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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) : July 29, 1998
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OMNICARE, INC.
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(Exact name of registrant as specified in its charter)
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Delaware 1-8269 31-1001351
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(State or other jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
50 East River Center Blvd.
Suite 1530
Covington, Kentucky 41011
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(Address of principal executive offices) (Zip Code)
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(606) 291-6800
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or address, if changed since last report)
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Item 5. Other Events.
Omnicare, Inc., a Delaware corporation ("Omnicare"), has entered into
an Asset Purchase Agreement (the "Purchase Agreement"), dated as of July 29,
1998, among Omnicare, Badger Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Omnicare, Extendicare Health Services, Inc., a
Delaware corporation ("Extendicare"), and certain subsidiaries of Extendicare.
The Purchase Agreement and the Press Release dated July 30, 1998, issued
by Omnicare, which are attached as Exhibits 2.1 and 99.1, respectively, are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
Exhibit No. Description
Exhibit 2.1 Asset Purchase Agreement, dated as of
July 29, 1998, among Omnicare, Inc., Badger
Acquisition Corp., Extendicare Health
Services, Inc., and certain subsidiaries of
Extendicare Health Services, Inc.
Exhibit 99.1 Press Release dated July 30, 1998
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SIGNATURE
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 thereunto duly authorized.
OMNICARE, INC.
By: /s/ Cheryl D. Hodges
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Name: Cheryl D. Hodges
Title: Senior Vice President
Date: August 7, 1998
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EXHIBIT INDEX
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Description Exhibit No.
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2.1 Asset Purchase Agreement, dated as of July 29,
1998, among Omnicare, Inc., Badger Acquisition
Corp., Extendicare Health Services, Inc., and
certain subsidiaries of Extendicare Health
Services, Inc.
99.1 Press Release dated July 30, 1998
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STATEMENT OF DIFFERENCES
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The trademark symbol shall be expressed as............................ 'tm'
The registered trademark symbol shall be expressed as................. 'r'
The section symbol shall be expressed as.............................. 'SS'
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
among
OMNICARE, INC.,
BADGER ACQUISITION CORP.,
EXTENDICARE HEALTH SERVICES, INC.
and
THE SELLERS PARTIES HERETO
Dated as of July 29, 1998
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Table of Contents
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ARTICLE I SALE AND PURCHASE OF ASSETS................................................2
Section 1.1. The Assets and the Assumed Liabilities............................2
Section 1.2. Closing...........................................................2
Section 1.3. Deliveries by the Sellers.........................................3
Section 1.4. Deliveries by Seller Parent.......................................3
Section 1.5. Deliveries by the Purchaser.......................................4
Section 1.6. Post-Closing Adjustment...........................................4
Section 1.7. Allocation of the Purchase Price..................................6
Section 1.8. Changes in Facilities.............................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER
ENTITIES.............................................................................7
Section 2.1. Organization......................................................7
Section 2.2. Authority Relative to this Agreement..............................7
Section 2.3. Consents and Approvals; No Violations.............................7
Section 2.4. Financial Statements..............................................8
Section 2.5. Absence of Certain Changes........................................8
Section 2.6. No Default........................................................9
Section 2.7. Litigation........................................................9
Section 2.8. Permits; Compliance with Applicable Law...........................9
Section 2.9. Taxes.............................................................9
Section 2.10. Intellectual Property.............................................11
Section 2.11. Transactions with Affiliates......................................12
Section 2.12. Contracts.........................................................12
Section 2.13. Labor Relations...................................................13
Section 2.14. Environmental.....................................................13
Section 2.15. Assets Used in the Business.......................................14
Section 2.16. Title to Assets...................................................14
Section 2.17. Insurance.........................................................15
Section 2.18. Inventory.........................................................15
Section 2.19. Accounts Receivable...............................................15
Section 2.20. Product Returns and Warranties....................................15
Section 2.21. Customers; Suppliers..............................................15
Section 2.22. Absence of Certain Business Practices.............................16
Section 2.23. Certain Healthcare Legal Matters..................................17
Section 2.24. Real Property.....................................................18
Section 2.25. Purchasing Contracts..............................................18
Section 2.26. Employee Benefits.................................................18
Section 2.27. Purchase Price....................................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER AND PARENT................................................................19
Section 3.1. Organization.....................................................19
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Section 3.2. Authority Relative to this Agreement.............................19
Section 3.3. Consents and Approvals; No Violations............................19
Section 3.4. Funds............................................................20
ARTICLE IV COVENANTS................................................................20
Section 4.1. Conduct of the Business..........................................20
Section 4.2. Access to Information............................................21
Section 4.3. Disclosure Supplements...........................................22
Section 4.4. Reasonable Efforts...............................................22
Section 4.5. Further Assurances...............................................23
Section 4.6. Brokers or Finders...............................................23
Section 4.7. No Solicitation..................................................23
Section 4.8. Tax Matters......................................................24
Section 4.9. Release of Liens.................................................24
Section 4.10. Performance of Obligations........................................24
Section 4.11. Consents to Transfer Assets.......................................24
Section 4.12. Employment Matters................................................24
Section 4.13. Non-Competition...................................................27
Section 4.14. Transition Services...............................................28
Section 4.15. Bulk Sales Laws...................................................28
Section 4.16. Facilities........................................................28
Section 4.17. Payments to the Business..........................................28
Section 4.18. Share Legend; Transfer............................................28
Section 4.19. Audit.............................................................29
ARTICLE V CONDITIONS................................................................31
Section 5.1. Conditions to Each Party's Obligations...........................31
Section 5.2. Conditions to Obligations of the Parent and the Purchaser........31
Section 5.3. Conditions to Obligations of Seller Parent and the Sellers.......32
ARTICLE VI TERMINATION AND AMENDMENT................................................33
Section 6.1. Termination......................................................33
Section 6.2. Effect of Termination............................................33
Section 6.3. Amendment........................................................33
Section 6.4. Extension; Waiver................................................33
ARTICLE VII SURVIVAL; INDEMNIFICATION...............................................34
Section 7.1. Survival Periods.................................................34
Section 7.2. Indemnification Amounts..........................................34
Section 7.3. Indemnification..................................................35
Section 7.4. Claims...........................................................36
Section 7.5. Relation to Escrow...............................................37
Section 7.6. Exclusive Remedy.................................................37
ARTICLE VIII MISCELLANEOUS..........................................................37
Section 8.1. Notices..........................................................37
Section 8.2. Headings.........................................................38
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Section 8.3. Counterparts.....................................................38
Section 8.4. Entire Agreement; Assignment.....................................38
Section 8.5. Governing Law....................................................38
Section 8.6. Specific Performance.............................................39
Section 8.7. Publicity........................................................39
Section 8.8. Binding Nature; No Third Party Beneficiaries.....................39
Section 8.9. Severability.....................................................39
Section 8.10. Interpretation....................................................39
Section 8.11. Payment of Expenses...............................................40
Section 8.12. Access to Records.................................................40
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Exhibits
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Exhibit A The Warrant
Exhibit B DEA Power of Attorney
Exhibit C Milwaukee Lease
Exhibit D Federal Way Sublease
Exhibit E Canada and UK Provider Agreement
Exhibit F Escrow Agreement
Exhibit G Accu-Med License Agreement
Exhibit H Registration Rights Agreement
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ASSET PURCHASE AGREEMENT, dated as of July 29, 1998 among Omnicare, Inc., a
Delaware corporation ("Parent"), Badger Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent (the "Purchaser"),
Extendicare Health Services, Inc., a Delaware corporation ("Seller Parent"), and
the subsidiaries of Seller Parent listed on the signature pages hereto
(collectively, the "Sellers" and, together with Seller Parent, the "Seller
Entities").
WHEREAS, the Seller Entities are engaged in several businesses, one of them
being the UPC Institutional Pharmacy business, defined herein as consisting of
the provision to nursing homes, assisted living facilities and other long-term
care facilities and residents of such facilities (collectively, the "LTC
Customers"), of the following items: (i) pharmaceutical products, (ii)
pharmacy-related services, (iii) infusion therapy products and services, (iv)
respiratory equipment and supplies, and (v) parenteral and enteral nutrition
products, wound care products, ostomy and urological supplies, together with all
home health care services provided by United Professional Companies, Inc.
("UPC") at its Springfield, Ohio location whether to LTC Customers or others
(the "Business" and all such products, equipment and supplies collectively the
"Business Products"). The Business excludes the following: (a) respiratory
therapist services, not including the provision of Business Products to LTC
Customers, (b) the provision of respiratory equipment and supplies other than to
LTC Customers, (c) home health services (including those provided by Stein
Medical), except for those services provided by UPC at its Springfield, Ohio
location and the provision of Business Products to LTC Customers, (d) group
purchasing services, provided that such services do not include the sale by
Seller Entities or affiliates (as distinguished from sales by unaffiliated
vendors or original manufacturers) of Business Products to LTC Customers, (e)
clinical psychology and other behavior health services, not including the
provision of Business Products to LTC Customers, (f) the business of contracting
with managed care organizations, insurers, and other payors of health care
services for the provision of care to individuals in nursing homes, assisted
living facilities and other long-term care facilities, provided that the
provision of all products and services included within the Business shall not be
provided by Seller Entities or any affiliates, (g) respiratory equipment and
supplies provided by UPC/Chippewa Valley Home Care, LLC in the Eau Claire,
Wisconsin area and (h) the provision by UPC Home Health Services of respiratory
equipment and supplies to residents in assisted living facilities in Wisconsin
which are not affiliated with the Seller Entities.
WHEREAS, the Seller Entities wish to sell, and the Purchaser wishes to
purchase, certain assets relating to the Business.
NOW, THEREFORE, the parties agree as follows:
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ARTICLE I
SALE AND PURCHASE OF ASSETS
Section 1.1. The Assets and the Assumed Liabilities.
(a) Upon the terms and subject to the conditions of this Agreement, at
the Closing, the Sellers shall sell, convey, assign, transfer and deliver to the
Purchaser and the Purchaser shall purchase and acquire good and valid title to
all of the properties, assets and rights of the Sellers or any subsidiary
thereof set forth on Schedule 1.1(a)(x) hereto (collectively, the "Assets"),
provided that the Assets shall not include any of the Assets set forth on
Schedule 1.1(a)(y) hereto (the "Excluded Assets").
(b) Upon the terms and subject to the conditions of this Agreement, at
the Closing, the Purchaser shall assume, and shall be solely and exclusively
liable with respect to, and shall pay, perform or discharge in accordance with
their respective terms, the liabilities and obligations of the Sellers set forth
on Schedule 1.1(b) hereto (collectively, the "Assumed Liabilities").
(c) Notwithstanding anything in this Agreement to the contrary, (i)
the Purchaser shall not assume, nor shall it be deemed to have assumed, any
liabilities or obligations, except as expressly provided in Section 1.1(b)
hereof and (ii) the Assumed Liabilities shall not, in any event, include the
liabilities and obligations set forth on Schedule 1.1(c) hereto (collectively,
the "Excluded Liabilities").
(d) Purchase Price. (x) In consideration for the sale and transfer of
the Assets and the performance by the Seller Entities of their covenants
hereunder (including making the deliveries contemplated hereby), at the Closing
the Purchaser shall pay an aggregate of (i) $250,000,000, (ii) 125,000 shares of
common stock, par value $1.00 per share (the "Shares"), and (iii) warrants, in
the form of Exhibit A hereto (the "Warrants"), to purchase up to 1,500,000
Shares on the terms set forth therein (the "Purchase Price") as provided in this
Article I, subject to adjustment as provided in Sections 1.1(d)(y) and 1.6, and
Parent and the Purchaser shall perform their respective covenants hereunder
(including making the deliveries contemplated hereby).
(y) Subject to Section 5.1(c), if the Audited EBITA Number (as defined
in Section 4.19 hereof) is less than $20,914,560, each of the amount of cash,
number of Shares and number of Shares issuable pursuant to the Warrants
contemplated by Section 1.1(d)(x) shall be reduced by the percentage equal to
(x) one minus the result obtained by dividing the Audited EBITA Number by
$21,786,000, multiplied by (y) 100.
Section 1.2. Closing. (a) Upon the terms and subject to the conditions of
this Agreement, the closing of the transactions contemplated by this Agreement
(the
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"Closing") will take place on the tenth business day following the satisfaction
or waiver of the conditions set forth in Article V hereof (other than conditions
which, by their nature, are to be satisfied at the Closing, but subject to such
conditions), at 10:00 a.m., Milwaukee time, at the offices of Quarles & Brady,
Milwaukee, Wisconsin, or at such other time or at such other place as shall be
agreed upon by the parties. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
(b) By virtue of the Closing, (x) the Sellers shall sell, convey,
assign, transfer and deliver to the Purchaser and the Purchaser shall purchase
and acquire good and valid title to all the Assets and (y) the Purchaser shall
assume, and shall be solely and exclusively liable with respect to, and shall
pay, perform or discharge in accordance with their respective terms, the Assumed
Liabilities.
