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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: March 16, 1995
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ROTECH MEDICAL CORPORATION
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(Exact name of Registrant as specified on its Charter)
Florida 59-2115892
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4506 L.B. McLeod Road, Suite F, Orlando, Florida 32811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 841-2115
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Not Applicable
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(former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
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Effective March 13, 1995, RoTech Medical Corporation (the "Registrant") through
itself and its wholly-owned subsidiaries acquired, or will acquire within 60
days from the filing of this Form 8-K, an aggregate of individually
insignificant businesses, as defined per Regulation S-X Rule 3-05. The
individually insignificant businesses were acquired during the period August 1,
1994 to March 13, 1995 for an approximate aggregate purchase price of $28
million. The acquisitions of the following businesses comprise the mathematical
majority of the aggregate of individually insignificant businesses: Lovejoy
Medical, Ltd., Rotherts Hospital Equipment, Inc., and Pioneer Medical Services,
Inc.
Effective August 1, 1994, the Registrant through its wholly-owned subsidiary,
Lexington Home Health Care, Inc., acquired substantially all of the assets of
Lovejoy Medical, Ltd., a Kentucky-based corporation ("Lovejoy"), for $3.8
million cash and 131,057 shares of its restricted Common Stock valued at $1.9
million. Lovejoy provides home health products through its six locations in
Kentucky.
Effective October 1, 1994, the Registrant through its wholly-owned subsidiary,
Covington Home Health Care, Inc., acquired substantially all of the assets of
Rotherts Hospital Equipment, Inc., a Kentucky-based corporation ("Rotherts"),
for $5.1 million cash. Rotherts provides home health products through its two
locations in Kentucky and one location in Ohio.
Effective January 1, 1995, the Registrant acquired all of the outstanding common
capital stock of Pioneer Medical Services, Inc., a West Virginia-based
corporation ("Pioneer"), for $4.7 million cash. Pioneer provides home health
products through its two locations in West Virginia.
The Sellers of each of the businesses acquired during the period August 1, 1994
to March 13, 1995, had no material relationships with the Registrant prior to
their respective acquisitions. The Registrant intends to continue each business
as acquired. The purchase prices of each of the acquisitions was paid with funds
borrowed in the ordinary course of business on the Registrant's $50 million
credit facility and with available cash on hand. The purchase price of each
acquisition was based on comparable purchases in the home health industry, type
and timing of consideration to be paid and arms-length negotiations between the
Registrant and the respective Sellers.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) 1. Financial statements of business acquired.
It is impracticable at this time to provide the required financial statements of
Lovejoy, Rotherts and Pioneer. Audited financial statements of Lovejoy for the
fiscal year ended December 31, 1993, unaudited financial statements of Lovejoy
for the seven months ended July 31, 1994, audited financial statements of
Rotherts for the fiscal year ended December 31, 1993, unaudited financial
statements of Rotherts for the nine months ended September 30, 1994 and audited
financial statements of Pioneer for
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the fiscal year ended December 31, 1994 will be filed, under cover of Form 8-K/A
as soon as practicable, but no later than (60) days after the filing of this
Form 8-K.
(b) 1. Pro forma financial information.
Pro forma financial information relating to the acquisitions of Lovejoy,
Rotherts and Pioneer will be filed, under cover of Form 8-K/A as soon as
practicable, but no later than (60) days after the filing of this report.
(c) Exhibits
Agreement for Sale and Purchase of Assets dated August 1, 1994 between the
Registrant and Lovejoy, Agreement for Sale and Purchase of Assets dated October
1, 1994 between the Registrant and Rotherts, Agreement for Purchase and Sale of
Shares dated January 1, 1995 between the Registrant and Pioneer (collectively
referred to as "Agreements"). Pursuant to Item 601(b)(2) of Regulation S-K,
schedules to the Agreements have been omitted. The Registrant hereby undertakes
to furnish supplementally a copy of such schedules to the Commission upon
request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on 8-K to be signed on its behalf by the
undersigned hereunto duly authorized.
RoTech Medical Corporation
a Florida Corporation
Dated: March 16, 1995 By: /s/ Rebecca R. Irish
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Rebecca R. Irish, Treasurer
and Chief Financial Officer
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EXHIBIT 2.1
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AGREEMENT FOR SALE AND PURCHASE OF ASSETS
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AND COVENANT NOT TO COMPETE
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THIS AGREEMENT is made as of the 1st day of August, 1994, by and between
LOVEJOY MEDICAL, LTD., a Kentucky corporation, having its principal place of
business at 171 Prosperous Place, Lexington, Kentucky 40509 (hereinafter
referred to as the "Seller" or "Corporation"), and LEXINGTON HOME HEALTH CARE,
INC., a Kentucky corporation, having its principal place of business at 4506
L. B. McLeod Road, Suite F, Orlando, Florida 32811 (hereinafter referred to as
the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller operates a home care business in the State of Kentucky
(the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller, certain assets of
the Business, including but not limited to, accounts receivable, notes
receivable, inventory, fixed assets and motor vehicles, and also desires to
purchase from the Seller all of the Seller's rights in: (a) the Medicare
provider numbers and Medicaid provider numbers listed on the Schedule of
Provider Numbers and Telephone Numbers attached hereto as Exhibit "P"; (b) the
patients' list of the Business; (c) the telephone numbers listed on the Schedule
of Provider Numbers and Telephone Numbers attached hereto as Exhibit "P"; (d)
all of the Seller's prepaid assets; and (e) all other assets of any kind owned
and utilized by Seller in the Business, excluding cash (together as herein
described sometimes referred to as the "Assets"). Buyer also desires to purchase
from the Seller, and the Seller desires to sell to Buyer, a covenant not to
compete as described in paragraph 16 hereof (the "Covenant Not to Compete").
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is hereby agreed as follows:
1. Sale of Assets and Covenant Not to Compete. The Seller shall, on the
Closing Date referred to below:
(a) Accounts Receivable; Notes Receivable. Sell, assign and transfer
to the Buyer all of the Seller's rights, title and interest in the accounts
receivable and notes receivable of the Business set forth on the Schedule of
Accounts Receivable Data attached hereto as Exhibit "A" and by this reference
made a part hereof;
(b) Inventory; Fixed Assets. Sell, assign and transfer to the Buyer
all of the Seller's rights, title and interest in the inventory and fixed assets
of the Business set forth on the
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Schedule of Inventory and Fixed Assets attached hereto as Exhibit "B" and by
this reference made a part hereof; and
(c) Motor Vehicles. Sell, assign and transfer to the Buyer all of the
Seller's rights, title and interest in the motor vehicles of the Business set
forth on the Schedule of Motor Vehicles attached hereto as Exhibit "C" and by
this reference made a part hereof; and
(d) Other Assets. Sell, assign and transfer to the Buyer all of the
Seller's rights, title and interest in: (i) the Medicare provider numbers and
Medicaid provider numbers listed on the Schedule of Provider Numbers and
Telephone Numbers attached hereto as Exhibit "P"; (ii) the patient's list of the
Business, as described in Exhibit "D"; (iii) the telephone numbers listed on the
Schedule of Provider Numbers and Telephone Numbers attached hereto as Exhibit
"P"; (iv) all of the Seller's prepaid assets; and (v) all other assets of any
kind owned and utilized by Seller in the Business, excluding cash.
(e) Covenant Note to Compete. Grant to Buyer, the Covenant Not to
Compete.
2. Purchase Price.
(a) Purchase Price. The purchase price for the Assets and the Covenant
Not to Compete shall be THREE MILLION EIGHT HUNDRED TWENTY THOUSAND DOLLARS
($3,820,000.00) in cash (the "Cash Consideration"), plus 130,527 shares of the
common stock, par value $.0002, of RoTech Medical Corporation, a Florida
corporation, issued in the name of the Seller (the "RoTech Stock") (the Cash
Consideration and RoTech Stock are sometimes herein referred to together as the
"Purchase Price"), which RoTech Stock shall be issued with certificates titled
in the name of the Seller and shall have the restrictive legend required by
paragraph 5.f. printed thereon. The Purchase Price shall be allocated among the
Assets and the Covenant Not to Compete in the manner set forth on the Allocation
Schedule attached hereto as Exhibit "E" and by this reference made a part
hereof, and both parties hereto expressly consent to the allocation stated
therein. As additional consideration for the Assets and Covenant Not to Compete,
the Buyer shall cause to be issued to Sheri Robinson, within sixty (60) days
from the Closing Date, 530 shares of the common stock, par value $.0002, of
RoTech Medical Corporation, which shares shall constitute restricted securities
and shall bear a restrictive legend.
(b) Method if Payment. The RoTech Stock shall be pledged to Buyer by
Seller at Closing to secure payment by Seller of those liabilities and
deficiencies set forth in paragraph 4 hereof. The RoTech Stock shall be pledged
pursuant to the terms of that certain Stock Pledge and Security Agreement, in
the form
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attached hereto as Exhibit "F" and by reference made a part hereof (the "Pledge
Agreement"), and shall be placed in escrow for a period of twenty-four (24)
months (the "Escrow Period") with the law firm of Winderweedle, Haines, Ward &
Woodman, P.A. ("WHWW"), to be held by WHWW pursuant to the terms of that certain
Escrow Agreement, in the form attached hereto as Exhibit "G" and by reference
made a part hereof (the "Escrow Agreement"). The parties hereto shall cause the
RoTech Stock to be delivered to Escrow Agent within thirty (30) days from the
date first written above.
(c) Indemnity Against Creditors Claims; Assumption of Certain
Liabilities. Seller agrees to indemnify Buyer and hold Buyer harmless against
all claims made by creditors of the Seller which relate to the Business,
including, but not limited to reasonable attorney's fees and costs in defending
such claims. The Seller represents that there are not trade liabilities of any
nature (accrued, absolute, contingent or otherwise), liens, encumbrances, or
security interests on any of the Assets. Notwithstanding anything contained in
this Agreement to the contrary, the Buyer expressly states that it is assuming
no existing debts or liabilities of any kind in connection with its purchase of
the Assets, except for the leases, contracts and agreements set forth on the
Schedule of Leases, Contracts and Agreements attached hereto as Exhibit "K".
Seller shall remain fully liable for any and all debts and liabilities of
Seller, and Buyer may, at its option in the exercise of its sole discretion,
either refuse to pay any debts or liabilities of Seller or, alternatively, may
pay one or more of such debts or liabilities, in which case Seller shall
immediately reimburse Buyer for the full amount paid by Buyer.
3. Additional Consideration Payable in Cash.
a. In the event the actual collections of the accounts receivable
described on the attached Exhibit "A" during the twelve (12) month period
following the Closing Date exceed ONE MILLION THREE HUNDRED SIX THOUSAND FIVE
HUNDRED FORTY-FIVE DOLLARS ($1,306,545) (the excess amount is herein referred to
as the "Excess Collections"), the Buyer shall pay to Seller by the Delivery Date
(as defined below), an amount in cash equal to the Excess Collections.
b. The term "Delivery Date" shall mean that date which is thirty (30)
days after the date on which the Excess Collections during such twelve (12)
month period have been finally determined.
4. Representations Concerning Contract Obligations. The Seller represents
and warrants that, to the best of its knowledge and belief, all of the contract
obligations of Seller are listed on the Exhibit "K" attached hereto, and such
Exhibit "K" is
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complete and accurately reflects all of Seller's "Contract Obligations" (as
hereinafter defined) as of the Closing Date. The term "Contract Obligations"
shall mean and refer to all of the Seller's lease, contract and agreement
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
on the Closing Date. The Seller acknowledges that the purchase price for the
Assets is based on the accuracy of Seller's representations and warranties
contained in this Agreement, including but not limited to the Seller's
representations and warranties contained in this paragraph 3.
