses
(collectively, " Employees") immediately after the Closing. Immediately prior to
Closing, Seller shall terminate the employment of all Employees that Purchaser
intends to hire. Seller waives any claims against Purchaser or any Employees
arising from such employment (including arising from any employment agreement or
noncompetition agreement). Nothing contained in this Agreement shall confer upon
any Employee
-18-
<PAGE>
any right with respect to continued employment by Seller or Purchaser. No
provision of this Agreement shall create any third-party rights in any Employee,
or any beneficiary or dependent thereof, with respect to the compensation, terms
and conditions of employment and benefits that may be provided to such Employee
by Purchaser or under any benefit plan that Purchaser may maintain.
Notwithstanding anything to the contrary in this Section 5.5(a), Purchaser will
--------------
employ after the Closing, pursuant to employment agreements substantially in the
form of Exhibit 5.5 (collectively, the "Employment Agreements"), the following
-----------
employees of Seller: April Anthony, Maura Coriston, Amy Figgins and Gene Schulle
(collectively, the "Executives").
(b) Seller agrees to discharge when due all liabilities to any
employee of the Business under all pay and compensation practices applicable to
the Business and under any employment agreements entered into prior to the
Closing Date. Seller shall pay all severance costs in respect of employees
severed prior to the Closing Date.
5.6 Accounts Receivable. Between the date hereof and the Closing Date,
-------------------
Seller will use prudent credit and collection procedures in order to collect the
Accounts Receivable so as not to jeopardize Purchaser's future customer,
patient, provider and third-party payor relations.
5.7 Title; Risk of Loss. Legal title and risk of loss with respect to
-------------------
the Purchased Assets shall not pass to Purchaser until the Purchased Assets are
transferred at the Closing. If prior to the Closing Date any of the Purchased
Assets are destroyed or damaged by fire or other casualty, or are otherwise
unable to be conveyed to Purchaser at the Closing, Purchaser may, at its option,
(i) require that Seller replace or restore such property; or (ii) elect to
receive at the Closing a reduction in the Preliminary Acquisition Price in an
amount reasonably estimated by Purchaser to replace or repair such property.
5.8 Regulatory Approvals. The parties agree that in order to consummate
--------------------
the transactions contemplated hereby, all material federal, state and local
governmental or regulatory approvals (collectively, the "Regulatory Approvals")
must be obtained, subject to Purchaser's right to waive in writing this
condition on behalf of the parties.
5.9 Refunding to Seller of Certain Prepaid Expenses. Notwithstanding
-----------------------------------------------
anything to the contrary contained in Section 1.2, Purchaser agrees that in the
-----------
event that any of the Prepaid Expenses set forth on Schedule 5.9 are refunded to
------------
the Purchaser after the Closing Date, it will pay such amounts over to Seller.
5.10 Disclosure Schedules. As of the date of execution of this
--------------------
Agreement, the Selling Parties have not delivered to the Purchasing Parties the
Schedules to this Agreement (and supporting agreements and documents) that are
required to be delivered hereunder by the Selling Parties ("Selling Parties'
Disclosure Schedules"). Within ten (10) business days after the date hereof,
the Selling Parties will deliver a complete set of Selling Parties' Disclosure
Schedules to the Purchasing Parties, who shall then have five (5) business days
after receipt of Selling Parties' Disclosure Schedules to review the same and to
either advise the Selling Parties that the Selling Parties' Disclosure Schedules
are acceptable or, if not, to provide comments thereon to the Selling Parties.
-19-
<PAGE>
If the Purchasing Parties do not so advise or provide comments to the Selling
Parties within such five (5) business day period, the Purchasing Parties shall
be deemed to have accepted the Selling Parties' Disclosure Schedules. With
respect to any disagreement over the Selling Parties' Disclosure Schedules, the
parties shall negotiate in good faith during the five (5) business day period
after the date of the Selling Parties' receipt of the Purchasing Parties'
comments to discuss such comments and to attempt to reach agreement concerning
the Selling Parties' Disclosure Schedules. If the parties are unable to reach
agreement, the Purchasing Parties shall have the right, in their sole
discretion, to terminate this Agreement at any time during such negotiation
period if the Selling Parties' Disclosure Schedules are not acceptable to the
Purchasing Parties. The Selling Parties agree that during the Purchasing
Parties' review of the Selling Parties' Disclosure Schedules, Purchaser may
elect not to assume certain of the contracts or other agreements that are listed
thereon.
6. Conditions Precedent to Purchasing Parties' Obligations. The
-------------------------------------------------------
obligation of the Purchasing Parties to consummate the acquisition of the
Purchased Assets and assumption of the Assumed Liabilities under this Agreement
is subject to the satisfaction on or prior to the Closing Date of the following
conditions, any of which may be waived in writing by the Purchasing Parties:
6.1 Regulatory Approvals. All Regulatory Approvals shall have been
--------------------
received in accordance with the provisions of Section 5.9.
-----------
6.2 Representations and Warranties on Closing Date. Except for changes
----------------------------------------------
between the date of this Agreement and the Closing Date permitted by this
Agreement or waived by the Purchasing Parties in writing, all representations
and warranties of the Selling Parties made in this Agreement or in any document
or certificate delivered by the Selling Parties to the Purchasing Parties
pursuant hereto shall be true and correct in all material respects (except for
representations and warranties that are qualified as to materiality, which shall
be true and correct in all respects) on and as of the Closing Date with the same
force and effect as though such representations and warranties were made on and
as of the Closing Date.
6.3 Terms, Covenants and Conditions. All the terms, covenants and
-------------------------------
conditions of this Agreement to be complied with and performed by the Selling
Parties on or prior to the Closing Date shall have been complied with and
performed in all material respects unless waived in writing by Purchaser.
6.4 No Material Adverse Change. On the Closing Date, there shall have
--------------------------
been no material adverse change in the business, prospects, operation or
condition (financial or otherwise) of the Business or in the Purchased Assets
since the Balance Sheet Date.
6.5 Absence of Litigation. No Action shall have been instituted before
---------------------
any court or governmental or regulatory body by any person (other than the
Purchasing Parties or any of their respective affiliates), or instituted or
threatened by any governmental or regulatory body, to restrain or modify, in
any respect that is materially adverse to Purchaser, the Business or the
Purchased Assets, to prevent the carrying out of the transactions contemplated
hereby, or to seek damages or a discovery order in connection with such
transactions, or that has or, if adversely determined, would
-20-
<PAGE>
reasonably be expected to have a materially adverse effect on the prospects,
operation or condition (financial or otherwise) of the Business or the Purchased
Assets.
6.6 Absence of Liens. At or prior to the Closing, the Purchasing
----------------
Parties shall have received a Uniform Commercial Code ("UCC") search report
issued by the Texas and Kentucky Secretaries of State and any applicable local
offices indicating that there are no filings under the UCC on file with such
Secretaries of State and such local offices that name LHS or Holdings as debtor
or otherwise indicating any lien or other encumbrance on the Purchased Assets
or, if any such liens or other encumbrances exist, such liens or other
encumbrances shall be extinguished and removed at the Closing.
6.7 Due Diligence. The Purchasing Parties shall have conducted a legal,
-------------
tax, accounting, regulatory and business due diligence investigation of the
Business, the results of which investigation shall be satisfactory to the
Purchasing Parties.
6.8 Closing Deliveries. The Selling Parties shall have delivered or
------------------
caused to be delivered to the Purchasing Parties at the Closing those items
specified in Section 8.1.
-----------
7. Conditions Precedent to the Selling Parties' Obligations. The
--------------------------------------------------------
obligation of the Selling Parties to consummate the sale of the Purchased Assets
and transfer of the Assumed Liabilities under this Agreement is subject to the
satisfaction on or prior to the Closing Date of the following conditions, any of
which may be waived in writing by the Selling Parties:
7.1 Representations and Warranties on Closing Date. Except for changes
----------------------------------------------
between the date of this Agreement and the Closing Date permitted by this
Agreement or waived by Seller in writing, all representations and warranties of
the Purchasing Parties made in this Agreement or in any document or certificate
delivered by the Purchasing Parties to the Selling Parties pursuant hereto shall
be true and correct in all material respects (except for representations and
warranties that are qualified as to materiality, which shall be true and correct
in all respects) on and as of the Closing Date with the same force and effect as
though such representations and warranties were made on and as of the Closing
Date.
7.2 Terms, Covenants and Conditions. All the terms, covenants and
-------------------------------
conditions of this Agreement to be complied with and performed by the Purchasing
Parties on or prior to the Closing Date shall have been complied with and
performed in all material respects unless waived in writing by Seller.
7.3 Absence of Litigation. No Action shall have been instituted before
---------------------
any court or governmental or regulatory body by any person (other than the
Selling Parties or any Related Party) or instituted or threatened by any
governmental or regulatory body, to prevent the carrying out of the transactions
contemplated hereby; provided, however, that this condition shall be deemed to
be waived by the Selling Parties if Purchaser agrees in writing to indemnify the
Selling Parties for any such Action in accordance with the terms of Section 11.
----------
-21-
<PAGE>
7.4 Closing Deliveries. The Purchasing Parties shall have delivered or
------------------
caused to be delivered to the Selling Parties at the Closing those items
specified in Section 8.2.
-----------
8. Deliveries at the Closings. The following deliveries shall be made at the
--------------------------
Closing, each of which shall be conditional upon completion of all the others
and all of which shall be deemed to have taken place simultaneously at the
Closing:
8.1 Selling Parties' Deliveries. At the Closing, the Selling Parties
---------------------------
shall deliver or cause to be delivered to the Purchasing Parties all of the
following:
(a) all conveyances, deeds, assignments, bills of sale, certificates
of title, powers of attorney (including those to collect accounts receivable)
and other appropriate conveyancing instruments transferring the Purchased Assets
to Purchaser, free and clear of any lien or other encumbrance;
(b) originals or copies of all Contracts or agreements constituting
Purchased Assets to the extent not previously provided to the Purchasing
Parties;
(c) a certificate executed by an executive officer of Seller and the
Shareholder confirming the matters set forth in Sections 6.2, 6.3 and 6.4;
--------------------------
(d) a certificate of the secretary of Seller attesting to (i) the
resolutions adopted by the board of directors of Seller duly authorizing the
execution, delivery and performance of this Agreement by Seller and the
execution and delivery by Seller of all instruments and documents contemplated
hereby, (ii) the signatures of the officers of Seller who have been authorized
to execute and deliver this Agreement and any other agreement executed or to be
executed in connection herewith and (iii) Seller's articles of incorporation and
bylaws (each of which shall be attached as exhibits to such certificate);
(e) a good standing certificate of Holdings from the Secretary of
State of Kentucky and a good standing certificate of each LHS and Nurses from
the Secretary of State of Texas;
(f) all required consents to the assignments of the Contracts that
constitute Purchased Assets (containing, with respect to the Real Property
Leases, appropriate estoppel representations in form and substance reasonably
satisfactory to the Purchasing Parties);
(g) the Employment Agreements duly executed by each Executive;
(h) the opinion of Craig L. Sparks, Esquire, counsel to the Selling
Parties, substantially in the form of Exhibit 8.1(h);
--------------
(i) releases, satisfaction pieces, and binding agreements, subject
only to receipt of payments to be made at the Closing, to deliver UCC
termination statements duly executed by each
-22-
<PAGE>
creditor of Seller releasing each of the liens or other encumbrances upon the
Purchased Assets, in form and substance satisfactory to the Purchasing Parties;
(j) detailed schedules listing all of the Inventory and Equipment to
be acquired by Purchaser as of the Closing Date;
(k) the amendments to LHS's and Nurses' articles of incorporation
required by any other agreement among the parties; and
(l) all such other documents and instruments as the Purchasing
Parties or their counsel may reasonably request in order to consummate the
transactions contemplated hereby.
8.2 Purchasing Parties' Deliveries. At the Closing, the Purchasing
------------------------------
Parties shall deliver or cause to be delivered to the Seller (or other
appropriate persons that may be specified below) all of the following:
(a) a written instrument of assumption providing for the assumption
of the Assumed Liabilities;
(b) the Closing Cash Payment (or any portion thereof to any other
person(s) in order to discharge any lien or other encumbrance on the Purchased
Assets);
(c) a certificate executed by an executive officer of the Purchasing
Parties confirming the matters set forth in Sections 7.1 and 7.2;
---------------------
(d) a certificate of the secretary of the Purchasing Parties
attesting to (i) the resolutions adopted by the board of directors of the
Purchasing Parties duly authorizing the execution, delivery and performance of
this Agreement by the Purchasing Parties and the execution and delivery by the
Purchasing Parties of all instruments and documents contemplated hereby, (ii)
the signatures of the officers of the Purchasing Parties who have been
authorized to execute and deliver this Agreement and any other agreement
executed or to be executed in connection herewith and (iii) the Purchasing
Parties' articles of incorporation and bylaws (each of which shall be attached
as exhibits to such certificate);
(e) a good standing certificate of HHCA from the Secretary of State
of Pennsylvania and a good standing certificate of Purchaser from the Secretary
of State of its jurisdiction of formation;
(f) the opinion of Kleinbard, Bell & Brecker, counsel to the
Purchasing Parties, substantially in the form of Exhibit 8.2(f); and
--------------
(g) the Employment Agreements duly executed by Purchaser.
-23-
<PAGE>
9. Miscellaneous.
-------------
9.1 Further Assurances. Each of the parties shall execute such
------------------
agreements and documents and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions to the Closing, including
the execution and delivery of any other agreement or document, the execution and
delivery of which are conditions precedent to the Closing.
9.2 Access to Records. From and after the Closing Date, Seller shall
-----------------
allow the Purchasing Parties, and their counsel, accountants and other
representatives, such access to Seller's records that after the Closing are in
the custody or control of Seller as the Purchasing Parties require in order to
comply with their obligations under law or under contracts constituting Assumed
Liabilities. From and after the Closing Date, the Purchasing Parties shall
allow Seller, and their counsel, accountants and other representatives, such
access to records that after the Closing are in the custody or control of the
Purchasing Parties as Seller requires in order to comply with its obligations
under law or under contracts constituting Excluded Liabilities.
9.3 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant, or any part of
any covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
9.4 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given when
received if delivered personally against receipt; when transmitted if
transmitted by facsimile, electronic or digital transmission method with
electronic confirmation; the next day if sent for next day delivery by a
nationally recognized overnight courier service; or upon receipt if sent by
certified, registered or express mail, return receipt requested, postage
prepaid. In each case notice shall be sent as follows:
(a) if to the Purchasing Parties, to:
Home Health Corporation of America, Inc.
2200 Renaissance Boulevard, Suite 300
King of Prussia, PA 19406-2755
Phone: (610) 272-1717
FAX: (610) 272-3131
Attention: Mr. Bruce J. Feldman, President
-24-
<PAGE>
with a required copy to:
Kleinbard Bell & Brecker
1900 Market Street, Suite 700
Philadelphia, PA 19103
Phone: (215) 568-2000
FAX: (215) 568-0140
Attention: Howard J. Davis, Esquire
(b) if to the Selling Parties, to:
LHS Holdings, Inc.
13400 U.S. Highway 42, Suite 290
Prospect, KY 40059
Phone: (502) 228-9698
FAX: (502) 228-7016
Attention: Mr. Mark H. O'Brien, President
with a required copy to:
Craig L. Sparks, Esquire
Four Market Centre
201 East Market Street, P.O. Box 768
Jeffersonville, IN 47131-0768
Phone: (812) 288-7732
FAX: (812) 288-7866
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9.5 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits) and the Indemnification Agreement together with the agreements,
certificates and other documents delivered hereunder or thereunder contain the
entire agreement between the parties with respect to the transactions described
herein, and supersede all prior agreements, written or oral, with respect
thereto.
9.6 Amendments and Waivers; Non-Contractual Remedies. This Agreement
------------------------------------------------
may be modified or amended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies herein provided are
-25-
<PAGE>
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
9.7 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania without regard to
principles of conflicts of law or any rule of interpretation or construction as
to which party drafted this Agreement, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity that is a
party to or the subject of this Agreement (as to those matters of law, the
jurisdiction under which the respective entity derives its powers shall govern).
9.8 Binding Effect; Assignment. Neither this Agreement nor any of the
--------------------------
rights or obligations hereunder may be assigned (including by operation of law)
by any party without the prior written consent of the other party, except that
the Purchasing Parties may, without such consent, assign any and all such rights
and obligations to any affiliate, provided that the Purchasing Parties shall
remain liable for the discharge of such obligations, and the Purchasing Parties
may, without such consent, assign any and all such rights and obligations to any
purchaser of the Purchased Assets. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.9 Joint and Several. Notwithstanding anything to the contrary herein
-----------------
contained or otherwise: (i) the obligations of the Selling Parties under this
Agreement shall be joint and several; and (ii) the obligations of the Purchasing
Parties under this Agreement shall be joint and several
9.10 Beneficiaries of Agreement. The representations, warranties,
--------------------------
covenants and agreements expressed in this Agreement are for the sole benefit of
the other party hereto and are not intended to benefit, and may not be relied
upon or enforced by, any other party as a third party beneficiary or otherwise.