Section 1.3. Deliveries by the Sellers. At the Closing, each Seller shall
deliver or cause to be delivered to the Purchaser the following:
(a) Good and sufficient instruments of assignment with respect to
Intellectual Property (as defined herein) in recordable form;
(b) A duly executed DEA Power of Attorney in the form of Exhibit B
attached hereto; and
(c) Such other duly executed documents and certificates as may be
required to be delivered by such Seller pursuant to the terms of this Agreement
or as may be reasonably requested by the Purchaser prior to the Closing.
Section 1.4. Deliveries by Seller Parent. At the Closing, Seller Parent
shall deliver to the Purchaser the following:
(a) A duly executed lease containing the terms set forth on Exhibit C
(the "Milwaukee Lease");
(b) A duly executed sublease containing the terms set forth on Exhibit
D (the "Federal Way Sublease");
(c) A duly executed Canada and UK Provider Agreement containing the
terms set forth on Exhibit E (the "Provider Agreement");
(d) On behalf of the Sellers, a duly executed escrow agreement in the
form of Exhibit F attached hereto (the "Escrow Agreement");
(e) A duly executed Accu-Med license agreement in the form of Exhibit
G attached hereto; and
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(f) Such other duly executed documents and certificates as may be
required to be delivered by Seller Parent pursuant to the terms of this
Agreement or as may be reasonably requested by the Purchaser prior to the
Closing.
Section 1.5. Deliveries by the Purchaser. At the Closing, the Purchaser
shall deliver or cause to be delivered (x) to Seller Parent the following:
(a) An aggregate of (i) $211,796,875 in immediately available funds,
by wire transfer to an account or accounts specified by Seller Parent no later
than one business day prior to the Closing, (ii) 125,000 newly issued, duly
authorized, validly issued, fully paid and non-assessable Shares and (iii) the
Warrants, duly executed;
(b) A duly executed Escrow Agreement;
(c) A duly executed Accu-Med license agreement;
(d) A duly executed Milwaukee Lease;
(e) A duly executed Federal Way Sublease;
(f) A duly executed Registration Rights Agreement, in the form of
Exhibit H;
(g) A duly executed Provider Agreement; and
(h) Such other duly executed documents and certificates as may be
required to be delivered by the Purchaser pursuant to the terms of this
Agreement or as may be reasonably requested by the Sellers prior to the Closing;
and
(y) to the Escrow Agent, $38,203,125 in immediately available funds by wire
transfer to an account specified by the Escrow Agent.
Section 1.6. Post-Closing Adjustment. (a) If the Closing Date Net Assets
(as defined below) are less than $44,000,000, the Sellers shall pay the
difference to the Purchaser; provided that if any event which would result in a
reduction in the Closing Date Net Assets (the "CDNA Amount") has resulted in an
adjustment pursuant to Section 1.1(d)(y), then the amount to be paid by Seller
pursuant to this Section 1.6 shall be reduced by the CDNA Amount. If the Closing
Date Net Assets are more than $46,000,000, the Purchaser shall pay the
difference to the Seller. Any payment under this Section 1.6(a) shall be made in
immediately available funds within five business days of the date the Closing
Date Net Assets are finally determined pursuant to this Section 1.6 and shall be
accompanied by interest on such amount from the Closing Date to the date of
payment at a floating rate equal to the publicly announced prime lending rate of
NationsBank, N.A. Any such payment shall be made in accordance with Section 7.5
hereof.
(b) As promptly as practicable following the Closing Date, but in no
event more than 90 days following the Closing Date, the Purchaser shall prepare
and
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deliver to Seller Parent a balance sheet setting forth the Assets and the
Assumed Liabilities as of the Closing Date, in accordance with clause (f) below.
(c) Unless within 30 days after its receipt of the Closing Date
Balance Sheet (as defined below), Seller Parent shall deliver to the Purchaser a
detailed statement describing its objections thereto, the amounts determined in
accordance with clause (b) shall be final and binding.
(d) If Seller Parent shall deliver the statement referred to in clause
(c) above, the Purchaser and Seller Parent will use reasonable efforts to
resolve any disputes, but if a final resolution is not reached within 20 days
after Seller Parent has submitted its objections, any remaining disputes will be
resolved by Arthur Andersen LLP or such other national accounting firm as the
parties mutually agree upon based on its neutrality with respect to all parties
(the "Reviewing Accountants"). The Reviewing Accountants shall be instructed to
resolve any matters in dispute as promptly as practicable in accordance with
Section 1.6(e) below. The determination of the Reviewing Accountants will be
final and binding.
(e) The Purchaser and Seller Parent will each pay one-half of the fees
and expenses of the Reviewing Accountants. Seller Parent and the Purchaser shall
cooperate with each other and the Reviewing Accountants in connection with the
matters contemplated by this Section 1.6, including by furnishing such
information and access to books, records (including accountants work papers),
personnel and properties as may be reasonably requested at their own expense.
Each party may also furnish to the Reviewing Accountants such other information
and documents as it deems relevant with copies and notification to the other
party. The Reviewing Accountants may conduct such procedures as it deems
appropriate, provided that the parties do not intend that formal civil
procedures necessarily be followed.
(f) The "Closing Date Net Assets" will be equal to the total assets
less the total liabilities set forth on the balance sheet finally determined in
accordance with this Section 1.6 (the "Closing Date Balance Sheet"). The Closing
Date Balance Sheet shall be prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a basis otherwise consistent with the
accounting principles used in preparation of the December 31, 1997 and March 31,
1998 balance sheets delivered pursuant to Section 2.4 hereof and in all respects
as if the Closing Date were the end of a fiscal year. Future payments by Parent
or any subsidiary thereof under any non-competition or "earn-out" agreements
included in the Assets and Assumed Liabilities shall be deemed liabilities for
purposes of this Section 1.6 and the present value (using a 7% discount rate) of
such payments shall be so reflected on the Closing Date Balance Sheet. The
provisions set forth in Schedule 1.6(f) shall govern the preparation of the
Closing Date Balance Sheet and the review thereof. Parent, Seller Parent, KPMG
Peat Marwick LLP ("KPMG") and Price Waterhouse Coopers LLP ("PWC") shall
promptly meet, and during the preparation of the Closing Date Balance Sheet and
review thereof shall continue to meet, to discuss such Closing Date Balance
Sheet, and any additions or other modifications to such Schedule. Any dispute
shall be resolved by the Reviewing Accountants.
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Section 1.7. Allocation of the Purchase Price. On or prior to the Closing
Date, Seller Parent and the Purchaser shall mutually agree on an allocation of
the Purchase Price and the amount of the Assumed Liabilities (and all other
capitalizable costs) among the Assets (on both a consolidated and state by state
basis) and other relevant items in accordance with Section 1060 of the Code (as
defined below) and the regulations promulgated thereunder and all applicable
provisions of state, local and foreign law (such allocations, the "Section 1060
Allocations"). If Seller Parent and the Purchaser are unable to agree with
respect to the Section 1060 Allocations, Seller Parent and the Purchaser shall
engage the Reviewing Accountants to determine such allocations. The conclusions
of the Reviewing Accountants shall be binding on the parties. The fees and
expenses of the Reviewing Accountants shall be shared equally by Seller Parent
and the Purchaser. Each of the parties hereto agrees (i) to prepare and file Tax
Returns (as defined below), including Form 8594, in a manner consistent with the
Section 1060 Allocations, as finally determined pursuant to this Section 1.7,
(ii) to report this transaction for federal, state, local and foreign income tax
purposes in accordance with the Section 1060 Allocations, as finally determined
pursuant to this Section 1.7, and (iii) to use its best efforts to sustain the
Section 1060 Allocations, as finally determined pursuant to this Section 1.7, in
any subsequent tax audit or dispute.
Section 1.8. Changes in Facilities. The Sellers shall pay the Purchaser an
amount equal to the diminution in value to the Business resulting from:
(a) the extent to which the rights assigned by Sellers to Purchasers
at the Closing under contracts pursuant to which Seller Parent, or any
subsidiary or affiliate, provides products or services to any Facility relates
to a number of pharmacy beds which is less than 47,553,
(b) any Facility ceasing to be a Seller Facility within 18 months
following the Closing, or
(c) prior to the 18th month following the Closing, there being an
event or fact which has had or is reasonably likely to have a material adverse
effect on the Business with respect to Seller Facilities for a reason unrelated
to (i) the management of the Business by Parent or its subsidiaries or
affiliates, (ii) any natural disasters or (iii) any "Changes in Law." As used in
this paragraph, "Change in Law" shall mean a change, after the date hereof, in
federal or state laws, regulations or programs pertaining to the provision of
services to residents of Facilities, or with respect to payment therefor,
excluding (x) any changes relating to or resulting from the Balanced Budget Act
of 1997 (to include the Medicare Prospective Payment System for skilled nursing
facilities contained therein), including any implementing regulations proposed
or adopted after the date hereof, and (y) changes in the Seller Facilities'
pharmacy, infusion, respiratory or medical supply usage resulting from changes
in clause (x).
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(d) As used herein, (i) "Facilities" shall mean all healthcare
facilities, including nursing homes, assisted living facilities and independent
living facilities, which are now or hereafter provided products or services by
the Business under contract and (ii) "Seller Facilities" shall mean all
Facilities now or hereafter owned, operated or leased by Seller Parent or any
subsidiary or affiliate.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER ENTITIES
The Seller Entities, jointly and severally, represent and warrant to the
Purchasers as follows, except as set forth in the disclosure schedule being
delivered by the Seller Entities to the Purchaser concurrently herewith (the
"Disclosure Schedule") (which Disclosure Schedule identifies the section or
subsection of this Agreement to which each entry relates):
Section 2.1. Organization. Each Seller Entity (x) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and (y) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
(including the Business) as now being conducted. Neither the Assets nor the
Assumed Liabilities include any securities of any person.
Section 2.2 Authority Relative to this Agreement. Each Seller Entity has
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each Seller Entity and the consummation by each
Seller Entity of the transactions contemplated by this Agreement have been duly
and validly authorized by the Boards of Directors of each Seller Entity, and by
Seller Parent as the sole stockholder of each of the Sellers, and no other
corporate proceedings on the part of any Seller Entity are necessary to
authorize this Agreement and to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each Seller Entity and constitutes the valid and binding obligation of each
Seller Entity, enforceable against each Seller Entity in accordance with its
terms.
Section 2.3. Consents and Approvals; No Violations. Except for the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), no filing with, and no permit, authorization,
consent or approval of any federal, state, local, municipal or foreign or other
government or governmental agency or body ("Governmental Entity") or any third
party, is necessary for the consummation by any Seller Entity of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by any Seller Entity nor the consummation by any Seller Entity
of the transactions contemplated by this Agreement nor compliance by any Seller
Entity with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws of any
Seller Entity, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time
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or both) a default (or give rise to any right of termination, modification,
cancellation or acceleration or loss of material benefits) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, agreement, permit, license, lease, purchase order, sales order,
arrangement or other commitment or obligation to which any Seller Entity is a
party or may be subject or which is included in the Assets or the Assumed
Liabilities or (iii) violate any order, writ, injunction, decree, statute,
treaty, rule or regulation applicable to any Seller Entity, the Assets or the
Assumed Liabilities, except in the case of (ii) or (iii), for violations,
breaches or defaults which would not (x) in the aggregate, have or would be
reasonably likely to have a material adverse effect on the business, operations,
assets, liabilities, financial condition or results of operations of the
Business, Assets or Assumed Liabilities or (y) prevent or significantly delay
the consummation of the transactions contemplated hereby (in either case, a
"Material Adverse Effect").
Section 2.4. Financial Statements. (a) Section 2.4(a) of the Disclosure
Schedule sets forth the unaudited balance sheets and unaudited statements of
income of the Business as of and for the year ended December 31, 1997 and the
three months ended March 31, 1998, and an unaudited statement of cash flows for
the three months ended March 31, 1998 (collectively, the "Financial
Statements").
(b) Each of the balance sheets (including the related notes) included
in the Financial Statements fairly presents, in all material respects, the
financial position of the Business as of the respective dates thereof and the
statements of income and cash flow (including the related notes) included in the
Financial Statements fairly present the results of operations of the Business
for the respective periods then ended. Each of the Financial Statements has been
(i) prepared in accordance with GAAP consistently applied during the periods
involved, except as otherwise noted therein or, with respect to the year-end
Financial Statements, in the notes thereto and (ii) prepared in accordance with
the books and records of the Sellers.
Section 2.5. Absence of Certain Changes. Since December 31, 1997, (a) the
Business has operated in the ordinary course of business , (b) no Seller Entity
has taken, or agreed to take, any of the actions set forth in Section 4.1 hereof
and (c) the Business has not suffered a Material Adverse Effect.
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Section 2.6. No Default. There exists no default or violation (and no event
has occurred which with notice or lapse of time would constitute a default or
violation or loss of material benefits) by any Seller Entity or, to the
knowledge of the Seller Entities, any other party thereto, of any term,
condition or provision of (i) any note, bond, mortgage, indenture, contract,
agreement, permit, license, lease, purchase order, sales order, arrangement or
other commitment or obligation to which any Seller Entity is a party or may be
subject or which is included in the Assets or the Assumed Liabilities or (ii)
any order, writ, injunction, decree, statute, treaty, rule or regulation
applicable to any of the Assets or the Assumed Liabilities, except for
violations or defaults which would not, in the aggregate, have a Material
Adverse Effect.
