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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: April 1, 1996
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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 April 1, 1996, 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 November
15, 1995 to April 1, 1996, for an approximate aggregate purchase price of $58
million. The acquisitions of the following businesses comprise the mathematical
majority of the aggregate of individually insignificant businesses: Physician
Management Group, Inc., Preferred Medical Equipment Co., Inc., G & G Medical,
Inc., Rhema, Inc., Respiratory Home Care, Inc., CP02, Inc., National Home Care,
Inc., Murray Medical, Inc. and Roth Medical, Inc.
Effective December 15, 1995, the Registrant, through its wholly-owned subsidiary
Doctors Management Group, Inc., acquired substantially all of the assets of
Physician's Management Group, Inc., a Louisiana-based corporation ("PMG"), for
$1,855,000 cash and 56,281 shares of its restricted Common Stock valued at
$950,000. PMG is a physician practice management company providing service to
hospitals and physicians through its locations in Louisiana.
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Effective January 1, 1996, the Registrant, through its wholly-owned subsidiary
Home Medical Systems, Inc., acquired substantially all of the assets of
Preferred Medical Equipment Co., Inc., a Tennessee-based corporation
("Preferred") for $2.5 million cash. Preferred provides home health products
through its three locations in Tennessee.
Effective January 4, 1996, the Registrant acquired substantially all of the
outstanding shares of common capital stock of G & G Medical, Inc., a Colorado-
based corporation ("G & G"), for $1.25 million cash and 49,091 shares of RoTech
Medical Corporation stock valued at $1.35 million. G & G provides home health
products through three locations in Utah and Colorado.
Effective January 1, 1996, the Registrant acquired all of the outstanding shares
of common capital stock of Rhema, Inc., a Texas Corporation ("Rhema") for $2.5
million cash and 109,091 shares of its restricted common stock valued at $3.0
million. Rhema provides home health care products and services through its
single location in Irving, Texas.
Effective January 1, 1996, the Registrant, through its wholly-owned subsidiary,
Respiratory Medical Equipment of Georgia, Inc., acquired substantially all of
the assets of Respiratory Home Care, Inc. a Georgia-based corporation ("RHC")
for $2.6 million cash
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and 41,818 shares of its restricted common stock valued at $1.15 million. RHC
provides home health products and services through its three locations in
Georgia .
Effective January 1, 1996, the Registrant, acquired all of the outstanding
shares of common capital stock of CP02, Inc., a Pennsylvania-based corporation
("CP02") for $4.0 million cash. CP02 provides respiratory therapy and home
health products through its three locations in Pennsylvania.
Effective February 1, 1996, the Registrant acquired all of the outstanding
shares of common capital stock of National Home Care Service, Inc., a Florida-
based corporation ("NHC") for $2.056 million cash and 19,917 shares of its
restricted common stock valued at $547,718. NHC provides home health care
products and services through its two locations in Florida.
Effective February 1, 1996 the Registrant acquired all of the outstanding shares
of common capital stock of Murray Medical, Inc., a Colorado Corporation
("Murray") for $2.4 million cash. Murray provides home health products through
its 2 locations in Colorado.
Effective February 22, 1996 the Registrant acquired all of the outstanding
shares of common capital stock of Roth Medical, Inc., a Colorado-based
corporation ("Roth") for $5.3 million cash. Roth provides home health products
through its 3 locations in Colorado.
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The Sellers of each of the businesses acquired during the period November 15,
1995 to April 1, 1996, had no material relationships with the Registrant prior
to their respective acquisitions. The Registrant intends to continue each
business as acquired. The cash purchase prices of each of the acquisitions was
paid with funds borrowed in the ordinary course of business on the Registrant's
$150 million credit facility. 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
the acquisitions noted under Item 2. Audited financial statements of PMG for the
fiscal year ended December 31, 1994, unaudited financial statements of PMG for
the eleven months ended November 30, 1995, audited financial statements of
Preferred, Rhema, RHC, and CP02 ended December 31, 1995, audited financial
statements of G & G for the fiscal year ended March 31, 1995, and unaudited
financial statements for the nine month period ended December 31, 1995, audited
financial statements of NHC for the fiscal year ended
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December 31, 1995, unaudited financial statements of NHC for the one month
period ended January 31, 1996, audited financial statements of Murray and Roth
(consolidated) for the fiscal year ended May 31, 1995, unaudited financial
statements for Murray and Roth (consolidated) for the eight months ended January
31, 1996 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 as listed in Item 2
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
2.1 Agreement for Sale and Purchase of Assets and Covenant Not to Compete dated
December 15, 1995 between the Registrant and PMG, Agreements for Sale and
Purchase of Assets and Covenant Not to Compete dated January 1, 1996 between the
Registrant and Preferred and the Registrant and RHC, Agreement for Purchase and
Sale of Shares dated January 4, 1996 between the Registrant and G & G and
the Registrant and CP02,
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Merger Agreement dated January 1, 1996 between the Registrant and Rhema,
Agreement for Purchase and Sale of Shares dated February 1, 1996 between
Registrant and NHC, Agreement for Purchase and Sale of Shares dated February 1,
1996 between the Registrant and Murray, Agreement for Purchase and Sale of
Shares dated February 22, 1996 between the Registrant and Roth (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: April 1, 1996 By: /s/ Rebecca R. Irish
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Rebecca R. Irish, Treasurer
and Chief Financial Officer
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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 15th day of December, 1995, by and between
