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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): DECEMBER 16, 1999
(DECEMBER 3, 1999)
ACCREDO HEALTH, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-25769 62-1642871
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1640 Century Center Pkwy
Suite 101
Memphis, Tennessee 38134
(Address of principal executive offices) (Zip Code)
(901) 385-3688
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 2. ACQUISITION
On December 3, 1999, Accredo Health, Incorporated (the "Company"),
through its wholly-owned subsidiary Hemophilia Health Services, Inc., acquired
all of the outstanding stock of Sunrise Health Management, Inc. ("Sunrise") from
its shareholders Margo Grbinich-Hunt and Mark B. Epstein pursuant to a Stock
Purchase Agreement dated effective as of December 1, 1999 (the "Stock Purchase
Agreement"). Sunrise is headquartered in Norcross, Georgia and Ms. Grbinich-Hunt
will continue to provide executive services to Sunrise for at least the next six
months. Sunrise is a provider of pharmaceutical care for certain chronic,
long-term patient populations, including those requiring intravenous
immunoglobulin, clotting factor and growth hormone.
The aggregate purchase price for Sunrise was approximately $13,500,000,
plus a potential earn-out payment of up to $1,000,000 if certain financial goals
are achieved by Sunrise during the six-month period ending May 31, 1999. The
Company also paid $500,000 as consideration for an agreement with the selling
shareholders and an officer of the corporation not to compete with the Company
in certain product lines. $1,400,000 of the consideration received by the
selling shareholders is currently being held in escrow to secure potential
indemnification claims for breaches of the sellers' representations and
warranties. Absent a claim for indemnification, the funds held in escrow will be
released to the sellers one year after the purchase date. To finance the
acquisition, the Company borrowed $14,000,000 pursuant to the terms of its
Revolving Credit Facility with a syndicate of banks led by Bank of America, as
Agent.
The selling shareholders of Sunrise have agreed to jointly file an
election with the Company under Section 338(h)(10) of the Internal Revenue Code
to treat the purchase of the stock as an asset purchase for tax purposes.
The descriptions contained herein of the transaction are qualified in
their entirety by reference to the Stock Purchase Agreement attached hereto as
Exhibit 2.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The required financial statements of Sunrise Health
Management, Inc. are not included in this current Report on
Form 8-K and will be filed by amendment within 60 days after
the date this initial Report on Form 8-K is required to be
filed as provided by Item 7(a)(4).
(b) Pro Forma Financial Information.
The required pro forma financial statements are not included
in this current Report on Form 8-K and will be filed by
amendment within 60 days after the date this initial Report on
Form 8-K is required to be filed as provided by Item 7(a)(4).
(c) Exhibits:
2.1 Stock Purchase Agreement, dated as of December 1, 1999, among
Margo Grbinich-Hunt, Mark B. Epstein, Hemophilia Health
Services, Inc. and Sunrise Health Management, Inc.
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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.
ACCREDO HEALTH, INCORPORATED
By: /s/ Joel R. Kimbrough
Joel R. Kimbrough
Chief Financial Officer
Date: December 16, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------- -----------------------
<S> <C>
2.1 Stock Purchase Agreement, dated as of December 1, 1999, among
Margo Grbinich-Hunt, Mark B. Epstein, Hemophilia Health
Services, Inc. and Sunrise Health Management, Inc.
</TABLE>
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
MARGO GRBINICH-HUNT
MARK B. EPSTEIN
HEMOPHILIA HEALTH SERVICES, INC.
AND
SUNRISE HEALTH MANAGEMENT, INC.
DATED AS OF DECEMBER 1, 1999
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 1, 1999 among MARGO
GRBINICH-HUNT ("Hunt"), MARK EPSTEIN ("Epstein"), HEMOPHILIA HEALTH SERVICES,
INC., a Delaware Corporation (the "Company"), and SUNRISE HEALTH MANAGEMENT,
INC., A GEORGIA CORPORATION ("Sunrise"). Hunt and Epstein are sometimes referred
to herein individually as "Seller" and collectively as "Sellers".
WHEREAS, Sellers collectively as of the Closing Date (as hereafter
defined) will own all of the issued and outstanding capital stock of Sunrise;
and
WHEREAS, Sellers wish to sell to the Company, and the Company wishes to
purchase from Sellers, all of the shares of capital stock of Sunrise owned by
Sellers for cash on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
PURCHASE OF SUNRISE SHARES BY THE COMPANY FROM SELLERS;
ADJUSTMENT TO PURCHASE PRICE;
CLOSING DATE
SECTION 1.01 Purchase and Sale of Sunrise Shares. Subject to the terms
and conditions hereinafter set forth, on the Closing Date, Sellers agree to sell
to the Company, or it's designee, and the Company, or it's designee, agrees to
purchase from Sellers, all of the issued and outstanding shares (consisting of
954,777 shares of $0.01 Par Common Stock), of Sunrise (the "Shares"), for an
aggregate price of Thirteen Million Five Hundred Thousand ($13, 500,000.00)
Dollars, plus the amount determined pursuant to Section 1.05 hereof (the
"Earnout Amount") (the "Purchase Price"), such price being subject to increase
or decrease as provided in Section 1.03. As payment in full for the Shares, the
Company shall, against delivery of a certificate or certificates evidencing the
Shares from Hunt and Epstein registered in the Company's name, pay an amount
equal to the aggregate Purchase Price for the Shares as follows:
(a) One Million Four Hundred Thousand ($1,400,000.00) Dollars
shall be placed in escrow to be disbursed pursuant to the
Escrow Agreement which is attached hereto as Exhibit 1.01(a)
and made a part hereof.
(b) Per Seller's request and direction, 9.67% of the Purchase
Price as adjusted shall be paid to the Trust Account of McLain
& Merritt for the benefit of, and in exchange for and against
delivery of shares owned by, those shareholders listed in
exhibit 1.01(b)("Other Shareholders")
(c) The Earnout Amount will be calculated and payable in the
manner provided in Section 1.05.
(d) 66.77% of the Purchase Price as adjusted shall be paid to Hunt
and 23.56% of the Purchase Price as adjusted shall be paid to
Epstein at closing.
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SECTION 1.02 Other Agreements. In addition to the transactions to occur
on the Closing Date pursuant to Section 1.01, each of the Other Agreements
listed in Schedule 5.01 shall be executed and delivered by the parties thereto
on the Closing Date concurrently with the consummation of such transactions.
SECTION 1.03. Adjustment to Purchase Price.
(a) Sunrise shall have delivered to Company two (2) days prior to
Closing the October 31, 1999 balance sheet of Sunrise (the "Estimated Closing
Balance Sheet") which is attached as Schedule 1.03. The Estimated Closing
Balance Sheet was prepared, based on good faith estimates, in accordance with
accounting principles consistently applied with those used in the preparation of
the unaudited financial statements for Sunrise referred to in Section 2.05, and
(i) is intended to fairly present, in all material respects, the estimated
balance sheet of Sunrise as of October 31, 1999. Sunrise will consult with
Company as to all pro forma adjustments (and will provide all such information
and supporting data in connection therewith as Company may request).
(b) If the Estimated Closing Balance Sheet shows Equity greater than
Eight Hundred Forty-Two Thousand ($842,000.00) Dollars, then on the Closing Date
the Purchase Price shall be adjusted by increasing the Purchase Price dollar for
dollar for each dollar that Equity exceeds Eight Hundred Forty-Two Thousand
($842,000) Dollars. Conversely, if the Estimated Closing Balance Sheet shows
Equity less than Eight Hundred Forty-Two Thousand ($842,000) Dollars, the
Purchase Price shall be reduced dollar for dollar for each dollar that Equity is
less than Eight Hundred Forty-Two Thousand ($842,000) Dollars.
(c) As promptly as practicable, but in no event later than sixty (60)
days after the Closing Date, Sunrise will cause to be prepared and delivered to
Sellers an unaudited final balance sheet for Sunrise as of the Effective Date
(the "Final Closing Balance Sheet"). The Final Closing Balance Sheet will be
compiled by Brooks, Holmes, Williams and Cook LLC and, except as indicated
therein, will be prepared in accordance with generally accepted accounting
principles applied consistently with those used in preparation of the financial
statements of Sunrise at June 30, 1999 and will (i) fairly present, in all
material respects, the actual balance sheet of Sunrise as of the Effective Date,
(ii) reflect any other modification, change or addition agreed to between
Sellers and the Company, and (iii) include a recalculation of Equity. Sellers
will consult with the Company as to all final adjustments which shall be
reasonably satisfactory to Sellers. The Final Closing Balance Sheet shall be
accompanied by a statement from Brooks, Holmes, Williams and Cook LLC stating
that the Final Closing Balance Sheet has been prepared in accordance with this
Section 1.03(c) and shall be subject to Section 1.03(e).
(d) If the Final Closing Balance Sheet shows Equity other than as shown
on the Estimated Closing Balance Sheet, the Purchase Price shall be
recalculated, and any further increase or decrease in the Purchase Price, after
giving effect to the adjustment provided in Section 1.03(b), shall be paid in
cash by the Company to Sellers, or by Sellers to the Company, as the case may
be. Any such cash payment shall be made by the Company or Sellers, as the case
may be, ten (10) days after the later of delivery of the Final Closing Balance
Sheet pursuant to paragraph (c) hereof or the resolution of any dispute in
accordance with Subsection (e) below by payment of such amount, in immediately
available funds, by wire transfer to an account designated in writing by the
Company or Sellers, as the case may be. If a decrease of Purchase Price results
based upon the adjustments to the Final Closing Balance Sheet, Sellers shall
have the option to direct that the payment due Company shall be paid from the
Purchase Price held in Escrow pursuant to Section 1.01(a), and shall give notice
to the Escrow Agent to disburse such payment to Company, provided, however, that
if such payment is greater than $50,000.00, Company may require Sellers to
immediately deposit into the Escrow from the Purchase Price paid pursuant to
Section 1.01(d) an amount equal to the payment made out of the Escrow to the
Company.
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(e) In the event of a disagreement between Company and Hunt and Epstein
as to the amounts determined pursuant to the Final Closing Balance Sheet,
Company and Sellers agree that they will designate a firm of nationally
recognized public accountants (other than Ernst & Young, LLP and any other firm
with a material relationship to any of the parties) mutually acceptable to
Company and Sellers to review the Final Closing Balance Sheet and the
adjustments provided therein, but a complete audit shall not be required or
performed without the consent of Sellers and Company. Company and Sellers
further agree that the determinations of such accounting firm as to any disputed
amount shall be conclusive. The expenses incurred in connection with the matters
described in Section 1.03(a) and (c) above shall be borne by Sunrise (and an
accrual therefore shall be reflected on the Final Closing Balance Sheet), and
the expenses incurred by the accounting firm retained pursuant to this Section
1.03(e) shall be shared by Sellers and the Company equally, and shall not be
charged to Sunrise or affect the Earnout.
(f) During the period of time that the adjusted price will be
determined, Mr. Jerry Hunt will be provided continued access to the records and
business operations of Sunrise for the purpose of participating in and
accounting for, and to the extent reasonably necessary, finalizing the Final
Closing Balance Sheet.
SECTION 1.04 Closing Date. The closing (herein the "Closing") of the
transactions described in Section 1.01 shall take place at the offices of McLain
& Merritt, 3445 Peachtree Road, N.E., Suite 500, Atlanta, Georgia, effective as
of Midnight, November 30, 1999, Atlanta time, or at such other date and time as
may be mutually agreed upon among the Company and Sellers (such date and time of
closing being herein called the "Effective Date" or the "Closing Date").
SECTION 1.05 Contingent Purchase Price Payment.
(a) The Earnout Amount shall be payable as specified below by wire
transfer of immediately available funds to such account or
accounts as Sellers shall specify. Payment of the Earnout Amount
shall be subject to setoff and reduction for any claims that
Company or its Affiliates may have against Sellers or their
Affiliates, including any claims for indemnification under
Article VII hereof.
The Earnout Amount shall equal the product of (a) $1,000,000.00
multiplied by (b) 100% minus the "Target Income Percentage
Deficiency," if any. The Target Income Percentage Deficiency
shall be the percentage determined from the product of (a) 4
times (b) the positive difference, if any, of (i) 100% minus (ii)
the "Pre-tax Income" divided by $1,250,000.00. The Pre-tax Income
shall equal the Pre-tax Income of Sunrise achieved during the
first full six months following the Effective Date (beginning
December 1, 1999 and ending May 31, 2000). An example calculation
is attached as Exhibit 1.05.
(b) For purposes of the foregoing, Pre-tax Income shall be determined
based upon Sunrise's books and records in accordance with GAAP
with (i) no allocation of corporate overhead expenses to Sunrise
that exceed the cost of those same services (i.e. legal,
accounting, services provided by Jerry Hunt) currently being paid
by Sunrise, and (ii) disregarding any amortization expenses
associated with intangible assets resulting from the acquisition
referenced herein. All direct expenses of Sunrise will be accrued
to Sunrise (for example, all bonuses, COBRA benefits, salary and
benefits, including salary and benefits to Hunt). Unless
otherwise agreed by Hunt, the calculation of Pre-Tax Income shall
exclude (i) any charges for accounting services and Sunrise's
collection consultant's charges which are currently designated on
the operating statement as "accounting" in excess of the average
of such charges for the six month period preceding the Effective
Date, excluding those associated with this transaction; (ii)
telephone, facsimile, electronic mail and similar
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communication expense and data processing expenses in excess of
the average of such charges for the six month period preceding
the Effective Date, unless such increases are necessary due to
increased volume; and (iii) any compensation of additional
personnel hired by Company or Sunrise without consent of Hunt,
such consent not to be unreasonably withheld and unless such
personnel are hired due to increased volume.
(c) Within 60 days after the end of the first full six months
following the Effective Date, Company shall submit to Sellers a
calculation, with reasonable detail, of the Earnout Amount, and
Sellers shall have 60 days to dispute such calculation by written
notice to Company. Company, Sunrise and Accredo shall made their
books and records of account, budgets, forecasts and capital
expense forecasts reasonably available to Sellers during the
period of the Earnout and the determination thereof solely for
use in verifying and calculating the Earnout Amount. Failure to
provide Company written notice of such dispute within such 60
days shall be deemed acceptance by Sellers of Company's
calculation. If Sellers do not dispute Company's calculation or
earlier accepts Company's calculation in writing, then Company
shall promptly remit the Earnout Amount to Sellers. If Sellers
dispute the calculation by written notice to Company within such
60 days, then Company and Sellers shall have 30 days to negotiate
in good faith to resolve the dispute. If such parties do not
reach a mutual resolution from such negotiations, then the
dispute shall be submitted to a nationally recognized public
accounting firm agreeable to each such party and with whom
neither such party (or any of its Affiliates) has had a
relationship within the past 24 months. Such accounting firm and
Sellers shall be given reasonable access to available records to
calculate the Earnout Amount, which calculation shall be
submitted by the accounting firm to Company and Sellers within 30
days. Each of Company and Sellers shall have 20 days thereafter
to submit to each other and the independent accountant written
comments on such calculation and an additional 15 days to
similarly submit to each other and the independent accountant
written rebuttal comments to each other's initial comments.