9.11 Counterparts; Facsimile Signatures. This Agreement may be executed by
----------------------------------
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto. Facsimile signatures on this Agreement and any of the
agreements and documents executed in connection herewith shall be deemed
original signatures.
9.12 Exhibits and Schedules. The Exhibits and Schedules are a part of
----------------------
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.13 Holidays. Whenever this Agreement provides for a date, day or
--------
period of time on or prior to which actions or events are to occur or not occur,
and if such date, day or last day of such period of time falls on a Saturday,
Sunday, or legal holiday, then the same shall be deemed to fall on the
immediately following business day.
-26-
<PAGE>
9.14 Headings. The headings in this Agreement are for reference only,
--------
and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOME HEALTH CORPORATION OF AMERICA, INC.
By:
---------------------------------------------
Bruce J. Feldman, President
LHS HOLDINGS, INC.
By:
---------------------------------------------
Name:
Title:
LIBERTY HEALTH SERVICES, INC.
By:
---------------------------------------------
Name:
Title:
NURSES TODAY M/C, INC.
By:
---------------------------------------------
Name:
Title:
------------------------------------------------
Mark H. O'Brien, Individually
-27-
<PAGE>
Exhibit 2.5
================================================================================
ASSET ACQUISITION AGREEMENT
AMONG
HOME HEALTH CORPORATION OF AMERICA, INC.,
AND ITS NOMINEES,
PDN, INC.,
MEDICAL I.V., INC.,
AND
MARK H. O'BRIEN
December 4, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Certain Definitions; Purchase and Sale of Assets; Assumption of Certain Liabilities............1
-----------------------------------------------------------------------------------
1.1 Certain Definitions................................................................1
-------------------
1.2 Purchased Assets...................................................................2
----------------
1.3 Excluded Assets....................................................................3
---------------
1.4 Assumption of Certain Liabilities by Purchaser.....................................3
----------------------------------------------
1.5 Excluded Liabilities...............................................................4
--------------------
1.6 No Expansion of Third-Party Rights.................................................4
----------------------------------
1.7 Assets Owned by Related Parties....................................................5
-------------------------------
2. Acquisition Price and Closing..................................................................5
-----------------------------
2.1 Acquisition Price..................................................................5
-----------------
2.2 Manner of Payment..................................................................5
-----------------
2.3 The Closing........................................................................6
-----------
2.4 Closing Date Minimum Assets; Adjustment of Acquisition Price.......................6
------------------------------------------------------------
2.5 Determination of Preliminary Contingent Acquisition Price
---------------------------------------------------------
and Acquisition Price..............................................................7
---------------------
2.6 Closing Costs; Transfer Taxes & Fees...............................................8
------------------------------------
3. Representations and Warranties of the Selling Parties..........................................8
-----------------------------------------------------
3.1 Organizational Status..............................................................8
---------------------
3.2 Qualification......................................................................8
-------------
3.3 Authorization; No Conflict.........................................................9
--------------------------
3.4 Financial Statements of Seller; Undisclosed Liabilities............................9
-------------------------------------------------------
3.5 Compliance with Laws..............................................................10
--------------------
3.6 Permits...........................................................................10
-------
3.7 Litigation........................................................................10
----------
3.8 Real Property; Contracts..........................................................10
------------------------
3.9 [INTENTIONALLY DELETED]...........................................................11
-----------------------
3.10 Inventory.........................................................................11
---------
3.11 Consents..........................................................................11
--------
3.12 Intellectual Property Rights......................................................12
----------------------------
3.13 Equipment.........................................................................12
---------
3.14 Title; Sufficiency and Location of Assets.........................................12
-----------------------------------------
3.15 Certain Relationships.............................................................12
---------------------
3.16 Employee Benefit Plans............................................................12
----------------------
3.17 Employee and Independent Contractor Relations.....................................13
---------------------------------------------
3.18 Transactions with Related Parties.................................................13
---------------------------------
3.19 No Material Adverse Change; Absence of Certain Changes............................13
------------------------------------------------------
3.20 Books and Records.................................................................14
-----------------
3.21 Taxes.............................................................................14
-----
3.22 No Other Agreements to Sell the Assets............................................15
--------------------------------------
3.23 Environmental.....................................................................15
-------------
3.24 Solvency..........................................................................16
--------
3.25 Insurance.........................................................................16
---------
3.26 Non-Solicitation..................................................................16
----------------
3.27 Disclosure........................................................................16
----------
4. Representations and Warranties of Purchasing Parties..........................................17
----------------------------------------------------
4.1 Organizational Status.............................................................17
---------------------
4.2 Qualification.....................................................................17
-------------
4.3 Authorization; No Conflict........................................................17
--------------------------
4.4 Consents..........................................................................17
--------
4.5 Financial Statements of HHCA; Undisclosed Liabilities.............................18
-----------------------------------------------------
4.6 Litigation........................................................................18
----------
4.7 No Material Adverse Change........................................................18
--------------------------
4.8 Disclosure........................................................................18
----------
5. Covenants of the Parties......................................................................19
------------------------
5.1 Continuance of Business...........................................................19
-----------------------
5.2 Access to Information.............................................................19
---------------------
5.3 Governmental Permits and Approvals; Consents......................................20
--------------------------------------------
5.4 Maintenance of Permits............................................................20
----------------------
5.5 Employees; Employee Compensation..................................................20
--------------------------------
5.6 Accounts Receivable...............................................................20
-------------------
5.7 Title; Risk of Loss...............................................................20
-------------------
5.8 Regulatory Approvals..............................................................21
--------------------
5.9 Subordination Agreement...........................................................21
-----------------------
5.10 Refunding to Seller of Certain Prepaid Expenses...................................21
-----------------------------------------------
5.11 Disclosure Schedules..............................................................21
--------------------
5.12 The Purchasing Parties' Conduct of the Business
-----------------------------------------------
During Earn-out Period...........................................................21
----------------------
6. Conditions Precedent to Purchasing Parties' Obligations.......................................22
-------------------------------------------------------
6.1 Closing Under LHS/Holdings Acquisition Agreement..................................22
------------------------------------------------
6.2 Regulatory Approvals..............................................................22
--------------------
6.3 Absence of Litigation.............................................................22
---------------------
6.4 Absence of Liens..................................................................22
----------------
6.5 Due Diligence.....................................................................22
-------------
6.6 No Breach of Management Agreement.................................................22
---------------------------------
6.7 Closing Deliveries................................................................22
------------------
7. Conditions Precedent to the Selling Parties' Obligations......................................23
--------------------------------------------------------
7.1 Closing Under LHS/Holdings Acquisition Agreement..................................23
------------------------------------------------
7.2 Absence of Litigation.............................................................23
---------------------
7.3 Closing Deliveries................................................................23
------------------
8. Deliveries at the Closing.....................................................................23
-------------------------
8.1 Selling Parties' Deliveries.......................................................23
---------------------------
8.2 Purchasing Parties' Deliveries....................................................25
------------------------------
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
9. Miscellaneous...............................................................................................25
-------------
9.1 Further Assurances..............................................................................25
------------------
9.2 Access to Records...............................................................................25
-----------------
9.3 Severability....................................................................................26
------------
9.4 Notices.........................................................................................26
-------
9.5 Entire Agreement................................................................................27
----------------
9.6 Amendments and Waivers; Non-Contractual Remedies................................................27
------------------------------------------------
9.7 Governing Law...................................................................................27
-------------
9.8 Binding Effect; Assignment......................................................................28
--------------------------
9.9 Joint and Several...............................................................................28
-----------------
9.10 Beneficiaries of Agreement......................................................................28
--------------------------
9.11 Counterparts; Facsimile Signatures..............................................................28
----------------------------------
9.12 Exhibits and Schedules..........................................................................28
----------------------
9.13 Holidays........................................................................................28
--------
9.14 Headings........................................................................................29
--------
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
--------
2.2(c) Form of Note
2.2(d) Form of Subscription Agreement
5.9 Form of Subordination Agreement
8.1(g) Form of Opinion of Selling Parties' Counsel
8.2(i) Form of Opinion of Purchasing Parties' Counsel
SCHEDULES
---------
1.3 Excluded Assets
3.5(b) Medicare/Medicaid Compliance
3.6 Permits
3.7 Litigation
3.8(b) Real Property Leases
3.8(c) Personal Property Leases
3.8(d) Contracts
3.10 Inventory
3.11 Selling Party Consents
3.12 Intellectual Property Rights
3.13 Equipment
3.16 Employee Benefit Plans
3.17(b) Employment Agreements
3.17(c) Employees/Independent Contractors
3.18 Related Party Transactions
3.19 Certain Changes
3.21 Taxes
3.23 Environmental
3.25 Insurance
4.4 Purchasing Parties' Consents
5.10 Prepaid Expenses to be Refunded to Seller
<PAGE>
ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT ("Agreement") is made as of December 4,
1996, by and among HOME HEALTH CORPORATION OF AMERICA, INC., a Pennsylvania
corporation ("HHCA"), and its nominees ("Purchaser"), PDN, INC., a Texas
corporation ("PDN"), MEDICAL I.V., INC., a Texas corporation ("MIV" and together
with PDN, "Seller"), and MARK H. O'BRIEN, an individual and sole shareholder of
Seller ("Shareholder"). Purchaser and HHCA are sometimes collectively referred
to herein as the "Purchasing Parties". Seller and the Shareholder are sometimes
collectively referred to herein as the "Selling Parties".
Background. Seller is engaged in the business of providing Medicaid-
----------
reimbursed home nursing services, private duty home nursing services, infusion
services and related services in the home health care industry in Texas (the
"Business"). The Purchasing Parties and their affiliates are engaged in the
States of Pennsylvania, New Jersey, Delaware, Maryland and Florida in the
business of: (i) providing private duty or Medicare-reimbursable nursing and
related health care services and equipment to home-bound patients (including
without limitation bedside care and treatment, infusion therapy, pharmaceutical
and rehabilitative services); (ii) providing mobile diagnostic services; (iii)
selling durable medical equipment; and (iv) the providing of respiratory
services and related equipment. Seller desires to sell to Purchaser, and
Purchaser desires to acquire from Seller, all of the Purchased Assets (as
hereinafter defined) and Business in accordance with the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Background and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Certain Definitions; Purchase and Sale of Assets; Assumption of Certain
-----------------------------------------------------------------------
Liabilities.
- -----------
1.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
have the following meanings unless the context otherwise requires:
(a) "affiliate", with respect to any person, means any other person
controlling, controlled by or under common control with such person. For
purposes of this definition, the term "control" shall mean 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 capital
stock, by contract or otherwise.
(b) "business day" means any day other than a Saturday, Sunday,
legal holiday in the Commonwealth of Pennsylvania or other day of the year on
which banks are authorized or required by law to close.
(c) "EBITDA" means earnings or operating income of Seller or of the
Business before deduction of the following expenses: (i) interest; (ii) taxes;
(iii) depreciation; (iv) amortization; (v) home office cost allocations of the
Prospect, Kentucky office of LHS Holdings, Inc., a Kentucky corporation and
affiliate of Seller ("Holdings"), for periods prior to the Closing Date (as
hereinafter defined); (vi) any item of expense accruing after the LHS/Holdings
Closing Date (as hereinafter
<PAGE>
defined) treated as "extraordinary" pursuant to the application of GAAP (as
hereinafter defined); (vii) any amount paid to, or accrued for the benefit of,
David Parker in respect of his sale to the Seller of his interest in the
business of MIV; (viii) the cost of any audit of the financial statements of
Seller or of the Business, as the case may be that Purchaser requires to be
performed; (ix) home office cost allocations of HHCA's King of Prussia,
Pennsylvania office for periods after the Closing Date; (x) the amount of any
management fee to paid by Seller under the Management Agreement (as hereinafter
defined); and (xi) the costs and expenses associated with three (3) additional
salespeople to be employed by Seller.
(d) "governmental or regulatory body" means any government or
political subdivision thereof, whether federal, state, or local, or any agency
or instrumentality of any such government or political subdivision.
(e) "herein", "hereby", "hereunder", "hereof" or other equivalent
words refer to this Agreement and not solely to the particular section or
portion of this Agreement in which any such word is used.
(f) "includes", "including" or other equivalent words mean
"including, without limitation".
(g) "lien or other encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any stockholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(h) "person" means any individual, corporation, limited liability
company, partnership, limited liability partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
(i) "Related Party" means (A) any past or present affiliate of
Seller or (B) any director, officer, or partner of any affiliate of Seller, (C)
the Shareholder or (D) any relative or spouse of any such person or entity.
1.2 Purchased Assets. On the terms and subject to the conditions
----------------
contained in this Agreement, Seller agrees to sell, assign, transfer and deliver
to Purchaser, free and clear of all liens or other encumbrances, all assets,
properties and rights in existence, of whatever kind or nature, real, personal
or mixed, tangible and intangible, wherever situated and located, of Seller,
that are used or useful in, or accounted for as part of, the Business, whether
or not reflected on the books and records of Seller (collectively referred to
herein as the "Purchased Assets"), except for the Excluded Assets (as
hereinafter defined). The Purchased Assets include all of Seller's right, title
and interest in and to the following: (a) all inventory and supplies
(collectively, "Inventory"); (b) all furniture, fixtures, equipment and
machinery, durable medical equipment (whether or not used for demonstration
purposes), vehicles, computer hardware and software, improvements, parts and
other tangible personal property other than Inventory (collectively,
"Equipment"); (c) all those certain lots and pieces of ground together with the
buildings, structures and improvements erected thereon, and together with all
easements, rights and privileges appurtenant thereto (the "Owned Real
Property"); (d) all leasehold
-2-
<PAGE>
interests created by all leases of personal property (the "Personal Property
Leases") or real property (the "Real Property Leases") under which Seller is a
lessee or lessor; (e) all of Seller's interest in all buildings, structures and
improvements located on any real property subject to a Real Property Lease
("Leased Real Property"), together with Seller's interest in all fixtures,
equipment and leasehold improvements; (f) all prepaid expenses, advance
payments, deferred charges, rights of offset, deposits and claims for refunds,
credits and the like (collectively, "Prepaid Expenses"); (g) all licenses,
permits, franchises, registrations, approvals and operating rights to the extent
transferable under applicable law or with any required consent, including all
licenses, certificates of need, permits and authorizations, occupancy and other
permits and licenses used in connection with the Business (collectively,
"Permits"); (h) all intellectual property rights of Seller, including the right
to use computer software programs, patents and applications therefor, know-how,
trade secrets, business and marketing plans, copyrights and applications
therefor, trademarks, service marks, trade names and all logos, names and
slogans used by Seller in conjunction with the Business (collectively,
"Intellectual Property Rights"); (i) all rights of Seller under all contracts,
agreements and commitments (including employment agreements, independent
contractor agreements, provider and managed care agreements and contracts and
other agreements relating to the provision of home health care related services,
the Real Property Leases and the Personal Property Leases) (collectively, the
"Contracts"); (j) copies of all books and records, manuals, files and operating
data, as required by the Purchasing Parties (including payroll records, employee
benefits records, employee information, accounts payable records, inventory
records, maintenance records and asset history records, patient and provider
lists, referral source lists, credit reports, marketing and service records,
credit information, any financial information, any nurse registries, and
computer software and data in computer readable and/or machine readable form
used to maintain such books and records, together with the media on which such
software and data are stored and all documentation relating thereto)
(collectively, "Books and Records"); (k) all of Seller's claims, causes of
action, and rights of recovery arising out of, or relating to, events or
occurrences involving Seller prior to the Closing Date, whether asserted or
commenced before, on or after the Closing Date; (l) all telephone and facsimile
numbers used by Seller in connection with the Business; and (m) all other
assets, properties and rights of every kind and nature owned or held by Seller
on the Closing Date with respect to the ownership or operation of the Business
(including all associated goodwill), whether or not referred to specifically in
this Section 1.2.
-----------
1.3 Excluded Assets. The Purchased Assets shall exclude the following
---------------
(collectively, the "Excluded Assets"): (a) all cash and cash equivalents; (b)
all accounts receivable, billed and unbilled, generated in the conduct of the
Business prior to the Closing Date (collectively, "Accounts Receivable") and
records with respect thereto (provided that Purchaser shall be provided with
copies of all such records); (c) the minute books, stock record books and tax
returns of Seller; (d) the capital stock of PDN and MIV; (e) Seller's rights
under this Agreement; and (f) those assets set forth on Schedule 1.3.
------------
1.4 Assumption of Certain Liabilities by Purchaser. In partial
----------------------------------------------
consideration of the sale of the Purchased Assets hereunder, on the Closing
Date, Purchaser shall assume and agree to discharge and perform those
liabilities and obligations accruing on and after the Closing Date solely under
the executory portion of any Contract to which Seller is a party that is listed
on Schedules 3.8(b), 3.8(c) or 3.8(d) and is a Purchased Asset (collectively,
----------------------------------
the "Assumed Liabilities").