PHYSICIAN MANAGEMENT GROUP, INC., a Louisiana corporation, having its principal
place of business at 7365 West Roadway, New Orleans, Louisiana 70124
(hereinafter referred to as the "Seller" or "Corporation"), and DOCTORS
MANAGEMENT GROUP, INC., a Louisiana 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 physician office management business in the
State of Louisiana (the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller, substantially all
of the assets of the Business, including but not limited to accounts receivable,
notes receivable, inventory and fixed assets, and also desires to purchase from
the Seller all of the Seller's rights, title and interest in and to: (a) the
client list of the Business set forth on the Client List and Contracts of the
Business attached hereto as Exhibit "B" and all of the Seller's rights under
those contracts listed on Exhibit "B"; (b) the telephone numbers listed on the
Schedule of Telephone Numbers attached hereto as Exhibit "A"; (c) all of the
Seller's prepaid assets; and (d) all other assets of any kind owned and utilized
by Seller in the Business, excluding those assets described on the Schedule of
Excluded Assets attached hereto as Exhibit "E" (the assets of Seller being
purchased by Buyer hereunder are together sometimes referred to herein as the
"Assets"). Buyer also desires to have Seller grant to Buyer, and the Seller
desires to grant to Buyer, a covenant not to compete as described in paragraph
17 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. Subject to and in
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accordance with the terms and conditions of this Agreement, and with all
representations and warranties applicable thereto, the Seller shall, on the
Effective Date (as hereafter defined) referred to below:
(a) Accounts Receivable; Notes Receivable. Sell, assign and
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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 "C" and by this
reference made a part hereof;
(b) Inventory; Fixed Assets. Sell, assign and transfer to the
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Buyer all of the Seller's rights, title and interest in the inventory and fixed
assets of the Business set forth on the Schedule
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of Inventory and Fixed Assets attached hereto as Exhibit "D" and by this
reference made a part hereof; and
(c) Other Assets. Sell, assign and transfer to the Buyer all of
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the Seller's rights, title and interest in: (i) the client list of the Business
set forth on the Client List and Contracts of the Business attached hereto as
Exhibit "B" and all of the Seller's rights under those contracts listed on
Exhibit "B"; (ii) the telephone numbers listed on the Schedule of Telephone
Numbers attached hereto as Exhibit "A"; (iii) all of the Seller's prepaid
assets; and (iv) all other assets of any kind owned and utilized by Seller in
the Business, excluding those assets described on the Schedule of Excluded
Assets attached hereto as Exhibit "E".
(d) Covenant Not to Compete. Grant to Buyer, the Covenant Not
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to Compete.
2. Purchase Price.
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(a) Purchase Price. The purchase price for the Assets and the
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Covenant Not to Compete shall be: (i) FOUR HUNDRED FIFTY THOUSAND DOLLARS
($450,000.00) in cash (the "Cash Consideration"); and (ii) 35,165 shares of the
common stock, par value $.0002, of RoTech Medical Corporation, a Florida
corporation (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
having the following legends printed thereon: the restrictive legend required by
paragraph 5.(f) hereof. 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 "F" and by this reference made a part
hereof, and both parties hereto expressly consent to the allocation stated
therein.
(b) Method of Payment. The Cash Consideration shall be payable
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on the Closing Date by wired funds to Seller's bank account (as designated by
Seller and communicated to Buyer) and Seller shall use the Cash Consideration to
pay off all existing debts, liabilities and obligations of the Business. The
RoTech Stock shall be pledged pursuant to the terms of that certain Stock Pledge
and Security Agreement, in the form attached hereto as Exhibit "G" 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 "H" and by reference made a part hereof (the "Escrow
Agreement"). The Buyer shall cause the RoTech Stock to be delivered directly to
Escrow Agent within fifteen (15) days from the Closing Date (as hereafter
defined). The parties hereto acknowledge that the RoTech Stock being placed in
escrow is subject to reduction pursuant to paragraph 6.(a) hereof.
Notwithstanding anything contained in this Agreement, the Pledge Agreement or
the Escrow Agreement to the contrary, the Escrow Period shall continue until
such time as all calculations required by paragraph 6.(a) hereof have been
finally determined and all reductions of RoTech Stock required by paragraph
6.(a) hereof (if any) have been made.
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(c) Indemnity Against Creditors Claims; No Assumption of
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Liabilities. The Seller represents to Buyer that the State of Louisiana has no
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bulk sales or bulk transfer laws applicable to the transactions contemplated by
this Agreement. Pursuant to paragraph 18 hereof, 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 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 not assuming any existing liabilities of any kind in
connection with its purchase of the Assets.
3. Existing Obligations. The Seller represents and warrants that, to the
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best of its knowledge and belief, all of the debts, liabilities and obligations
of Seller are listed on the Schedule of Liabilities attached hereto as Exhibit
"I", and such Schedule is complete and accurately reflects all of Seller's
"Existing Obligations" (as hereinafter defined) as of the Closing Date. The term
"Existing Obligations" shall mean and refer to all of the Seller'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, notes payable, trade payables, lease obligations,
indebtedness for borrowed money, accrued interest, contractual obligations, etc.