5. Right of Offset Against the RoTech Stock. In the event that: (i) the
Buyer pays for any debts or liabilities of Seller (the aggregate amount from
time to time paid by Buyer is herein referred to as the "Liabilities
Deficiency"), or (ii) the aggregate value of the Corporation's collectible
accounts receivable as of August 1, 1994, are determined to be less than
$1,050,000, as determined by actual cash collections of such receivables during
the twelve (12) month period immediately following the Closing Date (the "Asset
Value Deficiency"), or (iii) the Corporation has, since July 1, 1994, made
expenditures or incurred obligations or liabilities, except in the ordinary
course of business; discharged or satisfied any liens or encumbrances, except in
the ordinary course of business; declared or made any shareholder payment or
distribution or purchased or redeemed any of its common capital stock or agreed
to do so; mortgaged, pledged or subjected to lien or encumbrance any of its
assets; sold or transferred any assets; suffered any damage or loss (whether or
not covered by insurance), materially affecting its properties; waived any
rights of substantial value; or entered into any transaction other than in the
ordinary course of business (the "Subsequent Event Deficiency"), or (iv) any
debts, liabilities or obligations of any nature (whether absolute, accrued,
contingent, or otherwise), other than those subject to subparagraphs (i) through
(iii) of this paragraph 4 (the "Obligations"), become known, are uncovered or
arise after the Closing Date, which Obligations pertain to any actions,
omissions, debts, liabilities or obligations of the Corporation or any of its
shareholders, created or arising on or before the Closing Date (said Obligations
hereinafter referred to as the "Contingent Liability"); then, and in any of such
events, Buyer shall have the right, for a period of twenty-four (24) months from
the Closing Date, to make offset against the RoTech Stock, in accordance with
the terms and conditions of the Pledge Agreement and Escrow Agreement, in
amounts from time to time equal to any Liabilities Deficiency, Asset Value
Deficiency, Subsequent Event Deficiency or Contingent Liability which becomes
known, is uncovered or arises during the twenty-four (24) month period after the
Closing Date, and Seller agrees to pay said amounts to Buyer immediately upon
written request from Buyer to Seller. During the twenty-four (24) month period
following the Closing Date, in the event Buyer makes written request to Seller
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hereunder and Seller fails to make the requested payment within ten (10) days
from the date of such written request (said ten (10) day period hereinafter
referred to as the "Notice Period"), Buyer shall have the right to make offset
against the RoTech Stock, in accordance with the terms and conditions of the
Pledge Agreement and Escrow Agreement, in amounts from time to time equal to the
amount of any Liabilities Deficiency, Asset Value Deficiency, Subsequent Event
Deficiency or Contingent Liability which becomes known, is uncovered or arises
during the twenty-four (24) month period following the Closing Date, and the
Corporation agrees to allow Buyer to make offset against the RoTech Stock as
herein provided. In the event an offset against the RoTech Stock is to occur, an
offset against one share of RoTech Stock shall have the effect of reducing any
amounts owed Buyer by $19.00. Buyer's right of offset against the RoTech Stock
shall terminate on that date which is twenty-four (24) months from the Closing
Date (the "Release Date"), provided, however, that notwithstanding anything
contained in this Agreement or in the Pledge Agreement or Escrow Agreement to
the contrary, the right of offset shall extend past the Release Date in the
event a claim is in dispute at the time of the Release Date and, in such
instance, the right of offset shall not terminate until after the settlement of
such claim or claims. The Buyer shall be entitled to reimbursement from Seller
of the amount of any reasonable legal fees and expenses (including court costs
and the costs of appeal) incurred by Buyer to enforce the collection of amounts
owed Buyer by Seller hereunder.
6. Characteristics of RoTech Stock.
a. Investment. The RoTech Stock which the Seller is acquiring
hereunder is being acquired for Seller's own account, not as a nominee or agent,
and not with a view to the sale or distribution of any part (thereof for the
purposes of the Securities Act of 1933, as amended (the "Securities Act").
b. Securities Not Registered. The Seller understands that the RoTech
Stock has not been registered under the Securities Act on the ground that the
issuance of such securities hereunder is exempt from registration under the
Securities Act and that Buyer's reliance on such exemption is predicted on
Seller's representations set forth in this paragraph 5.
c. Rule 144. The Seller acknowledges that the RoTech Stock must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Seller is aware of the provisions
of Rule 144 promulgated under the Securities Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions. Rule 144 requires, among other things, that current
information on the issuer be available to the public and that the shareholder
intending to sell under
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the Rule hold the shares for at least two (2) years. In the event any of the
RoTech Stock held by Seller becomes eligible for sale pursuant to Rule 144, and
an opinion of Buyer's counsel is necessary to effectuate the transfer of RoTech
Stock thereunder, Buyer shall bear the costs of obtaining such opinion of
counsel. Buyer shall process any requests for transfer of RoTech Stock pursuant
to Rule 144 in an efficient and prompt manner.
d. Access to Data. Seller has received and reviewed information about
RoTech and has had an opportunity to ask questions of, and receive answers from,
Buyer concerning RoTech's business, management, legal and financial affairs and
to obtain additional information (to the extent Buyer possesses such information
or could acquire it without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished. Seller also had the opportunity to
inspect RoTech's facilities. Seller understands that such discussions, as well
as any written information issued by RoTech, were intended to describe the
aspects of RoTech's business and prospects which it believes to be material, but
were not necessarily a thorough or exhaustive description.
e. Risks. Seller is experienced in evaluating and investing in high
risk companies such as Buyer and by reason of its business and financial
experience has the capacity to protect its own interests in connection with the
transactions contemplated by this Agreement and has the ability to bear the
economic risk of its investment.
f. Restrictive Legends. Each certificate representing RoTech Stock,
including any securities issued as a dividend or other distribution with respect
to, in exchange for, or in replacement of such RoTech Stock shall be stamped or
otherwise imprinted with the following legend as well as any other legends
required by applicable state securities laws:
The securities represented by this stock certificate or warrant have
been acquired pursuant to an investment representation on the part of
the purchaser thereof and shall not be sold, pledged, hypothecated,
donated, or otherwise transferred, whether or not for consideration,
by the purchaser except upon the issuance to the company of a
favorable opinion of its counsel and/or the submission to the company
of such other evidence as may be satisfactory to counsel to the
company, in either case to the effect that any such transfer shall not
be in violation of the Securities Act of 1933, as amended, and
applicable state securities laws.
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g. No Registration Rights. Seller acknowledges that it possesses no
rights whatsoever to have any of the RoTech Stock registered.
7. Put Option.
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a. Amount and Price. The Seller have the right to require Buyer to
repurchase some or all of the RoTech Stock at a repurchase price of $17.10 per
share of RoTech Stock (the "Option Price"). The right of Seller to have Buyer
repurchase shares of RoTech Stock at the Option Price is sometimes herein
referred to as the "Put Option."
b. Restrictions on Exercise. This Put Option is not negotiable but the
Seller may submit the following amounts of RoTech Stock for redemption by Buyer
at the Option Price during the periods specified: up to 40,000 shares of RoTech
Stock on a cumulative basis during the period commencing August 1, 1994 and
ending July 31, 1995; up to 80,000 shares of RoTech Stock during the period
commencing August 1, 1994 and ending July 31, 1996; and up to 130,527 shares of
RoTech Stock during the period commencing August 1, 1994 and ending July 31,
1997. This Put Option is not assignable in any respect (other than as set forth
in subparagraph 6.f. hereof) and can only be exercised by the Seller or its
legal successors. This Put Option may only be exercised in blocks of 1,000
shares of RoTech Stock or more, provided, however, that if the Seller holds less
than 1,000 shares of RoTech Stock, Seller may exercise this Put Option with
respect to all of its shares of RoTech Stock if it does so at one time.
c. Term of Option. All shares of RoTech Stock submitted pursuant to
this Put Option must be delivered to the executive offices of Buyer, at the
address of Buyer as set forth herein. At 5:00 p.m., E.S.T., August 1, 1997, this
Put Option shall expire with respect to all shares of RoTech Stock and shall
thereafter have no prospective effect.
d. Exercise of Put Option and Delivery of Shares. To validly exercise
this Put Option, the Seller must execute a statement in which Seller warrants
that is has full and clear title to the applicable shares of RoTech Stock, free
of all liens and encumbrances. Such statement must be accompanied by original
stock certificates evidencing not less than the number of shares of RoTech Stock
for which the option exercise is made. Further, such certificates must be
accompanied by a validly executed stock power, with signature guaranteed by a
member of the New York Stock Exchange or a commercial bank who is a member of
the Federal Reserve System.
e. Settlement. Settlement for any shares of RoTech Stock redeemed
pursuant to this Put Option shall occur on that day which is thirty (30)
business days from the day such shares
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are submitted to Buyer with all required documentation. Such payment shall be
made without interest.
f. Assignment of Put Options. Notwithstanding anything contained in
this paragraph 6, the Seller may assign some portion or all of its Put Option
rights hereunder to the following individual, which shall hold such rights after
said assignment in accordance with the terms and conditions of this paragraph 6:
Mark Stanley. No assignment of any Put Option shall be effective unless written
notice of such assignment is delivered to Buyer at least ten (10) days prior to
the effective date of such assignment.
8. Effective Date. The effective date for the transaction contemplated
under this Agreement will be August 1, 1994 (herein sometimes referred to as the
"Closing" or "Closing Date").
9. Asset Condition and Quality. Substantially all Assets of Seller are free
of damage and defects and are not obsolete. Substantially all of the Assets on
the Closing Date shall be in good operating condition and repair, reasonable
wear and tear excepted, and shall conform in all material respects with all
applicable ordinances, regulations, zoning and other laws.
10. Instruments of Conveyance and Transfer. At the Closing:
(a) The Seller will deliver to the Buyer such bills of sale,
assignments and other good and sufficient instruments of conveyance and transfer
in form sufficient to sell, assign and transfer the Assets, such documents to
contain full warranties of title, and which documents shall be effective to vest
in the Buyer good, absolute, and marketable title to the Assets of the Business
being transferred to the Buyer by Seller, free and clear of all liens, charges,
encumbrances and restrictions of any kind, except as disclosed on Exhibits
hereto.
(b) Simultaneously with such delivery, the Seller will take all steps
as may be requisite to put the Buyer in actual possession, operation and control
of the Assets to be transferred hereunder.
11. Sales and Transfer Taxes Fees. All applicable sales, transfer, use,
filing and other taxes and fees that may be due or payable as a result of the
conveyance, assignment, transfer or delivery of the Assets of the Business to be
conveyed and transferred as provided herein, whether levied on the Seller or the
Buyer, shall be borne by the Buyer, and the Buyer indemnifies the Seller in the
event the Seller incurs expenses pertaining to such taxes and fees.
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12. Restrictions on Operations of Seller. Except as disclosed on Exhibits
hereto, since July 1, 1994, through the Closing Date, the Seller has not, except
in the ordinary course of business:
(a) Sold, assigned or transferred any Assets;
(b) Mortgaged, pledged, created a security in or otherwise encumbered
any Assets;
(c) Entered into any contracts or transaction binding the Business
other than contracts or transactions entered into in the ordinary course of
business;
(d) Incurred any liabilities or indebtedness other than in the
ordinary course of business; or
(e) made any distribution of any kind to its shareholder. The
information contained on the Schedule of Distribution to Shareholder attached
hereto as Exhibit "R" is accurate and complete.
13. Representations and Warranties by Seller. As a material inducement to
the Buyer to execute and perform its obligations under this Agreement, the
Seller hereby represents and warrants to the Buyer as follows:
(a) Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kentucky
and has requisite corporate power and authority to carry on its business as it
is presently being conducted, to enter into this Agreement, and to carry out and
perform the terms and provisions of this Agreement.