Within 15 days after the rebuttal comment period, the independent
accountant shall submit its final calculation to each of Company
and Sellers, which shall be final and binding on the parties
hereto, and after which Company shall promptly remit to Sellers
the Earnout Amount as so calculated. Company and Sellers shall
share equally the fees and expenses of such accounting firm.
Interest shall accrue on the Earn Out Amount commencing on the
Date Sellers give Notice of Dispute of the calculation, provided,
however, that Company may remit such amount as Company deems not
in dispute and interest shall thereupon accrue only on the
difference, if any, ultimately determined in accordance with this
Section 1.05(c). The rate of interest shall be that rate of
interest then published by SunTrust Bank, Atlanta, Georgia, as
its "prime" lending rate for commercial borrowers.
(d) Company agrees to operate Sunrise in good faith and in the normal
course of its and its Affiliates' operation of similar businesses
on a basis consistent with its and its Affiliates' prior
practices and will use reasonable efforts to achieve
profitability of Sunrise.
(e) The failure of Sunrise to generate an Earnout Amount shall not
effect the remainder of the Purchase Price.
SECTION 1.06 Deliveries. All deliveries, payments and other
transactions and documents relating to the Closing (i) shall be independent and
none shall be effective unless and until all are effective (except to the extent
that the party entitled to the benefit thereof has waived satisfaction or
performance thereof as a condition precedent to Closing), and (ii) shall be
deemed to be consummated simultaneously.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF SELLERS
Hunt and Epstein hereby severally and jointly represent and warrant to
the Company that on and as of the Closing Date, the statements in the following
sections are true, accurate and complete: (The representations and warranties of
the Sellers regarding matters pertaining to themselves in Sections 2.01, 2.02,
2.03, 2.04 or 2.35 are made severally and not jointly by Hunt and Epstein,
respectively, each as to herself, or himself, and not as to the other.)
SECTION 2.01 Organization, Qualification and Corporate Power;
Subsidiaries.
(a) Hunt is a resident of Lilburn, Georgia, and Epstein is a resident
of Snellville, Georgia, and each has the power and authority to
own the Shares and to execute, deliver and perform this Agreement
and the Other Agreements (as defined in Section 5.01(j)) to which
he or she is a party and to consummate the transactions
contemplated hereby and thereby.
(b) Sunrise is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Georgia and is
duly licensed or qualified as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or
leases any real property or in which the nature of business
transacted by it makes such licensing or qualification necessary.
Sunrise has the corporate power and authority to own and operate
its properties and to carry on its business as currently
conducted, to execute, deliver and perform this Agreement and the
Other Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. Set forth on
Schedule 2.01(b) is a list of all jurisdictions in which Sunrise
is qualified as a foreign corporation.
(c) Except as set forth on Schedule 2.01(c) Sunrise does not own any
shares of any corporation or other equity interest, either of
record, beneficially or equitably, in any association,
partnership, limited liability company, joint venture or other
legal entity, or have any commitment to acquire any such interest
or to make any loans or capital contributions to any such entity.
SECTION 2.02 Authorization of Agreements, Etc. The execution and
delivery by Sellers and Sunrise of this Agreement and the Other Agreements to
which it is a party, and the performance by Sellers and Sunrise of their
obligations hereunder and thereunder, have been duly authorized by all requisite
corporate, shareholder and other entity action required on the part of each and
will not violate any provision of law or any order of any court or other agency
of government applicable to Sellers or Sunrise, the Charter or By-laws of
Sunrise, or any provision of any indenture, agreement or other instrument to
which Sunrise or Sellers or any of their respective properties or assets is
bound, or conflict with, result in a breach of, create any right of termination
under or constitute (with due notice or lapse of time or both) a default under
any such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of Sunrise or Sellers or result in any suspension,
revocation, impairment, forfeiture or nonrenewal of, or any requirement to
obtain, any Governmental Permit (as hereinafter defined).
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by Sellers and Sunrise, and, subject to due execution by the Company,
constitutes, and with the Other Agreements, when executed and delivered by
Sellers and Sunrise as contemplated hereby, subject to the due execution by the
other parties thereto (other than Sunrise or Sellers), will constitute, the
legal, valid and binding obligations
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of Sunrise and Sellers, enforceable against them in accordance with their
respective terms, except as enforceability may be limited by bankruptcy or other
laws affecting creditors' rights generally and limitations on the availability
of equitable remedies.
SECTION 2.04 Capitalization; Ownership of Capital Stock.
(a) As of the Closing Date, the authorized capital stock of Sunrise
consists of One Million Two Hundred Fifty Thousand (1,250,000)
shares of $0.01 par value Stock. Nine Hundred Fifty-Four Thousand
Seven Hundred Seventy-Seven (954,777) shares of stock have been
duly and validly issued and are outstanding and fully paid and
non-assessable at closing.
(b) Except as set forth in Schedule 2.04(b), the Shares are owned by
Sellers free and clear of all liens, charges, security interests
or other encumbrances of any nature whatsoever ("Encumbrances").
All right, title and interest in and to the Shares is being sold,
assigned, transferred and delivered to the Company, and the
Company will receive valid title thereto, free and clear of any
and all Encumbrances.
(c) Except as otherwise set forth in Schedule 2.04(c) hereto (i) no
subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any shares of
any class of capital stock of Sunrise is authorized or
outstanding, (ii) there is not any commitment of Sunrise to issue
any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any
evidences of indebtedness or assets, and (iii) Sunrise has no
obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein
or to pay any dividend or make any other distribution in respect
thereof.
(d) (i) The holders of all outstanding options ("Optionholders") have
exercised their options on or prior to Closing in compliance with
all contractual and legal requirements applicable to said
exercise. (ii) At Closing, Sunrise has issued fully paid and
non-assessable stock to the Optionholders in exchange for the
exercise of these options. (iii) At Closing, Sellers have
acquired from the Other Shareholders all shares owned by the
Other Shareholders at such price per share as equal the price per
share paid to Sellers by Company hereunder; the purchase of said
shares from the Other Shareholders having been in full compliance
with all federal and state laws applicable thereto, including but
not limited to, state and federal securities laws and having been
consummated in such a manner that the Other Shareholders have no
further rights or claims contractual or otherwise, including
preemptive rights, against the Company or Sunrise, arising from,
with respect to, or related to, their ownership of shares or
options for shares of Sunrise.
SECTION 2.05 Financial Statements. Sunrise has previously delivered to
Company (i) unaudited financial statements for Sunrise as of and for the years
ending December 31, 1997 and December 31, 1998, and (ii) unaudited financial
statements for Sunrise as of, and for the nine month period ended September 30,
1999 (collectively, with the reports thereon included therewith, the "Financial
Statements"). The Financial Statements (i) were prepared from the books and
records of Sunrise, and (ii) except as otherwise set forth in Schedule 2.05
present fairly the financial position of Sunrise as of the respective dates
specified therein, and the income, and stockholders' equity for the respective
periods then ended. Except as set forth in Schedule 2.05, since September 30,
1999, there has been no material adverse change in the business, operations,
properties or condition (financial or other) of Sunrise.
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SECTION 2.06 Absence of Undisclosed Liabilities. Except as and to the
extent (i) reflected in the most recent balance sheet included in the financial
statements referred to in Section 2.05 hereof, (ii) incurred by Sunrise since
the date of such balance sheet in the ordinary course of business and consistent
with past practice, or (iii) set forth in Schedule 2.06 hereto, Sunrise has not
incurred any material liabilities or obligations of any kind or nature, whether
known or unknown or secured or unsecured (whether absolute, accrued, contingent
or otherwise, and whether due or to become due).
SECTION 2.07 Absence of Certain Changes or Events. Since the date of
its most recent balance sheet referred to in Section 2.05 (the "Interim Balance
Sheet Date"), except (i) as otherwise set forth in Schedule 2.07 hereto, or (ii)
as otherwise expressly contemplated in this Agreement, Sunrise has not:
(a) changed or amended its Charter or By-laws;
(b) borrowed any amount or incurred any material obligation or
liability (absolute or contingent), except current liabilities
incurred, and liabilities under contracts entered into, in the
ordinary course of business and consistent with past practice;
(c) discharged or satisfied any lien, security interest, charge or
other encumbrance or incurred or paid any obligation or liability
(absolute or contingent), other than current liabilities shown on
such Interim Balance Sheet and current liabilities incurred since
that date in the ordinary course of business and consistent with
the past practice;
(d) mortgaged, pledged or subjected to any lien, security interest,
charge or other encumbrance any of its assets or properties
(other than Permitted Liens as defined in Section 2.09 below);
(e) sold, transferred, assigned, leased or otherwise disposed of any
of its material assets or properties, except for fair
consideration in the ordinary course of business and consistent
with past practice, or acquired any assets or properties, except
in the ordinary course of business and consistent with past
practice;
(f) except for distributions actually made to Sunrise shareholders as
a subchapter S Corporation and as reflected on Sunrise's books
and records, declared, set aside or paid any distribution
(whether in cash, stock or property or any combination thereof)
in respect of its capital stock or redeemed or otherwise acquired
any of its capital stock or split, combined or otherwise
similarly changed its capital stock or authorized the creation or
issuance of or issued or sold any capital stock or any securities
or obligations convertible into or exchangeable therefor, or
given any person any right to acquire any capital stock, or
agreed to take any such action;
(g) made any distribution other than in the ordinary course of
business (whether in cash or property or any combination thereof
and whether in redemption or liquidation of an interest or
otherwise) to any person;
(h) made any investment of a capital nature, whether by purchase of
stock or securities, contributions to capital, property transfers
or otherwise, in any partnership, limited liability company,
corporation or other entity, or purchased any material property
or assets;
(i) canceled or compromised any debt or claim other than in the
ordinary course of business consistent with past practice;
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(j) intentionally or knowingly waived or released any rights of
material value, including without limitation, any Intangible
Rights (as defined in Section 2.10(b) below);
(k) intentionally or knowingly transferred or granted any rights
under or with respect to any Intangible Rights, or permitted any
license, permit or other form of authorization relating to an
Intangible Right to lapse;
(l) made or granted any wage, salary or benefit increase applicable
to any group or classification of employees generally, entered
into any employment contract with, made any loan to, or entered
into any material transaction of any other nature with, any
officer or employee of Sunrise;
(m) suffered any casualty loss or damage (whether or not such loss or
damage shall have been covered by insurance) which affects in any
material respect its ability to conduct its business;
(n) suffered any material losses, whether or not in the ordinary
course of business;
(o) received notification of cancellation or threatened cancellation
of, or cancelled, amended or intentionally or knowingly waived
any rights which, individually or in the aggregate, would have a
Material Adverse Effect as defined in Section 2.09; or
(p) made any material change in any method of accounting or
accounting practice; or
(q) hired, committed to hire or terminated any employee other than in
the ordinary course of business; or
(r) entered into any transaction which would have a Material Adverse
Effect as defined in Section 2.09 except in the ordinary course
of business; or conducted the business of Sunrise in any manner
which would have a Material Adverse Effect as defined in Section
2.09 other than the ordinary course of business consistent with
past practices, including without limitation, maintenance of
inventory levels, collection of third party accounts receivable
and payments of accounts payable.
(s) suffered any other change, event, or condition which, in any case
or in the aggregate, has had or is reasonably expected to have a
material adverse effect on its condition (financial or
otherwise), properties, assets, liabilities, operations, business
or prospects.
(t) agreed, whether in writing or otherwise, to take any action
described in this Section.
SECTION 2.08 Approvals. Except as set forth in Schedule 2.08 hereto, no
order, authorization, approval, license or consent from, or filing with, any
federal or state governmental or public body or other authority having
jurisdiction over Sellers or Sunrise, or any other third party, (i) is required
to be made or obtained by Sellers or Sunrise for the execution, delivery and
performance of this Agreement or any of the Other Agreements, (ii) is required
for the consummation of the transactions contemplated hereby and thereby, (iii)
is necessary in order to ensure the legality, validity, binding effect or
enforceability of this Agreement or any of the Other Agreements to which Sellers
or Sunrise is a party.
SECTION 2.09 Title to Properties, Absence of Liens and Encumbrances.
Sunrise does not own any real property. Sunrise has (or upon consummation of the
transactions to occur on the Closing Date will
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<PAGE> 10
have) good and valid title to all its other assets and properties, in each case
free and clear of all Encumbrances, other than (w) as set forth in Schedule
2.09, or disclosed in the Financial Statements, (x) liens for taxes not yet due
or, if due, being contested in good faith by appropriate proceedings, or (y)
mechanics', materialmen's, landlords' and similar statutory liens arising in the
ordinary course of business, or (z) liens, pledges or deposits under workers'
compensation, unemployment insurance, social security or similar legislation,
and all of which, in the aggregate, would not have a material adverse effect on
the business, properties or condition (financial or other) of Sunrise (a
"Material Adverse Effect") (the liens described in clauses (w), (x), (y) and (z)
above, together with liens that are released at or before Closing, being
referred to herein as "Permitted Liens").
SECTION 2.10 List of Properties, Contracts and Other Data. Attached
hereto as Schedule 2.10 is a list setting forth the following:
(a) a description of all leases of real or personal property to which
Sunrise is a party, either as lessee or lessor, including a
description of the parties to each such lease, the property to
which each such lease relates, and the rental term and monthly
(or other) rents payable under each such lease;
(b) (i) all patents, trademarks and trade names, business names,
trademark and trade name registrations, logos, service mark
registrations, copyright registrations, trade secrets and all
other material proprietary rights other than such rights relating
to Software (as hereinafter defined) set forth in Schedule 2.13
hereto (collectively, "Intangible Rights") owned by Sunrise
(specifying the nature of the rights therein), and (ii) all
licenses granted by or to Sunrise and all other material
agreements to which Sunrise is a party that relate, in whole or
in part, to any Intangible Rights mentioned in clause (i) above
or to other proprietary rights material to Sunrise, whether owned
by Sunrise or otherwise;
(c) all collective bargaining agreements, employment and consulting
agreements, independent contractor agreements (other than such
agreements entered into in the ordinary course of business and
which are terminable without penalty upon not more than 30 days
notice), executive compensation plans, bonus plans, deferred
compensation agreements, severance obligations, employee pension
plans or retirement plans, employee profit sharing plans,
employee stock purchase and stock option plans, group life
insurance, hospitalization insurance or other similar plans or
arrangements maintained for or providing benefits to employees
of, or independent contractors or other agents for, Sunrise; and
(d) all contracts, agreements, commitments, instruments and
obligations (whether written, oral, contingent or otherwise),
including without limitation guarantees, mortgages, indentures
and loan agreements, to which Sunrise is a party, or to which
Sunrise or any of its assets or properties is subject and which
are not specifically referred to in clauses (a), (b), or (c)
above, provided however, that there need not be listed in said
Schedule 2.10 pursuant to this clause (d) any sales contracts,
supply contracts with suppliers and other such contracts incurred
in the ordinary course of business and consistent with past
practice, other than any such contract which (i) is a contract or
group of related contracts which exceeds $10,000.00 in amount,
(ii) contains warranties by Sunrise in excess of those customary
in its business, or (iii) cannot be performed in the normal
course within 12 months after the Closing Date without breach or
penalty; and
(e) True and complete copies of all documents and complete
descriptions of all binding oral commitments (if any) referred to
in said Schedule 2.10 have been made available to the
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<PAGE> 11
Company and its counsel. All material provisions of the contracts
referred to in such Schedule are valid and enforceable
obligations of Sunrise, and, to the knowledge of Sellers of the
other parties thereto subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, and other similar laws
affecting the rights and remedies of creditors. Except as set
forth in Schedule 2.10, neither Sellers nor Sunrise has been
notified of any claim that any contract referred to in such
Schedule is not valid and enforceable in accordance with its
terms for the periods stated therein, or that there is under any
such contract any existing material default or event of default
or event which, with notice or lapse of time or both, would
constitute such a default.