Section 2.7. Litigation. There is no claim, action, suit, proceeding,
opposition, challenge, cancellation proceeding, charge or investigation
(collectively, a "Proceeding") pending or, to the knowledge of the Seller
Entities, threatened, regarding the Business, Assets or Assumed Liabilities.
There are no outstanding orders, writs, judgments, injunctions, decrees or
settlements that apply, in whole or in part, to the Business, Assets or Assumed
Liabilities that restrict the Business, Assets or Assumed Liabilities in any
material respect.
Section 2.8. Permits; Compliance with Applicable Law. (a) The Sellers
possess all permits, licenses, variances, exemptions, orders, approvals and
authorizations of all Governmental Entities necessary for the lawful conduct of
the Business, including, without limitation, all provider agreements and other
authorizations necessary for the Business to obtain reimbursement under the
Medicare program, each state Medicaid program and all other governmental
reimbursement programs under which the Business has obtained reimbursement since
January 1, 1997 (the "Permits"). All of such Permits which are material,
including all Permits to provide pharmacy services, are set forth in Section
2.8(a) of the Disclosure Schedule, and those, if any, included in the Assets are
appropriately identified as being purchased by the Purchaser, but only to the
extent Sellers may convey the same. All such Permits have been legally obtained
and maintained and are in full force and effect. The Sellers are duly licensed
to provide pharmacy services in all states in which the Business is conducted
and are in substantial compliance with the terms of such licenses.
(b) Except to the extent failure to be in compliance would not have a
Material Adverse Effect, the Business is being and has been conducted in
compliance with all Permits, orders, writs, judgments, injunctions, decrees and
settlements and applicable laws, ordinances, codes, rules, regulations and
policies of any Governmental Entity (collectively, the "Applicable Laws").
Section 2.9. Taxes. (a) Each of the Seller Entities has duly and timely
filed, or had Seller Parent file on its behalf (and, with respect to Tax Returns
(as defined below) due after the date hereof and prior to the Closing Date, will
duly and timely file or have Seller Parent file on its behalf), with the
appropriate federal, state, local and foreign taxing authorities all Tax Returns
required to be filed by or with respect to each
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member of the Group. All such Tax Returns were (and, as to Tax Returns not filed
as of the date hereof, will be) true, correct and complete in all material
respects as of the time of filing. Seller Parent and each member of the Group
has paid (and, until the Closing Date, will pay) in full on a timely basis all
Taxes (as defined below) due. The balance for accrued Taxes on the March 31,
1998 balance sheet referred to in Section 2.4 for the payment of accrued but
unpaid Taxes through the date thereof is correct and the amount of the Seller
Entities' liability for unpaid Taxes shall not exceed such balance for accrued
but unpaid Taxes of the Seller Entities. All monies which each member of the
Group was required by Applicable Laws to withhold from employee wages have been
withheld (and, until the Closing Date, will be withheld) and either timely paid
to the proper governmental authority or set aside in accounts for such purposes
and accrued on the books of the Group or member, as the case may be.
(b) Each of the Seller Entities is a domestic corporation for U.S.
federal income Tax purposes, within the meaning of Sections 7701(a)(3) and (4)
of the Code.
(c) Except as set forth on Schedule 2.9, (i) none of the members of
the Group has received any notice of a deficiency or assessment with respect to
Taxes for which any of the Seller Entities could be liable from any taxing
authority which has not been fully paid or finally settled, except to the extent
any such deficiency or assessment is being contested in good faith through
appropriate proceedings; (ii) there are no ongoing audits or examinations of any
Tax Return relating to the Group or any member thereof for which any of the
Seller Entities could be liable and no notice (oral or written) of audit or
examination of any such Tax Return has been received by any member of the Group;
(iii) none of the Seller Entities has given nor has there been given on its
behalf a waiver or extension of any statute of limitations relating to the
payment of Taxes for any year; (iv) no issue has been raised (either in writing
or orally, formally or informally) on audit or in any other proceeding (and is
currently pending) with respect to Taxes of the Group or any member thereof for
which any of the Seller Entities could be liable by any taxing authority.
(d) None of the Sellers is a party to any tax sharing agreement and
has not assumed the liability of any other person with respect to Taxes under
law or contract.
(e) None of the Assets is or could be treated as an equity interest in
a corporation (or an entity treated as a corporation for U.S. federal income Tax
purposes), an interest in a partnership (or an entity treated as a partnership
for U.S. federal income Tax purposes), or any interest in an entity (e.g., a
corporation or trust) for U.S. federal income Tax purposes.
(f) There are no security interests on any of the Assets that arose in
connection with any failure (or alleged failure) to pay any Taxes and, except
for liens for real and personal property Taxes that are not yet due and payable,
there are no liens for any Tax upon any Asset.
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(g) For purposes of this Section 2.9, the following terms shall have
the meaning given to them below:
(i) "Group" means, individually and collectively, (i) Seller
Parent, (ii) the subsidiaries included in the affiliated group of which Seller
Parent is the common parent within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), (iii) the Sellers and (iv) any
individual, trust, corporation, partnership or any other entity as to which any
of the Sellers are liable for Taxes incurred by such individual or entity either
as a transferee or successor, or pursuant to Treasury Regulation ss.1.1502-6, or
pursuant to any other Law.
(ii) "Tax" means any of the Taxes, and "Taxes" means, with
respect to the Group, (i) all income taxes (including any tax on or based upon
net income, or gross income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings, or profits) and all gross
receipts, estimated, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, environmental (including taxes under Code Section
59A), alternative, add-on minimum, custom duties, capital stock, social security
(or similar), unemployment, disability, or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest, penalty, or addition
thereto, whether disputed or not, imposed by any taxing authority on the Group
or any member thereof, and (ii) any liability for payment of any amount of the
Tax described in the immediately preceding clause (i) as a result of being a
"transferee" (within the meaning of Code Section 6901 or any other applicable
law) of another person or successor, by contract, or otherwise, or a member of
an affiliated, consolidated, or combined group.
(iii) "Tax Return" means any return, declaration, report, claim
or refund, or information return or statement or other document (including any
related or supporting information) filed or required to be filed with any
appropriate federal, state, local or foreign governmental entity or authority
(individually or collectively, "taxing authority") or other authority in
connection with the determination, assessment or collection of any Tax paid or
payable by the Group or the administration of any Laws, regulations, or
administrative requirements relating to any such Tax.
Section 2.10. Intellectual Property. The Assets include all U.S. and
foreign, registered and unregistered, patents, trademarks, trade names,
copyrights, technology (including software), trade secrets, know-how,
inventions, data, processes and other intellectual property rights
(collectively, "Intellectual Property Rights") material to the conduct of the
Business. No claims are pending by any person as to the use of any Intellectual
Property Rights in the Business and, to the best knowledge of each Seller
Entity, the use by the Seller Entities of all Intellectual Property Rights does
not infringe on the rights of any person and there is no basis for any such
claim. To the best knowledge of each Seller Entity, no third person is
infringing on the Intellectual
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Property Rights. The Intellectual Property Rights are owned exclusively by the
Seller Entities and not subject to any licenses or other encumbrances. The
Seller Entities have taken and, prior to Closing will continue to take, all
measures reasonably necessary to preserve and protect the Intellectual Property
Rights. Section 2.10 of the Disclosure Schedule sets forth a list of all
material Intellectual Property Rights included in the Assets.
Section 2.11. Transactions with Affiliates. As directly related to the
Business, there are no outstanding liabilities or obligations for amounts owing
to or from, or contracts and, within the past year there have been no
transactions, between Seller Parent or its stockholder, directors, officers,
employees or other affiliates (other than the Sellers) on the one hand, and the
Sellers, the Business, the Assets or the Assumed Liabilities, on the other hand,
other than the contracts included in the Assets and the Assumed Liabilities and
other than the provision of pharmacy services in the ordinary course of
business.
Section 2.12. Contracts.
(a) Section 2.12 of the Disclosure Schedule sets forth a complete and
accurate list of all contracts included in the Assets or the Assumed
Liabilities, other than contracts which involve the payment of less than
$100,000 per year and which are not otherwise material to the Business.
(b) Each contract included in the Assets or the Assumed Liabilities,
(i) is legal, valid, binding and enforceable against the applicable Seller
Entity, and to the Seller Entities' knowledge, against each other party thereto,
is in full force and effect and, subject to obtaining all requisite consents to
assignment from the other parties (which are listed in Section 2.12(b) of the
Disclosure Schedule) will continue to be so legal, valid, binding, enforceable
and in full force and effect following the Closing and (ii) neither the
applicable Seller Entity, nor to the Seller Entities' knowledge, any other
party, is in breach or default, and no event has occurred which would constitute
(with or without notice or lapse of time or both) a breach or default (or give
rise to any right of termination, modification, cancellation or acceleration) or
loss of material benefits under any such contract, except in the case of (i) and
(ii) above for lack of binding effect, enforceability, violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect.
(c) The Seller Entities have delivered or made available for review by
Parent true and complete copies of each contract listed on Section 2.12 of the
Disclosure Schedule. Since the Balance Sheet Date, there has been no material
modification, breach or termination of any such contract nor, to the Seller
Entities' knowledge, is any such modification, breach or termination
contemplated.
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Section 2.13. Labor Relations. (a) There is no unfair labor practice,
charge or complaint or other proceeding pending or, to the knowledge of each
Seller Entity, threatened, against any of the Assets or the Sellers or relating
to the Business before the National Labor Relations Board or any other
Governmental Entity.
(b) There is no labor strike, slowdown or stoppage pending or, to the
knowledge of the Sellers, threatened, against or affecting the Business, nor has
there been any such activity within the past two years affecting the Business.
(c) There are no pending collective bargaining negotiations relating
to the employees of any of the Sellers.
(d) (i) there are no agreements with, or pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for any or all of the employees of any of the Seller Entities, (ii) no such
petitions have been pending within the past five years and (iii) to the best
knowledge of each Seller Entity, there has not been any general solicitation of
representation cards by any union seeking to represent the employees of any of
the Seller Entities as their exclusive bargaining agent at any time within the
past five years.
Section 2.14. Environmental. (a) Except to the extent that any of the
following, individually or in the aggregate, could not result in any Damages (as
defined in Section 7.2(a) hereof) to any of the Seller Entities, the Assets or
the Business, individually or in the aggregate, of a value greater than $50,000:
(i) the Sellers, Seller Parent (in connection with the Business), the Assets and
the Business comply and at all times have complied with all applicable
Environmental Laws (as defined below), (ii) no Hazardous Substances (as defined
below) are present at or have been disposed on or released or discharged from,
onto or under any of the properties currently owned, leased, operated or
otherwise used by the Sellers (including soils, groundwater, surface water,
buildings or other structures) or Seller Parent (in connection with the
Business), (iii) no Hazardous Substances were present at or disposed on or
released or discharged from, onto or under any of the properties formerly owned,
leased, operated or otherwise used by the Sellers, Seller Parent (in connection
with the Business) or the Business during the period of ownership, lease,
operation or use by any of the Sellers, Seller Parent (in connection with the
Business) or the Business, (iv) none of the Sellers, Seller Parent (in
connection with the Business), the Assets or the Business are subject to any
liability or obligation in connection with Hazardous Substances present at any
location owned, leased, operated or otherwise used by any third party, (v) none
of the Seller Entities or the Business has received any notice, demand, letter,
claim or request for information alleging that any of the Sellers, Seller Parent
(in connection with the Business), the Assets or the Business is or may be in
violation of or liable under any Environmental Law, (vi) none of the Sellers,
Seller Parent (in connection with the Business), any of the Assets or the
Business is subject to any order, decree, injunction or other directive of any
governmental authority and none of the Sellers, Seller Parent (in connection
with the Business), the Assets or the Business is subject to any indemnity or
other agreement with any person or entity relating to Hazardous Substances and
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(vii) there are no circumstances or conditions involving any of the Seller
Entities, any of the Assets or the Business, any assets (including real
property) or businesses previously owned, leased, operated or otherwise used by
any of the Seller Entities, or any of the assets (including real property) or
businesses of any predecessors of any of the Seller Entities that could
reasonably be expected to result in any Damages to any of the Sellers, Seller
Parent (in connection with the Business), any of the Assets or the Business
arising under or pursuant to Environmental Law or in any restriction on the
ownership, use or transfer of any of the Assets arising under or pursuant to any
Environmental Law.
(b) As used herein, the term "Environmental Law" means any
international, national, provincial, regional, federal, state, municipal or
local law, regulation, order, judgement, decree, permit, authorization, opinion,
common or decisional law (including, without limitation, principles of
negligence and strict liability) or agency requirement currently in effect
relating to the protection, investigation or restoration of the environment
(including, without limitation, natural resources) or the health or safety of
human or other living organisms, including, without limitation, the manufacture,
introduction into commerce, export, import, handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to persons
or property.