-3-
<PAGE>
1.5 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser
--------------------
does not and shall not assume or in any way undertake to pay, perform, satisfy
or discharge any liabilities or obligations of Seller, and Seller agrees to pay
and satisfy when due any such liabilities and obligations not expressly assumed
by Purchaser (except where such liabilities or obligations are being contested
in good faith by Seller), including the following liabilities and obligations
(whether asserted before, on or after the Closing Date) (the "Excluded
Liabilities"): (a) Seller's third party accounts payable and accrued expenses
("Accounts Payable and Accrued Expenses"); (b) any obligations of Seller to any
Related Party other than leases or contracts with a Related Party set forth on
Schedules 3.8(b), 3.8(c) or 3.8(d) (unless it is noted on any such schedule that
- ----------------------------------
Purchaser is not assuming any such contract); (c) subject to any other agreement
among the parties, any liabilities for legal, accounting and other professional
fees and expenses incurred by Seller in connection with the preparation of,
negotiation of, and performance under, this Agreement; (d) any liabilities for
taxes of any nature; (e) any liabilities to pay severance benefits, if any, to
employees of Seller accrued prior to the Closing Date or whose employment is
terminated by Seller in connection with this Agreement; (f) any liabilities
arising out of claims, suits or proceedings arising out of events or conditions
existing prior to the Closing Date as a result of any environmental pollution or
any noncompliance with any federal, state or local statute, ordinance or
promulgated rule or regulation, any judicial or administrative order or
judgment, any duties imposed by common law and any provision or condition of any
permit, license or other operating authorization ("Environmental Laws") relating
to (i) the protection of the environment or the public welfare from actual or
potential exposure (or the effects of exposure) to any actual or potential
release, discharge, disposal or emission (whether past or present) of any
Regulated Substance (as hereinafter defined) or (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling or any Regulated Substance; as used herein, the term "Regulated
Substance" shall mean any substance that is identified (by listing or
characteristic) and regulated (or the clean-up of which can be required) by any
Environmental Law; (g) any liability for deferred compensation, commissions or
fees payable to employees or consultants or independent contractors of the
Business and attributable to services provided to Seller prior to the Closing
Date, and any liabilities under any Employee Benefit Plan (as hereinafter
defined); (h) any liabilities of Seller as a borrower, co-borrower or guarantor
under any loan agreements or other credit facilities; (i) any liability in
respect of claims or litigation (whether asserted or commenced before, on or
after the Closing Date) arising out of or relating to the conduct of the
Business prior to the Closing Date; (j) any liabilities under insurance
policies, permits, licenses and governmental orders, directives and agreements;
(k) any liabilities for (i) medical, dental, disability income, life insurance,
accidental death benefits, whether insured or self-insured, for claims incurred
or for disabilities occurring prior to the Closing Date, or (ii) workers'
compensation (both long-term and short-term) benefits, whether insured or self-
insured, to the extent accruing or based upon exposure to conditions prior to
the Closing Date, or for claims incurred or for disabilities occurring prior to
the Closing Date, which liabilities described in (k)(i) or (k)(ii) above arise
by virtue of an employment, consulting or other similar relationship at any time
with Seller; and (l) without limitation by the specific enumeration of the
foregoing, all liabilities of Seller not expressly assumed by Purchaser pursuant
to the provisions of Section 1.4.
-----------
1.6 No Expansion of Third-Party Rights. The assumption by Purchaser of
----------------------------------
the Assumed Liabilities shall in no way expand the rights or remedies of any
third party against Purchaser as compared to the rights and remedies that such
third party would have had against Seller had Purchaser
-4-
<PAGE>
not assumed the Assumed Liabilities. Without limiting the generality of the
preceding sentence, the assumption by Purchaser of the Assumed Liabilities shall
not create any third-party beneficiary rights.
1.7 Assets Owned by Related Parties. If any Related Party owns any assets
-------------------------------
that are used or were used within the last year in the operation of the Business
and such assets are not reflected on Schedules 3.8(b), 3.8(c) or 3.8(d), or
----------------------------------
necessary to allow Purchaser to continue to operate the Business as it is
presently operated, Seller shall cause such Related Party to transfer any such
assets not reflected on Schedules 3.8(b), 3.8(c) or 3.8(d) to Seller prior to
----------------------------------
the Closing Date (at no cost to Purchaser), and such assets shall become
Purchased Assets. To the extent that Seller or any Related Party owns any
assets that are useful to the Business, but which do not constitute Purchased
Assets, Seller shall, if requested by Purchaser, grant (or, with respect of any
Related Party, cause any such Related Party to grant) Purchaser an irrevocable,
nonexclusive, perpetual, paid-up, royalty-free, transferable license to utilize
such assets in connection with the operation of the Business after the Closing
Date.
2. Acquisition Price and Closing.
-----------------------------
2.1 Acquisition Price. The aggregate acquisition price for the
-----------------
Purchased Assets shall be an aggregate amount equal to: (i) Four Million Six
Hundred Thousand Dollars ($4,600,000); plus (ii) the product derived by
multiplying 4.5 by the EBITDA of the Business for the twelve (12) month period
ended December 31, 1997 as shown on an EBITDA statement of the Business for such
period prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), plus assumption of the Assumed Liabilities (the
"Acquisition Price").
2.2 Manner of Payment. Subject to adjustment as provided in Sections
----------------- --------
2.4 and 2.5:
- -----------
(a) At the Closing, Purchaser shall assume the Assumed Liabilities
by written instrument of assumption;
(b) At the Closing, Purchaser shall pay to Seller an aggregate
amount (the "Closing Cash Payment") equal to: (i) Three Million One Hundred
Thousand Dollars ($3,100,000); plus (ii) 66-2/3% of the Preliminary Contingent
Acquisition Price (as hereinafter defined);
(c) At the Closing, Purchaser and HHCA shall issue to Seller a
subordinated Promissory Note in the original principal amount of: (i) One
Million Dollars ($1,000,000); plus (ii) 13-1/3% of the Preliminary Contingent
Acquisition Price, substantially in the form of Exhibit 2.2(c) (the "Note");
--------------
(d) At the Closing, Purchaser shall deliver to Seller unregistered
shares of common stock of HHCA having an aggregate value equal to: (i) Five
Hundred Thousand Dollars ($500,000); plus (ii) 20% of the Preliminary Contingent
Acquisition Price (the "Shares") based upon the arithmetic average of the last
transaction price quoted by the NASDAQ System on the ten (10) trading days
ending two (2) business days immediately prior to the Closing Date, which Shares
will be subject to the terms of a Subscription Agreement (the "Subscription
Agreement") among the Selling Parties and HHCA substantially in the form of
Exhibit 2.2(d);
- --------------
-5-
<PAGE>
(e) On March 31, 1998, Purchaser shall pay to Seller an aggregate
amount equal to 50% of the difference derived by subtracting: (A) the sum of the
Preliminary Contingent Acquisition Price and $4,600,000; from (B) the
Acquisition Price (provided that such difference is a positive number); and
(f) On June 30, 1998, Purchaser shall pay to Seller an aggregate
amount equal to 50% of the difference derived by subtracting: (A) the sum of the
Preliminary Contingent Acquisition Price and $4,600,000; from (B) the
Acquisition Price (provided that such difference is a positive number).
As used herein, the term, "Preliminary Contingent Acquisition Price" means the
product derived by multiplying 4.5 by the EBITDA of Seller for the twelve (12)
month period ended on the last day of the calendar month that is not more than
two months prior to the Closing Date as shown on an EBITDA statement of Seller
for such period (the "Preliminary EBITDA Statement") prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP") (e.g., if
the Closing occurs in April 1997, the Preliminary EBITDA Statement for purposes
of calculating the Preliminary Contingent Acquisition Price shall be for the 12-
month period ended February 28, 1997).
2.3 The Closing. Unless this Agreement shall have been earlier terminated
-----------
in accordance with the terms of any other agreement among the parties, the
transactions contemplated by this Agreement shall be consummated (the "Closing")
at the offices of Kleinbard, Bell & Brecker, 1900 Market Street, Suite 700,
Philadelphia, Pennsylvania 19103, not earlier than the later to occur of (i)
April 2, 1997 and (ii) the fifth (5th) business day after Purchaser provides
written notice to Seller that the Regulatory Approvals (as hereinafter defined)
relating to the transfer of the Purchased Assets have been received in
accordance with the terms of Section 5.9 (the "Approval Date"); provided,
----------- --------
however, that in no event shall Closing occur after the later of the Approval
- -------
Date and June 30, 1997. The date on which the Closing shall occur is referred to
in this Agreement as the "Closing Date". The Closing shall be deemed to have
occurred as of 12:01 a.m. on the Closing Date.
2.4 Closing Date Minimum Assets; Adjustment of Acquisition Price.
------------------------------------------------------------
(a) The portion of the Acquisition Price to be paid at Closing shall
be decreased to the extent (the "Minimum Assets Deficiency") that the "Closing
Date Minimum Assets" (as hereinafter defined) of Seller (as reflected on the
Closing Date Balance Sheet (as hereinafter defined)) is less than $75,000 (the
"Required Closing Date Minimum Assets"). The term "Closing Date Minimum Assets"
shall mean the aggregate value (determined in accordance with GAAP) of Seller's:
(1) Inventory meeting the standards set forth in Section 3.10, plus (2)
------------
Equipment (net of accumulated depreciation) meeting the standards set forth in
Section 3.13, plus (3) Prepaid Expenses (but only to the extent that Purchaser
- ------------
is: (i) able to utilize and receive the benefits thereof after the Closing and
(ii) not required to refund them pursuant to Section 5.10).
------------
(b) At least two (2) business days prior to the Closing, Seller will
deliver to Purchaser a good faith estimate of the Minimum Assets Deficiency, if
any (the "Estimated Minimum Assets Deficiency"), such estimate to be deducted
from the portion of the Acquisition Price to be paid at the Closing.
-6-
<PAGE>
(c) As promptly as practicable (but in no event later than ninety
(90) calendar days after the Closing Date), Purchaser shall deliver to Seller
(i) a balance sheet of Seller dated as of the opening of business on the Closing
Date (the "Closing Date Balance Sheet") prepared in accordance with GAAP and
consistent with Seller's past practices and (ii) an accompanying closing
statement (the "Closing Statement") reasonably detailing Purchaser's
determination of the Minimum Assets Deficiency, if any, and Purchaser's
allocation of the Acquisition Price among the Purchased Assets. Seller must,
within five (5) business days after Seller's receipt of the Closing Date Balance
Sheet and Closing Statement, give written notice (the "Notice") to Purchaser
specifying in reasonable detail Seller's objections, if any, with respect
thereto or Purchaser's determination of the Closing Date Balance Sheet, the
Minimum Assets Deficiency, if any, and the Acquisition Price allocation shall be
final, binding and conclusive on the parties. With respect to any disputed
amounts, the parties shall meet in person and negotiate in good faith during the
five (5) business day period (the "Resolution Period") after the date of
Purchaser's receipt of the Notice to resolve any such disputes. If the parties
are unable to resolve all such disputes within the Resolution Period, then
within five (5) business days after the expiration of the Resolution Period, all
disputes shall be submitted to Ernst & Young, L.L.P. or any other nationally-
recognized accounting firm mutually acceptable to the parties (the "Independent
Accountant") who shall be engaged to provide a final and conclusive resolution
of all unresolved disputes within twenty (20) business days after such
engagement. The determination of the Independent Accountant shall be final,
binding and conclusive on the parties hereto, and the fees and expenses of the
Independent Accountant shall be borne by the party that the Independent
Accountant determines is the non-prevailing party.
(d) If the Minimum Assets Deficiency, if any, is greater than the
Estimated Minimum Assets Deficiency, Seller shall pay such shortfall (together
with interest at the rate of eight percent (8%) from the Closing Date) to
Purchaser within five (5) days after its final determination pursuant to this
Section 2.4. Seller and Purchaser agree not to assert, in connection with any
- -----------
tax return, tax audit or similar proceeding, any allocation of the Acquisition
Price that differs from that determined pursuant to this section.
2.5 Determination of Preliminary Contingent Acquisition Price and
-------------------------------------------------------------
Acquisition Price.
- -----------------
(a) At least fifteen (15) business days prior to the Closing Date,
Seller shall deliver to Purchaser the Preliminary EBITDA Statement and an
accompanying statement (the "Preliminary Contingent Acquisition Price
Calculation Statement") reasonably detailing Seller's determination of the
Preliminary Contingent Acquisition Price. Purchaser must, within five (5)
business days after Purchaser's receipt of the Preliminary EBITDA Statement and
Preliminary Contingent Acquisition Price Calculation Statement, give written
notice (the "Pre-Closing Notice") to Seller specifying in reasonable detail
Purchaser's objections, if any, with respect thereto or Seller's determination
of the Preliminary Contingent Acquisition Price shall be final, binding and
conclusive on the parties. With respect to any disputed amounts, the parties
shall meet in person and negotiate in good faith during the five (5) business
day period (the "Pre-Closing Resolution Period") after the date of Seller's
receipt of the Pre-Closing Notice to resolve any such disputes. If the parties
are unable to resolve all such disputes within the Pre-Closing Resolution
Period, then within five (5) business days after the expiration of the Pre-
Closing Resolution Period, all disputes shall be submitted to the Independent
-7-
<PAGE>
Accountant who shall be engaged to provide a final and conclusive resolution of
all unresolved disputes within twenty (20) business days after such engagement.
The determination of the Independent Accountant shall be final, binding and
conclusive on the parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party that the Independent Accountant
determines is the non-prevailing party.
(b) As promptly as practicable after December 31, 1997 (but in no
event later than March 31, 1998), Purchaser shall deliver to Seller (i) an
audited EBITDA Statement with respect to the Business for the twelve (12) month
period ended December 31, 1997 (the "Final EBITDA Statement") and (ii) an
accompanying statement (the "Post-Closing Statement") reasonably detailing
Purchaser's determination of the Acquisition Price. The cost of preparing the
Final EBITDA Statement and the Post-Closing Statement shall be borne by the
Purchaser. Seller must, within five (5) business days after Seller's receipt of
the Final EBITDA Statement and Post-Closing Statement, give written notice (the
"Post-Closing Notice") to Purchaser specifying in reasonable detail Seller's
objections, if any, with respect thereto or Purchaser's determination of the
Final EBITDA Statement, and the Acquisition Price shall be final, binding and
conclusive on the parties. With respect to any disputed amounts, the parties
shall meet in person and negotiate in good faith during the five (5) business
day period (the "Post-Closing Resolution Period") after the date of Purchaser's
receipt of the Post-Closing Notice to resolve any such disputes. If the parties
are unable to resolve all such disputes within the Post-Closing Resolution
Period, then within five (5) business days after the expiration of the Post-
Closing Resolution Period, all disputes shall be submitted to the Independent
Accountant who shall be engaged to provide a final and conclusive resolution of
all unresolved disputes within twenty (20) business days after such engagement.
The determination of the Independent Accountant shall be final, binding and
conclusive on the parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party that the Independent Accountant
determines is the non-prevailing party.
2.6 Closing Costs; Transfer Taxes and Fees. Seller and Purchaser shall
--------------------------------------
each pay one-half of the amount of any documentary and transfer taxes and any
sales, use, incremental franchise or other taxes imposed by the transfers of
Purchased Assets and any deficiency, interest or penalty asserted with respect
thereto. Purchaser shall pay: (i) any fees and costs of recording or filing all
applicable conveyancing instruments described in Sections 8.1(a), and (ii) all
---------------
application and filing costs of applying for new Permits and obtaining the
transfer of existing Permits that may be lawfully transferred.
3. Representations and Warranties of the Selling Parties. Each of the Selling
-----------------------------------------------------
Parties represents and warrants to Purchaser as follows:
3.1 Organizational Status. Each of PDN and MIV is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of the State of
Texas. Each of PDN and MIV has all requisite power and authority to own, lease
and operate its assets, properties, and the Business, and to carry on the
Business as now being and as heretofore conducted.
3.2 Qualification. Each of PDN and MIV is duly qualified to do business
-------------
and is in good standing in all states or jurisdictions in which the nature of
the Business as presently operated by it or
-8-
<PAGE>
the character of the property owned or leased by it with respect to the Business
makes such qualification or authorization necessary, unless the failure to do so
would not have a material adverse effect on the Business or the Purchased
Assets.
3.3 Authorization; No Conflict.
--------------------------
(a) Seller has the full legal right and all power and authority
required to enter into, execute and deliver this Agreement and the documents and
other agreements required to be executed and delivered hereunder and to perform
fully its obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by the Selling Parties and constitutes, and each of the
other agreements and documents to be delivered by the Selling Parties hereunder
when executed and delivered by the Selling Parties will constitute, the valid
and binding obligation of the Selling Parties, enforceable in accordance with
their respective terms.
(b) The execution, delivery and performance of this Agreement by the
Selling Parties and the documents and other agreements to be delivered hereunder
by the Selling Parties and the consummation of the transactions contemplated
hereby and thereby by the Selling Parties will not (i) violate any provision of
the articles of incorporation or bylaws of PDN or MIV, (ii) violate, conflict
with or result in the breach of any of the terms of, result in a material
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any contract or other agreement to which any of the
Selling Parties is a party or by or to which they or any of their respective
assets or properties may be bound or subject, (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body by which any of the Selling Parties, or the assets, properties
or Business of Seller is bound, (iv) violate any statute, law or regulation, or
(v) violate or cause any revocation of or limitation on any Permit (A) that is
necessary to the lawful conduct of the Business or (B) the violation, revocation
or limitation of which could reasonably be expected to have a material adverse
effect on the Purchased Assets or the Business.