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.
4. Right of Offset Against the RoTech Stock. In the event that: (i) the
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Buyer is required to pay for any debts or liabilities of Seller ("Liabilities
Deficiencies") (for the purposes of this subparagraph 4.(i), whether Buyer is
"required" to pay shall be determined by Buyer in the exercise of its reasonable
discretion based on all the facts of which Buyer is aware, e.g., whether legal
action to force payment has commenced, etc.), or (ii) the aggregate value of the
Corporation's collectible accounts receivable as of October 31, 1995, are
determined to be less than $180,140, as determined by actual cash
collections of such receivables during the twelve (12) month period immediately
following the Effective Date (the "Asset Value Deficiency"), or (iii) the
Corporation has, since October 1, 1995, except as disclosed on an exhibit
hereto, 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 the Assets; sold or transferred any of the 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) the Buyer is required to pay 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"), that become known, are uncovered or arise after the Effective
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 Effective Date (said Obligations
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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 Effective 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
Effective Date (subject, however, in the case of a "Dispute", to the provisions
of paragraph 18 hereof applicable to a "Dispute") 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 Effective Date, in the event
Buyer makes written request to Seller hereunder for Seller to pay any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency or
Contingent Liability, 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
Effective Date (subject, however, in the case of a "Dispute", to the provisions
of paragraph 18 hereof applicable to a "Dispute"), 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 $22.75. Buyer's right of offset against the RoTech Stock shall terminate on
that date which is twenty-four (24) months from the Effective 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.
In the event the right of offset is extended past the Release Date because a
claim is in dispute, RoTech Stock having a value equal to twice the amount of
the claim asserted by Buyer (using $22.75 per share in such calculation) shall
continue to be held in escrow past the Release Date until such claim is
resolved, with the remaining shares of RoTech Stock released to Seller within
fifteen (15) days after the Release Date. 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.
Notwithstanding anything contained in this paragraph 4 to the contrary, in the
case of a "Dispute" (as defined in paragraph 18 hereof), the provisions of
paragraph 18 hereof applicable to a "Dispute" shall govern, and no offset
against the RoTech Stock shall occur until the applicable "Dispute" is resolved
in accordance with the provisions of paragraph 18 hereof.
5. Characteristics of RoTech Stock.
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(a) Investment. The RoTech Stock which the Seller is acquiring
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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").
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(b) Securities Not Registered. The Seller understands that the
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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 predicated on
Seller's representations set forth in this paragraph 5.
(c) Rule 144. The Seller acknowledges that the RoTech Stock
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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 currently requires, among other
things, that current information on the issuer be available to the public and
that the shareholder intending to sell under 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, Seller or any
subsequent holder of the RoTech Stock shall bear the costs of obtaining such
opinion of counsel, up to $275.00 for each opinion of counsel issued in
connection with transfers under Rule 144. 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
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information about RoTech Medical Corporation ("RoTech"), including but not
limited to all of items listed on the Schedule of Securities Filings attached
hereto as Exhibit "V", and has had an opportunity to ask questions of, and
receive answers from, Buyer and RoTech 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, by reason of its business and financial
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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
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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
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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.
(g) No Registration Rights. Seller acknowledges that it
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possesses no rights whatsoever to have any of the RoTech Stock registered.
6. Contingent Reduction of Shares of RoTech Stock; Repayment of Cash
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Consideration; Put Option.
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(a) Contingent Reduction of Shares of RoTech Stock; Repayment of Cash
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Consideration.
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(1) Terms of Reduction. In the event the "First Two
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Year's Average Operating Profits" of the "Purchased Entity" is less than FIVE
HUNDRED THOUSAND DOLLARS ($500,000.00) (the "Threshold Amount"), the number of
shares of RoTech Stock required to be delivered by Buyer to Seller at the end of
the Escrow Period shall be reduced by .2198 shares o f RoTech Stock for every
ONE DOLLAR ($1.00) of the First Two Year's Average Operating Profits during the
Measurement Period below the Threshold Amount, rounded to the nearest full
share, with Buyer retaining complete title to and possession of such shares as
if Buyer were at all times the sole owner of such shares. For example, in the