(c) As used herein, the term "Hazardous Substance" means any element,
compound, substance or other material (including any pollutant, contaminant,
hazardous waste, hazardous substance, chemical substance, or product) that is
listed, classified or regulated pursuant to any Environmental Law currently in
effect, including, without limitation, any petroleum product, by-product or
additive, asbestos, presumed asbestos-containing material, asbestos-containing
material, medical waste, chloroflourocarbon, hydrochloroflourocarbon,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
material or radon.
Section 2.15. Assets Used in the Business. The Assets constitute all of the
assets, properties and rights used in the conduct of the Business, other than
the Excluded Assets. The Sellers are the sole owners of the Assets and Assumed
Liabilities. Immediately following the Closing, no Seller Entity (or any
subsidiary thereof) will own or lease any assets, properties or rights which are
used in or are necessary for the conduct of the Business, other than the
Excluded Assets.
Section 2.16. Title to Assets. The Sellers have good, valid and marketable
title to the Assets, free and clear of any lien, security interest, pledge,
claim, restriction on transferability, option, charge or encumbrance of any
nature whatsoever ("Liens") other than Permitted Liens (as defined below). At
the Closing, the Sellers will deliver the Assets free and clear of any Liens
other than Permitted Liens.
"Permitted Liens" means (i) Liens for current taxes not yet due and payable
or (ii) Liens arising or incurred in the ordinary course of business, which,
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individually or in the aggregate, are not substantial in amount, do not
materially detract from the value of or materially interfere with the present
use of any of the assets subject thereto or materially impair the conduct of the
Business.
Section 2.17. Insurance. During the past five years, no insurance policy
covering the Business has been revoked, cancelled or limited by the provider of
the insurance, and, to the knowledge of the Sellers, no provider of insurance
has threatened to revoke, cancel or limit any such policy.
Section 2.18. Inventory. At the Closing, the inventory included in the
Assets (the "Inventory"), will be items of a quality usable or saleable by the
Business in the ordinary course of business , except for dated or defective
materials (including raw materials, work-in-process and finished goods), which
will be written down or reserved against on the Closing Date Balance Sheet in
accordance with GAAP and the past practices of the Seller Entities. The
Inventory delivered at the Closing will be of a quantity and quality that is
reasonable and warranted in the circumstances of the Business. Notwithstanding
anything herein to the contrary, inventory shall be accounted for on a "first
in, first out" basis, and not on a "last in, first out" basis.
Section 2.19. Accounts Receivable. All accounts receivable, notes
receivable and other indebtedness included in the Assets (the "Accounts
Receivable") will represent sales actually made or services actually delivered
in the ordinary course of business . Except to the extent reserved against on
the Closing Date Balance Sheet, the Seller Entities know of no reason why such
Account Receivable would not be collectible in the ordinary course of business.
Reserves for bad debt shall be made in accordance with GAAP and the past
practices of Seller.
Section 2.20. Product Returns and Warranties. There are no liabilities for
product returns other than those arising in the ordinary course of business . To
the best knowledge of the Seller Entities, there are no threatened claims for
(i) product returns, (ii) warranty obligations or (iii) product services other
than in the ordinary course of business and such as have been adequately
reserved against on the Seller's books and records. No Seller Entity has made
any express warranties with respect to products sold or distributed by the
Seller Entities (other than passing on warranties made by the manufacturers
thereof) and, to the knowledge of the Seller Entities, no other warranties have
been made by their respective officers, directors, employees, consultants or
agents (collectively, the "Personnel"). No Seller Entity has any knowledge of
any presently existing circumstances that would constitute a valid basis for any
voluntary or governmental recall of any pharmaceutical or other product sold or
distributed by any Seller Entity in the course of or that relates to the
Business.
Section 2.21. Customers; Suppliers. (a) Section 2.21 of the Disclosure
Schedule contains a true and correct summary of all nursing homes and other
facilities, including assisted living or independent living, and the approximate
number of licensed beds in those facilities which are provided products and
services by the Business under contract, and, except as set forth in Section
2.21 of the
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Disclosure Schedule, during the quarter ended March 31, 1998, not more than 5%
of the revenues of the Business during such period was attributable to patients
serviced in a single nursing home company or other company or any group of
affiliated companies. Section 2.21 of the Disclosure Schedule sets forth a
complete list of all nursing home companies (including affiliated companies)
known to a Seller Entity to own or control more than 5% of the beds serviced by
the Business and all nursing home companies, other companies and related groups
or entities from which the Business derives directly or indirectly more than 5%
of its revenues. No Seller Entity has received any notice that any party intends
to cancel any contract or materially reduce the level of business it conducts
with Business.
(b) With respect to any of the contracts applicable to the provision
of pharmacy services by the Seller Entities to Seller Facilities, the Seller
Entities represent and warrant as follows:
(i) Seller Parent makes no representation in this Section 2.21(b)
regarding whether pharmacy services provided by the Seller Entities pursuant to
contracts are in compliance with applicable laws and regulations.
Notwithstanding the foregoing, Seller Parent agrees and acknowledges that (x)
any liabilities which might arise as a result of such contracts with Seller
Facilities or (y) any liabilities which might arise from the operation of the
Business prior to Closing as a result of such contracts with facilities other
than Seller Facilities, in either case, not complying with such laws and
regulations, including disallowances under prudent buyer or related party
principles, shall be Excluded Liabilities and accordingly shall remain the
obligation and responsibility of Seller Parent;
(ii) No Seller Facility intends to reduce materially the level of
business which it does with the Business after the Assets and the Business are
acquired by Purchaser; and
(iii) No actions are contemplated by Seller Parent or any
subsidiary or affiliate to sell, transfer or otherwise dispose of any Facility
(or Assets thereof) under contract with a Seller Entity. Neither Seller Parent
nor any of its subsidiaries or affiliates have executed a purchase and sale
agreement or letter of intent to sell, transfer or otherwise dispose of any
owned or leased Facility (or Assets thereof).
(iv) Notwithstanding the intentions of Seller Parent and any
subsidiary of Affiliate expressed in subsections (ii) and (iii) of this Section
2.21(b), the parties acknowledge that neither such intentions nor this Agreement
is intended to place any obligations or restrictions on the Seller Entities or
the Facilities which would result in a violation of any Healthcare Law.
Section 2.22. Absence of Certain Business Practices. No Seller Entity, nor
any director, officer, employee or agent of any Seller Entity, nor any other
person acting on behalf of the Business, directly or indirectly, has to the
Seller Entities' knowledge given or agreed to give any gift or similar benefit
to any customer, supplier,
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governmental employee or other person which (i) could reasonably be expected to
subject the Business, Assets or Assumed Liabilities to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (ii) if not given
in the past, might have had a Material Adverse Effect, or (iii) if not continued
in the future, might have a Material Adverse Effect or which might subject a
Seller Entity to suit or penalty in any private or governmental litigation or
proceeding.
Section 2.23. Certain Healthcare Legal Matters. With respect to the
Business, the Assets or the Assumed Liabilities:
(a) The Seller Entities and all of their Personnel have complied in
all material respects with all applicable statutes, regulations, rules, orders,
ordinances and other laws of any Governmental Entity to which it is subject with
respect to healthcare regulatory matters (including, without limitation, The
Social Security Act, as amended, Sections 1128, 1128A and 1128B, 42 U.S.C.
Sections 1320a-7, 7(a) and 7(b) including Criminal Penalties Involving Medicare
or State Health Care Programs, commonly referred to as the "Federal
Anti-Kickback Statute" and The Social Security Act, as amended, Section 1877, 42
U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred
to as the "Stark Statute", the statute commonly referred to as the "Federal
False Claims Act" and all statutes and regulations related to the possession,
distribution, maintenance and documentation of controlled substances)
("Healthcare Laws"). The Seller Entities have maintained all records required to
be maintained by the FDA, DEA and State Board of Pharmacy and the Medicare and
Medicaid programs as required by applicable Healthcare Laws. There are no
presently existing circumstances which would result or would be likely to result
in violations of any such Healthcare Laws.
(b) The Seller Entities hold all permits necessary for the lawful
conduct of their business under and pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all Governmental Entities having, asserting
or claiming jurisdiction over it or any part of their operations.
(c) The Seller Entities are qualified for participation in the
Medicare and Medicaid programs. None of the Seller Entities has received any
notice indicating that such qualification may be terminated or withdrawn and
have no reason to believe that such qualification may be terminated or
withdrawn. The Seller Entities have timely filed all claims or other reports
required to be filed with respect to the purchase of products or services by
third-party payors (including Medicare and Medicaid), and all such claims or
reports are complete and accurate in all material respects except where the
failure to file such claims and reports would not result in a Material Adverse
Effect. The Seller Entities have no liability to any payor with respect thereto,
except for liabilities incurred in the ordinary course of business. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by the Seller Entities.
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(d) To the best of the Seller Entities' knowledge, no Personnel have
been convicted of, charged with, or investigated for a Medicare, Medicaid or
other Federal Health Care Program (as defined in 42 U.S.C. 'SS' 1320a-7b(f))
related offense, or convicted of, charged with, or investigated for a violation
of federal or state law related to fraud, theft, embezzlement, breach of
fiduciary responsibility, financial misconduct, obstruction of an investigation,
or controlled substances. To the best knowledge of the Seller Entities, no
Personnel have been excluded or suspended from participation in Medicare,
Medicaid or any other Federal Health Care Program, or have been debarred,
suspended or are otherwise ineligible to participate in federal programs. To the
best of the Seller Entities' knowledge, no Personnel have committed any offense
which my reasonably serve as the basis for any such exclusion, suspension,
debarment or other ineligibility. To the best knowledge of the Seller Entities,
no Seller Entity has arranged or contracted with any individual or entity that
such Seller Entity knows or should know is suspended, excluded or debarred from
participation in, or otherwise ineligible to participate in, a Federal Health
Care Program or other federal program.
(e) There are no pharmaceutical or other products now being sold or
distributed by the Seller Entities which, at the date hereof, would require any
approval of any governmental or administrative body, whether federal, state,
local or foreign, prior to commercial distribution of such products, for which
approval has not been obtained. All pharmaceutical or other products now being
distributed by the Seller Entities and all products included in the inventories
of the Seller Entities on the date hereof comply with applicable legal
requirements of all jurisdictions in which such pharmaceutical or other products
are now being distributed.
Section 2.24. Real Property. Section 2.24 of the Disclosure Schedule sets
forth the location and a description of the owned or leased real property
included in the Assets or Assumed Liabilities and the general nature of the
facilities located on the properties.
Section 2.25. Purchasing Contracts. No provision, including of any law,
rule, regulation or to the knowledge of Seller Parent, any contract,
arrangement, understanding or other item which binds the Business or is included
in the Assets or Assumed Liabilities, prevents or will prevent the Business from
changing its purchasing contracts or arrangements with wholesalers to such new
contracts and arrangements as Parent or the Purchaser may specify.
Section 2.26. Employee Benefits. Section 2.26 of the Disclosure Schedule
lists or summarizes all (i) employee benefit and severance plans, practices,
programs or arrangements maintained by Seller Entities in which Seller Employees
(as defined below) are eligible to participate and (ii) employment, consulting
and non-compete contracts, agreements or arrangements between any Seller Entity
and any Seller Employee. No Seller Entity is a party to any contract, agreement,
plan or arrangement that, individually or in the aggregate, or when taken
together with any payment that may be made under this Agreement or any
agreements contemplated
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hereby, could give rise to the payment of any "excess parachute payment" within
the meaning of Section 280G of the Code.
Section 2.27. Purchase Price. The transactions contemplated hereby will not
constitute, and Seller Parent will take such actions as are necessary to ensure
that they will not constitute, fraudulent transfers as to any Seller under
applicable federal or state law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND
PARENT
The Purchaser and Parent, jointly and severally, represent and warrant to
the Seller Entities as follows:
Section 3.1. Organization. Each of the Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as now being conducted.
Section 3.2. Authority Relative to this Agreement. Each of the Parent and
the Purchaser has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by each of Parent and the Purchaser and
the consummation by each of Parent and the Purchaser of the transactions
contemplated by this Agreement have been duly and validly authorized by the
Board of Directors of each of Parent and the Purchaser and no other corporate
proceedings on the part of the Parent and the Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each of Parent and the Purchaser and constitutes the valid and binding agreement
of Parent and the Purchaser, enforceable against Parent and the Purchaser in
accordance with its terms.
Section 3.3. Consents and Approvals; No Violations. Except for the
applicable requirements of the HSR Act, no filing with, and no permit,
authorization, consent or approval of any Governmental Entity or any third party
is necessary for the consummation by Parent and the Purchaser of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by Parent and the Purchaser nor the consummation by Parent and
the Purchaser of the transactions contemplated by this Agreement nor compliance
by Parent and the Purchaser with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the certificates of
incorporation or by-laws of Parent and the Purchaser, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or loss of material benefits) under, any of the terms, conditions
or
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provisions of any note, bond, mortgage, indenture, contract, agreement, permit,
license, lease, purchase order, sales order, arrangement or other commitment or
obligation to Parent and the Purchaser are a party or by which Parent and the
Purchaser or any of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, statute, treaty, rule or regulation
(including, without limitation, Healthcare Laws) applicable to Parent and the
Purchaser, or any of their properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not, in the aggregate,
prevent or delay the consummation of the transactions contemplated by this
Agreement.