3.4 Financial Statements of Seller; Undisclosed Liabilities.
-------------------------------------------------------
(a) Seller has delivered to Purchaser copies of Seller's audited
annual balance sheet and income statement as of December 31, 1995 and unaudited
interim balance sheet and income statement as of June 30, 1996 (collectively,
the "Financial Statements"). As used herein, the term "Balance Sheet Date" shall
mean June 30, 1996. The Financial Statements (i) fairly present the financial
condition, assets and liabilities of Seller as of their respective dates and the
results of operations for the periods then ended, (ii) were prepared in
accordance with GAAP, and (iii) were prepared from the books and records of
Seller.
(b) Seller does not have any liabilities or obligations except (i)
liabilities reflected and reserved against in the balance sheet as of the
Balance Sheet Date that have not been paid or discharged since the date thereof,
and (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business and consistent with past practice and none of which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on the Business or the Purchased Assets.
-9-
<PAGE>
3.5 Compliance with Laws.
--------------------
(a) Seller is in, and has operated in, compliance with all
applicable federal (including 42 U.S.C. (S) 1320a-7b(b) et seq. and 42 U.S.C.
-- ---
(S) 1 395nn et seq.), state and local laws, regulations and ordinances
-- ---
(including those relating to reimbursement, reporting requirements,
certification standards, limitations on ownership and other financial
relationships between a provider and its referral sources, pharmaceuticals,
medical devices, and the provision of medical and related services) and any
applicable requirements of any governmental or regulatory body, court or
arbitrator affecting the Business or the Purchased Assets.
(b) Seller is certified for participation in, and is a party to
valid provider agreements for payment by, federal Medicare and Texas Medicaid
programs (the "Programs"). Except as set forth on Schedule 3.5(b): (i) all of
---------------
the cost reports of Seller, if any, including Seller's home office cost reports
for the Programs for their last three (3) fiscal years, have been filed when due
and were prepared in all material respects in accordance with all applicable
laws, regulations and principles governing reimbursement under the Programs;
(ii) there are no pending appeals, judgments, challenges, audits, litigation or
notices with respect to the Programs; and (iii) Seller has not, directly or
indirectly, offered, paid, solicited or received any remuneration in return for
the referral of products or services in violation of the Programs, any federal
or state laws and regulations promulgated thereunder, or any requirements
imposed by third-party payors.
3.6 Permits. Schedule 3.6 sets forth all of the Permits necessary to
------- ------------
operate the Business as now operated, and such Permits are validly issued in the
name of Seller. Such Permits are in full force and effect, are unimpaired by
any acts or omissions of Seller, are valid for the balance of the current
license term, if any, applicable generally to each such Permit, are
transferrable by Seller to Purchaser with such consents of third parties as are
set forth in Schedule 3.11, if permitted under applicable law and regulations,
-------------
and are sufficient in all material respects to permit the continued lawful
operation of the Business by Purchaser.
3.7 Litigation. Except as set forth on Schedule 3.7, there is no
---------- ------------
action, suit, claim, arbitration, investigation or other legal or administrative
proceeding or audit or claim by any insurance company or managed care
organization (collectively, "Actions") pending or, to the Selling Parties'
knowledge, threatened against Seller, any of the Purchased Assets, or any
employee of Seller; nor, to their knowledge, are there any facts upon which any
such Action may reasonably be expected to be based. There is not outstanding
any order, writ, injunction, decree, or judgment of any court, governmental or
regulatory body or arbitration tribunal applicable to Seller, the Business or
the Purchased Assets.
3.8 Real Property; Contracts.
------------------------
(a) Seller has no Owned Real Property.
(b) Schedule 3.8(b) sets forth a list of the Real Property Leases.
---------------
(c) Schedule 3.8 (c) sets forth a list of all of the Personal
----------------
Property Leases.
-10-
<PAGE>
(d) Schedule 3.8(d) sets forth a list of all of the following
---------------
Contracts (written or oral) relating to the Business to which Seller is a party
or by or to which Seller is or the Purchased Assets are bound or subject: (i)
contracts and other agreements for the sale of any of the assets or properties
of the Business (except for the sale of inventory in the ordinary course of
business) or for the grant to any person of any preferential rights to purchase
any of the assets or properties relating to the Business; (ii) contracts and
other agreements containing covenants of Seller not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with Seller in any line of business or in any geographical
area; (iii) contracts and other agreements (including options) relating to the
acquisition by Seller of any operating business or the capital stock of or other
interest in any other person; (iv) contracts (including options) for the
purchase of any asset, tangible or intangible; (v) contracts and other
agreements requiring the payment to any person of a royalty, override or similar
commission or fee; (vi) contracts and other agreements relating to the borrowing
of money; (vii) contracts and other agreements for the employment, or
restricting the employment, of any salaried employee of Seller, or for the
engagement of independent contractors by Seller; (viii) third-party payor
agreements (including provider agreements for the Programs), managed care
agreements, and agreements relating to the provision of health care, nursing,
pharmaceuticals, goods and services; (ix) all insurance policies or binders of
insurance that relate to the Business (including malpractice insurance); and (x)
any other material contract or other agreement whether or not made in the
ordinary course of business.
(e) There have been delivered to Purchaser true and complete copies
of all of the Contracts (including the Real Property Leases and the Personal
Property Leases). All of the Contracts are valid, in full force and effect and
binding upon Seller, and to Seller's knowledge, the other parties thereto,
enforceable in accordance with their respective terms; and Seller has satisfied
in full or provided for all liabilities and obligations thereunder through the
date hereof, is not in material default under any of them, nor, to Seller's
knowledge, does any condition exist that, with notice or lapse of time or both,
would constitute such a default. To Seller's knowledge, no other party to any
Contract is in default thereunder, nor, to Seller's knowledge, does any
condition exist that, with notice or lapse of time or both, would constitute
such a default.
3.9 [INTENTIONALLY DELETED.]
---------------------
3.10 Inventory. The Inventory was purchased in the ordinary course of
---------
business and consists only of new and complete items of Inventory (i.e., all
component parts are included). All Inventory that is obsolete, discontinued or
of below standard quality was discounted in value to net realizable value on
such Schedule. None of the Inventory is unusable or not saleable in the lawful
and ordinary course of business because of legal restrictions, failure to meet
specifications, damage, physical deterioration or for any other cause. Set
forth on Schedule 3.10 is a detailed list of the Inventory on the date hereof.
-------------
3.11 Consents. Except for the consent of such third parties as are
--------
separately identified on Schedule 3.11, no approval, consent or authorization
-------------
of, or registration or filing with any person is required in connection with the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby (including with respect to any Permit,
Intellectual Property Right, or any Contract).
-11-
<PAGE>
3.12 Intellectual Property Rights. All Intellectual Property Rights are
----------------------------
listed and described on Schedule 3.12 and are valid, uncontested and in good
-------------
standing subject to no liens or other encumbrances, and, to Seller's knowledge,
Seller owns or possesses adequate and enforceable rights to use all of the
foregoing with no conflict with or infringement by Seller of the asserted rights
of others. To Seller's knowledge, there is no infringement by any party
whatsoever of any of such Intellectual Property Rights and no event has occurred
that constitutes, or with notice or lapse of time or both that may constitute, a
default by Seller or any other party of any of the Intellectual Property Rights.
Seller possesses and will convey to Purchaser all rights, licenses or other
authority to use all Intellectual Property Rights without payment of any
royalties or other consideration. Seller uses no trade names other than "PDN"
and "Medical I.V.".
3.13 Equipment. To Seller's knowledge, the Equipment was purchased in
---------
bona fide third party transactions for fair market value, is in good operating
condition and repair, useable for the purposes for which it is intended,
reasonable wear and tear excepted, and is in compliance with all manufacturers'
specifications and industry standards and regulations. Seller has maintained
the Equipment in accordance with all warranties provided by the vendors or
manufacturers thereof. All leases, conditional sales contracts, franchises or
licenses pursuant to which Seller may hold or use any interest owned or claimed
by Seller (including options) in or to Equipment are in full force and effect
and, to Seller's knowledge, there is no default or event that, with notice or
lapse of time or both, would constitute such a default. Set forth on Schedule
--------
3.13 is a detailed list of the Equipment on the date hereof. Schedule 3.13 also
- ---- -------------
lists all motor vehicles and other Equipment for which a certificate of title or
origin is required in order to transfer title from Seller to Purchaser.
3.14 Title; Sufficiency and Location of Assets. Seller has good and
-----------------------------------------
marketable title to all of the Purchased Assets and each of PDN and MIV will at
the Closing convey to Purchaser good and marketable title to all of the
Purchased Assets, in each case free and clear of any lien or other encumbrance.
The Purchased Assets constitute all of the assets and properties used or held
for use in the Business, except for the Excluded Assets. All of Seller's assets
are located within the State of Texas.
3.15 Certain Relationships. Seller has no knowledge that any referral
---------------------
source, material supplier of the Business or party to an agreement (including
any third-party payor agreement) with Seller intends to cancel or otherwise
modify its relationship with Seller or the Business or to decrease materially or
limit its referrals, purchases, services, supplies or materials from or to
Seller or the Business.
3.16 Employee Benefit Plans.
----------------------
(a) Schedule 3.16 contains a true and complete list of any pension,
-------------
profit sharing, deferred compensation, commission, incentive compensation,
bonus, vacation, severance, disability, hospitalization, medical insurance or
other employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or program that
Seller maintains or to which Seller has any present or future obligation to
contribute (the "Employee Benefit Plans"). Seller has delivered to Purchaser
true and complete copies of all documents relating to the
-12-
<PAGE>
Employee Benefit Plans, including annual reports on Form 5500 and actuarial and
valuation reports. Seller does not have any contract or understanding, whether
legally binding or not, to create any additional Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan described on
Schedule 3.16, (i) Seller has made all payments required to be made by it, and
- -------------
(ii) Seller has operated and currently operates such plans in compliance with
the plan documents and, to the extent applicable, ERISA and the Code.
(c) Seller does not maintain or contribute to any employee pension
benefit plan as defined in Section 3(2) of ERISA. Neither Seller nor any
affiliate are (nor were any of their respective predecessors) obligated to
contribute to any multi-employer plan as defined in Section 3(37) of ERISA in
which any employee of the Business is a participant. Neither Seller nor any
affiliate have ever (nor had any of their respective predecessors) completely or
partially withdrawn (within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980) from any multi-employer plan.
3.17 Employee and Independent Contractor Relations.
---------------------------------------------
(a) Seller has not experienced any attempt by organized labor or its
representatives to make Seller conform to the demands of organized labor
relating to employees or to enter into a binding agreement with organized labor
that would cover the employees of Seller. Seller has not at any time during the
last three (3) years had, nor, to Seller's knowledge, is there now threatened,
(i) a strike, picket, work stoppage or work slowdown relating to the Business or
(ii) any unfair labor practice complaint against Seller before the National
Labor Relations Board.
(b) Except as set forth on Schedule 3.17(b), there are no
----------------
agreements, arrangements or understandings that would restrict the ability of
Seller to terminate the employment of any or all of Seller's employees for any
lawful reason or for no reason at all, without penalty or liability.
(c) Set forth on Schedule 3.17(c) is (i) the name, past twelve
----------------
months' salary and most recent bonus of each salaried employee of Seller and
(ii) the name and past twelve months' remuneration of each independent
contractor of Seller.
3.18 Transactions with Related Parties. Except as set forth on Schedule
--------------------------------- --------
3.18, no Related Party has (i) borrowed money from or loaned money to Seller
- ----
that remains outstanding, (ii) any contractual or other claims, express or
implied, of any kind whatsoever against Seller, (iii) any interest in any
property or assets used by or useful to Seller or the Business except as
reflected on Schedules 3.8(b), 3.8(c) or 3.8(d), or (iv) been a director,
----------------------------------
officer, or employee of, or had any direct or indirect interest in, any entity
that has done business with Seller or the Business.
3.19 No Material Adverse Change; Absence of Certain Changes.
------------------------------------------------------
(a) Since the Balance Sheet Date, there has been no material adverse
change in the business, operations, condition (financial or otherwise), or
prospects of the Business or in the Purchased Assets, and, to the knowledge of
Seller, no such change is threatened. Since the Balance
-13-
<PAGE>
Sheet Date, Seller has conducted the Business only in the ordinary course and
there has been no damage, destruction or loss materially adversely affecting the
business, prospects, operations or condition (financial or otherwise) of the
Business or the Purchased Assets, whether or not covered by insurance. Since
such date, there has been no loss or interruption in the use of any material
Permit.
(b) Since the Balance Sheet Date, except as set forth in
Schedule 3.19, Seller has not: (i) mortgaged, pledged or subjected to any lien
- -------------
or other encumbrance any of the Purchased Assets except in the ordinary course
of business; (ii) acquired or disposed of any Purchased Assets or properties
except in the ordinary course of business; (iii) forgiven or canceled any debts
or waived any rights arising under or in connection with any of the Purchased
Assets; (iv) adopted, canceled, terminated or amended any material agreement
(including any third-party payor agreement); (v) incurred or assumed any debt,
obligation or liability except in the ordinary course of business; (vi) made any
wage or salary increase or bonus, or increase in any other direct or any
indirect compensation or any severance or termination pay, for or to any
employees, consultants, agents or other representatives, or any accrual for or
commitment or agreement to make or pay the same, except for annual increases in
compensation of employees made in the ordinary course consistent with past
practices; (vii) entered into any agreement with any labor union or association
representing any employee or adopted, entered into or amended any employee
benefit plan except as necessary to comply with ERISA or other applicable legal
requirements; (viii) entered into any lease that requires or involves annual
lease payments of $2,500 or more; (ix) except for inventory or equipment
acquired in the ordinary course of business, made any acquisition of all or any
part of the assets, properties, capital stock or business of any other person;
(x) entered into any merger, consolidations, recapitalization or other business
combination or reorganization; (xi) made any loans, advances or capital
contributions to or investments in any person; (xii) done anything to affect
adversely the relationship of Seller with patients, independent contractors,
clients, customers, providers, referral sources, third-party payors or any
material suppliers or with any governmental or regulatory body; (xiii) made any
change in any method of accounting practice; (xiv) made any payment or
distribution on account of capital stock; or (xv) entered into any other
contract or other agreement or other transaction respecting the Business or the
Purchased Assets other than in the ordinary course of business consistent with
past practices.
3.20 Books and Records. Seller has made and kept its Books and Records
-----------------
that are complete and correct in all material respects and, in reasonable
detail, accurately and fairly reflect the activities of Seller and all material
transactions of the Business.
3.21 Taxes. Except as set forth on Schedule 3.21:
----- -------------
(a) Seller has timely filed with the appropriate taxing authorities
all true, correct and complete tax returns for federal, state, municipal,
payroll, withholding, excise, income, sales, use, unemployment compensation,
personal property, use and occupancy, business and occupation, mercantile, real
estate, franchise and other taxes (all the foregoing taxes, including interest
and penalties thereon and estimated taxes, being hereinafter collectively
referred to as "Taxes") required to be filed so as to prevent any lien or other
encumbrance on any of the Purchased Assets. Seller has delivered to Purchaser
complete and accurate copies of all Seller's federal, state and local tax
returns for the past three (3) years, together with copies of all significant
correspondence between Seller and
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<PAGE>
any taxing authorities during such period. Seller is not and has not been a
member of any consolidated group for tax purposes.
(b) All Taxes have been timely paid or an adequate reserve has been
established therefor in the Financial Statements, and Seller does not have any
liability for Taxes in excess of the amounts so paid or reserves so established.
(c) The income tax returns of Seller have not been audited by the
Internal Revenue Service ("IRS") or any other relevant taxing authority within
the past five (5) years. No deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against Seller or the
Shareholder (with respect to matters pertaining to the Business) within such
period. Within the past five (5) years, there have been no pending or, to the
best of Seller's knowledge, threatened audits, investigations or claims for or
relating to any additional liability in respect of Taxes in any jurisdiction,
and there are no matters under discussion with any governmental or regulatory
body with respect to Taxes that are likely to result in an additional liability
for Taxes. No extension of a statute of limitations relating to Taxes is in
effect with respect to Seller.
3.22 No Other Agreements to Sell the Assets. Neither Seller nor any
--------------------------------------
Related Party has any commitment or legal obligation to any other person other
than Purchaser to sell, assign, transfer or effect a sale of any of the
Purchased Assets (other than inventory in the ordinary course of business), to
sell or effect a sale of any of the capital stock of Seller, to effect any
merger, consolidation, liquidation, dissolution or other reorganization of
Seller, or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
3.23 Environmental. Except as set forth on Schedule 3.23:
------------- -------------
(a) None of the properties included in the Purchased Assets or to be
leased by Purchaser has underground or above ground storage tanks, or has had
any leak, spill, disposal, discharge, or release (collectively, "Release") of
any Regulated Substance.
(b) There are no asbestos-containing materials on or in the
Purchased Assets or any buildings or facilities thereon or to be leased to
Purchaser, nor are there any electrical transformers, fluorescent light fixtures
with ballasts, or other equipment containing PCB's in excess of legal
requirements on such properties.