(b) Litigation. There are no actions, suits or proceedings affecting
the transferred Assets which are pending or threatened against Seller or
effecting any of its properties or rights, at law or in equity, or before any
federal, state, municipal or other governmental agency or instrumentality,
domestic or foreign, nor is Seller or any of its officers or directors aware of
any facts which to it or their knowledge might reasonably be expected to result
in any such action, suit or proceeding. Seller is not in default with respect to
any order or decree of any court or of any such governmental agency or
instrumentality.
(c) Compliance with Laws and other Instruments. The Seller is not in
violation of any term or provision of any charter, bylaw, mortgage, indenture,
contract, agreement, instrument, judgment, decree, order, statute, rule or
regulation, and the execution and delivery of and performance and compliance
with this Agreement will not result in the violation of or be in
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conflict with or constitute a default under any such term or provision or result
in the creation of any mortgage, lien, encumbrance or charge upon any of the
properties or assets of the Seller pursuant to any such term or provision.
(d) Corporate Acts and Proceedings. The sale and transfer of the
Assets by the Seller, as provided for in this Agreement, have been or will be
approved and consented to by the Board of Directors of the Seller and by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable law by the stockholders of the Seller with regard to
such sale or transfer of the Assets by Seller, have been appropriately
authorized and accomplished.
(e) Title to Assets. Seller has good and indefeasible title to all of
the Assets being sold to Buyer pursuant to this Agreement, subject to only those
liens disclosed on Exhibits hereto.
(f) No Default. Seller is not in default in any respect under any of
the contracts, agreements, leases, documents or other commitments to which it is
a party or otherwise bound.
(g) Brokers. The introduction of the Seller to the Buyer and all
negotiations on the part of the Seller relative to this Agreement and the
transaction contemplated hereunder have been effected and carried on by the
Seller directly with the Buyer without the intervention of any dealer, finder,
broker or other person.
(h) Employment Contracts; Employees. There are no written contracts of
employment between Seller and any officer or other employee of the Business,
including Buyer. The information contained on the Schedule of Personnel Payroll
and Advances attached hereto as Exhibit "H" is accurate and complete.
(i) Employee Benefit Plans. Seller has no pension, bonus,
profit-sharing, or retirement plans for officers or employees of the Business,
nor is Seller required to contribute to any such plan.
(j) Insurance. All inventories, buildings and fixed assets owned or
leased by Seller are and will be adequately insured against fire through the
Closing Date. The information contained on the Schedule of Insurance Policies,
attached hereto as Exhibit "O", is accurate and complete.
(k) Disclosure. No representation or warranty by Seller in this
Agreement or in any writing attached hereto, contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact, of
which the Seller or any of its directors or stockholders have knowledge or
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notice required to make the statements herein or therein contained not
misleading.
(1) Officers, Directors and Shareholders. As of the Closing Date, Mark
Stanley is the sole shareholder and sole director of the Seller and the
following individuals are the officers of the Seller:
Name Office
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Mark Stanley President
Sheri Robinson Secretary
Mark Stanley Treasurer
(m) Cash Receipts. The information contained on the Schedule of
Collections attached hereto as Exhibit "I", is accurate and complete.
(n) Accounts Receivable. The information contained on the Schedule of
Accounts Receivable Data, attached hereto as Exhibit "A", is accurate and
complete. The Seller further warrants and represents that all of the Seller's
accounts receivable shown on Exhibit "A" (the "Receivables") are legally
billable and that no less than $1,050,000 is collectible. Buyer shall use its
best efforts to collect the Receivables; however, any Receivables not collected
as of that date which is twenty-four (24) months from the Closing Date, shall be
deemed uncollectible, and Buyer may immediately exercise any rights of offset
that it may have pursuant to paragraph 4 hereof, as a result of such
uncollectibility. Seller agrees to endorse over to Buyer, immediately upon
receipt, any checks representing payment of any Receivables.
(o) Inventory and Fixed Assets. The information contained on the
Schedule of Inventory and Fixed Assets, attached hereto as Exhibit "B", is
accurate and complete.
(p) Leases, Contracts and Agreements. The information contained on the
Schedule of Leases, Contracts and Agreements, attached hereto as Exhibit "K", is
accurate and complete.
(q) Tax Returns and Financial Statements. Seller has furnished Buyer
with tax returns (the "Tax Returns") for the periods ended December 31, 1992 and
December 31, 1993 and has furnished Buyer with financial statements (the
"Financial Statements") for the periods ended December 31, 1992, December 31,
1993, June 30, 1994 and July 31, 1994 (the "Financial Statement Dates"), copies
of which are attached hereto as Exhibit "L" and by this reference made a part
hereof. The Financial Statements: (i) are in accordance with the books and
records of the Seller; (ii) fairly represent the financial condition of the
Seller at such date and the results of its operations for the periods specified;
(iii) were prepared in accordance with
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<PAGE>
generally accepted accounting principles applied upon a basis consistent with
prior accounting periods; (iv) with respect to all contracts and commitments of
the Seller, reflect adequate reserves for all reasonably anticipated losses and
costs in excess of anticipated income; and (v) with respect to any balance
sheets, disclose all of the debts, liabilities and obligations of any nature
(whether absolute, accrued, contingent, or otherwise) of the Seller at the
Financial Statement Dates and include the appropriate reserves for all taxes and
other accrued liabilities, except that certain contingent liabilities, if not
disclosed on such balance sheets, shall be considered to be disclosed pursuant
to this subparagraph, if disclosed on an Exhibit to this Agreement.
(r) Adverse Business Developments. No notice has been received by the
Seller of any new or substantially expanded firm or individual engaged in a
business directly competitive to Seller in its primary service area within six
(6) months prior to the date hereof. Nor has Seller received, either orally or
in writing, any notice specific to Seller of pending or threatened adverse
action with respect to any Medicare, Medicaid, private insurance or third party
payor reimbursement method, practice or allowance as to any business activity
engaged by Seller, nor has Seller received nor been threatened with any claim
for refund specific to Seller in excess of $500.00 by a Medicare or Medicaid
carrier, except as disclosed in the Schedule of Proceedings attached hereto as
Exhibit "M."
14. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that:
a. Buyer is a duly organized, valid corporation under the laws of the
State of Kentucky. Buyer is a wholly-owned subsidiary of RoTech Medical
Corporation ("RoTech").
b. Buyer is duly authorized by law and corporate policy and approval
to: (1) enter into this Agreement; (2) make all warranties and representations
made by Buyer herein; and (3) issue all consideration provided for under the
terms hereof.
c. All signatures and agents designated as agents/officers for Buyer
for signing purposes have the authority to bind the Buyer to the terms of this
Agreement.
d. Buyer has the authority to cause the RoTech Stock to be issued in
accordance with the terms of this Agreement.
15. Conditions Precedent to Closing by Buyer. The obligation of the Buyer
to consummate this Agreement is subject to and conditioned upon the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12
<PAGE>
(a) Compliance with Agreement. All of the terms and conditions of this
Agreement to be complied with and performed by the Seller on or before the
Closing Date, shall have been complied with and performed; and
(b) Representations and Warranties. The representations and warranties
of the Seller in paragraph 12 shall be deemed to have been made again on the
Closing Date and then be true and correct, subject to any changes contemplated
by this Agreement. There shall have been no materially adverse change in the
financial condition of the Seller; and
(c) Non-Compete Agreement; Other Assignable Agreements. Mark Stanley
shall have entered into a non-compete agreement substantially in the form
attached hereto as Exhibit "N" and by this reference made a part hereof. Also,
Seller shall assign to Buyer, and hereby does assign to Buyer, all of Seller's
rights under all assignable agreements (including but not limited to any
employment, non-compete and/or non-disclosure agreements) that are deemed by
Corporation to be assets of the Corporation; and
(d) Guaranty Agreement. Mark Stanley shall have entered into a
Guaranty Agreement substantially in the form attached hereto as Exhibit "Q" and
by this reference made a part hereof; and
(e) Engagement Agreement. Seller shall have entered into an Engagement
Agreement substantially in the form attached hereto as Exhibit "J" and by this
reference made a part hereof.
16. Survival of Representations and Warranties. The representations and
warranties of Seller and Buyer contained and made pursuant to this Agreement
shall survive the execution of this Agreement.
17. Corporate Covenant Not to Compete. The Corporation hereby agrees that
for a period of sixty (60) months from August 1, 1994, the Corporation will not,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control, of or be connected with, in any
manner, any business within fifty (50) miles of any office of RoTech Medical
Corporation or any of its subsidiaries (or any of their subsidiaries), which
shall be in competition with any business engaged in by the Corporation, as of
August 1, 1994.
The Corporation agrees that the remedy at law for any breach by the
Corporation of the foregoing will be inadequate and that Buyer shall be entitled
to injunctive relief and reimbursement from the Corporation for all costs and
expenses, including attorneys' fees and court costs, incurred by Buyer in
connection with the enforcement of this Covenant Not to Compete. If any
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<PAGE>
provisions of this paragraph shall be held invalid, the Corporation agrees that
such provisions shall be severed and the balance thereof shall remain valid and
enforceable. In the event that a court of competent jurisdiction determines that
the scope of business restricted or the time or geographic limitations imposed
are too broad to be capable of enforcement, the Corporation agrees that such
court may ignore such provisions and instead enforce the provisions as to such
scope, time and geographical area as the court deems proper. This Covenant Not
to Compete shall be governed by the laws of the State of Florida and any action
involving this Covenant Not to Compete shall be brought in the court of
appropriate jurisdiction in Fayette County, Kentucky.
18. Indemnification. The Seller shall and hereby agrees to, indemnify and
hold harmless, the Buyer at all times from and after the Closing Date against
and in respect to any damages, as hereinafter defined. Damages as used herein,
shall include any claims, actions, demands, losses, costs, expenses, liabilities
(joint and several), penalties, and damages, including counsel fees incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof, relating to the Buyer from: (a) any materially inaccurate
representation made by Seller in or under this Agreement; (b) breach of any
warranties made by Seller in or under this Agreement; (c) breach or default in
the performance by Seller of any the covenants to be performed by it hereunder;
and (d) any debts, liabilities, or obligations of the Seller pertaining to the
Business, whether accrued, absolute, contingent or otherwise, due or to become
due. The remedies of Buyer pursuant to this paragraph 17 shall include, but not
be limited to, the right of offset against any RoTech Stock held in escrow
pursuant to paragraph 4 hereof.
19. Use of Corporate Name. Seller agrees to take all actions necessary to
assist Buyer in obtaining the rights to utilize the corporate name "Lovejoy
Medical, Ltd." including but not limited to the execution of any assignments and
consents to use.
20. Prepaid Items; Deposits; Etc. All prepaid insurance premiums, rent and
utility deposits and similar items paid by or owing to the Seller by any person,
firm or governmental entity (except customer accounts receivables) shall be
considered to be part of the Assets being purchased by Buyer and shall, upon the
consummation of the transactions contemplated by this Agreement, be considered
the property of Buyer.
21. Miscellaneous. This Agreement shall not be assignable by Seller or
Buyer without the consent of the other. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the parties hereto,
and their successors, any rights or remedies under or by reason of this
Agreement.
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22. Expenses. Except as otherwise stated herein, each of the parties shall
bear all expenses incurred by them in connection with this Agreement and in
consummation of the transactions contemplated hereby in preparation thereof.
23. Amendment and Waiver. This Agreement may be amended or modified at any
time and in all respects, or any provisions may be waived by an instrument in
writing executed by Buyer and Seller, or either of them in the case of a waiver.
24. Notices. All notices of request, demand and other communications
hereunder shall be addressed to the parties as follows:
TO SELLER: LOVEJOY MEDICAL, LTD.