SECTION 2.11 Third Party Payor and Supplier Contracts. Except as set
forth in Schedule 2.11, to Seller's knowledge, Sunrise has not lost any
customer, third-party payer or drug supplier contract since December 31, 1998,
or to the knowledge of Sellers suffered any diminution in its relationship with
any third party payer since that date, and, to the knowledge of Sellers, neither
Sunrise nor Sellers have received any notification that any specific customer,
third-party payor or drug supplier intends to cease doing business with Sunrise
in the event of a sale to Company or other change of ownership of Sunrise.
SECTION 2.12 Intangible Rights.
(a) Except as set forth in Schedule 2.12 (i) there are no outstanding
options, licenses or agreements of any kind relating to the
Intangible Rights, and Sunrise is in compliance with its material
contractual obligations relating to the protection of such of the
Intangible Rights used by it pursuant to licenses or other
contracts, (ii) Sunrise owns or has the right to use its
Intangible Rights to provide and sell the goods and services
provided and sold by it, and to conduct its business as
heretofore conducted, and the consummation of the transactions
contemplated hereby will not alter or impair its ownership or
right to use any such Intangible Rights, (iii) the use of said
Intangible Rights by Sunrise is without infringement of the
rights of others, and no claims are currently being asserted with
respect to the use by Sunrise of any of the Intangible Rights for
patent, copyright or trademark infringement, and (iv) to the
knowledge of Sellers, no person is infringing on or violating the
Intangible Rights or know-how owned by Sunrise.
(b) To the knowledge of Sellers, no Sunrise employee is obligated
under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would
conflict with his or her obligation to use his best efforts to
promote the interest of Sunrise or that would conflict with the
business of Sunrise now conducted. Neither the execution and
delivery of this Agreement nor the carrying on of the business of
Sunrise by the employees of Sunrise, will conflict with or result
in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument
under which any of such employees is now obligated.
SECTION 2.13 Software and Y2K Compliance.
(a) The operating and applications computer software programs and
databases used by Sunrise in the conduct of its business
(collectively, the "Software") are listed on Schedule 2.13
hereto. Except as set forth in Schedule 2.13 hereto, Sunrise
holds valid licenses to all copies of such Software material to
its business, and has not sold, licensed, leased or otherwise
transferred or granted any interest or rights to any thereof.
Except as set forth in Schedule 2.13 hereto, none of the Software
owned by Sunrise infringes upon or violates any patent,
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<PAGE> 12
copyright, trade secret or other proprietary right of any other
person and no claim with respect to any such infringement or
violation is threatened.
(b) Upon consummation of the transactions contemplated by this
Agreement, Sunrise will continue to license all the Software used
by it and material to its business, free and clear of all other
claims, liens, encumbrances, obligations and liabilities (other
than Permitted Liens or liens in favor of the Licensor) and, with
respect to all agreements for the lease or license of Software
which require consent or other actions as a result of the
consummation of the transactions contemplated by this Agreement
in order for Sunrise to continue to use and operate such Software
after the Closing Date, Sunrise will have obtained such consents
or taken such other actions so required except where the failure
to obtain such consent would not have a Material Adverse Effect
on Sunrise.
(c) Except as set forth in Schedule 2.13(c), Sunrise's operations,
including without limitation the submission of reimbursement
data, will not be materially delayed, interrupted or otherwise
materially adversely affected due to either: (i) the failure of
its business systems to be "Year 2000 Compliant", or (ii) to the
knowledge of Sellers the failure of business systems and/or
computer systems of any third party on which Sunrise is dependent
to be "Year 2000 Compliant". For purposes of this paragraph, a
system shall be considered "Year 2000 Compliant" only if (i) the
occurrence in or use by that system of dates on or after January
1, 2000 ("Millennial Dates") does not materially adversely affect
that system's performance, including without limitation,
performance with respect to date-dependent data, computations,
output, or other functions (including, without limitation,
calculating, comparing, and sequencing), and (ii) that system
creates, stores, processes and outputs information (as
applicable) related to or including Millennial Dates without
material errors or omissions.
SECTION 2.14 Litigation, etc.
(a) Schedule 2.14 hereto sets forth a complete list and an accurate
description of all claims, actions, suits, proceedings and
investigations pending or threatened, by or against Sunrise or
any of its properties, assets, rights or businesses. No such
pending or threatened claims, actions, suits, proceedings or
investigations, if adversely determined, would individually or in
the aggregate, exceed the amount of reserves therefor on the
books of Sunrise without regard to defense costs.
(b) Except as listed on Schedule 2.14(b), neither Sunrise nor any of
its properties, operations or businesses, nor to Sellers'
knowledge any licensed professional employed by, or providing
services to, Sunrise has been served with notice that it or they
are subject to any order, judgment, injunction or decree.
(c) There are no actions, suits, proceedings or claims pending before
or by any court, arbitrator, regulatory authority or government
agency against or affecting Sellers or Sunrise that might enjoin
or prevent the consummation of the transactions contemplated by
this Agreement or the Other Agreements to which Sellers or
Sunrise is a party.
SECTION 2.15 Taxes.
(a) Except as set forth in Schedule 2.15, (i) Sunrise has duly and
timely filed or caused to be filed all tax returns, reports,
estimates and information and other statements or returns
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<PAGE> 13
(collectively, "Tax Returns"), of which the failure to file would
have a Material Adverse Effect on Sunrise, required to be filed
by or on behalf of it (and all such Tax returns with respect to
which Sunrise or its assets and properties may be liable or
otherwise subject), pursuant to any applicable federal, state,
and local tax laws for all years and periods for which such Tax
Returns have become due (with extensions) as of the date hereof,
and (ii) all such Tax Returns (including all informational Tax
Returns) were true, correct and complete in all material respects
as filed and correctly reflect in all material respects the Tax
or Taxes required to be paid or collected by Sunrise.
(b) For purposes of this Agreement, "Tax" and "Taxes" shall mean any
net income, unincorporated business, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, prescription, transfer, gains, franchise,
profits, withholding on amounts paid or received, payroll,
employment, excise, severance, stamp, occupation, property,
windfall profit or other taxes, or other like assessments or
charges of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the
imposition of any such taxes.
(c) Except as set forth in Schedule 2.15, (i) Sunrise has paid all
Taxes shown as owed by it on the Tax Returns referred to in
Section 2.15(a) to the appropriate taxing authorities, or where
payment of Taxes is not yet due, has established or will
establish an adequate reserve on its books and records for the
payment of all such Taxes with respect to all taxable periods (or
portions thereof) through the Closing Date, and (ii) Sunrise has
not been the subject of a tax ruling (or made a request therefor)
or entered into any closing agreement under Section 7121 of the
Code, which ruling or closing agreement has a material adverse
effect on the Taxes of Sunrise on or after the Closing Date.
(d) Except as set forth in Schedule 2.15, (i) no extensions of time
have been granted to Sunrise to file any Tax Return required by
applicable law to be filed by it or on its behalf on or prior to
the Closing Date which have expired, or will expire, on or before
the Closing Date without such Tax Return having been filed, (ii)
no deficiency or adjustment for any Taxes has been proposed,
asserted or assessed against Sunrise, and no federal, state or
local audits or other administrative proceedings or court
proceedings are pending with regard to any such Taxes, (iii)
there is no pending or, to the knowledge of Sellers, threatened
dispute or claim concerning any Taxes of Sunrise with respect to
any taxable period, or portion thereof ending on or prior to the
Closing Date, (iv) no waiver or consent extending any statute of
limitations for the assessment or collection of any Taxes has
been executed by or on behalf of Sunrise, nor are any requests
for such waivers or consents pending, and (v) no federal income
tax returns of Sunrise for any year have been examined by the
Internal Revenue Service.
(e) Except as set forth in Schedule 2.15, Sunrise is not a party to
any tax-sharing or allocation agreement that will survive the
Closing Date, nor does Sunrise owe any amount to any entity under
any tax-sharing or allocation agreement.
(f) Sunrise (i) has not been a member of an affiliated group filing a
consolidated federal income Tax Return, nor (ii) has any
liability for the Taxes of any person under Treasury Regulation
Section 1.1502-6 (or any similar provision of state or local
law), as a transferee or successor, by contract, or otherwise.
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<PAGE> 14
(g) Except as set forth in Schedule 2.15, the books and records of
Sunrise made available for review by the Company and its
representatives provide information adequate to determine: (i)
the basis of Sunrise in each of its assets; (ii) the basis of
Sellers in the stock immediately preceding Closing (or the amount
of any "excess loss account" pursuant to applicable Treasury
Regulations under Section 1502 of the Code); and (iii) the amount
of any net operating loss, net capital loss, or unused investment
or other credit with respect to Sunrise.
(h) Since incorporation of Sunrise, Sellers have filed all elections
necessary for Sunrise to be taxed as a Subchapter S Corporation
and Sunrise has been recognized as a Subchapter S Corporation by
the Internal Revenue Service and Sellers know of no basis for any
challenge to the status of Sunrise as a Subchapter S Corporation.
SECTION 2.16 Governmental Authorizations and Regulations.
(a) Licenses, Authorizations and Provider Programs. (a) Except as
disclosed on Schedule 2.16(a), Sunrise holds all valid licenses
and other rights, accreditations, permits and authorizations
required by law, ordinance, regulation or ruling of any
governmental regulatory authority necessary to operate its
existing business. Except as disclosed on Schedule 2.16(a),
Sunrise is certified for participation and reimbursement under
Titles XVIII and XIX of the Social Security Act (the "Medicare
and Medicaid programs") (Medicare and Medicaid programs and such
other similar federal, state or local reimbursement or
governmental programs for which Sunrise is eligible are
hereinafter referred to collectively as the "Government
Programs") and has current provider agreements for such
Government Programs and with such private non-governmental
programs, including without limitation any private insurance
program, under which it directly or indirectly is presently
receiving payments (such non-governmental programs herein
referred to as "Private Programs"). Set forth on Schedule 2.16(a)
is a correct and complete list of such licenses, accreditations,
permits and other authorizations, and provider agreements under
all Government and Private Programs, complete and correct copies
of which have been made available for inspection and copying by
Company. True, complete and correct copies of all surveys of
Sunrise or its predecessors in interest relating to the business
conducted in connection with any Government Program, Private
Program or licensing or accrediting body during the past two (2)
years have been provided to Company.
(b) Except as disclosed on Schedule 2.16(b), no violation, default,
order or legal or administrative proceeding exists with respect
to any of the items listed on Schedule 2.16(a). None of the
Sellers or Sunrise have received any notice of any action pending
or recommended by any state or federal agencies having
jurisdiction over the items listed on Schedule 2.16(a), either to
revoke, withdraw or suspend any license, right or authorization,
or to terminate the participation of Sunrise in any Government or
Private Program. To the knowledge of the Sellers, no event has
occurred which, with the giving of notice, the passage of time,
or both, would constitute grounds for a material violation, order
or deficiency with respect to any of the items listed on Schedule
2.16(a) or to revoke, withdraw or suspend any such license, or to
terminate or modify the participation of Sunrise in any
Government or Private Program. To the knowledge of the Sellers,
there has been no decision not to renew any provider or
third-party payor agreement of Sunrise. Except as listed on
Schedule 2.16(b), no consent or approval of, prior filing with or
notice to, or any action by, any governmental body or agency or
any other third party is required in connection with any such
license, right or authorization, or Government or Private
Program,
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<PAGE> 15
by reason of the sale of Sunrise to Company at the Closing, and
the continued operation of Sunrise's business thereafter on a
basis consistent with past practices.
(c) Sellers and Sunrise have timely filed all reports and billings
required to be filed by them prior to the date hereof with
respect to the Government and Private Programs, all fiscal
intermediaries and other insurance carriers and all such reports
and billings are complete and accurate in all material respects
and have been prepared in compliance with all applicable laws,
regulations, and principles governing reimbursement and payment
claims. True and complete copies of such reports and billings for
the most recent year have heretofore been made available to
Company. Sunrise has paid or caused to be paid all known and
undisputed refunds, overpayments, discounts or adjustments which
have become due pursuant to such reports and billings, has not
claimed or received reimbursements from Government or Private
Programs in excess of amounts permitted by law, and has no
liability under any Government or Private Program (known or
unknown, contingent or otherwise) for any refund, overpayment,
discount or adjustment. To the knowledge of the Sellers, except
as set forth on Schedule 2.16(c), (i) there are no pending
appeals, adjustments, challenges, audits, litigation, or notices
of intent to audit such prior reports or billings, and (ii)
during the last two years neither any Seller nor Sunrise has been
audited, or otherwise examined by any Government or Private
Program. There are no other reports required to be filed by
Sunrise in order to be paid under any Government or Private
Program for services rendered, except for reports not yet due.
SECTION 2.17 Employment and Labor Matters.
(a) Schedule 2.17(a) sets forth a list of all current and former
(within the last 12 months) full-time and part-time employees or
consultants of Sunrise broken down by location and which includes
the name, title or position, years in service with Sunrise,
salary, bonus and benefits information for each such person (the
"Business Employees").
(b) No collective bargaining agreement has been entered into by
Sunrise. Except as disclosed in Schedule 2.17(b) there are not
any disputes between Sunrise and any such employees that could
reasonably be expected to materially adversely affect the conduct
of its business or any unresolved labor union grievances or
unfair labor practice or labor arbitration proceedings pending,
or threatened, relating to the business of Sunrise. There are not
any organizational efforts presently being made or threatened
involving any of such employees. Except as set forth in Schedule
2.17(b) hereto, Sunrise has fully complied with all laws relating
to employment, including any provisions thereof relating to
wages, hours, collective bargaining, the payment of social
security and other payroll or similar taxes, equal employment
opportunity, immigration, employment discrimination or harassment
and employment safety, and Sunrise is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any
of the foregoing.
(c) There are no proceedings pending or, to the knowledge of Sellers
or Sunrise, threatened before the National Labor Relations Board
with respect to any employees of Sunrise. Except as set forth in
Schedule 2.17(b) or Schedule 2.17(c) hereto, there are no
discrimination or harassment charges (relating to sex, age,
religion, race, national origin, ethnicity, handicap or veteran
status) pending before any federal or state agency or authority
against Sunrise.
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SECTION 2.18 Use of Real Property. The leased real properties listed in
Schedule 2.18 hereto are the only properties occupied by Sunrise and are used
and operated by Sunrise in material compliance and conformity with all
applicable leases.