event the First Two Year's Average Operating Profits of the Purchased Entity
during the Measurement Period is FOUR HUNDRED THOUSAND DOLLARS ($400,000.00),
the difference from the Threshold Amount of ONE HUNDRED THOUSAND DOLLARS
($100,000.00) would result in a reduction hereunder of 21,980 shares of RoTech
Stock ($100,000.00 x .2198), with all of such shares being returned to Buyer by
the Escrow Agent upon final determination of the First Two Year's Average
Operating Profits and with the balance of 13,185 shares of RoTech Stock (less
any offsets pursuant to paragraph 4 hereof) delivered to Seller at the end of
the Escrow Period. In the event the First Two Year's Average Operating Profits
of the Purchased Entity during the Measurement Period is less than THREE HUNDRED
FORTY THOUSAND DOLLARS ($340,000.00) (the "Cash Repayment Threshold Amount"),
resulting in a reduction of all shares of RoTech Stock, the Seller shall pay to
Buyer, immediately upon final determination of the First Two Year's Average
Operating Profits, an amount equal to FIVE DOLLARS ($5.00) for every ONE DOLLAR
($1.00) of the First Two Year's Average Operating Profits during the Measurement
Period below the Cash Repayment Threshold Amount (the "Cash Repayment Amount"),
rounded to the nearest dollar, up to a maximum Cash Repayment Amount of FOUR
HUNDRED FIFTY THOUSAND DOLLARS ($450,000.00). For example, in the event the
First Two Year's Average Operating Profits of the Purchased Entity during the
Measurement Period is THREE HUNDRED THOUSAND DOLLARS ($300,000.00), the
difference from the Cash Repayment Threshold Amount of FORTY THOUSAND DOLLARS
($40,000.00) would result in Seller being obligated to pay Buyer the sum of TWO
HUNDRED THOUSAND DOLLARS ($200,000.00) ($40,000.00 x $5.00). In the event that
the First Two Year's Average Operating Profits of the Purchased Entity are less
than the Threshold Amount and/or Cash Repayment Threshold Amount, the parties
agree that the sole consequence under this Agreement shall be the reduction in
the number of shares of RoTech Stock required to be delivered by Buyer
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to Seller at the end of the Escrow Period and the payment by Seller to Buyer of
the Cash Repayment Amount as determined above. Buyer shall not effect any
reorganization, recapitalization, splitup, splitoff, consolidation, merger, sale
of all or substantially all of its assets or change in effective control of
Buyer unless prior to or simultaneously with the consummation thereof, the
successor corporation (if other than the Buyer) resulting from such
reorganization, recapitalization, splitup, splitoff, consolidation or merger, or
the corporation purchasing such assets or the persons assuming control of Buyer
shall, by written instrument, preserve the terms of this subparagraph. The
acquisition by an unaffiliated third party of 50% or more of Buyer's issued and
outstanding common stock shall be deemed a change of effective control of Buyer.
(2) Certain Definitions. The term "First Two Year's
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Average Operating Profits" shall have the definition set forth on Exhibit "J"
attached hereto. The term "Purchased Entity" shall mean that division of the
Buyer which represents the Business purchased from Seller hereunder. The
Measurement Period shall mean that period commencing November 1, 1995 and ending
October 31, 1997. During the Measurement Period, the Buyer shall maintain
separate accounting records for the Purchased Entity to track the First Two
Year's Average Operating Profits during the Measurement Period. The term
"Delivered RoTech Shares" shall mean the total number of shares of RoTech Stock
actually delivered to Seller by Buyer by the end of the Escrow Period,
reflecting all reductions pursuant to paragraph 6.(a)(1) hereof and all offsets
pursuant to paragraph 4 hereof. The Delivered RoTech Shares shall be issued with
certificates titled in the name of the Seller's shareholders and having the
following legends printed thereon: the restrictive legend required by paragraph
5.(f) hereof.
(3) Inspection by Seller. Seller may, at its expense,
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from time-to-time during the Measurement Period, review or cause its accountants
to review all books, records, work papers and other accounting records of the
Purchased Entity which pertain specifically to the calculation of the First Two
Year's Average Operating Profits; provided, however, that this right to review
may only be exercised upon reasonable written notice from Seller to Buyer and
then only at reasonable times and dates and with a frequency not more often than
twice in any twelve (12) month period. Any right to review shall immediately
cease if Buyer, in the exercise of its reasonable discretion, determines that
such review is disruptive to the business operations of the Buyer.
Buyer shall provide to Seller no later than thirty (30) days after the end
of the Measurement Period a statement (the "Statement") showing in reasonable
detail Buyer's calculation of the First Two Year's Average Operating Profits and
the number of shares of RoTech Stock, if any, that Buyer intends to deduct from
the escrow account pursuant to paragraph 6.(a)(1) above.
Seller may, at its expense, review or cause its accountant to review the
Statement, for which purpose Seller or its accountants shall be given access to
all books, records, work papers and other materials and information relevant to
the calculations set forth in the Statement at such times and dates as are
mutually convenient for Buyer and Seller.
Seller shall, within fifteen (15) days after receipt of the Statement,
notify Buyer in writing either that (i) it agrees with the amount set forth in
the Statement or (ii) it disagrees with one or more
7
<PAGE>
items in the Statement. Any such notice shall identify the disputed item or
items and shall describe in reasonable detail the basis for the disagreement. If
Seller fails to give any notice in writing to Buyer within fifteen (15) days of
receipt of the Statement, Seller shall be conclusively deemed to agree with the
amounts set forth therein and waive its right to dispute thereafter the amounts
set forth in the Statement unless fraud or bad faith is involved in the
calculation of such amounts.