171 Prosperous Place
Lexington, Kentucky 40509
Attn: Mark Stanley
TO BUYER: LEXINGTON HOME HEALTH CARE, INC.
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
25. Choice of Law. It is the intention of the parties that the laws of the
State of Florida shall govern the validity of this Agreement, the construction
of its terms and the interpretation of the rights and duties of the parties. Any
action involving or relating to this Agreement shall be brought in the court of
appropriate jurisdiction located in Fayette County, Kentucky.
26. Sections and Other Headings. Section, paragraph and other headings
contained in this Agreement are for reference purposes only and shall not effect
in any way the meaning nor interpretation of this Agreement.
27. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one in the same agreement. Facsimile signatures
may be deemed binding for this Agreement, or any modification or amendment
thereto, or any leases or other documents contemplated hereby, provided that
originals of same are delivered within a reasonable time.
28. Gender. All personal pronouns used in this Agreement shall include the
other genders whether used in the masculine or feminine or neuter gender, and
the singular shall include the plural whenever and as often as may be
appropriate.
29. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of,
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<PAGE>
and be enforceable by Seller and Buyer and their respective successors and
assigns.
30. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and there are no agreements, understandings,
restrictions, warranties or representations between the parties other than those
set forth herein or herein provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first stated above.
Signed, sealed and delivered LOVEJOY MEDICAL, LTD., a
in the presence of: Kentucky corporation
/s/ Sheri Robinson By: /s/ Mark Stanley
- ---------------------------- ----------------------------
Mark Stanley, President
- ---------------------------- "Seller"
LEXINGTON HOME HEALTH CARE,
INC., a Kentucky corporation
/s/ Dawn E. Mulcahey By: /s/ Stephen P. Griggs
- ---------------------------- ----------------------------
Stephen P. Griggs, Chief
Operating Officer
/s/ Windy A. Kemp
- ---------------------------- "Buyer"
STATE OF KENTUCKY
COUNTY OF __________
The foregoing instrument was acknowledged before me this ____ day of
August 1, 1994, by Mark Stanley, as President of Lovejoy Medical, Ltd., a
Kentucky corporation, on behalf of the corporation. He is personally known to me
or has produced _______________________________ as identification.
/s/ Sheri Robinson
----------------------------
NOTARY SIGNATURE
/s/ Sheri Robinson
----------------------------
NOTARY NAME PRINTED
Notary Public
My Commission Expires: September 23, 1995
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<PAGE>
STATE OF Florida
--------------
COUNTY OF Orange
--------------
The foregoing instrument was acknowledged before me this 19 day of
September, 1994, by Stephen P. Griggs, as the Chief Operating Officer of
Lexington Home Health Care, Inc., a Kentucky corporation, on behalf of the
corporation. He is personally known to me or has produced ___________________ as
identification.
/s/ Gail Ann Webb
-----------------------------
NOTARY SIGNATURE
/s/ GAIL ANN WEBB
-----------------------------
NOTARY NAME PRINTED
Notary Public
My Commission Expires:
OFFICIAL NOTARY SEAL
GAIL ANN WEBB
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC204842
MY COMMISSION EXP. JUNE 1, 1996
17
<PAGE>
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
-----------------------------------------
AND COVENANT NOT TO COMPETE
---------------------------
THIS AGREEMENT is made as of the 1st day of October, 1994, by and between
ROTHERT'S HOSPITAL EQUIPMENT, INC., a Kentucky corporation, having its principal
place of business at 2020 Madison Avenue, Covington, Kentucky 41014-1248
(hereinafter referred to as the "Seller" or "Corporation"), and COVINGTON HOME
HEALTH CARE, INC., a Kentucky corporation, having its principal place of
business at 4506 L. B. McLeod Road, Suite F, Orlando, Florida 32811 (hereinafter
referred to as the "Buyer").
W I T N E S S E T H :
WHEREAS, the Seller operates a home care business in the Commonwealth of
Kentucky (the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller, certain assets of
the Business, including but not limited to, accounts receivable, notes
receivables, inventory, fixed assets, leasehold improvements and motor vehicles,
and also desires to purchase from the Seller all of the Seller's rights in: (a)
the Medicare provider numbers and Medicaid provider numbers listed on the
Schedule of Provider Numbers and Telephone Numbers attached hereto as Exhibit
"P"; (b) the patients' list of the Business; (c) the telephone numbers listed on
the Schedule of Provider Numbers and Telephone Numbers attached hereto as
Exhibit "P"; (d) all of the Seller's prepaid assets; (e) all of the cash in
Seller's checking accounts in excess of NINETY THOUSAND DOLLARS ($90,000.00) in
the aggregate; and (f) all other assets of any kind owned and utilized by Seller
in the Business as described on the Schedule of Cash and Other Assets attached
hereto as Schedule "F" and by this reference to as the "Assets"). Buyer also
desires to purchase from the Seller, and the Seller desires to sell to Buyer, a
covenant not to compete as described in paragraph 13 hereof (the "Covenant Not
to Compete").
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is hereby agreed as follows:
1. Sale of Assets and Covenant Not to Compete. The Seller shall, on the
Closing Date referred to below:
(a) Accounts Receivable; Notes Receivable. Sell, assign and transfer
to the Buyer all of the Seller's rights, title and interest in the accounts
receivable and notes receivable of the Business set forth on the Schedule of
Accounts Receivable Data attached hereto as Exhibit "A" and by this reference
made a part hereof;
<PAGE>
(b) Inventory; Fixed Assets. Sell, assign and transfer to the Buyer
all of the Seller's rights, title and interest in the inventory and fixed assets
of the Business set forth on the Schedule of Inventory and Fixed Assets attached
hereto as Exhibit "B" and by this reference made a part hereof; and
(c) Motor Vehicles. Sell, assign and transfer to the Buyer all of the
Seller's rights, title and interest in the motor vehicles of the Business set
forth on the Schedule of Motor Vehicles attached hereto as Exhibit "C" and by
this reference made a part hereof; and
(d) Other Assets. Sell, assign and transfer to the Buyer all of the
Seller's rights, title and interest in: (i) the Medicare provider numbers and
Medicaid provider numbers listed on the Schedule of Provider Numbers and
Telephone Numbers attached hereto as Exhibit "P"; (ii) the patients' list of the
Business, as described in Exhibit "D"; (iii) the telephone numbers listed on the
Schedule of Provider Numbers and Telephone Numbers attached hereto as Exhibit
"P"; (iv) all of the Seller's prepaid assets; (v) all of the cash in Seller's
checking accounts in excess of NINETY THOUSAND DOLLARS ($90,000.00) in the
aggregate; and (vi) all other assets of any kind owned and utilized by Seller in
the Business as described on the Schedule of Cash and Other Assets attached
hereto as Schedule "F" and by this reference made a part hereof; and
(e) Covenant Not to Compete. Grant to Buyer, the Covenant Not to
Compete.
2. Purchase Price.
--------------
(a) Purchase Price. The purchase price for the Assets and the Covenant
Not to Compete shall be FIVE MILLION FIFTY THOUSAND DOLLARS ($5,050,000.00) in
cash (the "Purchase Price"). Upon execution of this Agreement by all of the
parties hereto, Buyer shall pay to Seller the Purchase Price less the earnest
money deposit of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) previously
paid to Seller by Buyer prior to the date first written above, receipt of which
is acknowledged by Seller. The Purchase Price shall be allocated among the
Assets and the Covenant Not to Compete in the manner set forth on the Allocation
Schedule attached hereto as Exhibit "E" and by this reference made a part
hereof, and both parties hereto expressly consent to the allocation stated
therein.
(b) Indemnity Against Creditors Claims; Assumption of Certain
Liabilities. Seller agrees to indemnify Buyer and hold Buyer harmless against
any and all liabilities of Seller of any nature, whether accrued, absolute,
contingent or otherwise, existing on October 1, 1994, and any and all claims
against Seller arising out of the conduct of the Business on or prior to
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<PAGE>
October 1, 1994, including, but not limited to reasonable attorney's fees and
costs in defending such liabilities and claims, except to the extent such claims
pertain to liabilities of Seller specifically assumed by Buyer in writing
pursuant hereto or which arise out of the conduct of the Business after
October 1, 1994. The Seller represents that there are no trade liabilities of
any nature (accrued, absolute, contingent or otherwise), liens, encumbrances, or
security interests on any of the Assets. Notwithstanding anything contained in
this Agreement to the contrary, the Buyer expressly states that it is assuming
no existing debts or liabilities of any kind in connection with its purchase of
the Assets, except for the leases, contracts and agreements set forth on the
Schedule of Leases, Contracts and Agreements attached hereto as Exhibit "K" and
the Schedule of Accounts Payable and Other Accrued Expenses attached hereto as
Exhibit "S", provided, however, in no event shall Buyer's assumption of
liabilities listed on Schedule "S" exceed ONE HUNDRED SIXTY THOUSAND DOLLARS
($160,000.00) in aggregate and Seller agrees to reimburse Buyer immediately upon
notice in the event liabilities assumed by and/or paid by the Buyer exceed such
amount. Seller shall remain fully liable for any and all debts and liabilities
of Seller, and Buyer may, at its option in the exercise of its sole discretion,
either refuse to pay any debts or liabilities of Seller or, alternatively, may
pay one or more of such debts or liabilities, in which case Seller shall
immediately reimburse Buyer for the full amount paid by Buyer.
3. Representations Concerning Obligations. The Seller represents and
warrants that, to the best of its knowledge and belief, all of the obligations
of Seller are listed on Exhibits "K" and "S" attached hereto, and such Exhibits
are complete and accurately reflect all of Seller's "Obligations" (as
hereinafter defined) as of the Closing Date. The term "Obligations" shall mean
and refer to all of the Seller's obligations of any nature (whether absolute,
accrued, contingent, or otherwise) on the Closing Date. The Seller acknowledges
that the purchase price for the Assets is based on the accuracy of Seller's
representations and warranties contained in this Agreement, including but no
limited to the Seller's representations and warranties contained in this
paragraph 3.
4. Effective Date. The effective date for the transaction contemplated
under this Agreement will be October 1, 1994 (herein sometimes referred to as
the "Closing" or "Closing Date").
5. Asset Condition and Quality. Substantially all Assets of Seller are free
of damage and defects and are not obsolete. Substantially all of the Assets on
the Closing Date shall be in good operating condition and repair, reasonable
wear and tear excepted, and shall conform in all material respects with all
applicable ordinances, regulations, zoning and other laws.
3
<PAGE>
6. Instruments of Conveyance and Transfer. At the Closing:
(a) The Seller will deliver to the Buyer such bills of sale,
assignments and other good and sufficient instruments of conveyance and transfer
in form sufficient to sell, assign and transfer the Assets, such documents to
contain full warranties of title, and which documents shall be effective to
vest in the Buyer good, absolute, and marketable title to the Assets of the
Business being transferred to the Buyer by Seller, free and clear of all liens,
charges, encumbrances and restrictions of any kind, except as disclosed on
Exhibits hereto.
(b) Simultaneously with such delivery, the Seller will take all steps
as may be requisite to put the Buyer in actual possession, operation and control
of the Assets to be transferred hereunder.
7. Sales and Transfer Taxes Fees. All applicable sales, transfer, use,
filing and other taxes and fees that may be due or payable as a result of the
conveyance, assignment, transfer or delivery of the Assets of the Business to be
conveyed and transferred as provided herein, whether levied on the Seller or the
Buyer, shall be borne by the Buyer, and the Buyer indemnifies the Seller in the
event the Seller incurs expenses pertaining to such taxes and fees.