SECTION 2.19 Condition of Assets. All items of tangible personal
property, fixtures and equipment comprising the assets of Sunrise and necessary
to the conduct of its businesses are in a good state of repair (ordinary wear
and tear excepted) and operating condition, in all material respects.
SECTION 2.20 Accounts Receivable. Except as set forth in Schedule 2.20,
the accounts receivable reflected in the most recent balance sheet for Sunrise,
separately included in the financial statements referred to in Section 2.05
hereof, and all accounts receivable arising between September 30, 1999 and the
date hereof, arose from bona fide transactions in the ordinary course of
business. Except as set forth in Schedule 2.20, the accounts receivable
reflected on such balance sheet, have been properly recorded and reserved
against consistent with past practice. Except as set forth in Schedule 2.09, no
such account receivable has been assigned or pledged to any other person, firm
or corporation or, to the knowledge of the Sellers, is subject to any right of
set-off. Except as set forth in Schedule 2.20, reasonable provision has been
made in the Financial Statements for collection losses, contractual discounts
and other adjustments from third party payers.
SECTION 2.21 Books and Records. Company has previously been provided
with access to the books and records of Sunrise, including without limitation,
the books of account, which books and records are correct in all material
respects and there have been no material transactions involving Sunrise which
properly should have been set forth therein and which have not been so set
forth. Company has previously been provided with access to all of the corporate
and Quality Assurance Committee minutes of Sunrise, which minutes accurately
reflect in all material respects the proceedings of the board of directors (and
all committees thereof) and shareholders of Sunrise.
SECTION 2.22 Employee Benefit Plans.
(a) Schedule 2.22 attached hereto lists each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") maintained by Sunrise (the
"Plans" or "Plan"). Except as provided on Schedule 2.22, Sunrise
has complied and currently is in compliance in all material
respects, both as to form and operation, with the applicable
provisions of ERISA and the Internal Revenue Code of 1986, as
amended, ("Code") with respect to each of the Plans.
(b) Except as set forth on Schedule 2.22 hereto, with respect to each
of the Plans which is intended to qualify under Section 401(a) of
the Code, Sunrise has received favorable and unrevoked
determination letters from the Internal Revenue Service to the
effect that such Plan does so qualify and that the related trust
is exempt from taxation pursuant to Section 501(a) of the Code.
(c) Sunrise has not at any time maintained, adopted, or established,
contributed to or to Seller's knowledge been required to
contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or
arrangement subject to Title IV of ERISA (including, without
limitation, a "multiemployer plan" (as defined in Section 3(37)
of ERISA) and a defined benefit plan (as defined in Section 3(35)
of ERISA)).
(d) Except as set forth on Schedule 2.22 hereto, and notwithstanding
anything else set forth herein, Sunrise has not incurred any
liability with respect to any Plan under ERISA
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<PAGE> 17
(including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law, which has not been satisfied in
full on a timely basis, and to Seller's knowledge no event has
occurred, and there exists no condition or set of circumstances
which could reasonably be anticipated to result in the imposition
of any material liability under ERISA (including, without
limitation, Title I or Title IV of ERISA), the Code or other
applicable law with respect to any of the Plans.
(e) Except as listed on Schedule 2.22, no Plan, other than a Plan
which is an employee pension benefit plan (within the meaning of
Section 3(2)(A) of ERISA), provides benefits, including without
limitation, death, health or medical benefits (whether or not
insured), with respect to current or former employees of Sunrise
beyond their retirement or other termination of service with
Sunrise (other than (i) coverage mandated by applicable law, (ii)
deferred compensation benefits accrued as liabilities on the
books of Sunrise, (iii) benefits the full cost of which is borne
by the current or former employee (or his beneficiary)).
(f) Except as set forth on Schedule 2.04(c) or Schedule 2.22, the
consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or officer of
Sunrise to severance pay, unemployment compensation or any other
payment or benefit, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such
employee or officer.
(g) As a result of the transactions contemplated hereby, no portion
of any amount paid or payable by Sunrise to a "disqualified
individual" (within the meaning of Section 280G(c) of the Code
and the regulations promulgated thereunder), whether paid or
payable in cash, securities or otherwise and whether considered
alone or in conjunction with any other amount paid or payable to
such a "disqualified individual", constitutes an "excess
parachute payment" within the meaning of Section 280G(b) of the
Code (without regard to subsection (b)(4) thereof) and the
regulations promulgated thereunder.
(h) Sunrise has made available for inspection and copying by the
Company true and complete copies of the following for each Plan:
(i) the Plan; (ii) summary plan description of the Plan; (iii)
the trust agreement, insurance policy or other instruments
relating to the funding of the Plan; (iv) the two most recent
Annual Reports (Form 5500 series) and accompanying schedules
filed with the Internal Revenue Service or United States
Department of Labor with respect to the Plan; (v) the most recent
unaudited financial statement for the Plan; (vi) the most recent
actuarial report of the Plan; (vii) the policy of fiduciary
liability insurance (and agreements related thereto) maintained
in connection with the Plan; and (viii) the most recent
determination letter issued by the Internal Revenue Service with
respect to the Plan that is intended to qualify under Section
401(a) of the Code.
SECTION 2.23 Insurance.
(a) All of the assets of Sunrise and the operations of its Business
of an insurable nature are insured by Sunrise in such amounts and
against such losses, casualties or risks as is required by any
contract or agreement entered into by Sunrise which requires
insurance and as reflected is Schedule 2.23. Schedule 2.23
contains a complete and accurate list of all insurance policies
held or owned by Sunrise and now in force and such Schedule
indicates the name of the insurer, the type of policy, the risks
covered thereby, the amount of the premiums, the term of each
policy, the policy number, the amounts of coverage, the
deductible in each case and all outstanding claims thereunder.
Correct and complete copies
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<PAGE> 18
of certificates of insurance for all such policies have been
delivered to Company by the Sellers on or before the date of this
Agreement or made available to Company for inspection and
copying. All such policies are in full force and effect and
enforceable in accordance with their terms and Sunrise is not now
in default regarding the provisions of any such policy,
including, without limitation, failure to make timely payment of
all premiums due thereon, and Sunrise has not failed to file any
notice or present any claim thereunder in due and timely fashion.
Sunrise has not been refused, or denied renewal of, any insurance
coverage by insurance companies offering such insurance. In
addition to the deductibles set forth on Schedule 2.23, such
Schedule discloses all risks that are self-insured by Sunrise
pursuant to an organized plan of self insurance and that in the
ordinary course of business could be insured. Copies of all
insurance audit reports, loss prevention reports, all claims made
and loss history reports in respect of any insurance maintained
by Sunrise or any predecessor, including under any organized plan
of self insurance, during the past five (5) years have been made
available for inspection and copying by Company.
(b) Except as set forth on Schedule 2.23(b), the licensed
professional employees included among the Business Employees (i)
have not, in the last five (5) years, filed a written application
for professional malpractice insurance coverage which has been
denied by an insurance agency or carrier; (ii) have been
continuously insured for professional malpractice claims during
the same period; and (iii) are not in default with respect to any
provision contained in any such policy and none of them has
failed to give any notice or present any claim under any such
policy in due and timely fashion.
SECTION 2.24 Environmental Matters; Medical Waste.
(a) For the purposes of this Section 2.24, the following terms shall
have the following meanings:
"Environmental Law" means any current federal, state or local
statute, law, ordinance, rule or regulation of the United States
and any other jurisdiction within the United States now effective
and any order, to which Sunrise is a party or is otherwise
directly bound, of the United States or other jurisdiction within
the United States now effective relating to: (i) pollution or
protection of the environment, including natural resources; or
(ii) exposure of person, including employees, to Hazardous
Substances;
"Hazardous Substances" means any substance, whether liquid, solid
or gas (i) listed, identified or designated as hazardous or toxic
under any Environmental Law, (ii) which, applying criteria
specified in any Environmental Law, is hazardous or toxic, or
(iii) the use or disposal of which is regulated under
Environmental Law.
(b) No Hazardous Substances have been, or have been threatened to be,
discharged, released or emitted into the air, water, surface
water, ground water, land surface or subsurface strata or placed,
held, stored on or transported to or from the property of Sunrise
except in compliance in all material respects with Environmental
Law and except for incidental release of Hazardous Substances in
amount or concentrations which would not reasonably be expected
to give rise to any claims or liabilities against Sunrise under
any Environmental Law.
(c) Sunrise has not received any written notification from a
governmental agency that there is any violation of any
Environmental Law with respect to its business and properties and
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Sunrise has not received any written notification from a
governmental agency pursuant to Section 104, 106 or 107 of the
Comprehensive Environmental Response Compensation and Liability
Act, as amended.
(d) Sunrise is not in violation of or, the subject of, any
investigation, inquiry or enforcement action by any governmental
authority under the Medical Waste Tracking Act, 42 U.S.C. ss.
6992 et seq., or any applicable state or local governmental
statue, ordinance or regulation dealing with the disposal of
medical wastes ("Medical Waste Laws"). Sunrise has obtained and
is in compliance with any permits related to medical waste
disposal required by the Medical Waste Laws, and has taken
reasonable steps to determine, and has determined, that all
disposal of medical waste by it has been in compliance with the
Medical Waste Laws.
(e) There are no Hazardous Substances on, in or under the property
currently occupied by Sunrise (or Sellers have fully disclosed to
the Company in writing the existence, extent and nature of any
hazardous substances which Sunrise is legally authorized to
maintain on, in, or under the property or in connection
therewith).
(f) Sunrise and all property occupied by Sunrise is in full
compliance with, and Sunrise has not incurred any liability
under, federal, state or local Environmental Laws.
SECTION 2.25 Related Party Transactions. Except as set forth in
Schedule 2.25 hereto, there are no existing arrangements or proposed
transactions, other than (a) any transactions contemplated by the Other
Agreements (as hereinafter defined) (b) relating to such person's employment, or
(c) entered into on an arms' length basis in the ordinary course of business,
between Sunrise, and (i) any officer or director of Sunrise or any member of the
immediate family of any of the foregoing persons (such officers, directors and
family members being hereinafter individually referred to as a "Related Party"),
(iii) any business (corporate or otherwise) which a Related Party owns, or
controls directly or indirectly, or in which a Related Party has an ownership
interest, or (iv) between any Related Party and any business (corporate or
otherwise) with which Sunrise regularly does business.
SECTION 2.26 Places of Business. Since its formation in 1995, Sunrise
has done business only as Sunrise Health Management, Inc. and Sunrise
Therapeutic Services, Inc. (including all predecessor or merged entities and all
trade and assumed names). Since its formation, Sunrise has conducted its
business only at those offices and warehouses identified on Schedule 2.26, and
maintains inventory only at those locations identified on Schedule 2.26.
SECTION 2.27 Changes in Laws. To Sellers' knowledge, no pending changes
in applicable law or regulations would prevent Sunrise from conducting its
business in substantially the same manner as the business is currently conducted
by Sunrise.
SECTION 2.28 Contributions. Neither Sunrise, nor to the knowledge of
Sellers, any officer thereof has used any corporate funds for unlawful
contributions, gifts, entertainment or other expenses relating to political
activity or otherwise, or has made any direct or indirect unlawful payment to
governmental officials or employees from the corporate funds or been reimbursed
from corporate funds for any such payment, or is aware that any other person
associated with or acting on behalf of Sunrise has engaged in any such
activities, except as disclosed on Schedule 2.28.
SECTION 2.29 Controlled Substances. Except as set forth on Schedule
2.29, Sunrise and its officers, directors, and employees and persons who provide
professional services under agreements with Sunrise have not, in connection with
their activities directly or indirectly related to Sunrise, engaged in any
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activities which are prohibited under the Federal Controlled Substances Act, 21
U.S.C. ss. 801 et seq. or the regulations promulgated pursuant to such statute
or any related state or local statutes or regulations concerning the dispensing
and sale of controlled substances.
SECTION 2.30 Disclosure of Certain Financial Relationships. Schedule
2.30 lists all material financial relationships (whether or not memorialized in
a writing) that Sunrise has had with a person known by Sunrise to be a physician
or an immediate family member of a physician since January 1, 1993. For purposes
of this Section 2.30, the term "financial relationship" has the meaning set
forth in 42 USC ss. 1395nn. The operation of Sunrise is in compliance with and
does not otherwise violate the federal Medicare and Medicaid statutes regarding
health professional self-referrals, 42 U.S.C. ss. 1395nn and 42 U.S.C. ss.
1396b, or the regulations promulgated pursuant to such statute, or similar state
or local statutes or regulations.
SECTION 2.31 Brokers' or Finders' Fees. Except for the financial
advisory services provided to Sellers by Suntrust Equitable Securities, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Sellers directly with the Company, without the
intervention of any person on behalf of either Sellers or Sunrise in such manner
as to give rise to any claim by any person against Sunrise or the Company for a
finder's fee, brokerage commission or similar payment and all fees shall be
satisfied by Sellers on the Closing Date as provided in Section 9.01 hereof.
SECTION 2.32 Solvency. Sunrise (i) is not unable and has not admitted
in writing that it is or may become unable to pay its debts generally as they
become due, (ii) has not filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of an insolvency act,
(iii) has not made an assignment for the benefit of its creditors, (iv) has not
consented to the appointment of a receiver for itself or for the whole or any
substantial part of its property, (v) has not been served with a petition in
bankruptcy filed against it, (vi) has not been adjudged a bankrupt or filed a
petition or answer seeking reorganization or arrangement under the federal
bankruptcy laws or any law or statute of the United States of America or any
other jurisdiction, (vii) has not become insolvent (determined by its
liabilities exceeding the fair saleable value of its assets) and will not be
rendered insolvent as a result of the transactions contemplated hereby.
SECTION 2.33 Zoning. Except as set forth in Schedule 2.33, the real
property currently occupied by Sunrise is not subject to any lien, encumbrance,
easement, right of way, building or use restriction, reservation or limitation,
ordinance, or other law, order or regulation which in any material respect would
interfere with or impair the carrying out of the business of Sunrise.
SECTION 2.34 Ownership of Stock. To the knowledge of Sellers the
ownership by Company of the stock in Sunrise will not cause Sunrise to be unable
to conduct its business as proposed to be conducted in any of the states in
which Sunrise is now operating or proposes to operate because of any state or
federal law, rule or administrative regulation.
SECTION 2.35 Financial Interests. Except as set forth on Schedule 2.35
hereto, the Sellers have no financial interest (whether as owner (of more than a
1% interest in the case of a publicly traded Company), partner, officer,
director, affiliate, employee or otherwise) in any person, firm or corporation
which is, or during the past five years was, directly or indirectly, engaged in
any business engaged in by Sunrise; party to any agreement (other than this
Agreement or any Other Agreement) to which Sunrise is also a party; a
lessor/lessee, supplier, distributor, sales agent, client, or customer engaged
in transactions with Sunrise; the owner of any tangible or intangible property
used by Sunrise in Sunrise's business; or has or had a cause of action or claim
whatsoever against, or owes any amount to, Sunrise.