If Seller delivers a notice disagreeing with one or more items in the
Statement (which notice shall specify Seller's proposed calculation of the First
Two Year's Operating Profits), Seller and Buyer shall use all reasonable efforts
to resolve the disputed items in such notice. If, within fifteen (15) days
after receipt by Buyer of such notice, Seller and Buyer are unable to resolve
all of the disputed items specified in such notice, such remaining disputed
items shall be resolved by a firm of independent accountants jointly selected by
Seller and Buyer (or in the absence of agreement on the firm so to be selected,
by Coopers & Lybrand) and the determinations by such firm shall be final and
binding on Seller and Buyer. All fees and expenses of such firm of independent
accountants shall be borne by Seller and Buyer in inverse proportion to the
amounts of their respective awards with respect to the disputed items resolved
by the firm of independent accountants. For example, in the event Buyer's
calculation results in a reduction of 10,000 shares of RoTech Stock, and
Seller's calculation results in a reduction of 8,000 shares of RoTech Stock, a
finding by such firm of independent accountants that the reduction should be
9,500 shares would result in Buyer bearing 25% of the cost of such firm of
independent accountants (10,000 minus 9,500, divided by 10,000 minus 8,000) and
Seller bearing 75% of the cost of such firm of independent accountants (9,500
minus 8,000, divided by 10,000 minus 8,000). Within fifteen (15) days after
final determination of the First Two Year's Average Operating Profits (caused
either by Seller's acceptance of the Statement, or, in the case of any dispute,
final resolution by Buyer and Seller or final resolution by such firm of
independent accountants), all required reductions of RoTech Stock shall be made
(if any) and the Delivered RoTech Shares shall be delivered to Seller (if any),
and Seller shall immediately pay Buyer the Cash Repayment Amount if due as a
result of such final determination. In the event the Cash Repayment Amount, if
due, is not paid immediately upon final determination of the First Two Year's
Average Operating Profits, Buyer shall be entitled to receive interest from
Seller on such amount, calculated at the highest rate allowable by law, and in
the event Buyer institutes legal action against Seller to collect the Cash
Repayment Amount, Seller shall reimburse Buyer for the all attorneys' fees and
costs incurred by Buyer as a result of such legal action.
(b) Put Option.
----------
(1) Amount and Price. The Seller shall have the right
----------------
(the "Put Option") to require Buyer to repurchase some or all of the Delivered
RoTech Shares received by Seller pursuant to this Agreement (sometimes herein
referred to as the "Option Shares") at a repurchase price of $22.75 per share
(the "Option Price").
8
<PAGE>
(2) Restrictions On Exercise. This Put Option is not
------------------------
assignable, provided, however, that if Seller distributes any of the Option
Shares to its shareholders (which Seller may do by proper corporate action
without the consent of Buyer), Seller may assign this Put Option to its
shareholders to the extent of the Option Shares distributed to its shareholders.
Seller or, after proper assignment, its shareholders may submit Option Shares
for redemption by Buyer at the applicable Option Price during the period
commencing November 1, 1997 and ending October 31, 1998, but only with respect
to Option Shares representing RoTech Stock which has been released from the
escrow arrangement. This Put Option may only be exercised in blocks of 5,000
shares or more.
(3) Term of Option. All Option Shares submitted pursuant
--------------
to this Put Option must be delivered to the executive offices of Buyer, at the
address set forth on page 1 hereof (or at such other address as is communicated
by Buyer to Seller in writing). At 5:00 p.m., E.S.T., October 31, 1998, this Put
Option shall expire and shall thereafter have no prospective effect.
(4) Exercise of Put Option and Delivery of Shares. To
---------------------------------------------
validly exercise this Put Option, Seller or its shareholders, as applicable,
must execute a statement in which Seller or its shareholders, as applicable,
warrants that it or they have full and clear title to the applicable Option
Shares, free of all liens and encumbrances. Such statement must be accompanied
by original stock certificates evidencing not less than the number of Option
Shares 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 (and who is also a member of the Medallion
Group) or a commercial bank who is a member of the Federal Reserve System (and
who is also a member of the Medallion Group).
(5) Settlement. Settlement for any Option Shares
----------
redeemed pursuant to this Put Option shall occur on that day which is fifteen
(15) business days from the day such Option Shares are submitted to Buyer with
all required documentation. Such payment shall be made without interest.
(6) Changes in Capitalization. If, while the Put Option
-------------------------
is outstanding, the outstanding Option Shares have increased, decreased, changed
into, or been exchanged for a different number or kind of shares or securities
of Buyer or any other corporation through reorganization, merger, consolidation,
tender offer, exchange offer, recapitalization, reclassification, stock split,
reverse stock split, stock dividend or similar transaction, appropriate and
proportionate adjustments shall be made by Buyer in the number and/or kind of
shares which are subject to the Put Option and in the Option Price applicable
thereto.
7. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be November 1, 1995 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Seller and Buyer is herein sometimes referred to as the "Closing Date".
8. Asset Condition and Quality. To the extent applicable, all Assets of
---------------------------
Seller are, to the best of Seller's knowledge, free of defects and in good
working order, condition and repair, except for
9
<PAGE>
ordinary wear and tear. To the extent applicable, all of the Assets on the
Closing Date shall conform in all material respects with all applicable
ordinances, regulations, zoning and other laws.
9. Instruments of Conveyance and Transfer. On the Closing Date:
--------------------------------------
(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 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.
10. 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 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.
11. Restrictions on Operations of Seller. Except as disclosed on Exhibits
------------------------------------
hereto, since October 1, 1995, 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; or
(e) Made any distribution of any kind to any of its
shareholders, except as disclosed on the Schedule of Distributions to
Shareholders attached hereto as Exhibit "K".