8. Restrictions on Operations of Seller. Except as disclosed on Exhibits
hereto, since July 1, 1994, through the Closing Date, the Seller has not, except
in the ordinary course of business:
(a) Sold, assigned or transferred any Assets;
(b) Mortgaged, pledged, created a security in or otherwise encumbered
any Assets;
(c) Entered into any contract or transaction binding the Business
other than contracts or transactions entered into in the ordinary course of
business;
(d) Incurred any liabilities or indebtedness other than in the
ordinary course of business;
(e) made any distribution of any kind to its shareholders. The
information contained on the Schedule of Distribution to Shareholders attached
hereto as Exhibit "R" is accurate and complete.
9. Representations and Warranties by Seller. As a material inducement to
the Buyer to execute and perform its obligations under this Agreement, the
Seller hereby represents and warrants to the Buyer as follows:
4
<PAGE>
(a) Organization of Seller. Seller is a Corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Kentucky and has requisite corporate power and authority to carry on its
business as it is presently being conducted, to enter into this Agreement, and
to carry out and perform the terms and provisions of this Agreement.
(b) Litigation. There are no actions, suits or proceedings affecting
the transferred Assets which are pending or threatened against Seller or
effecting any of its properties or rights, at law or in equity, or before any
federal, state, municipal or other governmental agency or instrumentality,
domestic or foreign, nor is Seller or any of its officers or directors aware of
any facts which to it or their knowledge might reasonably be expected to result
in any such action, suit or proceeding. Seller is not in default with respect to
any order or decree of any court or of any such governmental agency or
instrumentality.
(c) Compliance with Laws and other Instruments. The Seller is not in
violation of any term or provision of any charter or bylaw, or, in any material
respect, of any mortgage, indenture, contract, agreement, instrument, judgment,
decree, order, statute, rule or regulation, and the execution and delivery of
and performance and compliance with this Agreement will not result in the
violation of or be in conflict with or constitute a default under any such term
or provision or result in the creation of any mortgage, lien, encumbrance or
charge upon any of the properties or assets of the Seller pursuant to any such
term or provision.
(d) Corporate Acts and Proceedings. The sale and transfer of the
Assets by the Seller, as provided for in this Agreement, have been or will be
approved and consented to by the Board of Directors of the Seller and by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable law by the stockholders of the Seller with regard to
such sale or transfer of the Assets by Seller, have been appropriately
authorized and accomplished.
(e) Title to Assets. Seller has good and indefeasible title to all of
the Assets being sold to Buyer pursuant to this Agreement, subject to only those
liens disclosed on Exhibits hereto.
(f) No Default. Seller is not in default in any material respect under
any of the contracts, agreements, leases, documents or other commitments to
which it is a party or otherwise bound.
(g) Brokers. With the exception of Medical Technology Development, the
introduction of the Seller to the Buyer and all
5
<PAGE>
negotiations on the part of the Seller relative to this Agreement and the
transaction contemplated hereunder have been effected and carried on by the
Seller directly with the Buyer without the intervention of any dealer, finder,
broker or other person. Seller is responsible for all commissions and fees due
Medical Technology Development and shall utilize a portion of the Purchase Price
to pay all such commissions.
(h) Employment Contracts; Employees. There are no written contracts of
employment between Seller and any officer or other employee of the Business,
including Buyer. The information contained on the Schedule of Personnel Payroll
and Advances attached hereto as Exhibit "H" is accurate and complete.
(i) Employee Benefit Plans. Seller has no pension, bonus,
profit-sharing, or retirement plans for officers or employees of the Business,
nor is Seller required to contribute to any such plan, except for a 401(k)
retirement plan participated in by Seller's employees, which plan the Seller
shall terminate at its expense. Seller shall be responsible for submitting
appropriate information to its employees of rights, obligations and duties
caused by the sale of the Assets and Business pursuant to the terms of this
Agreement, and shall terminate the existing profit-sharing plan at Seller's
expense.
(j) Insurance. All inventories, buildings and fixed assets owned or
leased by Seller are and will be adequately insured against fire through the
Closing Date. The information contained on the Schedule of Insurance Policies,
attached hereto as Exhibit "O", is accurate and complete.
(k) Disclosure. No representation or warranty by Seller in this
Agreement or in any writing attached hereto, contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact, of
which the Seller or any of its directors or stockholders have knowledge or
notice required to make the statements herein or therein contained not
misleading.
(l) Officers, Directors and Shareholders. As of the Closing Date,
Eugene Daniels, Walter Remke and William Remke are all the shareholders of the
Seller and the following individuals are all of the directors and officers of
the Seller:
Name Office
---- ------
Eugene Daniels President and Director
Walter Remke Vice President, Secretary,
Treasurer and Director
(m) Cash Receipts. The information contained on the Schedule of
Collections attached hereto as Exhibit "I", is accurate and complete.
6
<PAGE>
(n) Accounts Receivable. The information contained on the Schedule of
Accounts Receivable Data, attached hereto as Exhibit "A", is accurate and
complete. The Seller further warrants and represents that all of the Seller's
accounts receivable shown on Exhibit "A" as of October 1, 1994 (the
"Receivables") are legally billable and that no less than $677,383 is
collectible. Buyer shall use its best efforts to collect the Receivables;
however, any Receivables not collected as of that date which is twenty-four (24)
months from the Closing Date, shall be deemed uncollectible. Seller agrees to
endorse over to Buyer, immediately upon receipt, any checks representing payment
of any Receivables.
(o) Inventory and Fixed Assets. The information contained on the
Schedule of Inventory and Fixed Assets, attached hereto as Exhibit "B", is
accurate and complete.
(p) Lease, Contracts and Agreements. The information contained on the
Schedule of Leases, Contracts and Agreements, attached hereto as Exhibit "K", is
accurate and complete. Buyer agrees to enter into five year building leases at
existing rates for all locations of Seller being purchased by Buyer.
(q) Tax Returns and Financial Statements. Seller has furnished Buyer
with tax returns (the "Tax Returns") for the periods ended December 31, 1992 and
December 31, 1993 and has furnished Buyer with financial statements (the
"Financial Statements") for the periods ended December 31, 1992, December 31,
1993, July 31, 1994 and August 31, 1994 (the "Financial Statement Dates"),
copies of which are attached hereto as Exhibit "L" and by this reference made a
part hereof. The Financial Statements: (i) are in accordance with the books and
records of the Seller; (ii) fairly represent the financial condition of the
Seller at such date and the results of its operations for the periods specified;
(iii) were prepared in accordance with generally accepted accounting principles
applied upon a basis consistent with prior accounting periods; (iv) with respect
to all contracts and commitments of the Seller, reflect adequate reserves for
all reasonably anticipated losses and costs in excess of anticipated income; and
(v) with respect to any balance sheets, disclose all of the debts, liabilities
and obligations of any nature (whether absolute, accrued, contingent, or
otherwise) of the Seller at the Financial Statement Dates and include the
appropriate reserves for all taxes and other accrued liabilities, except that
certain contingent liabilities, if not disclosed on such balance sheets, shall
be considered to be disclosed pursuant to this subparagraph, if disclosed on an
Exhibit to this Agreement.
(r) Adverse Business Developments. No notice has been received by the
Seller of any substantial new or substantially expanded firm or individual
engaged in a business directly
7
<PAGE>
competitive to Seller in its primary service area within six (6) months prior
to the date hereof. Nor has Seller received, either orally or in writing, any
notice specific to Seller of pending or threatened adverse action with respect
to any Medicare, Medicaid, private insurance or third party payor reimbursement
method, practice or allowance as to any business activity engaged by Seller, nor
has Seller received nor been threatened with any claim for refund specific to
Seller in excess of $500.00 by a Medicare or Medicaid carrier, except as
disclosed in the Schedule of Proceedings attached hereto as Exhibit "M."
10. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that:
a. Buyer is a duly organized, valid corporation under the laws of the
Commonwealth of Kentucky. Buyer is a wholly-owned subsidiary of RoTech Medical
Corporation ("RoTech").
b. Buyer is duly authorized by law and corporate policy and approval
to: (1) enter into this Agreement; (2) make all warranties and representations
made by Buyer herein; and (3) issue all consideration provided for under the
terms hereof.
c. All signatures and agents designated as agents/officers for Buyers
for signing purposes have the authority to bind the Buyer to the terms of this
Agreement.
11. Conditions Precedent to Closing. The respective obligations of each of
the parties to consummate this Agreement is subject to and conditioned upon the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) Compliance with Agreement. All of the terms and conditions of this
Agreement to be complied with and performed by each party on or before the
Closing Date, shall have been complied with and performed; and
(b) Representations and Warranties. The representations and warranties
of Seller in paragraph 9 and of Buyer in paragraph 10 shall be deemed to have
been made again on the Closing Date and then be true and correct, subject to any
changes contemplated by this Agreement. There shall have been no materially
adverse change in the financial condition of the Seller; and
(c) Non-Compete Agreements; Other Assignable Agreements. Eugene
Daniels, Walter Remke, William Remke and Mike Downing shall have entered into
non-compete agreements substantially in the forms attached hereto as Exhibit "N"
and by this reference made a part hereof. Also, Seller shall assign to Buyer,
and hereby does assign to Buyer, all of Seller's rights under all assignable
agreements (including but not limited to any
8
<PAGE>
employment, non-compete and/or non-disclosure agreements) that are deemed by
Corporation to be assets of the Corporation; and
(d) Guaranty Agreements. Eugene Daniels, Walter Remke and William
Remke shall have entered into Guaranty Agreements substantially in the forms
attached hereto as Exhibit "Q" and by this reference made a part hereof; and
(e) Employment Agreements. Eugene Daniels and Mike Downing shall have
entered Employment Agreements substantially in the forms attached hereto as
Exhibit "J" and by this reference made a part hereof; and
(f) Contract Rights. Seller agrees to sell, assign and transfer to the
Buyer all of the Seller's rights, title and interest in and under all of the
contracts and agreements set forth on the Schedule of Contract Rights attached
hereto as Exhibit "T" and by this reference made a part hereof; and
(g) Lease Agreements. Buyer shall entered into those certain lease
agreements to be executed by Buyer as more particularly described on the Exhibit
"K" attached hereto and by this reference made a part hereof.
12. Survival of Representations and Warranties. The representations and
warranties of Seller and Buyer contained and made pursuant to this Agreement
shall survive the execution of this Agreement.
13. Corporate Covenant Not to Compete, The Corporation hereby agrees that
for a period of sixty (60) months from October 1, 1994, the Corporation will
not, directly or indirectly, own, manage, operate, join, control or participate
in the ownership, management, operation or control, of or be connected with, in
any manner, any business within fifty (50) miles of any office of Rothert's
Hospital Equipment, Inc. or any of its subsidiaries or related companies, which
shall be in competition with any business engaged in by the Corporation, as of
October 1, 1994.
The Corporation agrees that the remedy at law for any breach by the
Corporation of the foregoing will be inadequate and that Buyer shall be entitled
to injunctive relief and reimbursement from the Corporation for all costs and
expenses, including attorneys' fees and court costs, incurred by Buyer in
connection with the enforcement of this Covenant Not to Compete. If any
provisions of this paragraph shall be held invalid, the Corporation agrees that
such provisions shall be severed and the balance thereof shall remain valid and
enforceable. In the event that a court of competent jurisdiction determines that
the scope of business restricted or the time or geographic limitations imposed
are too broad to be capable of enforcement, the
9
<PAGE>
Corporation agrees that such court may ignore such provisions and instead
enforce the provisions as to such scope, time and geographical area as the
court deems proper. This Covenant Not to Compete shall be governed by the laws
of the Commonwealth of Kentucky and any action involving this Covenant Not to
Compete shall be brought in the court of appropriate jurisdiction in Kenton
County, Kentucky.