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SECTION 2.36 Absence of Certain Business Practices. Neither Sunrise nor
to the knowledge of Sellers, any officer, director, employee or agent of
Sunrise, nor to the knowledge of Sellers, any other person or entity acting on
behalf of Sunrise, acting alone or together, has (i) received, directly or
indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer,
governmental employee or other person or entity with whom Sunrise has done
business directly or indirectly, or (ii) directly or indirectly, given or agreed
to give any material gift or similar benefit to any customer, governmental
employee or other person or entity who is or may be in a position to help or
hinder the business of Sunrise (or assist Sunrise in connection with any actual
or proposed transaction) which, in the case of either clause (i) or clause (ii)
above, would reasonably be expected to subject Sunrise to any damage or penalty
in any civil, criminal or governmental litigation or proceeding.
SECTION 2.37 Inspections and Investigations. Except as set forth and
described in Schedule 2.37, (i) neither Sunrise's right nor, to the knowledge of
the Seller, the right of any licensed professional or other individual
affiliated with Sunrise to receive reimbursements pursuant to any Government or
Private Program has been terminated or otherwise adversely affected as a result
of any investigation or action whether by any federal or state governmental
regulatory authority or other third party, (ii) neither Sunrise, nor, to the
knowledge of the Sellers, any licensed professional or other individual who
provides services in connection with the operation of Sunrise's business has,
during the past three (3) years, been the subject of any inspection,
investigation, survey, audit, monitoring or other form of review by any
governmental regulatory entity, trade association, professional review
organization, accrediting organization or certifying agency based upon any
alleged improper activity on the part of such individual, nor has Sunrise
received any notice of deficiency during the past three years in connection with
the operations of its business, (iii) there are not presently, and at the
Closing Date there will not be, any outstanding deficiencies or work orders of
any governmental authority having jurisdiction over Sunrise, or requiring
conformity to any applicable agreement, statute, regulation, ordinance or bylaw,
including but not limited to, the Government and Private Programs, and (iv)
there is not any notice of any claim, requirement or demand of any licensing or
certifying agency or other third party supervising or having authority over
Sunrise to rework or redesign any part thereof or to provide additional
furniture, fixtures, equipment, appliances or inventory so as to conform to or
comply with any existing law, code, rule, regulation or standard. Attached as
part of Schedule 2.37 are copies of all reports, correspondence, notices and
other documents relating to any matter described or referenced therein.
SECTION 2.38 Certain Relationships. Except as set forth on Schedule
2.38, neither any Seller nor Sunrise has:
(a) offered, paid, solicited or received anything of value, paid
directly or indirectly, overtly or covertly, in cash or in kind
("Remuneration") to or from any physician, family member of a
physician, or an entity in which a physician or physician family
member has an ownership or investment interest, including, but
not limited to:
(i) payments for personal or management services pursuant to a
medical director agreement, consulting agreement, management
contract, personal services agreement, or otherwise;
(ii) payments for the use of premises leased to or from a
physician, a family member of a physician or an entity in
which a physician or family member has an ownership or
investment interest;
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(iii) payments for the acquisition or lease of equipment, goods
or supplies from a physician, a family member of a
physician or an entity in which a physician or family
member has an ownership or investment interest; or
(b) offered, paid, solicited or received any Remuneration (excluding
fair market value payments for equipment or supplies) to or from
any healthcare provider, pharmacy, drug or equipment supplier,
distributor or manufacturer, including, but not limited to:
(i) payments or exchanges of anything of value under a warranty
provided by a manufacturer or supplier of an item to
Sunrise; or
(ii) discounts, rebates, or other reductions in price on a good
or service received by Sunrise;
(c) offered, paid, solicited or received any Remuneration to or from
any person or entity in order to induce business, including, but
not limited to, payments intended not only to induce referrals of
patients, but also to induce the purchasing, leasing, ordering or
arrangement for any good, facility, service or item;
(d) entered into any joint venture, partnership, co-ownership or
other arrangement involving any ownership or investment interest
by any physician, or family member of a physician, or an entity
in which physician or physician family member has an ownership or
investment interest, directly or indirectly, through equity,
debt, or other means, including, but not limited to, an interest
in an entity providing goods or services to Sunrise;
(e) entered into any joint venture, partnership, co-ownership or
other arrangement involving any ownership or investment interest
by any person or entity including, but not limited to, a
hospital, pharmacy, drug or equipment supplier, distributor or
manufacturer, that is or was in a position to make or influence
referrals, furnish items or services to, or otherwise generate
business for Sunrise; or
(f) entered into any agreement providing for the referral of any
patient for the provision of goods or services by Sunrise, or
payments by Sunrise as a result of any referrals of patients to
Sunrise.
SECTION 2.39 Stark; Fraud and Abuse; False Claims. Neither Sunrise nor
persons and entities providing professional services in connection with
Sunrise's business have engaged in any activities which are prohibited under 42
U.S.C. ss. 1320a-7b, 42 U.S.C. ss. 1395nn or 31 U.S.C. ss. 3729-3733 (or other
federal or state statutes related to false or fraudulent claims) or the
regulations promulgated thereunder pursuant to such statutes, or related state
or local statutes or regulations, or which are prohibited by rules of
professional conduct, including but not limited to the following: (a) knowingly
and willfully making or causing to be made a false statement or representation
of a fact in any application for any benefit or payment; (b) knowingly and
willfully making or causing to be made any false statement or representation of
a fact for use in determining rights to any benefit or payment; (c) failing to
disclose knowledge by a claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such benefit or payment;
and (d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (i)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
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purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicare or Medicaid.
SECTION 2.40 Rates and Reimbursement Policies. Sunrise does not have
any reimbursement or payment rate appeals currently pending before any
governmental authority or any administrator of any Private Programs.
SECTION 2.41 Patients and Orders. Set forth on Schedule 2.41 is a list
of all current and former (indicating which are current) patients served by
Sunrise during the last twelve months and a list of all Open Customer Orders
from such customers or patients on the Closing Date.
SECTION 2.42 Inventories. All items of Sunrise's Inventory will at the
Closing consist in all material respects of items of a quality and quantity
usable and saleable in the ordinary course of business and conform to generally
accepted quality standards in the industry.
SECTION 2.43 No Violation of Law. (a) Neither any Seller nor Sunrise
has been or is currently in violation of any applicable local, state or federal
Law, order, injunction or decree, or any other requirement of any governmental
body, agency or Regulatory Authority or court binding on it, or relating to its
property or business or its advertising, sales or pricing practices.
SECTION 2.44 Charter and By-Laws. Schedule 2.44 contains a true,
complete and correct copy of the Charter and By-Laws of Sunrise, including all
amendments thereto as currently in effect. The Charter of Sunrise has not been
amended since the date of the last amendment contained in Schedule 2.44.
SECTION 2.45 Insurance Coverage. Since the incorporation of Sunrise,
Sunrise has continuously maintained general professional liability (including
completed operations hazard endorsement), insurance coverage on an occurrence
basis, or on a claims made basis with tail coverage upon each change in carrier,
at a level equal to or greater than that shown on the Certificate of Insurance
attached hereto as Schedule 2.45.
SECTION 2.46 Disclosure. Neither this Agreement, nor any exhibit
hereto, nor any certificate furnished to Company by or on behalf of Sellers or
Sunrise, pursuant to this Agreement, when read together, contains, or will
contain, any misstatement of a material fact or omits, or will omit, a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Sellers that on and as of the
Closing Date, the statements in the following sections are true, accurate and
complete:
SECTION 3.01 Organization, Power, Etc. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Tennessee. The Company has the corporate power and authority to execute
and deliver this Agreement and the Other Agreements to which it is a party, and
to perform its obligations hereunder and thereunder.
SECTION 3.02 Authorization of Agreements. (a) The Company has duly
approved this Agreement and all the Other Agreements to which the Company is to
be a party, and has duly authorized the execution and delivery of this Agreement
and the Other Agreements to which the Company is to be a party, and the
consummation of the transactions contemplated hereby and thereby. Neither the
execution and delivery by
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the Company of this Agreement or the Other Agreements to which the Company is to
be a party, nor the consummation of the transactions contemplated hereby and
thereby, will violate any provision of law, any order of any court or other
agency of government, the Certificate of Incorporation or By-laws of the
Company, or any judgment, award or decree or any indenture, agreement or other
instrument to which the Company is a party, or by which it or any of its
properties or assets is bound or affected, or result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
SECTION 3.03 Validity. This Agreement has been duly executed and
delivered by the Company, and, subject to due execution by the other parties
thereto, constitutes, and the Other Agreements to which the Company is a party,
when executed and delivered by the Company as contemplated hereby, subject to
due execution by the other parties thereto, will constitute, the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy or other laws affecting creditors' rights generally and
limitations on the availability of equitable remedies.
SECTION 3.04 Approvals. No order, authorization, approval, license or
consent from, or filing with, any federal or state governmental or public body
or other authority having jurisdiction over the Company or any other third
party, (i) is required to be made or obtained by the Company for the execution,
delivery and performance of this Agreement or any of the Other Agreements, (ii)
is required for the consummation of the transactions contemplated hereby or
thereby, or (iii) is necessary in order to ensure the legality, validity,
binding effect or enforceability of this Agreement or the Other Agreements to
which the Company is a party.
SECTION 3.05 Brokers' or Finders' Fees. All negotiations relative to
this Agreement and the transactions contemplated hereby have been carried out by
the Company directly with the Sellers without the intervention of any person on
behalf of the Company in such manner as to give rise to any claim by any person
against the Sellers for a finder's fee, brokerage commission or similar payment.
SECTION 3.06 Access to Records. To the extent requested by Company,
Company has been afforded full and complete access to Sunrise's records,
premises, personnel, properties, operations and any other access which it has
requested.
SECTION 3.07 Securities. Company covenants that the Shares will be
acquired for investment purposes only and not with a view to, or for resell in
connection with, any distribution of the Shares and Company intends to hold such
Shares for investment for Company's own account. Company acknowledges and agrees
that the Shares have not been registered under the Securities Act of 1933, as
amended, by reason of a specific exemption under the provisions of said Act and
that Sunrise may permit transfer of the Shares only when a request for transfer
is accompanied by an opinion of counsel satisfactory to Sunrise to the effect
that neither the sale nor the proposed transfer results in a violation of the
Securities Act of 1933, as amended, and other applicable state securities laws,
including, but not limited to, the Georgia Securities Act.
Company agrees that a legend may be affixed on the Certificate
evidencing the Shares in the form as may be required in the judgment of Sunrise
or its legal counsel to comply with the Securities Act of 1933 and the Georgia
Securities Act, or other laws and regulations applicable to securities
transactions.
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ARTICLE IV.
COVENANTS
SECTION 4.01 Certain Covenants of Sellers.
(a) During the period from the date of this Agreement to the Closing
Date, Sellers will cause Sunrise to (x) conduct its business and
operations according to its ordinary course of business
consistent with past practice, including without limitation the
maintenance of inventory levels, the collection of third party
accounts receivable and the payment of third party accounts
payable, (y) use its reasonable best efforts to preserve its
relationships with employees, customers and suppliers, and (z)
continue to provide its services to customers. Without limiting
the generality of the foregoing, during the period from the date
of this Agreement to the Closing Date, Sellers will not permit
Sunrise to do any of the things listed in paragraphs (a) through
(t) of Section 2.07, without the prior approval of the Company,
or except as otherwise contemplated by this Agreement or
disclosed on the schedules attached hereto and made a part
hereof.
(b) Between the date hereof and the Closing Date, Sellers shall
provide reasonable access during normal business hours to the
representatives of the Company, and their counsel and
accountants, to the financial, accounting and legal records of
Sunrise, and, with the prior express written consent of Hunt, to
key employees of Sunrise designated by Company, and, in
connection therewith, shall permit their respective
representatives to visit the premises of Sunrise.
(c) Unless otherwise contemplated by this Agreement, between the date
hereof and the Closing Date, Sellers will not permit Sunrise to
enter into any transaction, make any agreement or commitment, or
take any action, which they know would result in any of the
representations, warranties or covenants of Sellers or Sunrise
contained in this Agreement not being true and correct in all
material respects at and as of the time immediately after the
occurrence of such transaction, event or action.
(d) Sellers hereby agree to take such further actions and execute
such further documents as may, in the future, be reasonably
requested by Company or Sunrise in order to carry out the
obligations of Sellers hereunder and to confirm and further
document the transactions contemplated herein.
SECTION 4.02 Covenants of the Company.
(a) Between the date hereof and until the consummation of the
transaction contemplated by Section 1.01, the Company shall not
enter into any transaction, make any agreement or commitment, or
take or omit to take any action, which it knows would result in
any of the representations or warranties of the Company contained
in this Agreement not being true and correct in all material
respects at and as of the time immediately after the occurrence
of such transaction, event, action or omission.
(b) Company will cause Sunrise to continue employment of all
employees who currently are employed in the operations of Sunrise
for a period of six months after closing at their current levels
of salaries and with a benefits program comparable to that
offered by Company, subject however to said employees being
terminated during that period for cause.
(c) Company hereby agrees to take such further actions and execute
such further documents as may, in the future, be reasonably
requested by Sellers in order to carry out the obligations
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of Company hereunder and to conform and further document the
transactions contemplated herein.
SECTION 4.03 Intentionally Omitted.
SECTION 4.04 Tax Matters.
(a) Transfer Taxes. Any transfer taxes incurred by Sellers in
connection with the sale of the capital stock of Sunrise to the
Company pursuant to this Agreement shall be borne by Sellers.
Sellers shall prepare and file, at their own expense, all
necessary tax returns and other documentation with respect to all
such transfer taxes.
(b) Tax Returns.
(i) Except for tax returns required pursuant to Section 4.04(g)
below, Sellers shall prepare (or cause to be prepared) and
Sunrise shall timely file for all taxable periods ending on
or before the Effective Date (a "Pre-Closing Period") all
Tax Returns required to be filed after the Effective Date by
or on behalf of Sunrise (the "Pre-Closing Period Tax
Returns"). The preparation of such Tax Returns and the
positions taken thereon shall be consistent in all respects
with Sunrise's past tax accounting principles and practices.
(ii) The Company shall prepare and timely file (or cause to be
prepared and timely filed) for all taxable periods beginning
before and ending after the close of the Effective Date (a
"Straddle Period"), all Tax Returns required to be filed
after the Effective Date by Sunrise. For purposes of this
Agreement, the portion of the Straddle Period ending on and
including the Effective Date shall be referred to as the
"Pre-Closing Straddle Period" and the portion of the
Straddle Period beginning after the Effective Date shall be
referred to as the "Post-Closing Straddle Period". Any such
Taxes for a Straddle Period with respect to Sunrise shall be
apportioned to the Pre-Closing Straddle Period based on the
actual operations of Sunrise during the portion of such
period ending on and including the Effective Date,
determined as though Sunrise's books closed at the close of
the Effective Date. The cost and expenses of preparing any
Tax Return for a Straddle Period shall be borne by the
Company.