(c) None of the properties included in the Purchased Assets has
generated "hazardous waste" or "hazardous substances" or "toxic substances" (as
defined in applicable Environmental Laws), nor have any of such properties been
used by Seller for the use, treatment, transportation, storage, handling or
disposal of any "hazardous waste" or "hazardous substance" or "toxic substance".
To Seller's knowledge, none of the properties included in the Purchased Assets
or to be leased by Purchaser has ever appeared on any Federal or state list or
registry of hazardous or toxic waste disposal sites (active or inactive), nor
has Seller ever received any notice or claim from the Federal or any state or
local government or agency concerning the alleged or threatened Release of any
such waste or substance.
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<PAGE>
(d) There have been no environmental audits or assessments that have
been conducted at any Real Property site since the dates of Seller's occupancy
thereof, either by Seller or any attorney, environmental consultant or engineer
engaged by Seller or, to Seller's knowledge, by any other person for such
purpose.
(e) Seller has not released any other person from any claim under
any Environmental Law or waived any rights concerning any environmental
condition.
3.24 Solvency. Seller is, and after giving effect to the transactions
--------
contemplated hereby will be, solvent and is not subject to any voluntary or
involuntary proceedings in bankruptcy, reorganization, dissolution or
liquidation or to any assignment for the benefit of creditors, and no trustee,
receiver or liquidator has been appointed for Seller or any of its properties.
3.25 Insurance. Set forth on Schedule 3.25 is a list and description
--------- -------------
(including coverages) of all insurance policies or binders of insurance that
relate to the Business (including malpractice insurance), correct and complete
copies of which have been delivered to Purchaser. All of the insurable
properties of Seller is insured by such policies. No notice of reduction in
coverage, increase in premium, or cancellation or non-renewal with respect to,
or disallowance of any material claim under, any such policy or binder has been
received by Seller. All such policies provide coverage with insurers of
recognized responsibility to the extent and in the manner (i) customary for the
home health care industry and (ii) required by law and all agreements to which
Seller is a party or otherwise bound. All such policies provide coverage on an
"occurrence", rather than a "claims made", basis. Seller has not failed to give
any notice or to present any claim under any such policy or binder in a due and
timely fashion. There are no outstanding unpaid claims under any such policies
or binders.
3.26 Non-Solicitation. Since October 9, 1996, Seller has not (nor has any
----------------
Related Party), directly or indirectly, solicited, initiated, encouraged,
entertained or participated in discussions or negotiations, entered into any
agreements relating to, or consummated any transaction with respect to any offer
for purchase or sale of any interest in Seller, or any acquisition, combination
or similar transaction involving Seller, the Business or Seller's assets, stock
or employees (a "Third-Party Proposal") with any person other than Purchaser or
Purchaser's representatives.
3.27 Disclosure. No representation, warranty or statement of the
----------
Selling Parties contained in this Agreement, in any Schedule or Exhibit, or any
agreement or document delivered under this Agreement or in connection herewith
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein and
therein not misleading. Copies of all documents furnished by or on behalf of
the Selling Parties to Purchaser are complete and accurate in all material
respects. There is no fact that Seller has not disclosed to Purchaser that
could reasonably be expected to have a material adverse effect on the Business,
its prospects, financial condition, results of operations, assets or liabilities
or could reasonably be expected to have a material and adverse effect on the
ability of the Selling Parties to perform this Agreement.
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<PAGE>
4. Representations and Warranties of the Purchasing Parties. The Purchasing
--------------------------------------------------------
Parties hereby represent and warrant to the Selling Parties as follows:
4.1 Organizational Status. HHCA is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Purchaser, when formed will be duly organized, validly existing
and in good standing under the laws of is jurisdiction of formation. Each of the
Purchasing Parties has (or will have, in the case of Purchaser) all requisite
power and authority to own, lease and operate its assets, properties and
business and to carry on its business as now being and as heretofore conducted.
4.2 Qualification. Each of the Purchasing Parties is duly qualified to
-------------
do business (or will be duly qualified, in the case of Purchaser) and is in good
standing (or will be in good standing, in the case of Purchaser) in all states
or jurisdictions in which the nature of its business as presently operated by it
or the character of the property owned or leased by it with respect to its
business makes such qualification or authorization necessary.
4.3 Authorization; No Conflict.
--------------------------
(a) Each of the Purchasing Parties has the full legal right and all
power and authority required to enter into, execute and deliver this Agreement
and the documents and other agreements required to be delivered hereunder and to
perform fully its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by HHCA and constitutes, and each of the other
agreements and documents to be delivered by each of the Purchasing Parties
hereunder when executed and delivered by each of the Purchasing Parties will
constitute, the valid and binding obligation of each of the Purchasing Parties
enforceable in accordance with their respective terms.
(b) The execution, delivery and performance of this Agreement by
each of the Purchasing Parties and the documents and other agreements to be
delivered hereunder by each of the Purchasing Parties and the consummation of
the transactions contemplated hereby and thereby by each of the Purchasing
Parties will not (i) violate any provision of HHCA's or Purchaser's articles of
incorporation or bylaws (or other organizational documents), (ii) violate,
conflict with or result in the breach of any of the terms of, result in a
material modification of the effect of, otherwise give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any contract or other agreement to which any
of the Purchasing Parties is a party or by or to which any of them or any of
their respective assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which any of the Purchasing Parties, or any
of their respective assets, properties or business are bound, (iv) violate any
statute, law or regulation, or (v) violate or cause any revocation of or
limitation on any permit (A) that is necessary to the lawful conduct of the
business of any of the Purchasing Parties or (B) the violation, revocation or
limitation of which could reasonably be expected to have a material adverse
effect on the business of any of the Purchasing Parties.
4.4 Consents. Except for the consent of such third parties as are
--------
separately identified on Schedule 4.4, no approval, consent or authorization of,
------------
or registration or filing with any person is
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<PAGE>
required in connection with the execution and delivery of this Agreement by any
of the Purchasing Parties or the consummation of the other transactions
contemplated hereby.
4.5 Financial Statements of HHCA; Undisclosed Liabilities.
-----------------------------------------------------
(a) HHCA has delivered to Seller copies of HHCA's audited balance
sheet and income statement as of June 30, 1996 (collectively, the "Financial
Statements"). As used herein, the term "HHCA Balance Sheet Date" shall mean June
30, 1996. The Financial Statements (i) fairly present the financial condition,
assets and liabilities of HHCA as of the HHCA Balance Sheet Date and the results
of operations for the period then ended, (ii) were prepared in accordance with
GAAP, and (iii) were prepared from the books and records of HHCA.
(b) HHCA does not have any liabilities or obligations except (i)
liabilities reflected and reserved against in the balance sheet as of the HHCA
Balance Sheet Date that have not been paid or discharged since the date thereof,
and (ii) liabilities incurred since the HHCA Balance Sheet Date in the ordinary
course of business and consistent with past practice and none of which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on the ability of the Purchasing Parties to
consummate the transactions hereunder.
4.6 Litigation. There are no Actions pending or, to the Purchasing
----------
Parties' knowledge, threatened against any of the Purchasing Parties, or any of
their respective employees; nor, to their knowledge, are there any facts upon
which any such Action may reasonably be expected to be based, except for such
Actions that have not had and would not reasonably be expected to have a
material adverse effect on the business of the Purchasing Parties. There is not
outstanding any order, writ, injunction, decree, or judgment of any court,
governmental or regulatory body or arbitration tribunal applicable to the
Purchasing Parties or their businesses..
4.7 No Material Adverse Change. Since the HHCA Balance Sheet Date,
--------------------------
there has been no material adverse change in the business, operations, condition
(financial or otherwise), or prospects of the Purchasing Parties and, to the
knowledge of Purchasing Parties, no such change is threatened. Since the HHCA
Balance Sheet Date, the Purchasing Parties have conducted their respective
businesses only in the ordinary course and there has been no damage, destruction
or loss materially adversely affecting the business, operations or condition
(financial or otherwise) of the Purchasing Parties, whether or not covered by
insurance.
4.8 Disclosure. No representation, warranty or statement of the
----------
Purchasing Parties contained in this Agreement, in any Schedule or Exhibit, or
any agreement or document delivered under this Agreement or in connection
herewith contains or will contain any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
and therein not misleading. Copies of all documents furnished by or on behalf
of the Purchasing Parties to Seller are complete and accurate in all material
respects. There is no fact that the Purchasing Parties have not disclosed to
Seller that could reasonably be expected to have a material adverse effect on
the ability of the Purchasing Parties to perform this Agreement.
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<PAGE>
5. Covenants of the Parties. The Selling Parties and Purchasing Parties
------------------------
covenant and agree with each other as follows:
5.1 Continuance of Business. From the date hereof until the LHS/Holdings
-----------------------
Closing Date (as hereinafter defined), Seller agrees that it will, unless
otherwise consented to in writing by Purchaser: (a) carry on the Business in the
usual, regular and ordinary course in substantially the same manner as
heretofore carried on; (b) preserve intact the Permits and the present business
organization of the Business; (c) use best efforts to keep available the
services of the present employees and independent contractors of the Business
(except as provided in Section 5.5); (d) encourage such employees to accept
-----------
employment with Purchaser (if such employment is offered); (e) use best efforts
to preserve its relationships with patients, customers, clients, providers,
referral sources (including physicians and other health care providers),
suppliers and others having business dealings with the Business to the end that
its goodwill and ongoing business shall be conducted on substantially the same
basis on the Closing Date as on the date hereof; (f) perform all of its
obligations under all contracts and other agreements relating to the Business,
including the discharge of all tax obligations and accounts payable of the
Business according to the terms and conditions of all invoices therefor; (g)
maintain true, correct and complete books of account and records relating to the
Business; (h) comply with all statutes, laws, ordinances, rules and regulations
applicable to the conduct of the Business; (i) promptly upon its knowledge
thereof, advise Purchaser in writing of the termination or resignation of any
employee whose cash compensation is in excess of an annual rate of $50,000 or
independent contractor whose cash compensation is in excess of an annual rate of
$50,000 and, to its knowledge, the circumstances therefor; (j) not take or
permit to be taken any action that is represented and warranted in Section
-------
3.19(b) not to have been taken since the Balance Sheet Date; (k) not make,
- -------
change, or revoke any tax election or make any agreement or settlement with any
taxing authority; (l) not make any payments to or enter into or modify any
existing agreement or arrangement with any Related Party; (m) not hire any
employees (except in the ordinary course of business to replace employees of
Seller whose employment with Seller is terminated), (n) keep in full force and
effect insurance of the same type and in amounts at least equal to that carried
by Seller with respect to the Business on the date hereof; (o) maintain
sufficient levels of Inventory in the ordinary course of business; (p) maintain
the Equipment in at least the same condition as such exists on the date hereof,
normal wear and tear excepted; and (q) promptly upon its knowledge thereof,
advise Purchaser in writing of: (i) any material adverse change in the financial
condition, prospects or operations of the Business; (ii) any event, condition or
circumstance occurring from the date hereof until the Closing Date that would
constitute a material violation or breach of any representation, warranty,
covenant, agreement or provision contained in this Agreement (provided, however,
-------- -------
that such disclosure shall not be deemed to cure any violation or breach of any
such representation, warranty, covenant, agreement or provision), or (iii) any
event, occurrence, transaction or other item that would have been required to
have been disclosed on any Schedule delivered hereunder, had such event,
occurrence, transaction or item existed on the date hereof.
5.2 Access to Information. From and after the date hereof, the
---------------------
Purchasing Parties shall be entitled, through their employees and
representatives, to make such investigation of the assets, properties,
facilities, personnel, business and operations of the Business and such
examination of the books, records and financial condition of the Business as
Purchaser reasonably requests, and Seller shall fully cooperate with Purchaser
in connection with such investigation. No investigation by
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<PAGE>
Purchaser shall diminish, obviate, constitute a waiver as to the enforcement of,
or affect Purchaser's right to rely on, any of the representations, warranties,
covenants or agreements of Seller under this Agreement.
5.3 Governmental Permits and Approvals; Consents. Seller shall use its
--------------------------------------------
best efforts to obtain promptly (a) all permits and approvals from any
governmental or regulatory body required to be obtained by Seller for lawful
consummation of the Closing, (b) the consents set forth or required to be set
forth on Schedule 3.11 and (c) appropriate estoppel representation letters in
-------------
form and substance reasonably satisfactory to Purchaser from the lessors under
the Real Property Leases. The Purchasing Parties will fully cooperate in
connection with Seller's obtaining of such permits, approvals, consents and
estoppel letters, including without limitation, by providing any necessary
documents and information.
5.4 Maintenance of Permits. Seller shall at all times prior to the
----------------------
Closing Date preserve and maintain each of the material Permits free and clear
of all liens and other encumbrances. Seller shall not take any action that
would cause any governmental or regulatory body to institute proceedings
regarding any material Permit or take any other action that would result in
Seller being in noncompliance in any material respect with the requirements of
or any governmental or regulatory body having jurisdiction thereof that would
impair Seller's qualifications to be the assignor of such Permits or Purchaser's
rights with respect thereto.
5.5 Employees; Employee Compensation.
--------------------------------
(a) Purchaser has informed Seller that Purchaser may offer
employment on an "at will" basis to certain employees of PDN and MIV
(collectively, " Employees") immediately after the Closing. Immediately prior to
Closing, Seller shall terminate the employment of all Employees that Purchaser
intends to hire. Seller waives any claims against Purchaser or any Employees
arising from such employment (including arising from any employment agreement or
noncompetition agreement). Nothing contained in this Agreement shall confer upon
any Employee any right with respect to continued employment by Seller or
Purchaser. No provision of this Agreement shall create any third-party rights in
any Employee, or any beneficiary or dependent thereof, with respect to the
compensation, terms and conditions of employment and benefits that may be
provided to such Employee by Purchaser or under any benefit plan that Purchaser
may maintain.
(b) Seller agrees to discharge when due all liabilities to any
employee of the Business under all pay and compensation practices applicable to
the Business and under any employment agreements entered into prior to the
Closing Date. Seller shall pay all severance costs in respect of employees
severed prior to the Closing Date.
5.6 Accounts Receivable. Between the date hereof and the Closing Date,
-------------------
Seller will use prudent credit and collection procedures in order to collect the
Accounts Receivable so as not to jeopardize Purchaser's future customer,
patient, provider and third-party payor relations.
5.7 Title; Risk of Loss. Legal title and risk of loss with respect to
-------------------
the Purchased Assets shall not pass to Purchaser until the Purchased Assets are
transferred at the Closing. If prior to the
-20-
<PAGE>
Closing Date any of the Purchased Assets are destroyed or damaged by fire or
other casualty, or are otherwise unable to be conveyed to Purchaser at the
Closing, Purchaser may, at its option, (i) require that Seller replace or
restore such property; or (ii) elect to receive at the Closing a reduction in
the portion of the Acquisition Price to be paid at Closing in an amount
reasonably estimated by Purchaser to replace or repair such property.
5.8 Regulatory Approvals. The parties agree that in order to consummate
--------------------
the transactions contemplated hereby, all material federal, state and local
governmental or regulatory approvals (collectively, the "Regulatory Approvals")
must be obtained, subject to Purchaser's right to waive in writing this
condition on behalf of the parties.
5.9 Subordination Agreement. At the Closing, Seller will enter into a
-----------------------
Seller Subordination Agreement with CoreStates Bank, N.A. ("Senior Lender")
substantially in the form of Exhibit 5.9 (the "Subordination Agreement").
-----------
5.10 Refunding to Seller of Certain Prepaid Expenses. Notwithstanding
-----------------------------------------------
anything to the contrary contained in Section 1.2, Purchaser agrees that in the
-----------
event that any of the Prepaid Expenses set forth on Schedule 5.10 are refunded
-------------
to the Purchaser after the Closing Date, it will pay such amounts over to
Seller.
5.11 Disclosure Schedules. As of the date of execution of this
--------------------
Agreement, the Selling Parties have not delivered to the Purchasing Parties the
Schedules to this Agreement (and supporting agreements and documents) that are
required to be delivered hereunder by the Selling Parties ("Selling Parties'
Disclosure Schedules"). Within ten (10) business days after the date hereof,
the Selling Parties will deliver a complete set of Selling Parties' Disclosure
Schedules to the Purchasing Parties, who shall then have five (5) business days
after receipt of Selling Parties' Disclosure Schedules to review the same and to
either advise the Selling Parties that the Selling Parties' Disclosure Schedules
are acceptable or, if not, to provide comments thereon to the Selling Parties.
If the Purchasing Parties do not so advise or provide comments to the Selling
Parties within such five (5) business day period, the Purchasing Parties shall
be deemed to have accepted the Selling Parties' Disclosure Schedules. With
respect to any disagreement over the Selling Parties' Disclosure Schedules, the
parties shall negotiate in good faith during the five (5) business day period
after the date of the Selling Parties' receipt of the Purchasing Parties'
comments to discuss such comments and to attempt to reach agreement concerning
the Selling Parties' Disclosure Schedules. If the parties are unable to reach
agreement, the Purchasing Parties shall have the right, in their sole
discretion, to terminate this Agreement at any time during such negotiation
period if the Selling Parties' Disclosure Schedules are not acceptable to the
Purchasing Parties. The Selling Parties agree that during the Purchasing
Parties' review of the Selling Parties' Disclosure Schedules, Purchaser may
elect not to assume certain of the contracts or other agreements that are listed
thereon.