12. 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:
10
<PAGE>
(a) Organization of Seller. Seller is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Louisiana 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. Except as disclosed on the Schedule of
----------
Proceedings attached hereto as Exhibit "Q", there are no actions, suits or
proceedings affecting the Assets which are pending or, to the best of Seller's
constructive knowledge after due inquiry and investigation, threatened against
Seller, 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
affecting the Assets of any court or of any such governmental agency or
instrumentality.
(c) Compliance with Laws and other Instruments. 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, where such violation would have a material adverse effect on
Seller, 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 Assets 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 shares 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, which liens Buyer is expressly
not assuming.
(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) Employment Contracts; Employees. Except as set forth on the
-------------------------------
Schedule of Existing Employment Agreements attached hereto as Exhibit "W", there
are no written contracts of employment between Seller and any officer or other
employee of the Business. The information contained on the Schedule of
Personnel Payrates and Advances attached hereto as Exhibit "L" is accurate and
complete.
(h) Employee Benefit Plans. Except as set forth on the Schedule
----------------------
of Employee Benefit Plans attached hereto as Exhibit "X", 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
11
<PAGE>
such plan. 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 all
plans set forth on Exhibit "X" at Seller's expense.
(i) Insurance. All inventories, buildings and fixed assets
---------
owned or leased by Seller are and will be insured in accordance with Seller's
past practices against fire and other casualty through the Closing Date. The
information contained on the Schedule of Insurance Policies, attached hereto as
Exhibit "M", is accurate and complete.
(j) 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.
(k) Officers, Directors and Shareholders. As of the Closing
------------------------------------
Date, John W. McDaniel and Dara W. McDaniel are all of the shareholders of the
Seller and the following individuals are the officers and directors of the
Seller:
<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
John W. McDaniel President/Director
Dara W. McDaniel Secretary/Treasurer/Director
</TABLE>
(l) Cash Receipts. The information contained on the Schedule of
-------------
Collections for the period commencing November 1, 1994, and ending October 31,
1995, attached hereto as Exhibit "N", is accurate and complete in all material
respects.
(m) Accounts Receivable. The information contained on the
-------------------
Schedule of Accounts Receivable Data as of October 31, 1995, attached hereto as
Exhibit "C", is accurate and complete, of which $180,140 is collectible
within twelve (12) months.
(n) Inventory and Fixed Assets. The information contained on
--------------------------
the Schedule of Inventory and Fixed Assets as of October 31, 1995, attached
hereto as Exhibit "D", is accurate and complete in all material respects.
(o) Leases, Contracts and Agreements. The information contained
--------------------------------
on the Schedule of Leases, Contracts and Agreements as of October 31, 1995,
attached hereto as Exhibit "O", is accurate and complete in all material
respects.
(p) Tax Returns and Financial Statements. Seller has furnished
Buyer with tax returns (the "Tax Returns") for the periods ended December 31,
1993, and December 31, 1994 and has furnished Buyer with financial statements
(the "Financial Statements") for the periods ended December 31, 1994, September
30, 1995 and October 31, 1995 (the "Financial Statement Dates"), copies of which
are attached hereto as Exhibit "P" and by this reference made a part hereof. The
12
<PAGE>
Financial Statements: (i) are in accordance with the books and records of the
Seller; (ii) fairly represent the financial condition of the Seller in all
material respects 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,
subject to such adjustments as have been historically made by the Corporation in
the case of unaudited financial statements; (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.
(q) 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.
13. Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to Seller that:
(a) Organization of Buyer. Buyer is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of the State of
Louisiana 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) Authorization; Consents; Valid and Binding Obligation. The
-----------------------------------------------------
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Buyer have been duly and validly authorized
and approved by all necessary corporate action on behalf of Buyer. No
approvals, authorizations or consents, are necessary to permit Buyer to enter
into this Agreement and consummate the transactions contemplated hereby. This
Agreement constitutes the valid and legally binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except to the extent
that enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity.
(c) No Violation. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby nor
compliance with the terms hereof will (i) conflict with or result in a breach of
any of the terms, conditions, or provisions of the Articles of Incorporation or
By-Laws of Buyer nor (ii) violate, conflict with or result in a breach of or
default under any of the terms, conditions or provisions of any agreement,
arrangement, indenture, contract, lease, loan agreement, note, restriction,
obligation or liability to which Buyer is a party or by which Buyer is bound or
to which Buyer or its assets are subject nor (iii) conflict with, violate or
result in a breach of or constitute a default under any law, statute, rule,
judgment, order, decree, injunction, ruling or regulation of any government,
governmental agency, authority or instrumentality, court or arbitration tribunal
to which Buyer or any of its assets or properties are subject.