(iii) All Tax Returns referred to in Sections 4.04(b)(i) shall be
subject to review and approval by the Company, and all Tax
Returns referred to in Section 4.04(b)(ii) which affect the
liability of Sellers for Taxes pursuant to this Agreement or
otherwise shall be subject to review and approval by
Sellers, in each case prior to filing, and such approval
shall not be unreasonably withheld or delayed by either such
party. The party charged with responsibility to prepare a
Tax Return subject to review (the "Preparing Party") shall
present such Tax Return to the other party (the "Reviewing
Party") no less than thirty (30) days prior to the due date
(including extensions) for filing the Tax Return. The
parties shall cooperate with one another by making available
for review all related work papers and analyses utilized in
preparing the Tax Return and all related books, records and
personnel for this purpose without cost. Within fifteen (15)
days after receipt of the Tax Return, the Reviewing Party
shall communicate to the Preparing Party as to whether it
concurs with the Tax Return or, if not, stating its
exceptions thereto, together with the
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reasons and supporting information relating to such
exceptions. If there are no such exceptions or such
exceptions are resolved by the parties, then such resolution
shall be the final determination. If such exceptions cannot
be resolved by the parties within ten (10) business days
after delivery of the list of exceptions, the dispute shall
be submitted to an independent tax consultant who shall make
a final determination in accordance with the terms of this
Agreement within fifteen (15) days after submission to such
independent tax consultant. The independent tax consultant
shall be one of the "Big Five" public accounting firms or a
law firm with a nationally recognized tax practice with no
material relationship to the parties or their affiliates,
and such independent tax consultant shall be chosen by
agreement of the parties, or if they are unable to agree,
chosen by lot from an equal number of nominees submitted by
each party. The fees and expenses of the independent tax
consultant shall be allocated by it in inverse proportion to
the adjustment granted the Reviewing Party. For example, if
such tax consultant grants a portion of the exceptions
proposed by the Reviewing Party that results in an
adjustment to the amount of Taxes owed that is 25% of the
total adjustment to the amount of Taxes owed that would have
occurred had all of the Reviewing Party's proposed
exceptions been granted, it shall assess the Reviewing Party
with 75% of its fees and expenses. The independent tax
consultant's decision shall be final and binding upon, and
non-appealable by, the parties.
(c) Tax Payments. Sellers shall pay all Taxes with respect to all Tax
Returns described in Section 4.04(b) attributable to Pre-Closing
Periods or apportioned to Pre-Closing Straddle Periods pursuant
to Section 4.04(b)(ii), to the extent not accrued for on the
Financial Statements, ten (10) days prior to the respective due
dates (excluding extensions or waivers thereof) for such Taxes
or, if later, when the respective Tax Returns reporting such
Taxes are filed, other than any Taxes payable (the "Excluded
Taxes") as the result of any (i) events occurring on the
Effective Date, outside of the ordinary course of business,
except for events occurring as a condition of closing this
transaction, (ii) any increase in Taxes resulting from Sunrise
amending any Pre-Closing Tax Returns without the prior written
permission of Sellers, and (iii) Taxes which were previously paid
through estimated Tax payments.
(d) Refunds. The Company agrees to, and shall cause Sunrise to,
cooperate in obtaining any refunds of Taxes (other than any
Excluded Taxes) for Pre-Closing Tax Returns and the Pre-Closing
Straddle Periods and to promptly remit to Sellers any such
refunds received by the Company, or Sunrise net of any Taxes
incurred by the Company, or Sunrise provided that such refunds
were not reflected on the Final Closing Balance Sheet. Any
reasonable out-of-pocket costs or expenses incurred by the
Company or Sunrise in obtaining such refunds shall be borne by
Sellers. In no event shall Sellers be entitled to file an amended
return or otherwise make a claim for refund (or have such an
amended return filed or such claim made on its behalf) without
the prior approval of the Company (which approval shall not be
unreasonably withheld) to the extent that such action would
increase the Tax liability of the Company for any taxable period
or portion thereof following the Effective Date.
(e) Tax Characterization. Any payments made pursuant to (i) this
Section 4.04, (ii) the indemnity provisions of Article VII or
(iii) the purchase price adjustment provisions of this Agreement,
shall be treated by each of the parties hereto as an adjustment
to the Purchase Price paid by the Company for the Shares for all
Tax and financial accounting purposes. The parties hereto agree
to account for the transactions contemplated herein in a manner
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consistent with all the provisions of this Agreement when filing
their respective Tax Returns and the Tax Returns of Sunrise.
(f) Post-Closing Audits and Other Proceedings.
(i) Sellers, on the one hand, and Company on the other hand,
each agree, at its own expense (except to the extent such
expense, incurred to third parties, is subject to
indemnification pursuant to Section 7.02), to furnish or
cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance
(including access to books and records) relating to Sunrise
as is reasonably necessary or is reasonably requested for
the preparation of any return for Taxes, any claim for
refund or any audit, and the prosecution or defense of any
claim, suit or proceeding relating to any proposed
adjustment.
(ii) Sellers on the one hand, and the Company, on the other hand,
each agree to give prompt notice to each other of any
written inquiry by a Tax authority, scheduling of an
examination or proposed adjustment with respect to Taxes for
any Pre-Closing Period or any Pre-Closing Straddle Period.
Sellers and the Company shall cooperate with each other in
the conduct of any Tax audit or other Tax proceedings
involving Sunrise for such periods and each may participate
at its own expense; provided, however, that Sellers shall
have the right to control the conduct of any such audits or
proceedings to the extent such audits or proceedings relate
to a proposed adjustment that could adversely affect the
liability of Sellers for Taxes pursuant to this Agreement or
otherwise. The Company also may, at its own expense, be
present in any such audit or proceeding and, if Sellers do
not assume the defense of any such audit or proceeding, the
Company may defend the same in such manner as it may deem
appropriate, including, but not limited to, settling such
audit or proceeding after giving thirty (30) days' prior
written notice to Sellers setting forth the terms and
conditions of settlement, provided that Sellers have not
objected within fifteen (15) days of receipt of such notice
and assumed control of the audit. In the event that a
potential adjustment is present in an audit or proceeding
(otherwise controlled by Sellers) for which the Company
would be liable and not entitled to indemnification
hereunder, the Company shall have the right, at its expense,
to control the audit or proceeding with respect to such
proposed adjustment. With respect to a proposed adjustment
which could adversely affect the liability of Sellers for
Taxes pursuant to this Agreement or otherwise, on the one
hand, and the liability of the Company for Taxes pursuant to
this Agreement or otherwise, on the other hand, (i) Sellers
and the Company each may participate in the audit or
proceeding, and (ii) any issues with respect to the proposed
adjustment or otherwise pertaining to the audit or
proceeding shall be decided jointly by Sellers and the
Company. Notwithstanding the foregoing provisions of this
Section, the parties to this Agreement shall endeavor to
agree on a joint representative or representatives in any
proceeding in which each is entitled to and desires to be
represented.
(g) 338(h)(10) Election - All parties hereto agree that the Company's
purchase of all of the issued and outstanding shares (consisting
of 954,777 shares of No Par Common Stock) of Sunrise is a
"qualified stock purchase" as defined in IRC ss. 338(d)(3). The
parties hereto also agree that this "qualified stock purchase"
will be treated as a deemed asset sale pursuant to IRC ss.
338(h)(10) and Treasury Reg. ss. 1.338(h)(10)-1. Accordingly, the
Sellers agree to
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cooperate in the joint filing (as required by Treasury Reg.ss.
1.338(h)(10)-1(d)) of a Section 338(h)(10) election on IRS Form
8023 with Company as a condition to closing. Said Form 8023 to be
signed by all shareholders of Sunrise as of the Effective Date.
(h) Subchapter S Status - Unless Sunrise is not a valid Subchapter S
Corporation under the Code, there is no Straddle Period
applicable to Federal Taxes assessed upon the shareholders of
Sunrise.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to the Obligations of the Company.
The obligation of the Company to consummate the transactions contemplated by
this Agreement on the Closing Date are subject, at the option of the Company, to
the satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Sellers and Sunrise contained in this
Agreement, or in any certificate or document delivered to the
Company pursuant hereto or thereto shall be true and correct in
all material respects on and as of the Closing Date as though
made at and as of that date except as to items which are specific
as to time, and Sellers shall each have so certified to the
Company in writing.
(b) Compliance with Covenants. Sellers and Sunrise shall have
performed and complied in all material respects with all terms,
agreements, covenants and conditions of this Agreement to be
performed or complied with by them at or prior to the Closing
Date and Sellers shall have so certified to the Company in
writing.
(c) No Material Adverse Change. On the Closing Date there shall not
have been any material adverse change since September 30, 1999,
(i) in the financial condition or results of operations of the
business of Sunrise or (ii) in the capacity of Sunrise to conduct
its business in a manner consistent with past practice, and
Sellers shall have certified to such effect to the Company in
writing.
(d) Audited Financial Statements; Minimum Financial Requirements. An
unqualified accountant's audit opinion shall have been delivered
to the Company following an audit of Sunrise for the 12 month
period ending June 30, 1999 by Ernst & Young, LLP conducted at
Company's cost.
(e) Estimated Balance Sheet. The Estimated Balance Sheet shall have
been delivered to the Company.
(f) All Proceedings To Be Satisfactory. All proceedings to be taken
by Sellers and Sunrise in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company, and
Company shall have received all such counterpart originals or
certified or other copies of such documents as they may
reasonably request.
(g) Opinions of Counsel for Sellers. The Company shall have received
the opinions of McLain & Merritt addressed to the Company and
dated the Closing Date, satisfactory in form and
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substance to the Company and its counsel substantially in the
form attached as Exhibit 5.01(g) hereto.
(h) Consents and Approvals. All authorizations, consents, waivers and
approvals required to be obtained by Sunrise without which
Sunrise would not be able to conduct its business after the
Closing Date in substantially the same manner as theretofore
conducted shall have been duly obtained and shall be in form and
substance reasonably satisfactory to counsel for the Company.
(i) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or threatened by any private party or by any
governmental department, agency or authority, in either case
seeking to restrain, prohibit, invalidate or otherwise affect the
consummation of the transactions contemplated hereby or seeking
damages or which would, if adversely decided, cause a Material
Adverse Effect.
(j) Other Agreements. Each of the agreements listed in Schedule 5.01
(collectively the "Other Agreements") shall have been duly
executed and delivered by all parties thereto other than the
Company.
(k) Purchase from Other Shareholders. Sellers shall have purchased
all shares owned by Other Shareholders and shall deliver to
Company executed Stock Purchase and Estoppel Agreements in
substantially the form attached hereto as Exhibit 5.01(k).
Sellers shall be responsible for negotiating the purchase of
shares from the Other Shareholders and shall be solely
responsible for paying the Other Shareholders any portion of any
Purchase Price Adjustment or Earnout Amount, if any, owed to the
Other Shareholders.
(l) Supporting Documents. On or prior to the Closing Date, the
Company shall have received copies of the following supporting
documents:
(i) (1) the charter documents of Sunrise, certified as of a
recent date by the Secretary of State of the State of
Georgia; and (2) a certificate of the Secretary of State or
other appropriate official of the State of Georgia as to the
due incorporation and existence of such corporation, and
listing all documents on file with said official;
(ii) a certificate of the Secretary or an Assistant Secretary of
Sunrise, dated the Closing Date and certifying (1) that
attached thereto is a true and complete copy of the Charter
and By-laws of Sunrise as in effect on the date of such
certification; (2) that the Charter of such corporation has
not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause
(i)(2) above; (3) that attached thereto is a true and
complete copy of the resolutions adopted by the Board of
Directors of such corporation, authorizing the execution,
delivery and performance of this Agreement and the Other
Agreements to which such corporation is a party and the
consummation of the transactions contemplated hereby and
thereby; and (4) as to the incumbency and specimen signature
of each officer of Sunrise executing this Agreement, any
Other Agreement, and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of
said corporation as to the incumbency and signature of the
officer signing the certificate referred to in this
paragraph (ii); and
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(iii) such additional supporting documents and other information
with respect to the operations and affairs of Sunrise as the
Company or its counsel may reasonably request.
All such documents shall be reasonably satisfactory in form and
substance to the Company and its counsel.
(m) Stock Power. Sellers shall deliver possession of the stock
certificates evidencing the Shares in Sunrise to Company at
Closing, together with executed stock powers conveying
unencumbered title to said Shares to Company.
(n) Resignations and Release. Hunt shall have tendered her
resignation as a director and officer of Sunrise; and all other
directors and officers shall have tendered their resignations. As
part thereof, all officers and directors shall have released all
claims against Sunrise, whether contingent known or unknown
(o) Employment Contract. Hunt shall have executed an employment
contract with Sunrise in the form attached hereto as Exhibit
5.01(o).
(p) Searches. The Company shall have received uniform commercial code
financing statement searches conducted in the Office of the
Secretary of State of Georgia and such other locations as
determined by Company, dated within five (5) days of the date of
closing, which searches shall show no financing statements filed
against Sunrise.
(q) Insurance. A Certificate from each insurance company providing
coverage to Sunrise, setting forth all coverages in effect
together with the amount thereof.
(r) Due Diligence. Company, and its agents, shall have had access to
the management, books, records and facilities of Company for
purposes of allowing Company to fully inspect, examine and
investigate Sunrise's business and records, including without
limitation, examination of financial conditions, corporate
records, customer relations, compliance with healthcare and other
applicable laws and regulations, inventory balances and ownership
of leases, licenses, contract rights, and other proprietary
rights of Sunrise. Sunrise and its agents shall have cooperated
in every respect with Company and its representatives in
connection with this due diligence inspection.
(s) Bank Consent. Company shall have obtained the Consent of Bank of
America N.A. to the transactions contemplated herein, copies of
which shall be provided to Sellers at Closing.
(t) Tax Certificate. Sunrise shall have obtained and delivered to
Company, a tax good standing certificate from the Georgia
Department of Revenue dated within 15 days of Closing.
SECTION 5.02 Conditions Precedent to the Obligations of Sellers. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement on the Closing Date are subject, at the option of Sellers, to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company contained in this Agreement or in
any certificate or document delivered to Sellers pursuant hereto
shall be true and correct in all material respects on and as of
the Closing
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Date as though made at and as of that date except for items which
are specific as to time and the Company shall have so certified
to Sellers in writing.
(b) Compliance with Covenants. The Company shall have performed and
complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement to be performed or
complied with by it at or prior to the Closing Date, and the
Company shall have so certified to Sellers in writing.
(c) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or threatened by any private party, by any
governmental department, agency or authority, in either case
seeking to restrain, prohibit, invalidate or otherwise affect the
consummation of the transactions contemplated hereby or seeking
damages which would, if adversely decided, cause a Material
Adverse Effect.
(d) Other Agreements. Each of the Other Agreements shall have been
duly executed and delivered by the Company and the other party
thereto.