14. Indemnification. The Seller shall and hereby agrees to, indemnify and
hold harmless, the Buyer at all times from and after the Closing Date against
and in respect to any damages, as hereinafter defined. Damages as used herein,
shall include any claims, actions, demands, losses, costs, expenses, liabilities
(joint and several), penalties, and damages, including counsel fees incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof, relating to the buyer from: (a) any materially inaccurate
representation made by Seller in or under this Agreement; (b) breach of any
warranties made by Seller in or under this Agreement; (c) breach or default in
the performance by Seller of any the covenants to be performed by it hereunder;
and (d) any debts, liabilities, or obligations of the Seller pertaining to the
Business, whether accrued, absolute, contingent or otherwise, existing on
October 1, 1994, and any and all claims against Seller arising out of the
conduct of the Business on or prior to OCtober 1, 1994. The Buyer shall, and
hereby agrees to, indemnify and hold harmless the Seller and its directors,
officers, employees, agents and assigns at all times from and after the Closing
Date, against any damages arising from: (a) any materially inaccurate
representation made by Buyer in or under this Agreement; (b) breach of any
warranties made by Buyer in or under this Agreement; (c) breach or default in
the performance by Buyer of any the covenants to be performed by it hereunder;
(d) Buyer's failure to perform, or delay in the performance of, any obligations
of Seller specifically assumed by Buyer hereunder; or (e) the operation of the
Assets after October 1. 1994.
15. Use of Corporate Name. Seller agrees to take all actions necessary to
assist Buyer in obtaining the rights to utilize the corporate name "Rothert's
Hospital Equipment, Inc." including but not limited to the execution of any
assignments and consents to use.
16. Prepaid Items; Deposits; Etc. All prepaid insurance premiums, rent and
utility deposits and similar items paid by or owing to the Seller by any person,
firm or governmental entity (except customer accounts receivables) shall be
considered to be part of the Assets being purchased by Buyer and shall, upon the
consummation of the transactions contemplated by this Agreement, be considered
the property of Buyer.
10
<PAGE>
17. Miscellaneous. This Agreement shall not be assignable by Seller or
Buyer without the consent of the other. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the parties hereto,
and their successors, any rights or remedies under or by reason of this
Agreement.
18. Expenses. Except as otherwise stated herein, each of the parties shall
bear all expenses incurred by them in connection with this Agreement and in
consummation of the transactions contemplated hereby in preparation thereof.
19. Amendment and Waiver. This Agreement may be amended or modified at any
time and in all respects, or any provisions may be waived by an instrument in
writing executed by Buyer and Seller, or either of them in the case of a waiver.
20. Notices. All notices of request, demand and other communications
hereunder shall be addressed to the parties as follows:
TO SELLER: ROTHERT'S HOSPITAL EQUIPMENT, INC.
2020 Madison Avenue
Covington, Kentucky 41014-1248
Attn: Eugene Daniels
TO BUYER: COVINGTON HOME HEALTH CARE, INC.
4506 L.B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
21. Choice of Law. It is the intention of the parties that the laws of the
Commonwealth of Kentucky shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties. Any action involving or relating to this Agreement shall be brought in
the court of appropriate jurisdiction located in Kenton County, Kentucky.
22. Sections and Other Headings. Section, paragraph and other headings
contained in this Agreement are for reference purposes only and shall not effect
in any way the meaning nor interpretation of this Agreement.
23. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one in the same agreement. Facsimile signatures
may be deemed binding for this Agreement, or any modification or amendment
thereto, or any leases or other documents contemplated hereby, provided that
originals of same are delivered within a reasonable time.
11
<PAGE>
24. Gender. All personal pronouns used in this Agreement shall include the
other genders whether used in the masculine or feminine or neuter gender, and
the singular shall include the plural whenever and as often as may be
apropriate.
25. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of, and be enforceable by Seller
and Buyer and their respective successors and assigns.
26. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and there are no agreements, understandings,
restrictions, warranties or representations between the parties other than those
set forth herein or herein provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first stated above.
Signed, sealed and delivered ROTHERT'S HOSPITAL EQUIPMENT,
in the presence of: INC., a Kentucky corporation
Stephen P. Griggs /s/ Eugene Daniels
_____________________________ By:__________________________
Eugene Daniels, President
James A. Dressman
_____________________________ "Seller"
COVINGTON HOME HEALTH CARE,
INC., a Kentucky corporation
James A. Dressman /s/ Stephen P. Griggs
_____________________________ By:__________________________
Stephen P. Griggs, Chief
Operating Officer
Robyn Farrar
_____________________________ "Buyer"
12
<PAGE>
COMMONWEALTH OF KENTUCKY
COUNTY OF KENTON
The foregoing instrument was acknowledged before me this 5th day of
October, 1994, by Eugene Daniels, as President of ROTHERT'S HOSPITAL EQUIPMENT,
INC., a Kentucky corporation, on behalf of the corporation. He is personally
known to me or has produced ____________________________ as identification.
James A. Dressman III
-------------------------------
NOTARY SIGNATURE
James A. Dressman III
-------------------------------
NOTARY NAME PRINTED
Notary Public State At Large
My Commission Expires: 2-27-95
STATE OF KENTUCKY
COUNTY OF KENTON
The foregoing instrument was acknowledged before me this 5th day of
October, 1994, by Stephen P. Griggs, as the Chief Operating Officer of Covington
Home Health Care, Inc., a Kentucky corporation, on behalf of the corporation. He
is personally known to me or has produced ____________________________ as
identification.
James A. Dressman III
-------------------------------
NOTARY SIGNATURE
James A. Dressman III
-------------------------------
NOTARY NAME PRINTED
Notary Public State At Large
My Commission Expires: 2-27-95
13
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
AND COVENANTS NOT TO COMPETE
THIS AGREEMENT is entered into as of the 1st day of January, 1995, by and
between Mervil C. Perry, Huey Perry, Robert Holliday, Mervil C. Perry and Dreama
S. Perry, as joint tenants with the right of survivorship, and Patricia Brown
(together hereinafter referred to as the "Shareholders"), and RoTech Medical
Corporation, a Florida corporation (hereinafter referred to as "RoTech").
R E C I T A L S :
A. Shareholders are all of the owners of all of the issued and outstanding
shares of common capital stock of Pioneer Medical Services, Inc., a West
Virginia corporation, hereinafter referred to as the "Corporation," in that the
Corporation has 500 shares of its Class A common capital stock outstanding, and
the Shareholders hold, in the aggregate, 500 shares, and there are no shares of
any other class of stock issued and outstanding.
B. The Corporation is engaged in the business of providing health care
services in the State of West Virginia.
C. The Shareholders desire to transfer to RoTech and RoTech desires to
acquire from Shareholders, all of the issued and outstanding shares of the Class
A common capital stock of the Corporation.
D. RoTech also desires to purchase from the Shareholders, and the
Shareholders desire to sell to RoTech, covenants not to compete, as described
elsewhere in this Agreement (the "Covenants Not to Compete").
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock and Covenants Not to Compete. Subject to the
terms and conditions of this Agreement, Shareholders agree to sell, transfer and
assign to RoTech, and RoTech agrees to purchase from Shareholders, an aggregate
total of FIVE HUNDRED (500) shares of the Class A common capital stock, having a
par value of $10.00 per share, of the Corporation (the "Stock"), such Stock
constituting all of the issued and outstanding Class A common capital stock of
the Corporation, and the Covenants Not to Compete. At the Closing, Shareholders
will deliver to RoTech certificates evidencing the Stock duly endorsed to RoTech
and will also execute and deliver to RoTech the Covenants Not to Compete.
2. Purchase Price. The consideration from RoTech to Shareholders in
exchange for the Stock will be FOUR MILLION SIX HUNDRED SEVENTY-THREE THOUSAND
36
<PAGE>
FIVE HUNDRED SEVENTY-SIX DOLLARS ($4,673,576.00) (the "Purchase Price"), to be
paid to Shareholders upon the complete execution of this Agreement. The Purchase
Price shall be allocated among the Shareholders in the manner set forth in
paragraph 3 hereof.
3. Payment of Purchase Price. The total consideration described in
paragraph 2 hereof shall be allocated to the respective Shareholders as follows:
<TABLE>
<CAPTION>
Shareholder Purchase Price
- -------------------------------------------------------------------
<S> <C>
Mervil C. Perry and Dreama S. Perry,
joint tenants with the right of survivorship $2,804,145.60
Mervil C. Perry 233,618.80
Huey Perry 934,715.20
Robert Holliday 467,357.60
Patricia Brown 233,678.80
-------------
Total $4,673,576.00
</TABLE>
4. Existing Obligations. The Shareholders represent and warrant that, to the
best of their knowledge and belief, the debts, liabilities and obligations
listed on the Schedule of Liabilities attached hereto as Exhibit "C" is complete
and accurately reflects all of Corporation's "Existing Obligations" (as
hereinafter defined) as of the Closing Date. The term "Existing Obligations"
shall mean and refer to all of the Corporation's debts, liabilities and
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
on the Closing Date, including but not limited to any and all accounts payable,
trade payables, lease obligations, indebtedness for borrowed money, accrued
interest, contractual obligations, etc. The Shareholders jointly and severally
warrant and represent that the aggregate amount of the Existing Obligations is
not in excess of $5,000.00 (not including the amount of the "Permitted Expenses"
as hereafter defined), and in the event the aggregate amount of the Existing
Obligations exceeds $5,000.00 (not including the amount of the "Permitted
Expenses"), Mervil C. Perry, jointly and severally, and the other Shareholders
severally (on a pro rata basis with all Shareholders) but not jointly, agree to
reimburse RoTech for the entire amount in excess of $5,000.00 immediately upon
written request, in accordance with paragraph 5 hereof, with RoTech first making
a reasonable effort to obtain reimbursement from the Shareholders on a pro rata
basis, with the balance paid directly to RoTech from Mervil C. Perry if the full
amount is not collected from the Shareholders within sixty (60) days from the
date of the first request for reimbursement. The term "Permitted Expenses" shall
include only the following expenses: (1) all unpaid bills incurred in the
ordinary course of business by the Corporation in the month of December, 1994,
which pertain to equipment for rental or supplies for resale; and (b) the fourth
quarter 1994 state unemployment taxes owed by the Corporation up to a maximum
amount of $6,000.00.