5.12 The Purchasing Parties' Conduct of the Business During Earn-Out
---------------------------------------------------------------
Period. From the Closing Date through December 31, 1997 (the "Earn-Out
- ------
Period"), each of the Purchasing Parties agrees that it will not, unless
consented to in writing by Seller, remove April Anthony, Maura Coriston, Amy
Figgins or Gene Schulle (collectively, the "Executives") from the management of
the
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<PAGE>
Business, subject in each case to the terms of the Executives' respective
employment agreements with HHCA.
6. Conditions Precedent to Purchasing Parties' Obligations. The obligation
-------------------------------------------------------
of the Purchasing Parties to consummate the acquisition of the Purchased Assets
and assumption of the Assumed Liabilities under this Agreement is subject to the
satisfaction on or prior to the Closing Date of the following conditions, any of
which may be waived in writing by the Purchasing Parties:
6.1 Closing Under LHS/Holdings Acquisition Agreement. The closing under
------------------------------------------------
that certain Asset Acquisition Agreement of even date herewith among HHCA and
its nominees, Holdings, Liberty Health Services, Inc., a Texas corporation,
Nurses Today M/C, Inc., a Texas corporation, and the Shareholder (the
"LHS/Holdings Acquisition Agreement") shall have occurred. The date on which
such closing occurs shall be referred to herein as the "LHS/Holdings Closing
Date".
6.2 Regulatory Approvals. All Regulatory Approvals shall have been
--------------------
received in accordance with the provisions of Section 5.9.
-----------
6.3 Absence of Litigation. No Action shall have been instituted before
---------------------
any court or governmental or regulatory body by any person (other than the
Purchasing Parties or any of their respective affiliates), or instituted or
threatened by any governmental or regulatory body, to restrain or modify, in
any respect that is materially adverse to Purchaser, the Business or the
Purchased Assets, to prevent the carrying out of the transactions contemplated
hereby, or to seek damages or a discovery order in connection with such
transactions, or that has or, if adversely determined, would reasonably be
expected to have a materially adverse effect on the prospects, operation or
condition (financial or otherwise) of the Business or the Purchased Assets.
6.4 Absence of Liens. At or prior to the Closing, the Purchasing
----------------
Parties shall have received a Uniform Commercial Code ("UCC") search report
issued by the Texas and Kentucky Secretaries of State and any applicable local
offices indicating that there are no filings under the UCC on file with such
Secretaries of State and such local offices that name PDN or MIV as debtor or
otherwise indicating any lien or other encumbrance on the Purchased Assets or,
if any such liens or other encumbrances exist, such liens or other encumbrances
shall be extinguished and removed at the Closing.
6.5 Due Diligence. On or before the LHS/Holdings Closing Date, the
-------------
Purchasing Parties shall have conducted a legal, tax, accounting, regulatory and
business due diligence investigation of the Business, the results of which
investigation shall be satisfactory to the Purchasing Parties.
6.6 No Breach of Management Agreement. The Selling Parties shall not be
----------------------------------
in breach of that certain Management Agreement to be entered into among Seller,
Shareholder and HHCA on the LHS/Holdings Closing Date.
6.7 Closing Deliveries. The Selling Parties shall have delivered or
------------------
caused to be delivered to the Purchasing Parties at the Closing those items
specified in Section 8.1.
-----------
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<PAGE>
7. Conditions Precedent to the Selling Parties' Obligations. The obligation
--------------------------------------------------------
of the Selling Parties to consummate the sale of the Purchased Assets and
transfer of the Assumed Liabilities under this Agreement is subject to the
satisfaction on or prior to the Closing Date of the following conditions, any of
which may be waived in writing by the Selling Parties:
7.1 Closing Under LHS/Holdings Acquisition Agreement. The closing under
------------------------------------------------
the LHS/Holdings Acquisition Agreement shall have occurred.
7.2 Absence of Litigation. No Action shall have been instituted before
---------------------
any court or governmental or regulatory body by any person (other than the
Selling Parties or any Related Party) or instituted or threatened by any
governmental or regulatory body, to prevent the carrying out of the transactions
contemplated hereby; provided, however, that this condition shall be deemed to
be waived by the Selling Parties if Purchaser agrees in writing to indemnify the
Selling Parties for any such Action in accordance with the terms of Section 11.
----------
7.3 Closing Deliveries. The Purchasing Parties shall have delivered or
------------------
caused to be delivered to the Selling Parties at the Closing those items
specified in Section 8.2.
-----------
8. Deliveries at the Closings. The following deliveries shall be made at the
--------------------------
Closing, each of which shall be conditional upon completion of all the others
and all of which shall be deemed to have taken place simultaneously at the
Closing:
8.1 Selling Parties' Deliveries. At the Closing, the Selling Parties
---------------------------
shall deliver or cause to be delivered to the Purchasing Parties all of the
following:
(a) all conveyances, deeds, assignments, bills of sale, certificates
of title, powers of attorney (including those to collect accounts receivable)
and other appropriate conveyancing instruments transferring the Purchased Assets
to Purchaser, free and clear of any lien or other encumbrance;
(b) originals or copies of all Contracts or agreements constituting
Purchased Assets to the extent not previously provided to the Purchasing
Parties;
(c) a certificate of the secretary of Seller attesting to (i) the
resolutions adopted by the board of directors of Seller duly authorizing the
execution, delivery and performance of this Agreement by Seller and the
execution and delivery by Seller of all instruments and documents contemplated
hereby, (ii) the signatures of the officers of Seller who have been authorized
to execute and deliver this Agreement and any other agreement executed or to be
executed in connection herewith and (iii) Seller's articles of incorporation and
bylaws (each of which shall be attached as exhibits to such certificate);
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<PAGE>
(d) a good standing certificate of each of PDN and MIV from the
Secretary of State of Texas;
(e) all required consents to the assignments of the Contracts that
constitute Purchased Assets (containing, with respect to the Real Property
Leases, appropriate estoppel representations in form and substance reasonably
satisfactory to the Purchasing Parties);
(f) the Subscription Agreement duly executed by Seller and the
Shareholder;
(g) the opinion of Craig L. Sparks, Esquire, counsel to the Selling
Parties, substantially in the form of Exhibit 8.1(g);
--------------
(h) the Seller Subordination Agreement duly executed by Seller;
(i) releases, satisfaction pieces, and binding agreements, subject
only to receipt of payments to be made at the Closing, to deliver UCC
termination statements duly executed by each creditor of Seller releasing each
of the liens or other encumbrances upon the Purchased Assets, in form and
substance satisfactory to the Purchasing Parties;
(j) detailed schedules listing all of the Inventory and Equipment to
be acquired by Purchaser as of the Closing Date;
(k) the amendments to PDN's and MIV's articles of incorporation as
required by any other agreement among the parties; and
(l) all such other documents and instruments as the Purchasing
Parties or their counsel may reasonably request in order to consummate the
transactions contemplated hereby.
8.2 Purchasing Parties' Deliveries. At the Closing, the Purchasing
------------------------------
Parties shall deliver or cause to be delivered to the Seller (or other
appropriate persons that may be specified below) all of the following:
(a) a written instrument of assumption providing for the assumption
of the Assumed Liabilities;
(b) the Closing Cash Payment (or any portion thereof to any other
person(s) in order to discharge any lien or other encumbrance on the Purchased
Assets);
(c) the Note duly executed by the Purchasing Parties;
(d) share certificates for the Shares duly executed by HHCA;
(e) the Subscription Agreement duly executed by HHCA;
-24-
<PAGE>
(f) a certificate executed by an executive officer of the Purchasing
Parties confirming the matters set forth in Sections 7.2 and 7.3;
---------------------
(g) a certificate of the secretary of the Purchasing Parties
attesting to (i) the resolutions adopted by the board of directors of the
Purchasing Parties duly authorizing the execution, delivery and performance of
this Agreement by the Purchasing Parties and the execution and delivery by the
Purchasing Parties of all instruments and documents contemplated hereby, (ii)
the signatures of the officers of the Purchasing Parties who have been
authorized to execute and deliver this Agreement and any other agreement
executed or to be executed in connection herewith and (iii) the Purchasing
Parties' articles of incorporation and bylaws (each of which shall be attached
as exhibits to such certificate);
(h) a good standing certificate of HHCA from the Secretary of State
of Pennsylvania and a good standing certificate of Purchaser from the Secretary
of State of its jurisdiction of formation; and
(i) the opinion of Kleinbard, Bell & Brecker, counsel to the
Purchasing Parties, substantially in the form of Exhibit 8.2(i).
--------------
9. Miscellaneous.
-------------
9.1 Further Assurances. Each of the parties shall execute such
------------------
agreements and documents and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions to the Closing, including
the execution and delivery of any other agreement or document, the execution and
delivery of which are conditions precedent to the Closing.
9.2 Access to Records. From and after the Closing Date, Seller shall
-----------------
allow the Purchasing Parties, and their counsel, accountants and other
representatives, such access to Seller's records that after the Closing are in
the custody or control of Seller as the Purchasing Parties require in order to
comply with their obligations under law or under contracts constituting Assumed
Liabilities. From and after the Closing Date, the Purchasing Parties shall
allow Seller, and their counsel, accountants and other representatives, such
access to records that after the Closing are in the custody or control of the
Purchasing Parties as Seller requires in order to comply with its obligations
under law or under contracts constituting Excluded Liabilities.
-25-
<PAGE>
9.3 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant, or any part of
any covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
9.4 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given when
received if delivered personally against receipt; when transmitted if
transmitted by facsimile, electronic or digital transmission method with
electronic confirmation; the next day if sent for next day delivery by a
nationally recognized overnight courier service; or upon receipt if sent by
certified, registered or express mail, return receipt requested, postage
prepaid. In each case notice shall be sent as follows:
(a) if to the Purchasing Parties, to:
Home Health Corporation of America, Inc.
2200 Renaissance Boulevard, Suite 300
King of Prussia, PA 19406-2755
Phone: (610) 272-1717
FAX: (610) 272-3131
Attention: Mr. Bruce J. Feldman, President
with a required copy to:
Kleinbard Bell & Brecker
1900 Market Street, Suite 700
Philadelphia, PA 19103
Phone: (215) 568-2000
FAX: (215) 568-0140
Attention: Howard J. Davis, Esquire
(b) if to the Selling Parties, to:
LHS Holdings, Inc.
13400 U.S. Highway 42, Suite 290
Prospect, KY 40059
Phone: (502) 228-9698
FAX: (502) 228-7016
Attention: Mr. Mark H. O'Brien, President
-26-
<PAGE>
with a required copy to:
Craig L. Sparks, Esquire
Four Market Centre
201 East Market Street, P.O. Box 768
Jeffersonville, IN 47131-0768
Phone: (812) 288-7732
FAX: (812) 288-7866
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9.5 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits) and the Indemnification Agreement together with the agreements,
certificates and other documents delivered hereunder or thereunder contain the
entire agreement between the parties with respect to the transactions described
herein, and supersede all prior agreements, written or oral, with respect
thereto.
9.6 Amendments and Waivers; Non-Contractual Remedies. This Agreement
------------------------------------------------
may be modified or amended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity.
9.7 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania without regard to
principles of conflicts of law or any rule of interpretation or construction as
to which party drafted this Agreement, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity that is a
party to or the subject of this Agreement (as to those matters of law, the
jurisdiction under which the respective entity derives its powers shall govern).
9.8 Binding Effect; Assignment. Neither this Agreement nor any of the
--------------------------
rights or obligations hereunder may be assigned (including by operation of law)
by any party without the prior written consent of the other party, except that
the Purchasing Parties may, without such consent, assign any and all such rights
and obligations to any affiliate, provided that the Purchasing Parties shall
remain liable for the discharge of such obligations, and the Purchasing Parties
may, without such consent, assign any and all such rights and obligations to any
purchaser of the Purchased Assets. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
-27-
<PAGE>
9.9 Joint and Several. Notwithstanding anything to the contrary herein
-----------------
contained or otherwise: (i) the obligations of the Selling Parties under this
Agreement shall be joint and several; and (ii) the obligations of the Purchasing
Parties under this Agreement shall be joint and several
9.10 Beneficiaries of Agreement. The representations, warranties,
--------------------------
covenants and agreements expressed in this Agreement are for the sole benefit of
the other party hereto and are not intended to benefit, and may not be relied
upon or enforced by, any other party as a third party beneficiary or otherwise.
9.11 Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto. Facsimile signatures on this Agreement and any of
the agreements and documents executed in connection herewith shall be deemed
original signatures.
9.12 Exhibits and Schedules. The Exhibits and Schedules are a part of
----------------------
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.13 Holidays. Whenever this Agreement provides for a date, day or
--------
period of time on or prior to which actions or events are to occur or not occur,
and if such date, day or last day of such period of time falls on a Saturday,
Sunday, or legal holiday, then the same shall be deemed to fall on the
immediately following business day.
-28-
<PAGE>
9.14 Headings. The headings in this Agreement are for reference only,
--------
and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOME HEALTH CORPORATION OF AMERICA, INC.
By:
---------------------------------------
Bruce J. Feldman, President
PDN, INC.
By:
---------------------------------------
Name:
Title:
MEDICAL I.V., INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Mark H. O'Brien, Individually
-29-
<PAGE>
Exhibit 2.6
================================================================================
INDEMNIFICATION AGREEMENT
AMONG
HOME HEALTH CORPORATION OF AMERICA, INC.
AND ITS NOMINEES,
LHS HOLDINGS, INC.,
LIBERTY HEALTH SERVICES, INC.,
NURSES TODAY M/C, INC.,
PDN, INC.,
MEDICAL I.V., INC.,
AND
MARK H. O'BRIEN
December 4, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Covenants of the Parties................................... 2
------------------------
1.1 Non-Solicitation................................. 2
----------------
1.2 Management Agreement............................. 2
--------------------
1.3 Public Offering.................................. 2
---------------
1.4 Winding Up of LHS, Nurses, PDN and MIV........... 3
--------------------------------------
1.5 Confidentiality.................................. 3
---------------
1.6 Restrictive Covenant............................. 4
--------------------
1.7 Replacement Financing............................ 5
---------------------
1.8 Use of Names..................................... 5
------------
2. Survival of Representations and Warranties................. 5
------------------------------------------
3. Indemnification............................................ 6
---------------
3.1 Obligation to Indemnify by the Selling Parties... 6
----------------------------------------------
3.2 Obligation to Indemnify by Purchaser............. 6
------------------------------------
3.3 Losses........................................... 6
------
3.4 Procedures for Claims Between the Parties........ 7
-----------------------------------------
3.5 Defense of Third-Party Actions................... 7
------------------------------
3.6 Bulk Sales....................................... 8
----------
3.7 Interest on Unpaid Obligations................... 8
------------------------------
3.8 Reduction for Insurance.......................... 8
-----------------------
4. Breaches and Defaults; Termination; Remedies............... 8
--------------------------------------------
4.1 Breaches and Defaults; Opportunity to Cure....... 8
------------------------------------------
4.2 Termination...................................... 9
-----------
4.3 Effect of Termination............................ 9
---------------------
4.4 Specific Performance.............................10
--------------------
5. Miscellaneous..............................................10
-------------
5.1 Consent to Jurisdiction..........................10
-----------------------
5.2 Expenses.........................................10
--------
5.3 Further Assurances...............................10
------------------
5.4 Indemnification of Brokerage.....................11
----------------------------
5.5 Severability.....................................11
------------
5.6 Notices..........................................11
-------
5.7 Entire Agreement.................................12
----------------
5.8 Amendments and Waivers; Non-Contractual Remedies.12
------------------------------------------------
5.9 Governing Law....................................12
-------------
5.10 Binding Effect; Assignment.......................13
--------------------------
5.11 Joint and Several................................13
-----------------
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
5.12 Beneficiaries of Agreement.......................13
--------------------------
5.13 Counterparts; Facsimile Signatures...............13
----------------------------------
5.14 Exhibits and Schedules...........................13
----------------------
5.15 Holidays.........................................13
--------
5.16 Headings.........................................13
--------
</TABLE>
LIST OF EXHIBITS
----------------
1.2 Terms of Management Agreement
iii
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of December 4,
1996, by and among HOME HEALTH CORPORATION OF AMERICA, INC., a Pennsylvania
corporation ("HHCA"), and its nominees, LHS HOLDINGS, INC., a Kentucky
corporation ("Holdings"), LIBERTY HEALTH SERVICES, INC., a Texas corporation and
wholly-owned subsidiary of Holdings ("LHS"), NURSES TODAY M/C, INC., a Texas
corporation and wholly-owned subsidiary of LHS ("Nurses"), PDN, INC., a Texas
corporation ("PDN"), MEDICAL I.V., INC., a Texas corporation ("MIV"), and MARK
H. O'BRIEN, an individual and sole shareholder of Holdings, PDN and MIV
("Shareholder"). HHCA and its nominees are sometimes collectively referred to
herein as the "Purchasing Parties". Holdings, LHS, Nurses, PDN, MIV and the
Shareholder are sometimes collectively referred to herein as the "Selling
Parties".