(e) Supporting Documents. On or prior to the Closing Date, Sellers
and its counsel shall have received copies of the following
supporting documents:
(i) (1) the charter documents of the Company certified as of a
recent date by the Secretary of State of the State of
Tennessee; and (2) a certificate of the Secretary of State
or other appropriate official of the State of Tennessee as
to the due incorporation and good standing of the Company,
and listing all documents on file with said official;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Closing Date and certifying (1) that
attached thereto is a true and complete copy of the
Certificate of Incorporation and By-laws of the Company as
in effect on the date of such certification; (2) that the
Certificate of Incorporation of the Company has not been
amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i) (2) above;
(3) that attached thereto is a true and complete copy of the
resolutions adopted by the Board of Directors of the
Company, authorizing the execution, delivery and performance
of this Agreement and the Other Agreements to which the
Company is a party and the consummation of the transactions
contemplated hereby and thereby; and (4) as to the
incumbency and specimen signature of each officer of the
Company executing this Agreement, any Other Agreement, and
any certificate or instrument furnished pursuant hereto, and
a certification by another officer of the Company as to the
incumbency and signature of the officer signing the
certificate referred to in this paragraph (ii); and
(iii) such additional supporting documents and other information
with respect to the operation and affairs of Company as
Sellers or their counsel may reasonably request.
All such document shall be reasonably satisfactory in form and
substance to Sellers and their counsel.
(f) No Breach. Company shall not have asserted any breach by Sellers
of any representation or warranty contained in this Agreement or
any document delivered pursuant to this
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Agreement or any failure by Sellers to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by Sellers hereunder.
(g) All Proceedings To Be Satisfactory. All proceedings to be taken
by Company, in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Sellers and its counsel,
McLain & Merritt and Sellers and said counsel shall have received
all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(h) Employment Contract. Company shall have executed an employment
contract with Hunt in the form attached hereto as Exhibit
5.01(o).
(i) Certificate. Sellers shall have received a certificate from a
duly authorized executive officer of the Company attesting that
to Company's satisfaction its agents and representatives have
been provided with full access to such of Sunrise's records as
were requested by said agents and representatives, including, but
not limited to, all access and due diligence opportunities
required pursuant to Section 5.01(r) of this Agreement.
ARTICLE VI.
CERTAIN DEFINITIONS
SECTION 6.01 Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"Affiliate" of a party shall mean: (i)_any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such party; (ii) any officer, director, partner,
employer or direct or indirect beneficial owner of any ten percent (10%) or
greater equity or voting interest of such party; or (iii) any other Person for
which a Person described in clause (ii) above acts in any such capacity. For
purposes of the foregoing, "control" shall have the meaning provided by Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereto.
"Agreement" shall mean this Purchase Agreement, including the Exhibits
and Schedules delivered pursuant hereto and incorporated herein by reference.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
"Knowledge" of any Seller (or words to that effect) shall mean, include
and refer to, such knowledge as (i) is actually possessed by any Seller, (ii) is
contained in the books and records of Sunrise, or (iii) is actually possessed by
Hunt, Epstein, Jerry Hunt, Mark Montgomery, Jennye Schindler, Dora Caulfield,
Annell Morgan, Lisa Moore, or any officer or director of Sunrise.
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<PAGE> 34
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a person or its assets,
liabilities or business, including those promulgated, interpreted or enforced by
any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Open Customer Orders" shall mean prescription orders from patients
served by Sunrise that have been received but not filled prior to the Closing
Date, a list of which shall be provided at the Closing.
"Ordered Inventory" shall mean purchase orders for prescription drugs
that have not been received by Sunrise prior to the Closing (and which are
therefore not included among the Inventory), a list of which shall be provided
to Company at Closing and which shall be limited to orders in the ordinary
course of business consistent with past practices and not in excess of normal,
ordinary and usual requirements of Sunrise, and not at prices in excess of
prices normally and customarily paid by Sunrise for similar prescription drugs,
excluding price increases imposed by suppliers in the ordinary course of
business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Regulatory Authorities" shall mean, collectively, all federal and state
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries.
"Taxes" shall mean any federal, state, county, local, foreign or other
tax, charge, imposition or other levy (including interest or penalties thereon)
including without limitation, income taxes, estimated taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, taxes on earnings and
profits, employment and payroll related taxes, property taxes, real property
transfer taxes, Federal Insurance Contributions Act taxes, any taxes or fees
related to unclaimed property, taxes on value added and import duties, whether
or not measured in whole or in part by net income, imposed by the United States
or any political subdivision thereof or by any jurisdiction other than the
United States or any political subdivision thereof.
"Tax Return" shall mean any and all returns, reports, filings,
declarations and statements relating to Taxes that are required to be filed,
recorded, or deposited with any Regulatory Authority, including any attachment
thereto or amendment thereof.
ARTICLE VII.
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties. All covenants,
representations and warranties made by Sellers and Sunrise in this Agreement or
pursuant hereto or in any certificate delivered pursuant hereto SHALL SURVIVE
the Closing Date for the time periods indicated in this Article VII. The
representations, warranties, covenants and agreements made by either of the
Sellers or Sunrise shall not be affected or deemed waived by reason of the fact
that Company or its representatives should have known that
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any such representations, warranties, covenants or agreements are or might be
inaccurate in any respect. Except as set forth in this Agreement, any furnishing
of information to Company by either of the Sellers, or Sunrise, pursuant to, or
otherwise in connection with, this Agreement shall not waive Company's right to
rely on any representation, warranty, covenant or agreement made by either of
the Sellers or Sunrise.
SECTION 7.02 Tax Indemnity.
(a) Sellers jointly and severally agree and shall indemnify and hold
harmless the Company and Sunrise (collectively the
"Indemnitees"), from and against any and all Taxes or related
costs (other than Excluded Taxes) (i) imposed on or incurred by
Sellers or Sunrise for any taxable year or taxable period ending
on or prior to the close of the Effective Date (including any
short periods up to and including the close of the Effective Date
and any Pre-Closing Straddle Period), (ii) imposed on or incurred
by Company or Sunrise (with the exception of transfer Taxes
incurred by the Company other than as provided in Section
4.04(a)) arising out of the purchase contemplated hereby, (iii)
imposed on or incurred by the Company, or Sellers with respect to
reasonable attorneys' fees and expenses with respect to
contesting any of the indemnified Taxes referred to in clause (i)
and (ii), above incurred by the Company, or Sunrise, as well as
any applicable interest, penalty or additional charge with
respect to such Taxes. Sellers jointly and severally agree and
shall indemnify Indemnitees from and against any and all sales,
transfer and other like taxes and recording fees payable in
connection with this Agreement or the transactions contemplated
hereby.
(b) Sellers shall not be required to indemnify the Indemnitees in
respect of any Tax or related costs until there occurs a Final
Determination (as defined below) of the liability of the
Indemnitees for the Tax (and any interest, penalties and
additions to the Tax) asserted to be payable as a result of any
proposed adjustment, unless Sellers elect not to contest or
defend against the proposed adjustment of the Tax. A "Final
Determination" shall mean (i) a decision, judgment decree or
other order by any court of competent jurisdiction, which
decision, judgment, or decree or other order has become final
after all allowable appeals by either party to the action have
been exhausted or the time for filing such appeal has expired,
(ii) a closing agreement entered into under Section 7121 of the
Internal Revenue Code or other State authority, or any other
settlement agreement entered into in connection with an
administrative or judicial proceeding with the consent of
Sellers, or (iii) the expiration of the time for instituting a
claim for refund, or if such claim was filed, the expiration of
the time for instituting a suit with respect thereto. If Sellers
elect to protest a proposed adjustment and payment is required in
order to contest the adjustment, Sellers shall deposit an amount
equal to the taxes in dispute with the Indemnitees (a "Tax
Deposit"), and the Indemnitees shall, upon the receipt of such
Tax Deposit from Sellers, promptly remit such Tax Deposit to the
tax authority or court, as requested by Sellers, and properly
designate the nature of such amount. Any interest expense which
is stopped as a result of such Tax Deposit shall be for the
account of Sellers. If the Indemnitees subsequently receive a
refund, in whole or in part, of the Tax Deposit or interest,
penalties, or additions to Tax paid with funds advanced by
Sellers, the Indemnitees shall within thirty (30) days of such
receipt pay to Sellers the amount of such refund, plus the amount
of any additional interest received from the Internal Revenue
Service thereon. Within thirty (30) days after a Final
Determination of, or the election of Sellers not to contest or
defend against, the liability of the Indemnitees for which
Sellers are required to make an indemnity payment hereunder
Sellers shall pay the Indemnitees any excess of such full amount
due over any advances or Tax Deposits previously made by Sellers
(net of any prior return to Sellers of such advances or Tax
Deposits) pursuant to this indemnity and any other payments
previously made by
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Sellers with respect to such Taxes. The Company shall cooperate
fully with Sellers in obtaining any refund or return of any Tax
Deposits previously made by Sellers where so requested by
Sellers. In the event that any Tax Deposit made by Sellers has
been applied to any Taxes payable by the Company or Sunrise which
are not subject to indemnification under this Section 7.02, the
Company shall pay to Sellers an amount equal to the portion of
the Tax Deposit so applied, together with any applicable interest
savings actually realized by the Company or Sunrise as a result
of such application of the Tax Deposit, within thirty (30) days
following the day on which such Taxes would have otherwise been
paid, but for the application of such Tax Deposit, by the Company
or Sunrise as the case may be.
(c) If, as a result of a governmental audit or examination or
adjustment, an item of income is accelerated into a Pre-Closing
Straddle Period or an earlier period from a Post-Closing Straddle
Period or later period, or an item of deduction or credit is
disallowed or deferred from a Pre-Closing Straddle Period or
earlier period into a Post-Closing Straddle Period or later
period, such shift in taxable periods shall not give rise to an
indemnifiable claim by Company or Sunrise. If, as a result of a
governmental audit or examination or adjustment, an item of
income is deferred from a Pre-Closing Straddle Period or earlier
period to a Post-Closing Straddle Period or later period, or an
item of deduction or credit is disallowed or accelerated from a
Post-Closing Straddle Period or later period into a Pre-Closing
Straddle Period or earlier period, the Company shall be entitled
to file an amended Tax Return or otherwise claim a refund or
credit, and retain all such amounts for its own account, in
respect to any reduction in Taxes in such Pre-Closing Straddle
Period or earlier period to the extent attributable to such shift
in Tax items.
(d) Anything in this Agreement to the contrary notwithstanding, the
provisions of Section 4.04 and this Section 7.02 shall survive
until the expiration of the applicable tax statute of limitation
period (including any extensions thereof provided that Sunrise
will not consent to the extension of the statute of limitations
without Seller's consent, such consent not to be unreasonably
withheld) for the Taxes referred to herein, and any Taxes subject
to indemnification under this Section 7.02 shall not be subject
to the provisions of Sections 7.03 and 7.04 hereof.
SECTION 7.03 Sellers General Indemnity.
(a) Subject to the terms and conditions of this Article VII, Sellers
agree to and will indemnify, defend and hold the Company and
Sunrise harmless from and against all demands, claims, actions or
causes of actions, assessments, losses, damages (including
special and consequential damages), liabilities, costs and
expenses, including without limitation, interest, penalties and
reasonable attorney fees and expenses (hereinafter collectively
called "Damages"), asserted against, resulting to, imposed upon
or incurred by the Company and/or Sunrise related to, resulting
from or arising out of, (i) a breach of any of the
representations and warranties made by the Sellers herein,
(except that those representations and warranties listed in
Section 7.04 shall be excluded from this Section 7.03 and
governed instead by the provisions of Section 7.04), or (ii) the
nonfulfillment of any undertaking, agreement or covenant on the
part of the Sellers hereunder. The obligations of Sellers under
this Section 7.03 shall survive and shall terminate at the close
of business on the second anniversary of the Closing Date ("First
Indemnity Period"), except that Sellers shall continue to be
responsible after such date for those specific claims and losses
of which Company or Sunrise shall have given Sellers the notices
required by this Section prior to the end of the First Indemnity
Period referred to herein. In the event that Sellers receive
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actual notice, prior to the expiration of the above-referenced
First Indemnity Period, of a claim which ultimately results in a
loss to Company or Sunrise referenced in this Section 7.03, such
notice shall be deemed to constitute the notice required to be
given by Company or Sunrise hereunder, the same as if Company or
Sunrise had timely given such notice to Sellers, Sellers'
indemnity obligations shall not be terminated as to those
liabilities, losses, damages and expenses incurred by Company or
Sunrise as a result of said claim and such indemnity obligation
shall survive until such claim shall have been finally resolved
and all damages shall have been fully satisfied.
SECTION 7.04 Ownership and Regulatory Indemnity. Subject to the terms
and conditions of this Article VII, Sellers jointly and severally agree to and
will indemnify, defend and hold the Company and Sunrise harmless from and
against all demands, claims, actions or causes of actions, assessments, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and reasonable attorney fees and expenses (hereinafter
collectively called "Damages"), asserted against, resulting to, imposed upon or
incurred by the Company and/or Sunrise related to, resulting from or arising out
of, a breach of the representations and warranties made by the Sellers in
Sections 2.04, 2.16, 2.24, 2.29, 2.30, 2.36, 2.37, 2.38 and 2.39 herein.
The obligations of Sellers under this Section 7.04 shall survive and
shall terminate at the close of business on the fifth anniversary of the Closing
Date ("Second Indemnity Period"), except that Sellers shall continue to be
responsible after such date for those specific claims and losses of which
Company or Sunrise shall have given Sellers the notices required by this Section
prior to the end of the Second Indemnity Period referred to herein. In the event
that Sellers receive actual notice, prior to the expiration of the
above-referenced Second Indemnity Period, of a claim which ultimately results in
a loss to Company or Sunrise referenced in this Section 7.04, such notice shall
be deemed to constitute the notice required to be given by Company or Sunrise
hereunder, the same as if Company or Sunrise had timely given such notice to
Sellers, Sellers' indemnity obligations shall not be terminated as to those
liabilities, losses, damages and expenses incurred by Company or Sunrise as a
result of said claim and such indemnity obligation shall survive until such
claim shall have been finally resolved and all damages shall have been fully
satisfied.
SECTION 7.05 Conditions of Indemnification. The obligations and
liabilities of Sellers (herein sometimes called the "indemnifying party"), to
the Company and Sunrise (herein sometimes collectively called the "party to be
indemnified") under Sections 7.02, 7.03 and 7.04 hereof with respect to claims
resulting from the assertion of liability by third parties shall be subject to
the following terms and conditions:
(a) within 20 days after receipt of notice of (i) commencement of any
action or (ii) the assertion of any claim by a third party, or
(iii) the party to be indemnified obtains actual knowledge that
an event giving rise to an indemnity obligation has arisen, the
party to be indemnified shall give the indemnifying party written
notice thereof specifying the factual basis of the claim in
reasonable detail to the extent then known to the party to be
indemnified, together with a copy of such claim, process or other
legal pleading, if applicable, and the indemnifying party shall
have the right to undertake the defense thereof by
representatives of its own choosing who shall be reasonably
satisfactory to the indemnified party;
(b) in the case of a third party claim, in the event that the
indemnifying party, by the 30th day after receipt of notice of
any such claim (or, if earlier, by the tenth day preceding the
day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting
such claim) does not elect to defend against such claim, the
party to be indemnified will (upon further notice to the
indemnifying party) have the right to undertake the defense
through legal counsel reasonably satisfactory to the
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indemnifying party, and, with consent of the indemnifying party
(which shall not be unreasonably withheld), compromise or settle
such claim on behalf of and for the account of the indemnifying
party, subject to the right of the indemnifying party, with the
consent of the indemnified party, to assume the defense of such
claim at any time prior to settlement, compromise or final
determination thereof;
(c) anything in this Section 7.05 to the contrary notwithstanding,
(i) if there is a reasonable probability that a claim for
injunction, specific performance or similar equitable remedy
other than money damages which may materially and adversely
affect the business or operations of indemnified party, the
indemnified party shall have the right, at its own cost and
expense, to compromise or settle such claim, but (ii) the
indemnified party shall not, without the prior written consent of
the indemnifying party, settle or compromise any claim or consent
to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the
plaintiff to the indemnifying party a release from all liability
in respect of such claim; and
(d) in connection with any such indemnification, the indemnified
party will cooperate in all reasonable requests of the
indemnifying party.