Section 3.4. Funds. Parent and the Purchaser have, or at the Closing will
have, sufficient funds to consummate the transactions contemplated by Article I
hereto.
ARTICLE IV
COVENANTS
Section 4.1. Conduct of the Business. During the period from the date
hereof to the Closing, except as otherwise expressly provided in this Agreement,
the Seller Entities shall operate the Business only in the ordinary course of
business . The Seller Entities shall use their respective reasonable best
efforts to preserve intact the present organization of the Business, keep
available the services of the present officers and employees of the Business and
preserve relationships with customers, suppliers, licensors, licensees,
contractors, distributors and others having business dealings with the Business.
Without limiting the generality of the foregoing, from the date of this
Agreement to the Closing, the Seller Entities shall not, without the prior
written consent of Parent, to the extent related to the Business:
(a) sell, lease, encumber, transfer or dispose of any assets or rights
or acquire any assets or rights which would be included in the Assets, unless in
the ordinary course of business, or pursuant to the capital expenditure plan
described in Section 4.1(a) of the Disclosure Schedule, or except for the
acquisition from Metrovision of North America, Inc. of the 40% minority interest
in York Hannover Partnership, a Wisconsin general partnership;
(b) engage in any sales of a product (i) with payment terms longer
than terms customarily offered by each of the Seller Entities for such product,
(ii) at a greater discount from listed prices than customarily offered for such
product, other than pursuant to a promotion of a nature previously used in the
normal course of business of each of the Seller Entities for such product, (iii)
at a price which does not give effect to any previously announced general
increase in the list price for such product, (iv) with shipment terms more
favorable to the customer than shipment terms customarily offered by each of the
Seller Entities for such product, (v) in a quantity greater than the reasonable
retail or wholesale (as the case may be) resale requirement of the particular
customer or (vi) in conjunction with other benefits to the customer not in the
ordinary course of business with such customer;
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(c) collect any accounts receivables or fail to pay any accounts
payable, other than in the ordinary course of business;
(d) enter into any material commitment or transaction unless in the
ordinary course of business;
(e) permit any Asset to suffer any Lien thereupon, other than
Permitted Liens;
(f) change (or permit to be changed) any accounting (other than with
respect to inventory accounting as described in Section 2.18) or Tax procedure
or practice or its financial structure or make (or permit to be made) any Tax
election or settle or compromise any liability for Taxes;
(g) enter into, adopt, amend or terminate any employee benefit plan,
increase in any manner the compensation or benefits of any officer or employee
or pay any benefit not required by any existing employee benefit plan, or enter
into any contract, agreement, commitment or arrangement to do any of the
foregoing, except to the extent bound by applicable law and except for normal
merit and seniority raises and discretionary bonuses in the aggregate not to
exceed $10,000 to any individual, granted in the ordinary course of business
consistent with past practices;
(h) enter into or offer to enter into any employment or consulting
agreement with any person outside the ordinary course of business, unless
terminable at will by the employing Seller Entity;
(i) make any capital expenditures outside the ordinary course of
business, except for those included in the capital expenditure plan described in
Section 4.1(a) of the Disclosure Schedule;
(j) enter into, amend or terminate any material contract, except in
the ordinary course of business;
(k) enter into any transaction or any contract with any affiliate,
other than transactions on arm's-length terms in the ordinary course; or
(l) authorize, or commit or agree to take, any of the foregoing
actions.
Section 4.2. Access to Information. The Seller Entities shall afford to
officers, employees, accountants, counsel and other representatives of Parent
and the Purchaser reasonable access to all of the properties, personnel, books
and records of the Seller Entities relating to the Business, and the Seller
Entities shall furnish promptly to the Parent and the Purchaser all information
within the Sellers' control or possession concerning the business, properties
and personnel of the Business as Parent and the Purchaser may reasonably
request. All such information shall be kept confidential in accordance with the
terms of the Confidentiality Agreement, dated as
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of May 4, 1998, between Parent and Bear Stearns, on its own behalf and on behalf
of Extendicare, Inc.
Section 4.3. Disclosure Supplements. (a) From time to time prior to the
Closing, the Seller Entities shall supplement or amend the Disclosure Schedule
with respect to any matter hereafter arising or any information obtained after
the date hereof of which, if existing, occurring or known at or prior to the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Schedule or which is necessary to complete or correct any
information in such schedule or in any representation and warranty of the Seller
Entities which has been rendered inaccurate thereby. The Seller Entities shall
promptly inform Parent of any claim by a third party that a material contract
has been breached, is in default, may not be renewed or that a consent would be
required as a result of the transactions contemplated by this Agreement. For
purposes of determining the satisfaction of the conditions set forth in Article
V and the indemnification obligations set forth in Article VII hereof, and
except as expressly provided in Section 4.3(b) with respect to Disclosure
Schedule updates, no such supplement, amendment or information shall be
considered.
(b) If requested in writing by Parent, Seller Parent will meet and
discuss with Parent any update to the Disclosure Schedule made by any Seller
Entity pursuant to the first sentence of Section 4.3(a). If Parent shall fail to
make such request (i) prior to the Closing, with respect to an update received
by Parent at least 5 business days but less than 15 business days prior to the
Closing or (ii) otherwise within 15 business days of receipt of an update, such
update shall be treated for all purposes as if it had been included in the
Disclosure Schedule being delivered by the Seller Entities concurrently
herewith. However, if Parent shall so request, then the update shall not be
considered for purposes of determining the satisfaction of the conditions set
forth in Article V and the indemnification obligations set forth in Article VII
hereof, except to the extent mutually agreed between the parties. No such update
may be made following the Closing.
Section 4.4. Reasonable Efforts. (a) Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable including, but not
limited to, (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions contemplated by this
Agreement and the taking of such commercially reasonable actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions or
waivers by any third party or Governmental Entity, including filings pursuant to
the HSR Act and (ii) using all reasonable efforts to cause the satisfaction of
all conditions to Closing. Each party shall promptly consult with the other with
respect to, provide any necessary information with respect to and provide the
other (or its counsel) copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
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Governmental Entity in connection with this Agreement and the transactions
contemplated by this Agreement. No party will take any action which would
prevent the satisfaction of any condition to Closing set forth in Article V
hereof.
(b) Each party hereto shall promptly inform the others of any
communication from any Governmental Entity regarding any of the transactions
contemplated by this Agreement. If any party or affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request.
Section 4.5. Further Assurances. From time to time after the Closing,
without additional consideration, each of the parties hereto will (or, if
appropriate, cause their affiliates to) execute and deliver such further
instruments and take such other action as may be necessary to make effective the
transactions contemplated by this Agreement. If any party to this Agreement
shall following the Closing have in its possession any asset or right which
under this Agreement should have been delivered to the other, such party shall
promptly deliver such asset or right to the other.
Section 4.6. Brokers or Finders. Each party hereto represents, as to itself
and its affiliates that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, other than Bear Stearns in the case
of the Seller Entities and NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") in the case of Parent and the Purchaser. The Seller Entities shall
be solely responsible for any payments to Bear Stearns and Parent and the
Purchaser shall be solely responsible for any payments to NationsBanc
Montgomery.
Section 4.7. No Solicitation. (a) Each Seller Entity will, and will cause
its officers, directors, employees, subsidiaries, affiliates and agents to,
immediately cease any existing discussions or negotiations with respect to any
Takeover Proposal (as defined below) and will not, and will cause such persons
and entities not to, directly or indirectly, encourage, solicit, participate in
or initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
the Purchaser or their directors, officers, employees or other affiliates)
concerning any Takeover Proposal. The Seller Entities will immediately
communicate to Parent any such inquiries or proposals regarding a Takeover
Proposal including the terms thereof.
(b) "Takeover Proposal" shall mean any of the following involving the
Business, the Assets or the Assumed Liabilities (other than the transactions
contemplated by this Agreement): any inquiry or proposal relating to a sale of
stock,
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merger, consolidation, share exchange, business combination, disposition of
assets (or any interest therein) or other similar transaction.
Section 4.8. Tax Matters. Notwithstanding any other provision of this
Agreement, all transfer, registration, stamp, documentary, sales, use and
similar Taxes (including, but not limited to, all applicable real estate
transfer or gains Taxes and transfer Taxes), any penalties, interest and
additions to Tax, and fees incurred in connection with this Agreement shall be
shared equally by Seller Parent and Purchaser, other than the HSR filing fee,
which shall remain the Purchaser's responsibility. Seller Parent and the
Purchaser shall cooperate in the timely making of all filings, returns, reports
and forms as may be required in connection therewith.
Section 4.9. Release of Liens. At or prior to the Closing, Seller Parent
shall cause the release of all Liens on the Assets, so that such Assets and
rights are free and clear of any liens, except for Permitted Liens.
Section 4.10. Performance of Obligations. Seller Parent shall cause each of
the Sellers to timely perform their respective obligations under this Agreement
and as otherwise contemplated by the transactions contemplated hereby. Parent
shall cause the Purchaser to timely perform its obligations under this Agreement
and as otherwise contemplated by the transactions contemplated hereby.
Section 4.11. Consents to Transfer Assets. The Seller Entities agree that
if any required consent to the transfer of any Asset to the Purchaser as
provided for herein is not obtained prior to Closing, the Seller Entities shall
exercise commercially reasonable efforts to arrange for the Purchaser to acquire
all of the material benefits of such Asset as though the required consents had
been obtained (and, to the extent, but, notwithstanding anything herein to the
contrary, only to the extent, such benefits are provided, the Purchaser shall
assume the corresponding obligation) and shall continue to use all reasonable
efforts to obtain such consent. Nothing in this Section 4.11 shall (i) affect
Parent's and the Purchaser's other rights under this Agreement or (ii) require
Seller Parent to pay money or other consideration to any third party in
violation of applicable law or regulation.
Section 4.12. Employment Matters.
(a) Definitions. As used in this Section 4.12:
(i) "Hired Employee" shall mean each Seller Employee listed on
Section 4.12(a)(i) of the Disclosure Schedule, as such Section may be modified
pursuant hereto, who receives and accepts an offer of employment from the
Purchaser in accordance with Section 4.12(b) hereof.
(ii) "Non-Hired Employee" shall mean any Seller Employee who is
neither a Hired Employee or a Transitional Employee, but excluding each Seller
Employee, if any, listed on Section 4.12(a)(i) or (a)(v) of the Disclosure
Schedule, as such Section may be modified pursuant hereto, who Purchaser fails
to
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make an offer of employment in accordance with Section 4.12(b) hereof
("Non-Offered Employees").
(iii) "Seller Employee" shall mean salaried and hourly employees
of the Seller Entities, who as of the Closing Date are in the active employment
of a Seller Entity and whose duties relate to the Business or who are on
employment leave therefrom.
(iv) "Seller Service" shall mean a Hired Employee's period of
employment prior to the Closing Date with any one or more Seller Entities and
any predecessor employers, which are counted by the Seller for purposes of
determining the Seller Employee's eligibility to participate in any vacation,
sick pay or similar plan programs or arrangement maintained by Seller Entities.
Seller Service and the compensation of Seller Employees shall be reported to the
Purchaser as determined by the Seller Entities in connection with the specific
plans. The Purchaser shall be entitled to rely on the Seller Entities
computation of Seller Service.
(v) "Transitional Employees" shall mean each Seller Employee
listed in Section 4.12(a)(v) of the Disclosure Schedule who receives and accepts
an offer of temporary employment from the Purchaser in accordance with Section
4.12(b) hereof.
(vi) "Transitional Severance Plan" shall mean any severance pay
to which Purchaser and Seller Entities jointly agree to pay Transitional
Employees following their termination of employment from Purchaser.
(b) Duty of Purchaser to Offer Employment. Purchaser shall offer
employment to each Seller Employee identified jointly by Purchaser and Seller
and listed in Section 4.12(a)(i) of the Disclosure Schedule; which employment
shall commence as of the Effective Time of the Closing. Such offers shall
include salary and benefits comparable, in the aggregate, either to the salary
and benefits such employees were entitled to from the Seller Entities
immediately prior to the Closing Date or to the salary and benefits provided to
similarly situated employees of Parent. Purchaser shall offer temporary
employment to each Seller Employee listed in Section 4.12(a)(v) of the
Disclosure Schedule which employment shall commence as of the Effective Time of
the Closing. Seller will not discourage any employees listed in Sections
4.12(a)(i) or 4.12(a)(v) of the Disclosure Schedule from accepting an employment
offer from the Purchaser and Seller will comply with any reasonable request of
Purchaser in connection with such offers of employment. Purchaser shall not have
any obligation to offer employment to any Seller Employee not listed in Sections
4.12(a)(i) or 4.12(a)(v) of the Disclosure Schedule.