Background.
----------
A. Holdings, LHS, Nurses, PDN and MIV are engaged in the business of
providing Medicare and Medicaid-reimbursed home nursing services, private duty
home nursing services, infusion services and related services in the home health
care industry in Texas (the "Business").
B. The Purchasing Parties and their affiliates are engaged in the States
of Pennsylvania, New Jersey, Delaware, Maryland and Florida in the business of:
(i) providing private duty or Medicare-reimbursable nursing and related health
care services and equipment to home-bound patients (including without limitation
bedside care and treatment, infusion therapy, pharmaceutical and rehabilitative
services); (ii) providing mobile diagnostic services; (iii) selling durable
medical equipment; and (iv) providing respiratory services and related
equipment.
C. Holdings, LHS, Nurses, Shareholder, HHCA and its nominees have entered
into an Asset Acquisition Agreement of even date herewith pursuant to which HHCA
through its nominees has agreed to acquire, and Holdings, LHS and Nurses have
agreed to sell, substantially all of the assets owned or used by or useful to
Holdings, LHS and Nurses in connection with the Business (the "LHS/Holdings
Acquisition Agreement").
D. PDN, MIV, Shareholder, HHCA and its nominees have entered into an Asset
Acquisition Agreement of even date herewith pursuant to which HHCA through its
nominees has agreed to acquire, and PDN and MIV have agreed to sell,
substantially all of the assets owned or used by or useful to PDN and MIV in
connection with the Business (the "PDN/MIV Acquisition Agreement" and together
with the LHS/Holdings Acquisition Agreement, "Acquisition Agreements").
E. The parties desire to enter into this Agreement to set forth their
agreement and understanding with respect to various matters concerning the
Acquisition Agreements, including without limitation, the respective rights of
the parties to terminate the Acquisition Agreements and the obligations of the
parties to indemnify each other.
F. All capitalized terms used but not otherwise defined in this Agreement
shall have meanings ascribed to such terms in the Acquisition Agreements.
1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing Background and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Covenants of the Parties.
------------------------
1.1 Non-Solicitation. From the date hereof until the closing under the
----------------
PDN/MIV Acquisition Agreement (the "PDN/MIV Closing"), neither the Selling
Parties nor any Related Party will, directly or indirectly, solicit, initiate,
encourage, entertain or participate in discussions or negotiations, enter into
any agreements relating to, or consummate any transaction with respect to any
Third-Party Proposal with any person other than the Purchasing Parties or the
Purchasing Parties' representatives. During such period, Seller shall promptly
inform the Purchasing Parties of the occurrence of a Third-Party Proposal and
the terms thereof (including the identity of the prospective purchaser or
soliciting party).
1.2 Management Agreement. At the closing under the LHS/Holdings
--------------------
Acquisition Agreement (the "LHS/Holdings Closing"), PDN and MIV will enter into
a Management Agreement with HHCA pursuant to which HHCA will manage PDN and MIV
during the period commencing on the date of the LHS/Holdings Closing and ending
on the date of the PDN/MIV Closing substantially on the terms set forth on
Exhibit 1.2 (the "Management Agreement").
- -----------
1.3 Public Offering. HHCA filed with the Securities and Exchange
---------------
Commission ("SEC") on November 1, 1996 a registration statement for an
underwritten public offering (the "Public Offering") of shares of common stock
of HHCA ("Registration Statement"). Each of HHCA's nominees and the Selling
Parties shall use all reasonable efforts to assist HHCA in having the
Registration Statement declared effective under the Securities Act of 1933, as
amended ("Securities Act"), as promptly as practicable after such filing. The
Purchasing Parties and the Selling Parties shall cooperate to take any action
required to be taken under any applicable state securities or "blue sky" laws in
connection with the Public Offering. The Selling Parties shall furnish promptly
to HHCA and its counsel for inclusion in any prospectus and the Registration
Statement in connection with the Public Offering in a form reasonably
satisfactory to HHCA and its counsel, such information concerning each of
Holdings, LHS, Nurses, PDN and MIV, its respective operations, capitalization,
stock ownership, financial statements, businesses, assets and other matters as
HHCA or its counsel may reasonably request in connection with the Public
Offering, including without limitation, audited financial statements (including
pro formas) for any period prior the date of the PDN/MIV Closing. The Purchasing
Parties agree to reimburse the Selling Parties (in an amount not to exceed
$50,000) for the reasonable fees and expenses of the Selling Parties'
independent certified public accounting firm for its work in connection with the
Registration Statement. The information supplied by any of the Selling Parties
to be included in the Registration Statement or in any prospectus made a part
thereof, or in any amendments thereof or supplements thereto, will not, taken as
a whole, at the date the Registration Statement (or on the date of any
amendments thereof or supplements thereto) is declared effective by the SEC and
on the closing of the Public Offering, (i) contain any statement that, at such
time and in light of the circumstances under which it was made, will be false or
misleading with respect to any material fact, or (ii) omit to state any material
fact
2
<PAGE>
required to be stated therein or necessary in order to make the statements made
therein not misleading or necessary to correct any statement in any earlier
communication with respect to the Public Offering that has become false or
misleading.
1.4 Winding-Up of LHS, Nurses, PDN and MIV. Notwithstanding anything to
--------------------------------------
the contrary contained herein or in the Employment Agreements, the Purchasing
Parties shall permit each of the Executives to devote such time during regular
business hours as may be reasonably necessary to the winding-up of LHS and
Nurses (commencing on the date of the LHS/Holdings Closing) and the winding-up
of PDN and MIV (commencing on the date of the PDN/MIV Closing) with respect to
billings, collection of Accounts Receivable, preparation of cost reports, cost
report audits and related managerial and administrative duties; provided that:
(i) such activities do not, in the Purchasing Parties' reasonable opinion,
interfere in any material respect with the performance of Executives' duties
under the Employment Agreements; (ii) the Executives use their best efforts to
give priority to their HHCA-related work in the event of a conflict; and (iii)
Executives shall not be permitted to devote time to such duties during regular
business hours after the conclusion of the final procedural step with respect to
any third-party reimbursement program audit for any period prior to the date of
the LHS/Holdings Closing.
1.5 Confidentiality.
---------------
(a) As used in this Agreement, the term "Confidential Information"
shall mean all confidential and proprietary knowledge and information not
readily available to the public heretofore or hereafter conceived, learned or
disclosed (including all documents, writings, memoranda, business plans,
computer software, reports, pricing, cost and sales information, financial
statements, customer lists, provider lists, patient lists, referral source and
supplier lists, trade secrets, discoveries, ideas, concepts, models, prototypes,
diagrams and marketing strategies, plans and techniques).
(b) From and after the date hereof, the Selling Parties shall (and
shall use their respective best efforts to cause the Related Parties to) keep
secret and retain in strictest confidence, and shall not, without the Purchasing
Parties' express prior written consent, directly or indirectly, disclose,
disseminate, publish, reproduce, retain, use (for their benefit or for the
benefit of others), or otherwise make available in any manner whatsoever, any
Confidential Information regarding the Selling Parties or the Purchasing Parties
(or the Acquisition Agreements, this Agreement or the transactions contemplated
hereby) to anyone except (i) to their representatives (who shall be informed of
the confidential nature of such information and who shall agree to keep such
information confidential), (ii) to the Purchasing Parties and their affiliates
or representatives, (iii) as otherwise required by law, including securities
laws, (iv) as required by the Selling Parties to the extent necessary to enforce
their rights or to enjoy any benefit under this Agreement or the Acquisition
Agreements including, by way of illustration and not limitation, to collect
accounts receivable, to make such filings with third-party payors as may be
appropriate, to defend program audits and the like, or (v) as required to obtain
the Regulatory Approvals or any consents that are required for consummation of
the transactions contemplated by the Acquisition Agreements; provided, however,
that prior to the date of the LHS/Holdings Closing the Selling Parties shall be
permitted to use such Confidential Information as may be necessary to conduct
the Business in the ordinary course and
3
<PAGE>
thereafter to do so as may be required to enforce their rights, or to enjoy any
benefit, under this Agreement or the Acquisition Agreements; and provided
further that during the period from the date of the LHS/Holdings Closing until
the date of the PDN/MIV Closing, the Selling Parties shall be permitted to use
such Confidential Information relating to PDN and MIV as may be necessary to
conduct the portion of the Business conducted by PDN and MIV in the ordinary
course and thereafter to do so as may be required to enforce their rights, or to
enjoy any benefit, under this Agreement or the Acquisition Agreements.
(c) From and after the date hereof and continuing until the date of
the LHS/Holdings Closing (with respect to any Confidential Information regarding
the Selling Parties) and from and after the date of the LHS/Holdings Closing
until the date of the PDN/MIV Closing (with respect to Confidential Information
regarding PDN and MIV), the Purchasing Parties shall keep secret and retain in
strictest confidence, and shall not, without the Selling Parties' express prior
written consent, directly or indirectly, disclose, disseminate, publish,
reproduce, retain, use (for its benefit or for the benefit of others) or
otherwise make available in any manner whatsoever, any Confidential Information
regarding the Selling Parties (or the Acquisition Agreements, this Agreement or
the transactions contemplated hereby) to anyone except (i) to its
representatives (who shall be informed of the confidential nature of such
information and who shall agree to keep such information confidential), (ii) as
otherwise required by law, including securities laws, (iii) as required by its
lenders or underwriters, (iv) as required by the Purchasing Parties to enforce
their rights under this Agreement, or (v) as required to obtain the Regulatory
Approvals. Notwithstanding the foregoing, the Purchasing Parties may following
execution of the Acquisition Agreements, issue a statement of public
dissemination describing the Acquisition Agreements, this Agreement and the
transactions contemplated herein.
1.6 Restrictive Covenant. Each of the Selling Parties acknowledges that
--------------------
(a) Holdings', LHS's, Nurses', PDN's and MIV's ownership of the Business and the
Shareholder's ownership of stock of Holdings, PDN and MIV and Shareholder's
position as an officer of Holdings, LHS, Nurses, PDN and MIV have necessarily
brought each of them in close contact with certain confidential and proprietary
information of the Business (including the Confidential Information) not readily
available to the public; and (b) the Purchasing Parties would not purchase the
Business but for the agreements and covenants of the Selling Parties contained
in this Section 1.6. In respect of the foregoing, each of the Selling Parties
-----------
covenants and agrees, for a period of three (3) years from the date of the
LHS/Holdings Closing (which period of time shall be extended as appropriate for
any period(s) of time that any applicable party is in violation of the
provisions of this Section 1.6) that none of the Selling Parties shall, directly
-----------
or indirectly:
(i) be engaged, either for their own account or as agent,
consultant, employee, partner, shareholder, creditor, officer, director,
proprietor, investor, or otherwise of any person in a business similar to the
Business within the State of Texas (the "Territory"), unless the Purchasing
Parties shall agree otherwise in writing;
(ii) call on or solicit or divert or take away from Purchasing
Parties (including by divulging to any competitor or potential competitor of the
Purchasing Parties) any person that is or was a patient, customer or referral
source of the Business;
4
<PAGE>
(iii) render financial or other assistance to any person engaged in a
business similar to the Business in the Territory, unless the Purchasing Parties
shall agree otherwise in writing or the Selling Parties are acting exclusively
on behalf of the Purchasing Parties; or
(iv) solicit or employ or cause to be solicited or employed, for or
on behalf of the Selling Parties or any third party, any persons who are
employees of Holdings, LHS, Nurses, PDN or MIV immediately prior to the date of
the LHS/Holding Closing or at any time in the six (6) month period immediately
prior thereto.
Notwithstanding anything in this Section 1.6 to the contrary, during the period
-----------
commencing on the date of the LHS/Holdings Closing and ending on the date of the
PDN/MIV Closing, the Selling Parties shall be permitted to engage in the
activities described in Sections 1.6(i) and 1.6(iii) above in connection with
----------------------------
the conducting of the portion of the Business conducted by PDN and MIV in
accordance with Section 5 of the PDN/MIV Acquisition Agreement.
1.7 Replacement Financing. Each of Holdings, LHS, Nurses, PDN and MIV
---------------------
hereby agrees to execute, deliver and perform on behalf of any successor or
replacement lender to the Senior Lender, a subordination agreement on terms
substantially similar to the terms of the Subordination Agreement.
1.8 Use of Names. From and after the date of the LHS/Holdings Closing,
------------
the Selling Parties shall not conduct business: (i) in any location under the
name "Liberty Health Services" or "Nurses Today" or any variation thereof or
(ii) under the name "LHS" in the State of Texas. The Selling Parties shall,
effective as of the LHS/Holdings Closing, amend the articles of incorporation of
LHS and Nurses to change their respective names to dissimilar names, withdraw or
terminate any foreign qualification filing in Texas of Holdings, and shall
provide the Purchasing Parties with satisfactory evidence thereof. From and
after the date of the PDN/MIV Closing, the Selling Parties shall not conduct
business in any location under the name "PDN" or "Medical I.V." or any variation
thereof. The Selling Parties shall, effective as of the PDN/MIV Closing, amend
the articles of incorporation of PDN and MIV to change their respective names to
dissimilar names and shall provide the Purchasing Parties with satisfactory
evidence thereof.
2. Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the Selling Parties and the Purchasing Parties contained in the
Acquisition Agreements (or in any schedule or certificate delivered thereunder)
shall survive the consummation of the transactions contemplated by the
Acquisition Agreements, without regard to any investigation made by any of the
parties hereto, and shall expire on June 30, 1998; provided, however, that the
-------- -------
representations and warranties (and all claims and causes of action with respect
thereto) in Sections 3.1, 3.2, 3.3, 3.14, 3.18, 3.21, 3.22, 3.23, 3.26, 4.1,
4.2 and 4.3 of the Acquisition Agreements shall survive the date of the PDN/MIV
Closing until the expiration of the applicable statute of limitations. The
termination of the representations and warranties provided herein shall not
affect the rights of a party seeking indemnification under this Agreement,
provided that such party shall have given written notice to the other party,
prior to the expiration of the applicable survival period provided above, of:
(a) a claim for indemnification or (b) a contingent claim for indemnification
(provided that the party seeking indemnification for such contingent claim has
reasonable grounds to believe that the claim
5
<PAGE>
or demand for indemnification will be made and sets forth the estimated amount
of such claim to the extent then ascertainable).
3. Indemnification.
---------------
3.1 Obligation to Indemnify by the Selling Parties. Subject to the terms
----------------------------------------------
of Section 2, the Selling Parties agree to indemnify, defend and hold harmless
---------
the Purchasing Parties (their respective affiliates, and their respective
directors, officers, stockholders, representatives and employees), from and
against all losses, Taxes, liabilities, damages, lawsuits, deficiencies, claims,
demands, costs or expenses, including interest, penalties, and reasonable
attorneys', accountants' and other professionals' fees and disbursements
("Losses"), based upon, incurred in connection with, arising out of or otherwise
in respect of (a) any inaccuracy in or any breach of any representation or
warranty of the Selling Parties contained in the Acquisition Agreements or in
any document delivered pursuant to the Acquisition Agreements, (b) any breach of
any covenant or agreement of the Selling Parties contained in the Acquisition
Agreements, this Agreement or in any document or instrument contemplated
thereunder or hereunder, (c) the Release or presence of any Regulated Substance
at the Real Property at any time prior to the date of the LHS/Holdings Closing
with respect to any Real Property owned or occupied by LHS, Nurses, or Holdings
or prior to date of the PDN/MIV Closing with respect to any Real Property owned
or occupied by PDN or MIV, or (d) any liability or obligation of the Selling
Parties that is not an Assumed Liability.
3.2 Obligation to Indemnify by the Purchasing Parties. Subject to the
-------------------------------------------------
terms of Section 2, the Purchasing Parties agree to indemnify, defend and hold
---------
harmless the Selling Parties (their affiliates, and their respective directors,
officers, stockholders, representatives and employees) from and against all
Losses based upon, incurred in connection with, arising out of or otherwise in
respect of (a) any inaccuracy in or any breach of any representation or warranty
of the Purchasing Parties contained in the Acquisition Agreements or in any
document delivered pursuant to the Acquisition Agreements, (b) any breach of any
covenant or agreement of the Purchasing Parties contained in the Acquisition
Agreements, this Agreement or in any document or instrument contemplated
hereunder or thereunder, (c) any liability or obligation arising on and after
the date of the LHS/Holdings Closing with respect to any Assumed Liability under
the LHS/Holdings Acquisition Agreement or the date of the PDN/MIV Closing with
respect to any Assumed Liability under the PDN/MIV Acquisition Agreement, or (d)
any liability or obligation resulting from any Action described in Section 7.4
of the Acquisition Agreements for which the Purchasing Parties have agreed in a
separate writing to indemnify the Selling Parties.