(e) notwithstanding any provision of this Agreement to the contrary,
Sellers shall not be liable or responsible in any respect, either
for indemnity or otherwise, for claims, damages, losses, or
expenses of any description arising due to the acts or omissions
of Sunrise after the Closing.
(f) the giving of any notice of any claim or event giving rise to
indemnity shall not excuse the obligation to give notice of any
subsequent claim or event giving rise to indemnity.
SECTION 7.06 General Provisions Relating to Indemnification.
(a) The party entitled to indemnification shall take all reasonable
steps to mitigate all indemnifiable liabilities and damages upon
and after becoming aware of any event which could reasonably be
expected to give rise to any liabilities or damages that are
indemnifiable hereunder. No party shall be entitled to
indemnification to the extent of any insurance, federal or state
income tax deductions or credits arising from the indemnifiable
event (to the extent that any savings from such deduction or
credit is actually realized) or net proceeds of actions against
third parties by Company or Sunrise based on pre-Closing Date
facts; such indemnified party agrees to timely notify the
insurance carrier and diligently prosecute claims against the
insurance carrier without regard to the possibility of
indemnification hereunder.
(b) Neither Company, nor Sunrise shall make any claim against Sellers
for indemnification to the extent that the basis thereof has
resulted in a purchase price adjustment pursuant to Section 1.03
hereof, which adjustment shall discharge such claim.
SECTION 7.07 Exclusive Remedies. The rights of the Sellers on the one
hand, and Sunrise and the Company on the other hand, under Article I and Section
4.04 and the indemnification rights provided in this Section VII shall be the
exclusive remedy of these parties pursuant to this Agreement with respect to any
dispute arising out of or related to this Agreement, except for (a) the right to
seek specific performance of any of the agreements contained herein, or (b) in
any case where one party has been guilty of fraud in connection with this
transaction. As used herein, fraud shall be construed as actual fraud and deceit
as
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determined by applicable law, and shall exclude conduct which would only give
rise to a claim for negligent misrepresentation. No provision contained in this
Article VII shall apply to a breach of the terms of any Other Agreements, and
the parties to the Other Agreements shall have all rights and remedies provided
to them by law or equity without limitation. Subject only to those indemnity
claims for which notice has been given within the applicable Indemnity Period,
upon expiration of the Indemnity Period, Sellers' obligations for indemnity
under this Agreement shall be discharged and extinguished.
SECTION 7.08 Escrow Agreement. The funds held in escrow by the escrow
agent pursuant to the Escrow Agreement are intended to give security to Company
and Sunrise in case either of the Sellers shall become liable, after the Closing
Date, for any amounts for which Company or Sunrise is entitled to
indemnification by such Seller pursuant to Sections 7.02, 7.03, and 7.04 hereof.
Company may set off the amount to which it is entitled under Article VII against
the escrowed funds in the Escrow Agreement and by setoff against any Earnout
Amount due under Section 1.05 provided, however, that Company or Sunrise may not
set off, withhold or otherwise retain any amount exceeding the amount reasonably
necessary to satisfy or resolve the claim for which setoff is claimed by Company
or Sunrise. The rights and remedies of Company and Sunrise under the Escrow
Agreement shall be in addition to, and not exclusive of, any other rights and
remedies that Company and Sunrise may have against either of the Sellers for a
breach of any provision of this Agreement or with respect to any of the items
enumerated above and Company may first pursue set-off against the Earnout Amount
prior to seeking recourse through the escrow, or by first setting off against
any other obligations that Company or its Affiliates may owe Sellers or their
Affiliates.
SECTION 7.09 Overall Limit.
(a) Notwithstanding anything in this Agreement to the contrary,
Sellers shall not be liable for any claim against them for
indemnity under Sections 7.02 (excluding claims for actual tax
liability, interest and penalties), 7.03 or 7.04 of this
Agreement, either as asserted or as ultimately determined, equal
to or less than Two Hundred Fifty Thousand ($250,000.00) Dollars
in the aggregate for all claims under those Sections, and the
maximum collective liability of Sellers for any and all claims
against them for indemnity under Sections 7.02 (excluding claims
for actual tax liability, interest and penalties), 7.03 and 7.04
of this Agreement, shall not exceed Nine Million ($9,000,000.00)
Dollars, provided that claims for which Sellers are not liable by
virtue of the Two Hundred Fifty Thousand ($250,000.00) Dollar
exclusion provided above in this Section shall not be counted as
a claim in determining said maximum liability. For purposes of
Section 7.02, the amount of the actual tax liability (including
interest and penalties) is not subject to the dollar floor and
cap set out herein, however, all other expenses associated with
the tax liability and subject to Section 7.02, such as attorney
fees and costs of defense, are subject to the dollar floor and
cap set out in this Section 7.09(a).
(b) Notwithstanding anything in this Agreement to the contrary,
including but not limited to, the provisions of Section 7.09(a),
Sellers shall not be liable for any claim against them for
indemnity under Section 7.04 of this Agreement, either as
asserted or as ultimately determined, equal to or less than Five
Hundred Thousand ($500,000.00) Dollars in the aggregate for all
claims under that Section, and Sellers' liability under Section
7.04 shall not exceed in the aggregate the following amounts, and
Sellers will have no liability with respect to the
indemnification set forth in Section 7.04 for any amount of
claims which in the aggregate exceeds the following amounts:
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(i) For any claim asserted against Sellers for liability under
Section 7.04 in the first twenty-four (24) months following
the Closing Date the sum of Nine Million ($9,000,000.00)
Dollars.
(ii) For any claim asserted against Sellers for liability under
Section 7.04 in the period comprising the twenty-fifth
(25th) month through the thirty-sixth (36th) month following
the Closing Date, the sum of Seven Million ($7,000,000.00)
Dollars.
(iii) For any claim asserted against Sellers for liability under
Section 7.04 in the period comprising the thirty-seventh
(37th) month through the forty-eighth (48th) month following
the Closing Date, the sum of Six Million ($6,000,000.00)
Dollars.
(iv) For any claim asserted against Sellers for liability under
Section 7.04 in the period comprising the forty-ninth (49th)
month through the sixtieth (60th) month following the
Closing Date, the sum of Five Million ($5,000,000.00)
Dollars;
In determining the aggregate maximum liability under subparts (i), (ii), (iii)
and (iv) above claims for which Sellers are not liable by virtue of the Five
Hundred Thousand ($500,000.00) Dollar exclusion provided above in this Section
shall not be counted as a claim in determining said maximum liability, and all
claims asserted under Section 7.04 at any time whether or not during the
particular measuring period shall be cumulative. For example, if a claim
totaling Nine Million Five Hundred Thousand ($9,500,000.00) Dollars is made in
the sixth month following Closing Date the maximum liability cap under Section
7.04 shall have been met for the entire five year period for which Section 7.04
survives.
(c) This Section 7.09 will not apply to (i) any intentional breach of
any of the Sellers' representations and warranties if either
Seller had actual knowledge of the breach on the date on which
such representation and warranty is made, or (ii) any intentional
breach by either Seller of any covenant or obligation in this
Agreement, and Sellers will be jointly and severally liable for
all damages with respect to such intentional breaches, except
that Epstein's liability in such event shall not exceed 23.56% of
the Purchase Price unless Epstein had actual knowledge of the
breach of the representation and warranty or Epstein
intentionally breached the covenant or obligation, in which case
Epstein's liability shall not be limited in any manner of amount.
SECTION 7.10 Allocation of Indemnity Obligation. In the event that
Sellers are liable for indemnity under Sections 7.02, 7.03 or 7.04 of this
Agreement, the individual liability of Epstein shall be limited to 26.1% of the
amount of the indemnity claimed and the liability of Hunt shall be limited to
73.9% of the amount of the indemnity claimed. Except as set out in Section
7.09(c) above and notwithstanding any other provision of this Agreement to the
contrary, Sellers' liability for indemnity under this Agreement shall be several
and distinct in proportion to the Purchase Price paid to each pursuant to this
Agreement, and is not joint and several.
SECTION 7.11 General Company Indemnity. Subject to the terms and
conditions of this Article VII, the Company agrees to and will indemnify, defend
and hold Sellers harmless from and against all Damages asserted against,
resulting to, imposed upon or incurred by Sellers, resulting from or arising out
of (i) a breach of the representations, warranties or covenants made by the
Company in this Agreement or any document delivered by or for it pursuant to
this Agreement, or (ii) any event, claim or liability occurring or arising out
of the operation of Sunrise after the Closing Date. Accredo Health, Incorporated
("Accredo") unconditionally guarantees the full and timely payment and
performance of all obligations and liabilities of
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<PAGE> 41
the Company arising out of this Agreement and the Other Agreements, and Accredo
is executing this Agreement solely for the purpose of this guaranty.
ARTICLE VIII.
TERMINATION AND ABANDONMENT
SECTION 8.01 Termination. This Agreement may be terminated at any time
prior to the closing on the Closing Date:
(a) by the mutual consent of the Company and Sellers; or
(b) by either the Company or Sellers if the Closing Date shall not
have occurred on or before December 15, 1999 or such later date
as may be agreed upon by them; provided, however, that the right
to terminate this Agreement under this clause (b) shall not be
available to any party (a "Defaulting Party") whose failure or
delay (or whose affiliate's or affiliates' failure ) to fulfill
any obligation under this Agreement has been the cause of, or
resulted in the failure of the Closing to occur on or before such
date.
(c) by Sellers, in their discretion, in the event that any minority
Shareholders or option holders of Sunrise shall not sell or have
not sold, for any reason, their options, shares, or equity
interest in Sunrise to Sellers at or prior to Closing.
No such termination shall affect the liability hereunder of any
Defaulting Party.
SECTION 8.02 Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby pursuant to Section 8.01 above, written notice thereof shall forthwith be
given to the other parties to this Agreement and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned, without further
action by any of the parties hereto. If this Agreement is terminated as provided
in this Agreement:
(a) the parties hereto will promptly redeliver all documents, work
papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same; and
(b) no party shall have any liability or further obligation to any
other party to this Agreement pursuant to this Agreement except
as provided in Section 8.01 above or Section 9.01.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Expenses, Etc. None of the parties hereto shall have any
obligation to pay any of the fees and expenses of any other party incident to
the negotiation, preparation and execution of this Agreement, including the fees
and expenses of counsel, accountants, investment bankers and other experts,
except as hereinafter provided or as otherwise provided in Section 1.03(e). If
such transactions are consummated, then the Company shall pay the fees and
expenses of (i) Alston & Bird, LLP for its legal services to the Company, and
(ii) subject to the provisions of Section 1.03(e), E&Y for its accounting and
other related services to the Company. Sellers will pay or cause Sunrise to
accrue or pay at or prior to the Effective Date the fees and expenses of (i)
McLain & Merritt and any other attorneys retained by Sunrise
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<PAGE> 42
or Sellers for its legal services to Sellers, and (ii) Brooks, Holmes, Williams
and Cook, LLC, for its services to Sellers, and (iii) fees or expenses of
SunTrust Equitable Securities.
SECTION 9.02 Publicity. The parties hereto agree to cooperate in
issuing any press release or other public announcement concerning this Agreement
or the transactions contemplated hereby. Each party shall furnish to the other
drafts of all such press releases or announcements prior to their release. In
the case of any press release or communication proposed to be made (i) by
Sellers relating to the transactions contemplated by this Agreement, the prior
consent (which shall not be unreasonably withheld) of Company shall be obtained
with respect to the timing and contents thereof, or (ii) by the Company relating
to the transactions contemplated by this Agreement, the prior consent (which
shall not be unreasonably withheld) of Sellers shall be obtained with respect to
the timing and contents thereof. Nothing contained herein shall prevent any
party from at any time furnishing any information required by any governmental
authority.
SECTION 9.03 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 9.04 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
If to Sellers to: Margo Grbinich-Hunt
535 Lake Front Drive
Lilburn, Georgia 30047
Mark Epstein
2310 Woodland Lake Walk
Snellville, Georgia 30078
with a copy to: Robert B. Hill, Esq.
McLain & Merritt
3445 Peachtree Road, N.E.
Suite 500
Atlanta, Georgia 30326-1276
Facsimile No.: 404-262-7531
If to Company
or Sunrise, to: 6820 Charlotte Pike
Suite 100
Nashville, Tennessee 37209
Facsimile No.: (615)352-2588
Attention: Mr. Kyle Callahan
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<PAGE> 43
with a copy to: Thomas W. Bell, Jr., Esq.
General Counsel
Accredo Health, Incorporated
1640 Century Center Parkway
Suite 101
Memphis, Tennessee 38134
Facsimile No.: (901) 385-3689
or such other address or addresses as any party shall have designated by notice
in writing to the other parties. All notices shall be deemed to have been given
or made when delivered by hand or courier or when sent by facsimile, or, if
mailed, five business days after being so mailed.
SECTION 9.05 Waivers. Either Sellers or Company may, by written notice
to the other, and without the consent of any other party hereto, (i) extend the
time for the performance of any of the obligations or other actions of the other
under this Agreement, (ii) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement, (iii) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (iv) waive performance of
any of the obligations of the other under this Agreement. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action, of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 9.06 Amendments. This Agreement may be amended, without the
consent of any other party, only by an instrument in writing signed by the
Company and Sellers.
SECTION 9.07 Entire Agreement. This Agreement, its Exhibits, Schedules
and Annexes, the Other Agreements referred to in Section 5.01 and the documents
and agreements executed on the Closing Date in connection herewith, constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
SECTION 9.08 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, EXCLUSIVE OF THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 9.09 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 9.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 9.11 Headings. The section and other headings in this Agreement
are inserted solely as a matter of convenience and for reference, and are not a
part of this Agreement, and shall not be construed as either limiting or
expanding any provision of this Agreement.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HEMOPHILIA HEALTH SERVICES, INC.
By: /s/ Kyle J. Callahan
---------------------------
Title: President
------------------------
SUNRISE HEALTH MANAGEMENT, INC.
By: /s/ Margo Grbinich-Hunt
---------------------------
Title: President
------------------------
/s/ Mark B. Epstein
-------------------------------
MARK B. EPSTEIN
/s/ Margo Grbinich-Hunt
-------------------------------
MARGO GRBINICH-HUNT
Executed by the undersigned for purposes of Section 7.11 only.
Attest: ACCREDO HEALTH, INCORPORATED
/s/ Thomas W. Bell, Jr. By: /s/ Kyle J. Callahan
- ----------------------------- ---------------------------
Title: Secretary Title: Sr. Vice President
---------------------- ------------------------
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