<PAGE>
5. Obligations of Shareholders: Remedies of RoTech. In the event that: (i)
the aggregate amount of the Corporation's liabilities as of December 31, 1994,
are determined to be greater than $5,000.00 (the "Liabilities Deficiency"), or
(ii) except as disclosed on Exhibit "L" the Corporation has, since 11:59 p.m. on
December 31, 1994, made expenditures or incurred obligations or liabilities,
except in the ordinary course of business; discharged or satisfied any liens or
encumbrances, except in the ordinary course of business; declared or made any
shareholder payment or distribution or purchased or redeemed any of its common
capital stock or agreed to do so; mortgaged, pledged or subjected to lien or
encumbrance any of its assets; sold or transferred any assets; suffered any
damage or loss (whether or not covered by insurance), materially affecting its
properties; waived any rights of substantial value; or entered into any
transaction other than in the ordinary course of business (the "Subsequent Event
Deficiency"), or (iii) the aggregate amount of cash ("Asset Deficiency") in the
corporate bank accounts of Corporation are determined to less than $75,000.00 as
of December 31, 1994, or (iv) any debts, liabilities or obligations of any
nature (whether absolute, accrued, contingent, or otherwise), other than those
subject to subparagraphs (i) through (iii) of this paragraph 5, become known,
are uncovered or arise after the Closing Date (the "Obligations"), which
Obligations pertain to any actions, omissions, debts, liabilities or obligations
of any of the Shareholders or of the Corporation created or arising on or before
the Closing Date (said Obligations hereinafter referred to as the "Contingent
Liability"); then, and in any of such events, Mervil C. Perry, jointly and
severally, and the other Shareholders severally (on a pro rata basis with all
Shareholders) but not jointly, shall be obligated to RoTech in amounts from time
to time equal to any Liabilities Deficiency, Subsequent Event Deficiency, Asset
Deficiency, or Contingent Liability which becomes known, is uncovered or arises
at any time following the Closing Date, and Mervil C. Perry, jointly and
severally, and the other Shareholders severally (on a pro rata basis with all
Shareholders) but not jointly, agree to pay said amount to RoTech, immediately
upon written request from RoTech to Shareholders, with RoTech first making a
reasonable effort to obtain collection of such amount from the Shareholders on a
pro rata basis, with the balance paid directly to RoTech by Mervil C. Perry if
the full amount is not collected from the Shareholders within sixty (60) days
from the date of the first request for payment. The Shareholders shall have the
option to provide joint written notice (executed by all Shareholders) to RoTech
within the first (30) days of the date on RoTech's written request that they
dispute the validity of the claim, and in the event RoTech and Shareholders
cannot all reach agreement on the validity of such claim within forty-five (45)
days of the date on RoTech's written request, the dispute over the validity of
the claim shall be settled by arbitration, with the non-prevailing party bearing
all of RoTech's and the Shareholders' costs of arbitration. In the event an
arbitration is required hereunder, RoTech and the Shareholders will select an
arbitration; those two arbitrators will then select a third arbitrator; and the
three arbitrators so chosen will determine the validity of the claim.
3
<PAGE>
6. The Closing and Closing Date. The closing date for the transaction
contemplated under this Agreement will be effective January 1, 1995 (the
"Closing Date").
7. Representations and Warranties by Shareholders. The Shareholders
represent and warrant to RoTech that, to the best of the Shareholders' knowledge
and belief, each of the following representations and warranties are true and
correct and are made with the full understanding that such representations and
warranties constitute material inducement to RoTech to enter into the
transactions contemplated hereby:
(a) Title to the Stock. Shareholders have good, absolute and marketable
title to the Stock free and clear of all liens, claims, encumbrances and
restrictions of every kind. Shareholders have the complete and unrestricted
right, power and authority to sell the Stock pursuant to this Agreement.
(b) Organization. The Corporation is a duly organized and validly
existing West Virginia corporation in good standing, with all requisite
corporate power and authority to carry on its business as presently conducted.
The Corporation has no subsidiaries and has no direct or indirect equity
interest in any other firm, corporation, or business enterprise.
(c) Capitalization and Long Term Indebtedness.
(i) The Corporation is authorized by its Articles of Incorporation
to issue 1,000 shares of Class A common capital stock, having a par value of
$10.00 per share, of which 500 shares are duly and validly issued and
outstanding, fully paid, and nonassessable. There are no shares of any other
class of stock issued and outstanding. The certificate numbers held by the
Shareholders, and the number of shares of the Corporation's common stock
represented by each, is as set forth on the Schedule of Stock Ownership attached
hereto as Exhibit "A." The Corporation has not issued any preferred stock or any
other common capital stock, and has no authority to issue any other capital
stock, preferred stock or other securities.
(ii) The Corporation is not in any default or violation of any
provision of its outstanding long term or short term indebtedness.
(iii) There are no outstanding options, contracts, commitments or
agreements of any character relating to the issuance of the Corporation's common
capital stock or other securities.
(iv) All FICA and Federal withholding tax deposits have been timely
paid.
4
<PAGE>
(v) There are no outstanding or unpaid loans to stockholders,
directors or officers other than as listed on Exhibit "C" hereof.
(d) Financial Statements. Shareholders have furnished RoTech with balance
sheets (the "Balance Sheets") dated December 31, 1992, December 31, 1993 and
September 30, 1994, and the related statements of income (the "Income
Statements") for the period ended December 31, 1992, December 31, 1993 and
September 30, 1994, copies of which are attached hereto as Exhibit "J" and by
this reference made a part hereof (the Balance Sheets and Income Statements are
collectively referred to herein as the "Financial Statements"). The Financial
Statements: (i) are in accordance with the books and records of the Corporation;
(ii) fairly represent the financial condition of the Corporation at such date
and the results of its operations for the periods specified; (iii) were prepared
in accordance with generally accepted accounting principles applied upon a basis
consistent with prior accounting periods; (iv) with respect to all contracts and
commitments of the Corporation, reflect adequate reserves for all reasonably
anticipated losses and costs in excess of anticipated income; and (v) with
respect to the Balance Sheets, disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued, contingent, and otherwise)
of the Corporation at the Last Balance Sheet Date and include the appropriate
reserves for all taxes and other accrued liabilities, except that certain
contingent liabilities, if not disclosed on the Balance Sheets, shall be
considered to be disclosed pursuant to this subparagraph, if disclosed on an
Exhibit to this Agreement. The representations and warranties made in this
subparagraph are subject to the threshold liability provisions of paragraph 5
hereof.
(e) Present Status. Except as discussed on the Schedule of Shareholders,
Distributions, and Exempted Transactions attached hereto as Exhibit "L", since
December 1, 1994, the Corporation has not made any expenditures nor incurred
any obligations or liabilities, except in the ordinary course of business;
discharged or satisfied any liens or encumbrances, except in the ordinary course
of business; declared or made any shareholder payment or distribution or
purchased or redeemed any of its common capital stock or agreed to do so;
mortgaged, pledged or subjected to lien or encumbrance any of its assets; sold
or transferred any assets; suffered any damage or loss (whether or not covered
by insurance), materially affecting its properties; waived any rights of
substantial value; nor entered into any transaction other than in the ordinary
course of business.
(f) Tax Returns and Audits. The Corporation has duly filed all Federal,
State and local tax returns required to be filed by it and has paid all periods
covered by such returns. The Corporation has not been delinquent in the payment
of any tax, assessment or governmental charge. The Corporation has not had any
tax deficiencies proposed or assessed against it and has not executed any waiver
of the Statute of Limitations on the assessment or collection of any tax. The
Corporation's Federal and State Tax Returns have never been audited by either
the Internal Revenue Service or the Department of Revenue of the State of West
Virginia. In the event that a deficiency is determined in the amount of Federal
or State
5
<PAGE>
or Local tax payable by the Corporation, which deficiency relates to periods
ending on or before the Closing Date, then, in that event, the Shareholders
hereby agree to be fully responsible for the payment of such deficiency and
any interest and penalties thereon. In the event that a tax refund is received,
which tax refund relates to periods ending on or before the Closing Date, then,
in that event, the Shareholders are entitled to such tax refund and RoTech
agrees to have the Corporation endorse and deliver such tax refund. The
Shareholders jointly and severally agree that RoTech shall not be liable for any
income taxes (and associated interest and penalties) of Corporation payable or
incurred by Corporation through the Closing Date. Any income tax payable
estimated as of the Closing Date shall be adjusted by the parties hereto upon
knowledge of final numbers. As soon as practical following the Closing Date, the
Shareholders shall prepare and file a tax return for the period ending December
31, 1994, shall have prepared and filed annual tax returns for all prior year
end periods and shall have made payment of all taxes due for such periods.
(g) Litigation. There are no legal actions, suits, arbitrations, or other
legal, administrative, or other governmental proceedings pending or threatened
against the Corporation, and the Shareholders are not aware of any facts which
to their knowledge might result in any such action, suit, arbitration, or other
proceedings, except as disclosed on the Schedule of Proceedings attached hereto
as Exhibit "B" and by this reference made as part hereof.
(h) Compliance With the Law and Other Instruments. The business and
operation of the Corporation have been and are being conducted in accordance
with all applicable laws, rules and regulations of all authorities, except those
which do not (either individually or in the aggregate) materially and adversely
affect the Corporation or its properties, assets, businesses or prospects.
Performance of this Agreement will not result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon, any
property of the Corporation under any arrangement, agreement, or other
instrument to which the Corporation or the Shareholders are a party or by which
either is bound or affected, and will not violate the Articles of Incorporation,
as amended, or the Bylaws, as amended, of the Corporation. The Corporation is
not in violation of its Articles of Incorporation, as amended, its Bylaws, as
amended, or of any indebtedness, mortgage, contract, lease or other agreement
or commitment.
(i) Title to Property and Assets. The Corporation has good, absolute and
marketable title to all its properties and assets, including without limitation
those reflected in the Balance Sheets, not limited to the property described in
the Schedule of Property attached hereto as Exhibit "E" and incorporated herein
by this reference, subject to no mortgage, pledge, lien, charge, security
interest, encumbrance or restriction except those which are disclosed and
described on said Schedule of Property. The assets of the Corporation also
include the name of the business, its current telephone number, its patient
list, and its provider number. The Shareholders hereby agree to undertake
whatever steps are necessary to assure
6
<PAGE>
the RoTech can utilize any name or names under which the Corporation presently
conducts its business.
(j) Asset Condition and Quality. All of the properties and assets of
Corporation are free of damage and defects and are not obsolete. All of the
properties and assets of Corporation on the Closing Date shall be in good
operating condition and repair, reasonable wear and tear excepted, and shall
conform in all material respects with all applicable ordinances, regulations,
zoning and other laws.
(k) Leases and Insurance Policies. The Schedule of Leases and Insurance
Policies attached hereto as Exhibit "H" and by this reference made as part
hereof, sets forth all leases and insurance policies executed by or issued
for the benefit of the Corporation and such information is accurate and
complete through the Closing Date. The Shareholders have delivered to
RoTech:
(i) The original of the lease, with amendments, covering the
property that the Corporation presently occupies.
(ii) The originals of all other leases, with amendments, to
which the Corporation is a party.
(iii) The originals of all fire and other casualty and liability
policies of the Corporation in effect at the date of this Agreement.
(l) Trademarks. The Corporation owns, possesses and has good title to
all trademarks, trademark names, trade names, and licenses necessary in
the conduct of its business.
(m) Contracts. Except as set forth on the Schedule of Contracts attached
hereto as Exhibit "G" and by this reference made a part hereof, the
Corporation is not a party to, or otherwise bound by, any written or oral
contract not made in the ordinary course of business; employment or
consultant contract not terminable at will without cost or other liabilities;
labor union contract; bonus, pension, profit sharing, retirement, share
purchase, stock option, hospitalization, group insurance or similar employee
benefit plans; personal property lease, as lessor or lessee; advertising or
public relations contract; or purchase, supply or service contract which is
not terminable without cost or expense on less than fifteen (15) days'
notice. The Corporation has in all respects performed all obligations required
to be performed to date and is not in default in any respect on commitments
to which the Corporation is a party or otherwise bound.
7
<PAGE>
(n) Records. The respective books of account and minute books of the
Corporation are complete and correct, and reflect all those transactions
involving its business which properly should have been set forth in such
books.
(o) No Dealers' or Finders' Fee. Neither RoTech nor the Corporation will
be obligated in any way for any commission, fee or other remuneration to any
finder, dealer, or the like employed by Shareholders in connection with this
Agreement or its negotiation.
(p) Insurance Policies. There are in full force all policies of insurance
referred to above in subparagraph k. Such policies are in amounts and against
such losses and risks as are generally maintained by comparable businesses.
(q) Checking Account Balances. The information contained on the Schedule of
Cash Accounts and Cash Balances as of December 31, 1994, attached hereto as
Exhibit "D", is accurate and complete.
(r) Accounts Receivable. The information contained on the Schedule of
Accounts Receivable Data as of December 31, 1994, attached hereto as Exhibit
"F", is accurate and complete. The Shareholders further warrant and represent
that all of the Corporation's accounts receivable shown on Exhibit "F" (the
"Receivables") are legally billable.