13
<PAGE>
(d) Financial Statements. Buyer has furnished Seller with a
--------------------
financial statement (the "Buyer Financial Statement") for the period ended
October 31, 1995 (the "Buyer Financial Statement Date"), a copy of which is
attached hereto as Exhibit "Y" and by this reference made a part hereof. The
Buyer Financial Statement: (i) is in accordance with the books and records of
the Buyer; (ii) fairly represents the financial condition of the Buyer in all
material respects at such date and the results of its operations for the period
specified; (iii) was prepared in accordance with generally accepted accounting
principles; (iv) with respect to all contracts and commitments of the Buyer,
reflects adequate reserves for all reasonably anticipated losses and costs in
excess of anticipated income; and (v) with respect to any balance sheet,
discloses all of the debts, liabilities and obligations of any nature (whether
absolute, accrued, contingent, or otherwise) of the Buyer at the Buyer Financial
Statement Date and includes the appropriate reserves for all taxes and other
accrued liabilities, except that certain contingent liabilities, if not
disclosed on such balance sheet, shall be considered to be disclosed pursuant to
this subparagraph, if disclosed on an Exhibit to this Agreement.
(e) Disclosure. No representation or warranty by Buyer 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 Buyer or any of its directors or stockholders have knowledge or notice
required to make the statements herein or therein contained not misleading.
14. 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, any of which may be waived in writing by Buyer:
(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 contained in this Agreement 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. John W. McDaniel shall have entered
---------------------
into a non-compete agreement substantially in the form attached hereto as
Exhibit "R" and by this reference made a part hereof. Also, in the event any
shareholder, director, officer or employee of Seller shall have entered into any
employment, non-compete and/or non-disclosure agreements with Seller, Seller
shall assign to Buyer, and hereby does assign to Buyer, all of Seller's rights
under such agreements; and
(d) Guaranty Agreement. John W. McDaniel shall have entered
------------------
into a Guaranty Agreement substantially in the form attached hereto as Exhibit
"S" and by this reference made a part hereof; and
14
<PAGE>
(e) Employment Agreements. John W. McDaniel and Barbara Ann
---------------------
Groux shall each have entered into an Employment Agreement substantially in the
forms attached hereto as Exhibit "T" and by this reference made a part hereof.
(f) No Injunction; Consents. No action, proceeding or
-----------------------
investigation shall have been instituted or threatened to set aside the
transactions provided for herein or to enjoin or prevent the consummation of the
transactions contemplated hereby, and all required consents and approvals for
the consummation of the transactions contemplated hereby shall have been
secured.
(g) Buyer shall have reviewed to Buyer's satisfaction a Recast
and Reconciliation Report prepared by Seller in which Seller has recasted and
reconciled the expenses of the Business incurred through the Closing Date, with
such Report also containing representations by Seller as to which expenses will
not be incurred by the Business on an ongoing basis.
(h) Seller and John W. McDaniel shall each have executed an
Indemnification of Additional Claims in form and substance satisfactory to
Buyer, in which they have jointly and severally agreed to indemnify Buyer and
RoTech against certain claims that could or may arise out of certain
transactions occurring prior to the Closing Date in which either or both were
parties.
15. Conditions Precedent to Closing by Seller. The obligation of Seller
-----------------------------------------
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, any of which may be waived in writing by Seller.
(a) Compliance with Agreement. All of the terms and conditions
-------------------------
of this Agreement to be complied with and performed by Buyer on or before the
Closing Date, shall have been complied with and performed; and
(b) Representations and Warranties. The representations and
------------------------------
warranties of Buyer contained in this Agreement 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 Buyer; and
(c) Employment Agreements. John W. McDaniel and Barbara Ann
---------------------
Groux shall each have entered into an Employment Agreement substantially in the
forms attached hereto as Exhibit "T" and by this reference made a part hereof.
(d) No Injunction; Consents. No action, proceeding or
-----------------------
investigation shall have been instituted or threatened to set aside the
transactions provided for herein or to enjoin or prevent the consummation of the
transactions contemplated hereby, and all required consents and approvals for
the consummation of the transactions contemplated hereby shall have been
secured.
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.
15
<PAGE>
17. Corporate Covenant Not to Compete. The Corporation hereby agrees that
---------------------------------
for a period of sixty (60) months from November 1, 1995, 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 physician practice management business within the city limits of
New Orleans, Louisiana, or within fifty (50) miles of New Orleans, Louisiana.
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 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 internal laws of the State of Louisiana,
without reference to applicable principles of conflicts of law, and any action
involving this Covenant Not to Compete shall be brought in the court of
appropriate jurisdiction in Orleans Parish, Louisiana.
18. Indemnification; Remedies.
-------------------------
(a) Indemnification of Seller. The Seller shall and hereby
-------------------------
agrees to indemnify and hold harmless at all times, Buyer and its directors,
officers, employees, agents and assigns, as to and against any Damages (as
hereinafter defined) resulting from: (i) any materially inaccurate
representation made by Seller in or under this Agreement; (ii) breach of any
warranties made by Seller in or under this Agreement; (iii) breach or default in
the performance by Seller of any of the covenants to be performed by Seller
hereunder; and (iv) any debts, liabilities or obligations of the Seller
pertaining to the Business, whether accrued, absolute, contingent or otherwise,
due or to become due.
(b) Indemnification of Buyer. Buyer shall and hereby agrees to
------------------------
indemnify and hold harmless at all times the Seller, as to and against any
Damages resulting from: (i) any materially inaccurate representation made by
Buyer in or under this Agreement; (ii) breach of any warranties made by Buyer in
or under this Agreement; and (iii) breach or default in the performance by Buyer
of any of the covenants to be performed by Buyer hereunder.