(c) Termination Liabilities. Following termination of employment from
the Purchaser, a Transition Employee will be paid an amount equal to the
severance pay such employee is entitled to under the Transitional Severance
Plan, with the aggregate cost of such plan to be divided equally between the
Purchaser and the Seller Entities. Any other costs associated with the
termination of such
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employment (including, without limitation, any liability assessed under the
Workers Adjustment Retraining and Notification Act (the "WARN Act") or any
Seller severance policy) shall be borne by the Seller Entities.
(d) Vacation and Sick Leave Benefits. From and after the Effective
Time of the Closing, Purchaser shall grant all Hired Employees credit for Seller
Service (to the same extent such service with Purchaser is taken into account
with respect to similarly situated employees of Purchaser) for purposes of
determining Hired Employees' eligibility to participate in and receive benefits
under the Purchaser's vacation, sick leave and other similar plans.
(e) Medical Coverage. Each Purchaser medical benefit plan covering
Hired Employees as of the Effective Time of the Closing shall provide such
coverage without regard to any pre-existing condition exclusion contained in
such plans to the extent such pre-existing condition would not be applicable
under the medical benefit plan under which such employee was covered immediately
prior to the Effective Time of the Closing.
(f) Employee Information. Seller Parent and the Purchaser shall
furnish to each other such employee information and such descriptions of
personnel policies, procedures and benefits plans applicable to Seller Employees
as either party may reasonably request, both prior to and after the Effective
Time of the Closing. Seller Parent and the Purchaser shall each make its
appropriate employees available to the other at such reasonable times as may be
necessary for the proper administration by the other of any and all matters
relating to employee benefits and workers' compensation claims affecting their
employees.
(g) Indemnity. The Seller Entities shall retain all liability and
shall be responsible for, and shall indemnify and hold Purchaser harmless from
and against, any direct and indirect costs, claims, liabilities or losses with
respect to Non-Hired Employees including, without limitation, any liability
assessed under the WARN Act or comparable state laws. Purchaser shall assume all
liability and shall be responsible for, and shall indemnify and hold the Seller
Entities harmless from and against, any direct and indirect costs, claims,
liabilities or losses incurred by Seller Entities as a result of Purchaser's
failure to satisfy its obligations under Section 4.12(b) hereof with respect to
Non-Offered Employees including, without limitation, any liability assessed
under the WARN Act or comparable state laws.
(h) Deemed Termination. All Seller Employees, other than Non-Hired
Employees and those who continue to be employed by the Seller Entities
immediately following the Closing, shall be deemed to have been terminated by
the applicable Seller Entity.
(i) Update of Schedule 4.12. From time to time prior to the Closing
Date, Purchaser shall have the right to supplement or amend Schedule 4.12 in
respect of the categorization of Seller Employees as described in this Section
4.12.
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Section 4.13. Non-Competition. (a) From and after the Closing, until the
fifteenth anniversary of the Closing Date, Seller Parent will not, and Seller
Parent will cause its affiliates not to, directly or indirectly, anywhere in the
United States (i) engage in, own any interest in, invest in, lend funds to, or
provide any management, consulting, financial, administrative or other services
to any Competitive Business (as defined below), (ii) solicit, sell or attempt to
sell goods and services offered by the Business to any facility which is a
customer of the Business (or any successor), or (iii) disclose any confidential
or non-public information regarding the Business to any third party, except as
may be required by law. For purposes hereof, a "Competitive Business" means any
business that provides the following goods or services to nursing homes,
assisted living facilities and other long-term care constituencies: (a)
pharmaceutical products, (b) pharmacy-related services of a nature currently
provided (or being developed with the intention of providing) by Parent, its
affiliates or the Business, (c) infusion therapy products and services, (d)
respiratory equipment and supplies, and (e) parenteral and enteral nutrition
products, wound care products, ostomy and urological supplies, together with all
home health care services provided by UPC at its Springfield, Ohio location
whether to LTC Customers or others. For a period of one year following the
Closing Date, Seller Parent will not, and will cause its affiliates to not
solicit, employ or contract with any person who is an employee of the Business
(or any successor) and who is hired by Parent or the Purchaser in connection
with the transactions contemplated thereby. This covenant not to hire shall not
preclude Seller Parent or any of its affiliates from employing any person
responding to a general solicitation for employment, provided neither Seller
Parent nor any of its affiliates specifically directed the solicitation to such
person. Moreover, the noncompetition covenant contained in this Section 4.13(a)
shall not be interpreted to prohibit Seller Parent or any affiliate from owning
or acquiring securities of any corporation or other business enterprise that may
be engaged in activities described in said noncompetition covenants, provided
that: (i) no affiliate of Seller Parent is an officer, director or employee of,
or consultant to, such corporation or business enterprise, (ii) such securities
are held by Seller Parent or any affiliate for investment purposes only and
represent in the aggregate less than five percent of the total equity interests
of such corporation or business enterprise and (iii) such securities are listed
on a national securities exchange or are regularly quoted in the over the
counter market by one or more members of the National Association of Securities
Dealers, Inc. Additionally, this covenant shall not preclude Sellers from
continuing to operate the businesses identified in Section 4.13 of the
Disclosure Schedule. The Sellers shall use all reasonable efforts to cause such
employees as Parent may designate to sign employment and non-competition
agreements on such terms as Parent may reasonably designate.
(b) Notwithstanding the foregoing, Seller Parent may acquire a
healthcare business which includes business operations in which Seller Parent
could not engage consistent with its covenant under Section 4.13(a) above (a
"Competitive Operation") or an investment therein, provided that Parent shall
have the right to acquire the Competitive Operation portion of such business at
its fair market value. Seller Parent shall give Parent notice of such
acquisition as promptly as practicable,
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but in no event later than the execution of a definitive purchase agreement
relating thereto. As promptly as practicable Seller Parent and Parent shall
attempt to agree on the fair market value of such Competitive Operation and the
terms of the acquisition thereof, which shall be reasonable and customary under
the circumstances. If they are not able to agree promptly, they shall engage a
recognized, national investment banking firm (the "Investment Bank") to resolve
such dispute. Parent and Seller Parent will each pay one-half of the fees and
expenses of the Investment Bank and shall cooperate with each other and such
firm in connection with the matters contemplated by this Section 4.13, including
by furnishing such information and access to books, records, personnel and
properties as may be reasonably requested. Parent shall have the right, within
30 days of the final determination of such price and terms, to execute a
definitive agreement with Seller Parent to implement such acquisition. If Parent
does not exercise such right, Seller Parent may continue to operate such
Competitive Operation for eighteen months, during which time it shall use its
reasonable best efforts to divest itself of such Competitive Operation. If, upon
the expiration of such 18-month period, Seller Parent has not sold such
Competitive Operation, pursuant to the noncompetition covenants contained
herein, Seller Parent shall cease its operation of said Competitive Operation.
Section 4.14. Transition Services. The Seller Entities shall provide such
transition services as Parent may reasonably request, including, without
limitation, the transition services listed on Schedule 4.14. Such services shall
(i) include the use of facilities shared between the Business and the Seller
Entities and any services provided by the Seller Entities to the Business, (ii)
be performed in a prompt and commercially reasonable manner and (iii) be
provided at the Seller Entities' cost of providing such services (without taking
into account general overhead charges) plus an amount equal to ten percent of
such costs. In addition, Parent and the Purchaser shall have the right to use
the names "UPC" and "UPC Pharmacy" (and similar names) on Business letterhead,
signage, purchase orders, invoices and other business forms and similar items
while Parent and the Purchaser secure their own supplies of such materials, for
a period of 90 days from Closing.
Section 4.15. Bulk Sales Laws. The parties hereto hereby waive compliance
with the provisions of any applicable bulk sales laws, including Article 6 of
the Uniform Commercial Code as it may be in effect in any applicable
jurisdiction.
Section 4.16. Facilities. None of Seller Parent or subsidiary or affiliate
has taken or within 18 months of Closing will take any action which would make
the representations and warranties contained in Section 2.21(b) hereof untrue or
incorrect as of the date when made or as of any future date, as if made as of
such future date.
Section 4.17. Payments to the Business. Seller Parent shall pay, or cause
its subsidiaries and affiliates to pay, all accounts receivable and other
amounts owing to the Business in accordance with their terms.
Section 4.18. Share Legend; Transfer.
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(a) Each certificate for the Shares to be issued at the Closing shall
bear the following legend:
This security has not been registered under the Securities Act of 1933
(the "Securities Act"), or the securities laws of any state and may not be
offered, sold, transferred, pledged, hypothecated or otherwise disposed of
except pursuant to (i) an effective registration statement under the
Securities Act and any applicable state securities laws or (ii) an
exemption from the registration requirements of the Securities Act and any
applicable state securities laws, such exemption to be evidenced by such
documentation as the issuer may reasonably request.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (which counsel and opinion shall be
reasonably acceptable to Parent), the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act or any
state securities laws.
(b) The Sellers and their affiliates shall not offer, sell, transfer,
pledge, hypothecate or otherwise dispose of the Shares issued on the Closing
Date or any interest therein prior to the date which is six months following the
Closing Date. The Sellers and their affiliates shall not offer, sell, transfer,
pledge, hypothecate or otherwise dispose of the Warrant or any interest therein
at any time, other than pursuant to the terms of the Warrants. If any person to
whom the Warrant or any portion thereof was transferred ceases to be a wholly
owned subsidiary of Seller Parent, Seller Parent shall cause the transfer of
such Warrant or portion thereof to Seller Parent or a wholly owned subsidiary of
Seller Parent no later than immediately prior to the time such person ceases to
be a wholly owned subsidiary of Seller Parent. Neither the Shares issuable upon
exercise of the Warrants nor any interest therein may be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of except pursuant to
(i) an effective registration statement under the Securities Act and any
applicable state securities laws or (ii) an exemption from the registration
requirements of the Securities Act and any applicable state securities laws,
such exemption to be evidenced by such documentation as Parent may reasonably
request, including an opinion of counsel (which counsel and opinion shall be
reasonably satisfactory to Parent) that such transfer is not in violation of the
Securities Act and any applicable state laws.
Section 4.19. Audit. (a) As promptly as practicable after the date hereof,
but in no event later than July 31, 1998, Seller Parent shall deliver to Parent
an unaudited income statement for the Business for the six months ended June 30,
1998, which shall fairly present, in all material respects, the results of
operations for the Business for such period in accordance with generally
accepted accounting principles. Upon such delivery, the parties shall cause KPMG
to audit such income
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statement in accordance with generally accepted auditing standards. PWC shall
have the right to participate in and observe all aspects of such audit.
(b) The parties hereto shall cooperate with KPMG and PWC with respect
to such audit, including by furnishing each of KPMG and PWC with such
information and access as it shall reasonably request (including KPMG's work
papers). Seller Parent shall make such adjustments (if any) to such income
statement as are necessary to enable KPMG to deliver an unqualified opinion (in
its customary form but subject to Schedule 4.19(f)(2)) to the effect that such
income statement presents fairly, in all material respects, the results of
operations of the Business for the six months ended June 30, 1998. Such audited
income statement, as finally determined pursuant to this Section 4.19, is
sometimes referred to as the "Audited Income Statement." The amount of earnings
before interest, taxes and amortization reflected on such audited income
statement, multiplied by two, shall be included in a schedule to KPMG's opinion,
and is referred to as the "Audited EBITA Number" (subject to final determination
as provided in this Section 4.19). The calculation of EBITA shall be performed
in a manner consistent with Schedule 4.19(b).
(c) Unless within six business days after its receipt of the Audited
Income Statement, Parent shall deliver to Seller Parent a detailed statement
describing its objections thereto, the Audited EBITA Number determined in
accordance with clause (b) above shall be final and binding.
(d) If Parent shall deliver the statement referred to in clause (c)
above, Parent and Seller Parent will use reasonable efforts to resolve any
disputes, but if a final resolution is not reached within 5 days after Parent
has submitted its objections, any remaining disputes will be resolved by the
Reviewing Accountants. The Reviewing Accountants shall be instructed to resolve
any matters in dispute as promptly as practicable in accordance with clause (e)
below. The determination of the Reviewing Accountants will be final and binding.
(e) Parent and Seller Parent will each pay one-half of the fees and
expenses of the Reviewing Accountants. Parent and Seller Parent shall cooperate
with each other and the Reviewing Accountants in connection with the matters
contemplated by this Section 4.19, including by furnishing such information and
access to books, records (including accountants work papers), personnel and
properties as may be reasonably requested at their own expense. Each party may
also furnish to the Reviewing Accountants such other information and documents
as it deems relevant with copies and notification to the other party. The
Reviewing Accountants may conduct such procedures as it deems appropriate,
provided that the parties do not intend that formal civil procedures necessarily
be followed.
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(f) The provisions set forth in Schedule 4.19(f) shall govern the
audit and the review thereof. Parent, Seller Parent, KPMG and PWC shall promptly
meet, and during the audit and review shall continue to meet, to discuss such
audit, including the scope of the audit, and any additions or other
modifications to such Schedule. Any dispute shall be resolved by the Reviewing
Accountant.
ARTICLE V
CONDITIONS
Section 5.1. Conditions to Each Party's Obligations. The respective
obligation of each party to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver of the following
conditions:
(a) All consents and approvals of any Governmental Entity required for
the consummation of the transactions contemplated by this Agreement, the absence
of which would have a Material Adverse Effect, shall have been obtained, and any
waiting period applicable to the consummation of the transactions contemplated
hereby under the HSR Act shall have expired or been terminated.