(s) Inventories. The inventories of the Corporation which are reflected in
the Balance Sheets and all inventory items which have been acquired since
December 1, 1994 consist of goods of such quality and in such quantities as are
salable in the ordinary course of business with normal markup at prevailing
market prices. Such inventories were determined at cost. Since December 1, 1994,
the Corporation has continued to replenish its inventory in a normal and
customary manner consistent with prior practice and prudent practice prevailing
in the business of the Corporation.
(t) Absence of Certain Changes or Events. Since December 1, 1994, there
has not been any change in or any event or condition (financial or otherwise)
affecting the properties, assets, liabilities, operations or prospects of the
Corporation other than changes in the ordinary course of its business, none of
which has (either when taken by itself or when taken in conjunction with all
other such changes) been materially adverse.
(u) Purchase Commitments and Outstanding Bids. No purchase commitments of
the Corporation are in excess of normal, ordinary and usual requirements of its
business, or were made at any price in excess of the then current market price,
or contain terms and conditions more onerous than those usual and customary in
the industry.
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(v) Personnel, Payrates and Non-Compete Agreements. The information
contained on the Schedule of Personnel, Payrates and Non-Compete Agreements as
of December 31, 1994, attached hereto as Exhibit "I", is accurate and
complete, and all rights of the Corporation under the non-compete agreements
listed thereon are enforceable by Corporation in accordance with the terms of
such agreements.
(w) Profit-Sharing Plan. The Shareholders will be responsible for
terminating the Corporation's profit-sharing plan prior to the Closing Date at
the expense of the Shareholders.
(x) Disclosure. No representation or warranty by the Shareholders in
this Agreement or in any Exhibit hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements herein or therein contained not misleading.
(y) Adverse Business Developments. No notice has been received by
the Corporation of any new or substantially expanded firm or individual engaged
in a business directly competitive to Corporation in its primary service area
within six (6) months prior to the date hereof. Nor has Corporation received,
either orally or in writing, any notice of pending or threatened adverse action
with respect to any Medicare, Medicaid, private insurance or third party payer
reimbursement method, practice or allowance as to any business activity engaged
by Corporation, nor has Corporation received nor been threatened with any claim
for refund in excess of $500.00 by a Medicare or Medicaid carrier, except as
disclosed in the Schedule of Proceedings attached hereto as Exhibit "B."
8. Representations and Warranties by RoTech. RoTech represents and
warrants to Shareholders that it is authorized, by appropriate action of its
directors, to enter into this Agreement and to consummate all of the
transactions contemplated by this Agreement.
9. Actions of the Corporation Pending Closing. Shareholders agree that
from the date hereof through the Closing Date:
a. Operations. Unless RoTech consents in writing to the contrary,
Shareholders will cause the Corporation to operate only in the ordinary course
of business; and to not enter into any transaction or perform any act which
would constitute a breach of the representations, warranties or agreements
contained herein; will use its best efforts to preserve its existing business
organization and relations with its employees, customers, franchisers, suppliers
and others with whom it has a business relationship; will use its best efforts
to preserve and protect the Assets; will not dispose of any of the Assets,
except such as are retired or replaced in the ordinary course of business; will
not make any distributions to shareholders, except those disclosed on Exhibit
"L", and will not pay any bonuses or make
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any salary or wage increases to the senior management of Pioneer, except those
disclosed on Exhibit "L."
(b) Compliance. Shareholders will cause the Corporation and its
officers and employees to comply with all applicable provisions of this
Agreement.
10. Resignation of Officers and Directors. The Shareholders shall deliver
to RoTech, at the Closing, the undated written resignations of all of the
directors and officers of the Corporation.
11. Covenants Not to Compete. Mervil C. Perry, Huey Perry, Robert Holliday,
Dreama S. Perry and Patricia Brown shall each execute, at Closing, covenants not
to compete in the forms attached to this Agreement as Exhibit "K."
12. Employment of Agreements. Mervil C. Perry and Robert Holliday shall
each execute, at closing, employment agreements in the form attached hereto as
Exhibit "M."
13. Indemnification. Mervil C. Perry, jointly and severally, and the other
Shareholders severally (on a pro rata basis with all Shareholders) but not
jointly, agree to indemnify RoTech and hold RoTech harmless against all damages,
as such term is hereinafter defined, resulting from: (i) any materially
inaccurate misrepresentation made in this Agreement or in any exhibit thereto,
or (ii) any breach of any warranty made by the Shareholders in this Agreement,
or (iii) any breach in the performance by the Shareholders of any of their
obligations under this Agreement, or (iv) any debts, liabilities or obligations
of any nature (whether absolute, accrued, contingent or otherwise) of
Corporation which Shareholders have actual or constructive knowledge thereof but
failed to disclose to RoTech in this Agreement. As used herein, the term
"damages" includes any loss, cost or liability, including any attorneys' fees
and court costs (whether incurred at trial or on appeal).
14. Miscellaneous--Expense. The parties agree to pay individually whatever
expenses they incur in connection with this Agreement. In connection with any
action arising out of or concerning this Agreement, the prevailing party shall
be entitled to recover reasonable attorneys' fees and costs, whether incurred at
trial, on appeal or otherwise.
15. Amendment and Waiver. This Agreement may be amended or modified at any
time in all respects by an instrument in writing executed by the Shareholders
and RoTech.
16. Assignment. Neither this Agreement nor any right created hereby shall
be assignable by any of the Shareholders or RoTech without the prior written
consent of the other, except for an assignment incident to a merger,
consolidation or reorganization, or, in the event of any of the Shareholders'
death, a transfer to the legal representatives of that Shareholder's estate or
to that Shareholder's legal heirs. Nothing in this Agreement,
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<PAGE>
expressed or implied, is intended to confer upon any person, other than the
parties hereto and their successors, any rights or remedies under or by reason
of this Agreement. Nothing herein shall be construed to prevent RoTech from
transferring all of the assets of the Corporation to another corporation which
is controlled by RoTech and/or dissolving the Corporation.
17. Headings. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
18. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instruments.
19. Parties In Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by RoTech
and the Shareholders, and their respective heirs, executors, administrators,
successors and assigns.
20. Integrated Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and there are no agreements, understandings,
restrictions, warranties, or representations between the parties other than
those set forth herein or herein provided for.
21. Survival of Agreement. The provisions of this Agreement shall survive
the Closing for the sale and purchase of the Stock and Covenants Not to Compete.
22. Choice of Law and Venue. It is the intention of the parties that the
laws of the State of West Virginia should govern the validity of this Agreement,
the construction of its terms, and the interpretation of the rights and duties
of the parties.
23. Notices. Any notice to be given pursuant to this Agreement shall be
deemed given at such time as it is mailed to the addressee by certified mail,
return receipt requested to the addresses shown below:
As to Shareholders:
Mervil Perry
Mervil & Dreama Perry
Huey Perry
Robert Holliday
Patricia Brown
306 Main Street
Man, West Virginia 25635
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With copy to:
David A. Barnette, Esq.
Jackson & Kelly, Attorneys at Law
1600 Laidley Tower
Charleston, West Virginia 25322
As to RoTech Medical Corporation:
RoTech Medical Corporation
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
With copy to:
Thomas A. Simser, Jr., Esquire
Winderweedle, Haines, Ward
& Woodman, P.A.
Post Office Box 1391
Orlando, Florida 32802-1391
In the event that any of the named parties desire to receive notice at
another address, it shall be their responsibility to notify the other party, in
writing, of the new address.
24. Further Documentation. The parties shall in good faith execute such
further documentation with respect to evidencing details of the transactions
contemplated hereby as may reasonably be required.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
Signed, sealed and delivered
in the presence of:
/s/ Angie Dickenson /s/ Mervil C. Perry
- ------------------ -------------------
Mervil C. Perry
/s/ Tracy Carter
- ------------------
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- ------------------------------ -------------------------------
Huey Perry
- ------------------------------
/s/ Phyllis J. Roache /s/ Robert Holliday
- ------------------------------ -------------------------------
Robert Holliday
/s/ Kimberly A. Wood
- ------------------------------
/s/ Mervil C. Perry &
Dreama S. Perry
- ------------------------------ -------------------------------
Mervil C. Perry and Dreama S. Perry,
as joint tenants with the right of
survivorship
- ------------------------------
/s/ Michael Daniels /s/ Patricia K. Brown
- ------------------------------ -------------------------------
Patricia Brown
/s/ Kathy Daniels
- ------------------------------
"Shareholders"
ROTECH MEDICAL CORPORATION,
a Florida corporation
/s/ Chele Dallas By: /s/ Stephen P. Griggs
- ------------------------------ -------------------------
Stephen P. Griggs, Chief
Operating Officer
/s/ Dawn E. Mulcahey
- -------------------------------
"RoTech"
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<PAGE>
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this 1st day of ,
1995, by Mervil C. Perry. He is personally known to me or has produced his
drivers' license as identification.
/s/ Teresa Schoolcraft
[LOGO OF SEAL OF NOTARY PUBLIC --------------------------
OF TERESA SCHOOLCRAFT] NOTARY SIGNATURE
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this day of ,
1995, by Huey Perry. He is personally known to me or has produced as
identification.
--------------------------
NOTARY SIGNATURE
STATE OF WEST VIRGINIA
COUNTY OF RALEIGH
The foregoing instrument was acknowledged before me this 1st day of ,
1995, by Robert Holliday. He is personally known to me or has produced his
drivers' license as identification.
/s/ Kimberly A. Wood
[LOGO OF SEAL OF NOTARY PUBLIC --------------------------
OF KIMBERLY A. WOOD] NOTARY SIGNATURE
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<PAGE>
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this 4th day of
, 1995, by Mervil C. Perry and Dreama S. Perry. They are personally
known to me or has produced _______________________________ as identification.
/s/ David Allen Barnette
[NOTARY SEAL] _________________________
NOTARY SIGNATURE
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this 2nd day of
, 1995, by Patricia Brown. She is personally known to me or has
produced _______________________________ as identification.
/s/ Debra F. Holly
[NOTARY SEAL] _________________________
NOTARY SIGNATURE
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 5th day of
January, 1995, by Stephen P. Griggs, as Chief Operating Officer of RoTech
Medical Corporation, a Florida corporation, on behalf of the corporation.
He is personally known to me or has produced ______________________
as identification.
/s/ Gwendolyn Shirley
[NOTARY SEAL] _________________________
NOTARY SIGNATURE
/s/ Gwendolyn Shirley
_________________________
NOTARY NAME PRINTED
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<PAGE>
/s/ Huey Perry
__________________________ __________________________
Huey Perry
__________________________
__________________________ __________________________
Robert Holliday
__________________________
__________________________ __________________________
Mervil C. Perry and Dreama S. Perry,
as joint tenants with the right of
__________________________ survivorship
__________________________ __________________________
Patricia Brown
__________________________
"Shareholders"
ROTECH MEDICAL CORPORATION,
a Florida corporation
__________________________ By:________________________
Stephen P. Griggs, Chief
Operating Officer
__________________________
"RoTech"
<PAGE>
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this day of ,
1995, by Mervil C. Perry. He is personally known to me or has produced
as identification.
----------------------
NOTARY SIGNATURE
STATE OF WEST VIRGINIA
COUNTY OF CABELL,
The foregoing instrument was acknowledged before me this 1st day of ,
1995, by Huey Perry. He is personally known to me.
/s/ Patricia M. Knapp
[NOTARY ----------------------
SEAL] NOTARY SIGNATURE
STATE OF WEST VIRGINIA
COUNTY OF LOGAN
The foregoing instrument was acknowledged before me this day of ,
1995, by Robert Holliday. He is personally known to me or has produced
as identification.
----------------------
NOTARY SIGNATURE