3.3 Losses. The term "Losses" as used herein (a) is not limited to
------
matters asserted by third parties against the Selling Parties or the Purchasing
Parties, but includes Losses incurred or sustained by the Selling Parties or the
Purchasing Parties in the absence of third-party claims, and (b) includes Losses
incurred through and after the date of the claim for indemnification (including
any Losses suffered after the end of any applicable survival period), provided
that in the case of a claim for Losses incurred because of the breach of a
representation or warranty hereunder, such claim is made within the applicable
survival period under Section 2. Payments by the Purchasing Parties of amounts
---------
for which the Purchasing Parties are indemnified hereunder, and payments by the
Selling Parties of amounts for which the Selling Parties are indemnified
hereunder, shall not be
6
<PAGE>
condition precedent to recovery. The indemnification rights contained in
Section 3 shall not limit any other rights, including rights of contribution
- ---------
with respect to environmental liabilities, that either party may have under
statute or common law.
3.4 Procedures for Claims Between the Parties. If a claim (a "Claim") is
-----------------------------------------
to be made by the party claiming indemnification (the "Claimant") against the
other party (the "Indemnifying Party"), the Claimant shall give written notice
(a "Claim Notice") to the Indemnifying Party as soon as practicable after the
Claimant becomes aware of the facts, condition or event that may give rise to
Losses for which indemnification may be sought under this Section 3. Following
---------
receipt of the Claim Notice from the Claimant, the Indemnifying Party shall have
thirty (30) calendar days to make such investigation of the Claim as the
Indemnifying Party deems necessary or desirable; provided, however, that if
-------- -------
Claimant reasonably determines that it will be materially prejudiced by
affording the Indemnifying Party such period of time for investigation, the
Indemnifying Party and the Claimant shall agree promptly on the appropriate
period of time for such investigation. For the purposes of such investigation,
the Claimant agrees to make available to the Indemnifying Party and/or its
authorized representative(s) the information relied upon by the Claimant to
substantiate the Claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of said thirty (30) day period (or any mutually agreed
upon period or extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall pay promptly to the Claimant the full amount of such
Claim. If the Claimant and the Indemnifying Party do not agree within said
period (or any mutually agreed upon period or extension thereof), the Claimant
may seek appropriate legal remedy.
3.5 Defense of Third-Party Actions. If any lawsuit or enforcement action
------------------------------
(a "Third Party Action") is filed against a Claimant entitled to the benefit of
indemnity hereunder, written notice thereof (the "Third-Party Action Notice")
shall be given by Claimant to the Indemnifying Party as promptly as practicable
(and in any event within fifteen (15) calendar days after the service of the
citation or summons or other manner of process). The failure of any Claimant to
give notice timely hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure. After such notice, if the Indemnifying Party
shall acknowledge in writing to the Claimant that the Indemnifying Party shall
be obligated under the terms of its indemnity hereunder in connection with such
Third-Party Action, then the Indemnifying Party shall be entitled, if it so
elects, (i) to take control of the defense and investigation of such Third-Party
Action, (ii) to employ and engage attorneys reasonably satisfactory to the
Claimant to handle and defend the same, at the Indemnifying Party's cost, risk
and expense, and (iii) to compromise or settle such Third-Party Action, which
compromise or settlement shall be made only with the written consent of the
Claimant, such consent not to be unreasonably withheld. If the Indemnifying
Party fails to assume the defense of such Third-Party Action within fifteen (15)
calendar days after receipt of the Third-Party Action Notice, the Claimant will
(upon delivering notice to such effect to the Indemnifying Party) have the right
to undertake, at the Indemnifying Party's cost and expense, the defense,
compromise or settlement of such Third-Party Action on behalf of and for the
account and risk of the Indemnifying Party; provided, however, that such Third-
-------- -------
Party Action shall not be compromised or settled without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. In the event the Claimant assumes the defense of the
Third-Party Action, the Claimant will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement. The
7
<PAGE>
Indemnifying Party shall be liable for any settlement of any Third-Party Action
effected pursuant to and in accordance with this Section 3 and for any final
---------
judgment (subject to any right of appeal), and the Indemnifying Party agrees to
indemnify and hold harmless Claimant from and against any Losses by reason of
such settlement or judgment.
3.6 Bulk Sales. It may not be practicable to comply or attempt to comply
----------
with the procedures of the "Bulk Sales Act," if applicable, or similar law of
any or all of the states in which the Purchased Assets are situated or of any
other state that may be asserted to be applicable to the transactions
contemplated hereby. Accordingly, to induce the Purchasing Parties to waive any
requirements for compliance with any or all of such laws, the Selling Parties
hereby agree that the indemnity provisions of this Section 3 hereof shall apply
---------
to any Losses of the Purchasing Parties arising out of or resulting from the
failure of the Selling Parties or the Purchasing Parties to comply with any such
laws.
3.7 Interest on Unpaid Obligations. If all or part of any indemnification
------------------------------
obligation under this Agreement is not paid when due, the Indemnifying Party
shall pay the Claimant interest on the unpaid amount of such obligation for each
day from the date the amount became due until it is paid in full, interest at
the rate of 200 basis points in excess of the prime rate in effect from time to
time at CoreStates Bank, N.A., Philadelphia, Pennsylvania, or any successor
thereto.
3.8 Reduction for Insurance. The amount which an Indemnifying Party is
-----------------------
required to pay to, for or on behalf of the Claimant pursuant to this Section 3
---------
shall be reduced (including, without limitation, retroactively) by eighty
percent (80%) of any insurance proceeds actually recovered by or on behalf of
such Claimant in reduction of the related indemnifiable loss (the "Indemnifiable
Loss"). Amounts required to be paid, as so reduced, are hereafter called an
"Indemnity Payment". If a Claimant shall have received or shall have had paid
on its behalf an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently receive insurance proceeds in respect of such Indemnifiable Loss,
then such Claimant shall pay to such Indemnifying Party a sum equal to the
amount of eighty percent (80%) of such insurance proceeds up to an amount equal
to the Indemnity Payment).
4. Breaches and Defaults; Termination; Remedies.
--------------------------------------------
4.1 Breaches and Defaults; Opportunity to Cure. Prior to the exercise by
------------------------------------------
a party of any termination rights afforded under this Agreement, if either party
(the "Non-Breaching Party") believes the other (the "Breaching Party") to be in
breach of an Acquisition Agreement or hereunder, the Non-Breaching Party shall
provide the Breaching Party with written notice specifying in reasonable detail
the nature of such breach, whereupon the Breaching Party shall have fifteen (15)
calendar days from the receipt of such notice to cure such breach. If a breach
has in fact occurred but is not cured within such time period, then the
Breaching Party shall be in default hereunder and the Non-Breaching Party shall
be entitled to terminate the Acquisition Agreements and this Agreement (as
provided in Section 4.2). This right of termination shall be in addition to,
-----------
and not in lieu of, any legal or equitable remedies available to the Non-
Breaching Party.
8
<PAGE>
4.2 Termination. This Agreement and the Acquisition Agreements may be
-----------
terminated at any time prior to the LHS/Holdings Closing as follows:
(a) by mutual written agreement of the parties hereto;
(b) by the Purchasing Parties, provided the Purchasing Parties are not
then in breach of the Acquisition Agreements or this Agreement, at the election
of the Purchasing Parties (pursuant to a written notice to the Selling Parties),
(i) if any one or more of the conditions to the Purchasing Parties' obligations
to consummate the LHS/Holdings Closing under the LHS/Holdings Acquisition
Agreement has not been fulfilled in any material respect as of the date of the
LHS/Holdings Closing, (ii) subject to Section 4.1, if the Selling Parties have
breached in any material respect any representation, warranty, covenant or
agreement contained in the Acquisition Agreements or in any other agreement or
document delivered pursuant to the Acquisition Agreements, or (iii) if the
LHS/Holdings Closing shall not have taken place by January 15, 1997 (the
"Outside Date") (unless any of the foregoing events shall have resulted
primarily from the Purchasing Parties' breach of any representation, warranty,
covenant or agreement contained in this Acquisition Agreements or this
Agreement); and
(c) by the Selling Parties, provided the Selling Parties are not then
in breach of the Acquisition Agreements or this Agreement, at the election of
the Selling Parties (pursuant to a written notice to the Purchasing Parties),
(i) if any one or more of the conditions to the Selling Parties' obligations to
consummate the LHS/Holdings Closing has not been fulfilled in any material
respect as of the date of the LHS/Holdings Closing, (ii) subject to Section 4.1,
-----------
if the Purchasing Parties have breached in any material respect any
representation, warranty, covenant or agreement contained in the Acquisition
Agreements or this Agreement or in any other agreement or document delivered
pursuant to the Acquisition Agreements, or (iii) if the LHS/Holdings Closing
shall not have taken place by the Outside Date (unless any of the foregoing
events shall have resulted primarily from the Selling Parties' breach of any
representation, warranty, covenant or agreement contained in this Agreement).
Notwithstanding any provision that may be to the contrary in this Agreement or
in the Acquisition Agreements, the parties shall have no right to terminate this
Agreement and the Acquisition Agreements after the LHS/Holdings Closing occurs.
4.3 Effect of Termination. In the event of any termination of the
---------------------
Acquisition Agreements and this Agreement, all obligations of the parties hereto
thereunder and hereunder shall terminate as of such date of termination and the
Acquisition Agreements and this Agreement shall thereafter become void and be of
no further force and effect, and upon such termination no party hereto shall be
liable to the other party, except for Losses resulting from such termination and
from breaches of the Acquisition Agreement and this Agreement prior to such
termination; provided, however, that (a) the obligations contained in Sections
-------- ------- --------
1.5, 3 and 5.2 shall survive any termination hereof, and (b) the foregoing
- --------------
provisions shall not limit or restrict the availability of specific performance
(as provided in Section 4.4) or other injunctive relief as to the obligations
-----------
referred to in clause (a) to the extent that specific performance or such other
relief would otherwise be available to a party hereunder.
9
<PAGE>
4.4 Specific Performance. Each of the Selling Parties agrees that the
--------------------
Purchased Assets under the Acquisition Agreements and the Business are unique
assets that cannot be readily obtained on the open market and that the
Purchasing Parties will be irreparably injured if the Acquisition Agreements are
not specifically enforced. Therefore, notwithstanding anything to the contrary
contained in the Acquisition Agreements, this Agreement or otherwise, the
Purchasing Parties shall have the right (but not the obligation) to enforce
specifically the Selling Parties's performance under this Agreement (including
those obligations contained in Sections 1.1, 1.5 and 1.6) in lieu of the
--------------------------
termination of this Agreement and the Acquisition Agreements, and each of the
Selling Parties waives the defense in any such suit that the Purchasing Parties
have an adequate remedy at law and will interpose no opposition, legal or
otherwise, as to the propriety of specific performance as a remedy. The remedies
described in this Section 4.4 shall be in addition to, and not in lieu of, any
-----------
other remedies that the Purchasing Parties may elect to pursue.
5. Miscellaneous.
-------------
5.1 Consent to Jurisdiction. All actions to enforce the provisions of
-----------------------
this Acquisition Agreements and this Agreement shall be brought in the
Commonwealth of Pennsylvania and, in connection therewith, each of the parties
hereto (a) submits and consents to the personal jurisdiction of any Pennsylvania
state or federal court with respect to any suit, action or proceeding relating
to this Agreement or any of the transactions contemplated hereby, (b) waives any
objection that such party may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in any such court, and waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum, (c) waives the right to object that any
such court does not have personal jurisdiction over such party, and (d) consents
to the service of process in any such suit, action or proceeding upon the
receipt through the United States mail of copies of such process to such party
by certified mail to the addresses indicated herein or at such other addresses
of which the other parties shall have received written notice.
5.2 Expenses. Except as otherwise specifically provided herein, the
--------
parties to this Agreement shall bear their respective expenses incurred in
connection with the preparation, negotiation, execution and performance of the
Acquisition Agreements and this Agreement and the transactions contemplated
hereby, including all fees and expenses of agents, advisors, representatives,
consultants, counsel and accountants. Notwithstanding the foregoing, in the
event that the Acquisition Agreements and this Agreement are terminated pursuant
to Section 4.2(c),the Purchasing Parties shall reimburse the Selling Parties for
--------------
the reasonable out-of-pocket costs and expenses (including the reasonable fees
of attorneys and accountants) incurred by them in connection with the
Acquisition Agreements and this Agreement.
5.3 Further Assurances. Each of the parties shall execute such agreements
------------------
and documents and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby. Each such party shall use its reasonable best efforts to fulfill or
obtain the fulfillment of the conditions to the LHS/Holdings Closing and the
PDN/MIV Closing, including the execution and delivery of any other agreement or
document, the execution and delivery of which are conditions precedent to the
LHS/Holdings Closing or the PDN/MIV Closing.
10
<PAGE>
5.4 Indemnification of Brokerage. Each party agrees to indemnify and save
----------------------------
the others harmless from any claim or demand for commissions or other
compensation by any broker, finder, agent or similar intermediary claiming to
have been employed by or on behalf of such party, and to bear the cost of legal
fees and expenses incurred in defending against any such claim.
5.5 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant, or any part of
any covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
5.6 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given when
received if delivered personally against receipt; when transmitted if
transmitted by facsimile, electronic or digital transmission method with
electronic confirmation; the next day if sent for next day delivery by a
nationally recognized overnight courier service; or upon receipt if sent by
certified, registered or express mail, return receipt requested, postage
prepaid. In each case notice shall be sent as follows:
(a) if to the Purchasing Parties, to:
Home Health Corporation of America, Inc.
2200 Renaissance Boulevard / Suite 300
King of Prussia, PA 19406-2755
Phone: (610) 272-1717
FAX: (610) 272-3131
Attention: Mr. Bruce J. Feldman, President
with a required copy to:
Kleinbard Bell & Brecker
1900 Market Street, Suite 700
Philadelphia, PA 19103
Phone: (215) 568-2000
FAX: (215) 568-0140
Attention: Howard J. Davis, Esquire
11
<PAGE>
(b) if to the Selling Parties, to:
LHS Holdings, Inc.
13400 U.S. Highway 42, Suite 290
Prospect, KY 40059
Phone: (502) 228-9698
FAX: (502) 228-7016
Attention: Mr. Mark H. O'Brien, President
with a required copy to:
Craig L. Sparks, Esquire
Four Market Centre
201 East Market Street, P.O. Box 768
Jeffersonville, IN 47131-0768
Phone: (812) 288-7732
FAX: (812) 288-7866
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
5.7 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits) together with the Acquisition Agreements and the agreements,
certificates and other documents delivered thereunder or hereunder contain the
entire agreement between the parties with respect to the transactions described
herein, and supersede all prior agreements, written or oral, with respect
thereto.
5.8 Amendments and Waivers; Non-Contractual Remedies. This Agreement may
------------------------------------------------
be modified or amended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at law or
in equity.
5.9 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania without regard to
principles of conflicts of law or any rule of interpretation or construction as
to which party drafted this Agreement, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity that is a
party to or the subject of this Agreement (as to those matters of law, the
jurisdiction under which the respective entity derives its powers shall govern).
12
<PAGE>
5.10 Binding Effect; Assignment. Neither this Agreement nor any of the
--------------------------
rights or obligations hereunder may be assigned (including by operation of law)
by any party without the prior written consent of the other party, except that
the Purchasing Parties may, without such consent, assign any and all such rights
and obligations to any affiliate, provided that the Purchasing Parties shall
remain liable for the discharge of such obligations, and the Purchasing Parties
may, without such consent, assign any and all such rights and obligations to any
purchaser of the Purchased Assets under the Acquisition Agreements. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
5.11 Joint and Several. Notwithstanding anything to the contrary herein
-----------------
contained or otherwise: (i) the obligations of the Selling Parties under this
Agreement shall be joint and several; and (ii) the obligations of the Purchasing
Parties under this Agreement shall be joint and several
5.12 Beneficiaries of Agreement. The covenants and agreements expressed
--------------------------
in this Agreement are for the sole benefit of the respective other parties
hereto and are not intended to benefit, and may not be relied upon or enforced
by, any other person as a third party beneficiary or otherwise.
5.13 Counterparts; Facsimile Signatures. This Agreement may be executed
----------------------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto. Facsimile signatures on this Agreement and any of the
agreements and documents executed in connection herewith shall be deemed
original signatures.
5.14 Exhibits and Schedules. The Exhibits and Schedules are a part of
----------------------
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
5.15 Holidays. Whenever this Agreement provides for a date, day or period
--------
of time on or prior to which actions or events are to occur or not occur, and if
such date, day or last day of such period of time falls on a Saturday, Sunday,
or legal holiday, then the same shall be deemed to fall on the immediately
following business day.
5.16 Headings. The headings in this Agreement are for reference only,
--------
and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOME HEALTH CORPORATION OF AMERICA, INC.
By:
----------------------------------------
Bruce J. Feldman, President
[Signatures continued on next page.]
13
<PAGE>
LHS HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
LIBERTY HEALTH SERVICES, INC.
By:
----------------------------------------
Name:
Title:
NURSES TODAY M/C, INC.
By:
----------------------------------------
Name:
Title:
PDN, INC.
By:
----------------------------------------
Name:
Title:
MEDICAL I.V., INC.
By:
----------------------------------------
Name:
Title:
-------------------------------------------
Mark H. O'Brien, Individually
14