(b) No statute, rule, regulation, order, decree or injunction shall
have been enacted, entered, promulgated or enforced by a Governmental Entity
which prohibits the consummation of the transactions contemplated by this
Agreement and shall be in effect.
(c) The Audited EBITA Number shall have been finally determined
pursuant to Section 4.19 hereof and the Audited EBITA Number shall not be less
than $20,043,120.
Section 5.2. Conditions to Obligations of the Parent and the Purchaser. The
obligation of Parent and the Purchaser to effect the transactions contemplated
by this Agreement are further subject to the satisfaction or waiver of the
following conditions:
(a) The representations and warranties of the Seller Entities in this
Agreement shall be true and correct in all material respects (without regard for
any materiality qualifiers therein) as of the date hereof and at and as of the
Closing with the same effect as though such representations and warranties had
been made at and as of such time, other than representations and warranties that
speak as of another specific date or time prior to the date hereof (which need
only be true and correct as of such date or time).
(b) The Seller Entities shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Closing.
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(c) There shall not have occurred any events that have had or are
reasonably likely to have a Material Adverse Effect.
(d) All consents or approvals listed in Section 2.3 of the Disclosure
Schedule and identified as mandatory shall have been obtained and any other
consents or approvals, the absence of which would have a Material Adverse
Effect, shall have been obtained.
(e) Parent shall have received from the Seller Entities a certificate,
dated the Closing Date, duly executed by an executive officer of each Seller
Entity, reasonably satisfactory in form to Parent, to the effect of (a)-(d)
above.
(f) If requested by Parent, each Seller shall provide Parent with a
certified statement, in the form contained in Section 1.1445-2(b)(2)(iii)(B) of
the Treasury Regulations, that it is not a "foreign person."
(g) Parent shall have received from Seller Parent written evidence
that certain medical carts and fax machines have been transferred to the Sellers
at net book value and such medical carts and fax machines are reflected on the
Closing Date Balance Sheet.
Section 5.3. Conditions to Obligations of Seller Parent and the Sellers.
The obligation of Seller Parent and the Sellers to effect the transactions
contemplated by this Agreement are further subject to the satisfaction or waiver
of the following conditions:
(a) The representations and warranties of the Parent and the Purchaser
in this Agreement shall be true and correct in all material respects (without
regard for any materiality qualifiers therein) as of the date hereof and at and
as of the Closing with the same effect as though such representations and
warranties had been made at and as of such time, other than representations and
warranties that speak as of another specific date or time prior to the date
hereof (which need only be true and correct as of such date or time).
(b) Parent and the Purchaser shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing.
(c) Seller Parent shall have received from the Parent and the
Purchaser a certificate, dated the Closing Date, duly executed by an executive
officer of Parent and the Purchaser, reasonably satisfactory in form to the
Sellers, to the effect of (a) and (b).
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ARTICLE VI
TERMINATION AND AMENDMENT
Section 6.1. Termination. This Agreement may be terminated at any time
prior to the Closing by:
(a) Mutual consent of Seller Parent and Parent;
(b) Either Seller Parent or Parent if the Closing shall not have
occurred on or before September 30, 1998, provided that if the Audited EBITA
Number shall not have been finally determined by such date or the applicable
waiting period under the HSR Act has not expired or been terminated by such
date, 15 business days from the later of the date that the Audited EBITA Number
is finally determined and the applicable waiting period under the HSR Act has
expired or been terminated (unless the failure to consummate the Closing by such
date shall be due to the action or failure to act of the party (or its
affiliates) seeking to terminate this Agreement); or
(c) Either Seller Parent or Parent if any court of competent
jurisdiction or other competent Governmental Entity shall have issued a statute,
rule, regulation, order, decree or injunction or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such statute, rule, regulation, order, decree
or injunction or other action shall have become final and nonappealable.
Section 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or stockholders,
other than the provisions of the Confidentiality Agreement and Section 8.11
hereof. Nothing contained in this Section 6.2 shall relieve any party from
liability for any breach of this Agreement.
Section 6.3. Amendment. This Agreement may be amended or modified at any
time by the parties hereto, but only by an instrument in writing signed on
behalf of each of the parties hereto.
Section 6.4. Extension; Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Neither the failure nor the
delay on the part of any party to exercise any
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right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. Survival Periods. (a) All representations and warranties of
the parties contained in this Agreement, the Disclosure Schedule or any
certificate delivered in connection herewith shall survive until the date which
is 18 months from the Closing Date, and, if notice of a claim is provided by
such date, shall survive until the final resolution thereof, provided, that the
representations and warranties set forth in Sections 2.9 [taxes] and 2.16
[title] (the "Listed Representations") shall survive the Closing without
limitation. All covenants hereunder shall survive without limit (unless by their
terms they are to survive for a shorter period). The obligation of the Seller
Entities to indemnify Parent and the Purchaser pursuant to this Article VII with
respect to the Excluded Liabilities set forth in Schedule 1.1(c), Item 3
[environmental] shall survive until the date which is 18 months from the Closing
Date, and, if notice of a claim is provided by such date, shall survive until
the final resolution thereof.
(b) For purposes of this Agreement, a party's representations and
warranties shall be deemed to include such party's Disclosure Schedule and all
other documents or certificates delivered by or on behalf of such party in
connection with this Agreement. None of the Closing, any party's waiver of any
condition to Closing or a party's knowledge of any breach prior to the Closing
shall constitute a waiver of any rights such party may have hereunder.
Section 7.2. Indemnification Amounts. (a) Notwithstanding any provision to
the contrary contained in this Agreement, the Seller Entities shall not be
obligated to indemnify Parent or the Purchaser for any costs or expenses
(including reasonable attorneys', experts' and consultants' fees), judgments,
fines, penalties, losses, claims, liabilities and damages, net of any insurance
proceeds and tax benefits but grossed up to take into account tax detriments
(such net amounts being referred to herein as, "Damages") pursuant to this
Article VII to the extent they (i) are the result of any breach of any
representation or warranty or failure to perform any covenant made by or on
behalf of the Seller Entities (other than Damages resulting from the breach of
any of the Listed Representations as to which there shall be no limitation) or
(ii) constitute Excluded Liabilities set forth in Schedule 1.1(c), Item 3
[environmental], unless and until the dollar amount of all Damages shall equal
in the aggregate $1,500,000, and then only for the excess over such amount.
Notwithstanding the foregoing, no breach of the representations and warranties
contained in Section 2.18, 2.19 and 2.20 [inventory, accounts receivable and
product returns and warranties] shall be counted as Damages until all reserves
for such matters reflected on the Closing Date Balance Sheet have been
exhausted.
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(b) Notwithstanding any provision to the contrary contained in this
Agreement, the Parent and the Purchaser shall not be obligated to indemnify the
Seller Entities for any Damages pursuant to this Article VII to the extent they
are the result of any breach of any representation or warranty or failure to
perform any covenant made by or on behalf of Parent or the Purchaser, unless and
until the dollar amount of all such Damages shall equal in the aggregate
$1,500,000, and then only for the excess over such amount.
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the maximum aggregate amount payable pursuant to this Article VII to
Parent and the Purchaser or the Seller Entities, as the case may be, shall not
exceed the Purchase Price.
Section 7.3. Indemnification. Subject to the other provisions of this
Article VII, from and after the Closing:
(a) The Seller Entities shall jointly and severally indemnify and hold
harmless Parent, the Purchaser, their affiliates and their and their affiliates
employees, officers, directors, agents and other representatives from and
against any Damages that are the result of, arise out of or relate to (i) any
breach of any representation or warranty or failure to perform any covenant made
by or on behalf of any of the Seller Entities under this Agreement, (ii) any
Excluded Liabilities, (iii) any bulk sales law or a determination that the sale
of the Assets hereunder is ineffective against any creditor of any Seller Entity
or any taxing authority or other entity asserting any similar claim against any
Seller Entity, Parent, the Purchaser or the Assets or (iv) any claims that any
transaction contemplated hereby constituted a fraudulent transfer under
applicable federal or state law.
(b) Parent and the Purchasers shall jointly and severally indemnify
and hold harmless the Seller Entities, their affiliates and their and their
affiliates employees, officers, directors, agents and other representatives from
and against any Damages that are the result of, arise out of or relate to (i)
any breach of any representation or warranty or the failure to perform any
covenant made by or on behalf of Parent or the Purchaser under this Agreement or
(ii) any Assumed Liabilities.
(c) The persons to whom indemnification is provided hereunder are
referred to herein as the "Indemnified Parties" and the persons providing
indemnification are referred to as the "Indemnifying Parties."
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Section 7.4. Claims. (a) If an Indemnified Party intends to seek
indemnification pursuant to this Article VII, such Indemnified Party shall
promptly notify the Indemnifying Party in writing of such claim. The Indemnified
Party will provide the Indemnifying Party with prompt notice of any third party
claim in respect of which indemnification is sought. The failure to provide
either such notice will not affect any rights hereunder except to the extent the
Indemnifying Party is materially prejudiced thereby.
(b) If such claim involves a claim by a third party against the
Indemnified Party, the Indemnifying Party may, within ten days after receipt of
such notice and upon notice to the Indemnified Party, assume, through counsel of
its own choosing and at its own expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with it in connection therewith, provided,
that the Indemnified Party may participate in such settlement or defense through
counsel chosen by it. If the Indemnified Party reasonably determines that
representation by the Indemnifying Party's counsel of both the Indemnifying
Party and the Indemnified Party may present such counsel with a conflict of
interest, then the Indemnifying Party shall pay the reasonable fees and expenses
of the Indemnified Party's counsel. Notwithstanding anything in this Section 7.4
to the contrary, the Indemnifying Party may not, without the consent of the
Indemnified Party, settle or compromise any action or consent to the entry of
any judgment, such consent not to be unreasonably withheld. So long as the
Indemnifying Party is contesting any such claim in good faith, the Indemnified
Party shall not pay or settle any such claim without the Indemnifying Party's
consent, such consent not to be unreasonably withheld. If the Indemnifying Party
is not contesting such claim in good faith (including if it does not notify the
Indemnified Party of its assumption of the defense of such claim within the ten
day period set forth above), then the Indemnified Party may conduct and control,
through counsel of its own choosing and at the expense of the Indemnifying
Party, the settlement or defense thereof, and the Indemnifying Party shall
cooperate with it in connection therewith. The failure of the Indemnified Party
to participate in, conduct or control such defense shall not relieve the
Indemnifying Party of any obligation it may have hereunder.
(c) If a firm written offer is made by the third party to settle a
third party claim referred to in (b) above and the Indemnifying Party proposes
to accept such settlement and the Indemnified Party refuses to consent to such
settlement, then, provided that such proposed settlement (x) includes a full and
unconditional release of the Indemnified Party and (y) does not provide for
anything other than the payment of money damages, (i) the Indemnifying Party
shall be excused from, and the Indemnified Party shall be solely responsible
for, all further defense of such third party claim, (ii) the maximum liability
of the Indemnifying Party relating to such third party claim shall be the amount
of the proposed settlement, and other amounts for which the Indemnified Party
would be entitled to prior to the rejection of the proposed settlement, if the
amount thereafter recovered from the Indemnified Party on such third party claim
is greater than the amount of the proposed settlement and (iii) the Indemnified
Party shall pay all attorneys' fees incurred after the rejection of such
settlement by the Indemnified Party, but if the amount thereafter recovered by
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such third party from the Indemnified Party is less than the amount of the
proposed settlement, the Indemnified Party shall be reimbursed by the
Indemnifying Party for such attorneys' fees up to a maximum amount equal to the
difference between the amount recovered by such third party and the amount of
the proposed settlement.
Section 7.5. Relation to Escrow. Amounts payable to the Purchaser for
indemnification claims under this Article VII or claims made under Section 1.6
hereof shall first be paid from the escrow account under the Escrow Agreement.
To the extent the foregoing is not sufficient to pay such claim, such claim
shall be paid by the Indemnifying Parties.
Section 7.6. Exclusive Remedy. Following the Closing, the provisions of
this Article VII shall be the exclusive remedy for the matters covered hereby,
provided that nothing herein shall relieve any party from any liability for
fraud.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt by the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or the Purchaser, to:
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45203
Attention: President
Telecopy: 513-762-6678
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Morton A. Pierce and Richard D. Pritz
Telecopy: 212-259-6333
(b) if to the Sellers to:
Extendicare Inc.
105 W. Michigan Street
Milwaukee, WI 53203
Attention: President and CFO
Telecopy: 905-470-4003
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with a copy to:
Extendicare Health Services, Inc.
105 W. Michigan Street
Milwaukee, WI 53203
Attention: Timothy J. Murphy, Esq.
Telecopy: 414-207-3663
Section 8.2. Headings. The headings herein are inserted for convenience
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 8.3. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument.
Section 8.4. Entire Agreement; Assignment. (a) This Agreement and the
exhibits and schedules hereto and the documents and certificates delivered in
connection herewith constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(b) This Agreement shall not be assigned by a party hereto by
operation of law or otherwise; provided, that Parent or the Purchaser may assign
its rights and obligations hereunder to any wholly owned subsidiary (including
an LLC) of Parent or the Purchaser, but no such assignment shall relieve Parent
or the Purchaser of its obligations hereunder if such assignee does not perform
such obligations.
Section 8.5. Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO ANY APPLICABLE CONFLICTS OF LAW PRINCIPLES. THE PARTIES HERETO EXPRESSLY AND
IRREVOCABLY (I) CONSENT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS SITTING IN DELAWARE, (II) AGREE NOT TO BRING ANY ACTION RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY OTHER COURT (EXCEPT TO
ENFORCE THE JUDGMENT OF SUCH COURTS), (III) AGREE NOT TO OBJECT TO VENUE IN SUCH
COURTS OR TO CLAIM THAT SUCH FORUM IS INCONVENIENT AND (IV) AGREE THAT NOTICE OR
THE SERVICE OF PROCESS IN ANY PROCEEDING SHALL BE PROPERLY SERVED OR DELIVERED
IF DELIVERED IN THE MANNER CONTEMPLATED BY SECTION 8.1 HEREOF. FINAL JUDGEMENT
BY SUCH COURTS SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY MANNER PERMITTED
BY LAW. IN ADDITION, EACH OF THE
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PARTIES HERETO WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR
PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
(b) Prior to commencing any litigation involving any dispute arising
from this Agreement or the transactions contemplated hereby, the parties shall
negotiate in good faith for a period of 30 days (the "Negotiation Period") to
resolve such dispute. Any relevant time periods hereunder or under applicable
law, rule or regulation will be tolled during the Negotiation Period. If, upon
the expiration of the Negotiation Period, the parties have failed to resolve
such dispute, all remedies at equity or law shall be available to the parties.
Notwithstanding the foregoing, if a party in good faith believes that the other
party is taking or will take action that is irreparable or otherwise requires
injunctive relief, such party may seek injunctive relief without complying with
the other provisions of this Section 8.5(b).
Section 8.6. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 8.7. Publicity. Except as otherwise required by law or the rules
and regulations of any U.S. or foreign national securities exchange, no party
hereto shall issue any press release or otherwise make any public statement with
respect to the transactions contemplated by this Agreement without prior
approval of the other parties hereto. Neither the Sellers nor any affiliates
shall disparage the Business, including by commenting negatively on its earnings
or prospects.
Section 8.8. Binding Nature; No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of each party hereto and
their permitted successors and assigns, and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person or persons any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.9. Severability. This Agreement shall be deemed severable; the
invalidity or unenforceability of any term or provision of this Agreement shall
not affect the validity or enforceability of this Agreement or of any other term
hereof, which shall remain in full force and effect.
Section 8.10. Interpretation. As used in this Agreement, (a) "including"
(or similar terms) shall be deemed followed by "without limitation" and shall
not be deemed to be limited to matters of a similar nature to those enumerated,
(b) "contract" shall include any note, bond, mortgage, indenture, contract,
agreement, permit, license, lease, purchase order, sales order, arrangement or
other commitment, obligation or understanding, (c) "subsidiary" of any person
means another person, an
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amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person and, in the case of the Seller Entities, shall include all
subsidiaries, affiliates or any entity under the control of such Seller Entity
or over which it has the power to direct, or cause the direction, of the
management of the entity, whether through ownership of stock, by contract or
otherwise, but not including Chippewa Valley Home Care, LLC, HFM/UPC Home
Medical Services, LLC or UPC/HME, LLC, (d) "ordinary course of business" (or
similar terms) shall be deemed followed by "consistent with past practice," (e)
"assets" shall include "rights" including rights under contracts and (f)
"knowledge" (or similar terms) with respect to any Seller Entity shall mean the
knowledge of the persons set forth in Section 8.10(f) of the Disclosure
Schedule, provided, however, that with respect to matters relating to
Facilities, assets or operations acquired as part of the acquisition of the
Arbor Health Care Company, knowledge shall mean the knowledge such individuals
would have after conducting a reasonable inquiry. In determining whether a fact,
event or other item has a Material Adverse Effect, such fact, event or other
item shall be considered individually and in the aggregate with all similar or
related facts, events or other items. Seller Entities hereby represent and
warrant that HFM/UPC Home Medical Services, LLC and UPC/HME, LLC are not engaged
in the Business and none of the assets of such entities are utilized in the
conduct of the Business.
Section 8.11. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement shall be consummated, each party hereto shall pay
its own expenses incident to preparing for, entering into and carrying out this
Agreement.
Section 8.12. Access to Records.
(a) Parent and the Purchaser agree that each of the Seller Entities
and their attorneys, agents, accountants and designees may have such access to
the books and records of the Business which are a part of the Assets and such
right to make copies thereof as the Sellers may reasonably deem necessary. Any
such examination shall be at the expense of the Sellers, shall be performed at
the place where such books and records are regularly maintained, shall be
conducted during normal business hours, and shall be done in a reasonable manner
so as to minimize the disruption and interference with normal business
activities. Such access shall extend only insofar as such books and records
relate to the Sellers or events arising prior to the Closing Date with respect
to the Business or the Sellers.
(b) Each Seller Entity agrees that each of Parent and the Purchaser
and their attorneys, agents, accountants and designees may have such access to
the books and records of the Business which were not part of the Assets and such
right to make copies thereof as Parent or the Purchaser may reasonably deem
necessary. Any such examination shall be at the expense of Parent and the
Purchaser, shall be performed at the place where such books and records are
regularly maintained, shall
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be conducted during normal business hours, and shall be done in a reasonable
manner so as to minimize the disruption and interference with normal business
activities. Such access shall extend only insofar as such books and records
relate to the Business or events arising after the Closing Date with respect
thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
OMNICARE, INC.
By: /s/ Joel F. Gemunder
-----------------------------------
Name: Joel F. Gemunder
Title: President
BADGER ACQUISITION CORP.
By: /s/ Leo P. Finn, III
-----------------------------------
Name: Leo P. Finn, III
Title: President
EXTENDICARE HEALTH
SERVICES, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: President and CEO
THE SELLERS:
ALTERNACARE PLUS
ENTERPRISES, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
BAY GERIATRIC PHARMACY, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
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THE DRUGGIST, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
HOME CARE PHARMACY, INC. OF
FLORIDA.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
POLY-STAT COMPUTER
APPLICATIONS, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
POLY-STAT SUPPLY CORPORATION
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
Q.D. PHARMACY, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
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UNITED PROFESSIONAL
COMPANIES, INC.
By: /s/ Joy D. Calkin
-----------------------------------
Name: Joy D. Calkin
Title: Chair
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Exhibit 99.1
Omnicare to Acquire Pharmacy Operations of Extendicare
COVINGTON, Ky.--July 30, 1998--Omnicare, Inc. (NYSE:OCR) today
announced the execution of a definitive agreement pursuant to which Omnicare
will acquire the institutional pharmacy operations of Extendicare Health
Services, Inc. ("EHSI"), a wholly owned subsidiary of Extendicare Inc.
(TSE/ME:EXE and EXE.A; NYSE:EXE.A) for $250 million in cash, 125,000 shares of
Omnicare common stock and 1.5 million warrants to purchase Omnicare common stock
at $48.00 per share.
The transaction, which is structured as a purchase of assets, has been
approved by the Board of Directors of both Omnicare and Extendicare, and is
subject to the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the satisfaction of certain other
conditions. It is expected that the transaction will close by September 30, 1998
and that, given the economies of scale and cost synergies anticipated from the
acquisition, it will be non-dilutive to Omnicare's per share earnings in 1998
and accretive in 1999 and beyond.
Based in Milwaukee, Wisconsin, the pharmacy business of EHSI, operating
under the name United Professional Companies, Inc. ("UPC"), has contracts to
provide comprehensive pharmacy, related consulting and infusion therapy services
to approximately 55,000 residents in more than 550 facilities in 12 states. This
transaction also offers Omnicare the opportunity to provide pharmacy services to
an additional 77 Extendicare facilities with capacity for 9,300 residents in
Canada and the United Kingdom. UPC's pharmacy revenues are currently running at
the annualized rate of approximately $163 million.
"Extendicare has built a sizeable and well-regarded institutional
pharmacy operation. Its addition to Omnicare will significantly expand our core
business of providing high quality pharmaceutical care to the nation's elderly
and will create economies of scale that allow both Omnicare and Extendicare to
operate more efficiently," said Joel F. Gemunder, Omnicare president.
Upon the completion of this transaction, it is anticipated that
Omnicare will have contracts to provide institutional pharmacy services to more
than 551,000 residents in over 6,850 long-term care facilities in 40 states,
representing an increase of 11% over the number of residents currently served by
Omnicare. Based on revenues reported for the quarter ended June 30, 1998,
Omnicare's annualized revenues following this transaction are expected to be
nearly $1.6 billion.
"The acquisition of UPC's pharmacy business also gives Omnicare the
opportunity to introduce its broad range of sophisticated clinical programs,
including our proprietary drug formulary, the Omnicare Geriatric Pharmaceutical
Care Guidelines'r' and disease management programs to all of the client
facilities of UPC. These programs, which promote the use of the most clinically
effective pharmaceutical care at the lowest cost are increasingly important to
all long-term care facilities and particularly so to skilled nursing facilities
under the new Prospective
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Payment System (PPS) for Medicare residents. Also important to long-term care
facilities in this environment are advanced clinical information systems such as
our Accu-Med'tm' software products which we will have the opportunity to offer
to all UPC clients. Moreover, the transaction provides us with the foundation
for expansion of Omnicare's pharmacy services outside the United States. The
critical mass created by the addition of UPC's client base also offers
significant new opportunities to leverage our resources in contract research and
data management," Gemunder said.
"This divestiture follows a late 1997 decision that the pharmacy is a
non-strategic asset," said Dr. Joy D. Calkin, President and Chief Executive
Officer of Extendicare Inc. "As the largest provider of institutional pharmacy
services in the U.S., Omnicare is exceptionally well-positioned to achieve
economies of scale and make cost-effective investments in the new technology
required for success.
"The long-term implications of the transaction for Extendicare are very
positive. Omnicare is an excellent provider of services and advanced
pharmacy-related systems. We expect to build a close ongoing relationship with
Omnicare, including the potential for coordinated services," Dr. Calkin added.
"Extendicare will continue to focus on its core businesses of providing care in
skilled nursing and assisted living centers."
Concluding, Mr. Gemunder said, "The evolution of the health care
industry, and long-term care specifically, is creating numerous opportunities
for alliances which not only can contain or lower costs but also enhance the
quality of care. In that vein, we see much potential for growth in our ongoing
relationship with Extendicare. As we build our respective organizations, we
share a common goal of providing outstanding geriatric care cost-effectively."
Extendicare, based in Markham, Ontario, is one of the largest operators
of long-term care facilities in North America. On March 31, 1998, the
Corporation operated 312 facilities, with capacity for over 31,800 residents and
had more than 41,100 employees in the United States, Canada, and the United
Kingdom. Extendicare also provides medical specialty services, including
subacute care and rehabilitative therapy services and other medical supplies and
services in the United States and home care and rehabilitative therapy services
in Canada.
Omnicare is a leading geriatric pharmaceutical care company. Currently
serving over 496,000 residents in more than 6,300 long-term care facilities in
40 states, Omnicare is the nation's largest provider of professional pharmacy,
related consulting and data management services for long-term care, assisted
living and other institutional health care providers. Omnicare also provides
comprehensive clinical research services for the pharmaceutical and
biotechnology industries.
(Statements in this press release concerning Omnicare's business
outlook or future economic performances, anticipated profitability, revenues,
expenses or other financial items, anticipated cost synergies, the impact of the
Extendicare transaction on earnings, the anticipated closing date of such
transaction, the potential for expansion, and other expected benefits from the
Extendicare transaction, together with other statements that are not historical
facts, are forward-looking statements that are estimates reflecting the best
judgement of Omnicare based on
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currently available information. Such forward-looking statements involve known
and unknown risks, uncertainties, contingencies and other factors that could
cause results, performance or achievements to differ materially from those
stated. Such risks, uncertainties, contingencies and other factors, many of
which are beyond the control of Omnicare, include overall economic and business
conditions, trends for the continued growth of the pharmacy businesses of
Omnicare, the realization of anticipated revenues, profitability and cost
synergies of the combined companies, the demand for Omnicare's products and
services, pricing and other competitive factors in the industry, new government
regulations and/or legislative initiatives, the consummation and successful
integration of the Extendicare transaction, and other risks and uncertainties
described in Omnicare's reports and filings with the Securities and Exchange
Commission. There can be no such assurance that such factors will not affect the
accuracy of such forward-looking statements, and Omnicare assumes no obligation
to update the information in this release.)
For more information on Omnicare, Inc. via Internet, including a full
menu of news releases, visit our Corporate News on The Net site at
http://www.businesswire.com/cnn/ocr.htm.
Contact:
Omnicare, Inc.
Cheryl D. Hodges, 513/762-6967