(c) Definition of Damages. The term "Damages" as used herein,
---------------------
shall include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, penalties and damages, including counsel fees incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof. The term "Damages" shall include, but not be limited to, any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency and
Contingent Liability, as defined in paragraph 4 hereof.
16
<PAGE>
(d) Remedies.
--------
(1) Buyer's Remedies. In the event Buyer makes written
----------------
request to the Seller for the payment of Damages and the 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: (i) if such request is made during the Escrow Period and
RoTech Stock sufficient to pay such Damages in full is held by Buyer in escrow,
to make offset against the RoTech Stock, in accordance with the terms and
conditions of this Agreement and the related Pledge Agreement and Escrow
Agreement; (ii) if such request is made during the Escrow Period and the amount
of RoTech Stock held by Buyer in escrow is insufficient to pay such Damages in
full, to first make offset against any RoTech Stock held in escrow and then to
require Seller to pay Buyer the remaining balance in cash within the ten (10)
day period following the applicable Notice Period (and Seller shall be liable
for such balance and for the payment of such balance in full during such
period); and (iii) if such request is made during the Escrow Period and no
RoTech Stock is being held in escrow by Buyer at the time of such request, or if
such request is made after the Escrow Period, to require the Seller to pay Buyer
the full amount of such Damages in cash within the ten (10) day period following
the applicable Notice Period (and Seller shall be liable for such amount and for
the payment of such amount in full during such period); provided, however, that
in any of the events described in (i) through (iii) of this subparagraph (d),
the Seller shall have the option to provide written notice to Buyer within the
Notice Period that the Seller disputes the validity of the Damages triggering
the right of offset against the RoTech Stock and/or the requirement for payment
by Seller in cash, and in the event Buyer and the Seller cannot reach agreement
on the validity of such Damages by the end of the ten (10) day period following
the Notice Period, the dispute over the validity of such claim or liability (the
"Dispute") shall be settled as set forth in subparagraph (e) of this paragraph
18, with the non-prevailing party bearing the prevailing party's costs of
arbitration in the event any Dispute is resolved by arbitration.
(2) Seller's Remedies. In the event Seller makes written
-----------------
request to Buyer for the payment of Damages and Buyer 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"),
Seller shall have the right to require Buyer to pay Seller the full amount of
such Damages in cash within the ten (10) day period following the applicable
Notice Period (and Buyer shall be liable for such amount and for the payment of
such amount in full during such period); provided, however, that Buyer shall
have the option to provide written notice to Seller within the Notice Period
that Buyer disputes the validity of the Damages triggering the requirement for
payment by Buyer in cash, and in the event Seller and Buyer cannot reach
agreement on the validity of such Damages by the end of the ten (10) day period
following the Notice Period, the dispute over the validity of such Damages shall
be settled by arbitration, with the non-prevailing party bearing all of the
prevailing party's costs of arbitration. In the event an arbitration is required
pursuant to this subsection (2) of subparagraph (d), Buyer and Seller will each
select an arbitrator; those two arbitrators will then select a third arbitrator;
and the three arbitrators so chosen will determine the validity of the claim for
Damages. In the event either party fails to appoint an abitrator by the end of
the thirty (30) day period following the Notice Period, the arbitrator appointed
by the other party shall arbitrate the dispute.
17
<PAGE>
(e) Settlement of Disputes.
----------------------
(1) Disputes Involving Claims by Buyer Against the Seller
-----------------------------------------------------
(Not Involving Third Parties). In the event a Dispute arises which Dispute
- ----------------------------
involves claims by Buyer against the Seller (i.e., not involving any third
parties), Buyer and the Seller shall settle the Dispute by submitting same to
settlement by arbitration. In the event arbitration is required pursuant to this
subsection (1) of subparagraph (e), the Seller shall immediately place cash in
the full amount of the requested Damages into a separate escrow fund at Buyer's
direction pending resolution of the Dispute, and Buyer and the Seller will each
select an arbitrator; those two arbitrators will then select a third arbitrator;
and the three arbitrators so chosen will settle the Dispute (the failure of
Seller to place such amount in escrow shall cause the full amount of Damages to
be immediately due and payable by Seller in full). In the event either party
fails to appoint an abitrator by the end of the thirty (30) day period following
the Notice Period, the arbitrator appointed by the other party shall arbitrate
the dispute. In the event the final settlement of the Dispute is for an amount
less than the amount in escrow, the balance shall be refunded to the Seller; and
in the event the final settlement of the Dispute is for an amount greater than
the amount in escrow, the Seller shall be liable for the excess, which amount
shall be immediately due and payable.
(2) Disputes Involving Claims Made by Third Parties. In
-----------------------------------------------
the event a Dispute arises which Dispute involves claims made by a third party
or parties (the "Third Party Claim"), Buyer shall give written notice to the
Seller as soon as practical after Buyer receives notice of a Third Party Claim.
If any lawsuit or enforcement action is filed against Buyer by a person
asserting a Third Party Claim, written notice shall be given to the Seller as
promptly as is practicable (in any event, within ten (10) days after the service
of citation or summons). After such notice, if the Seller shall acknowledge in
writing to Buyer that the Seller shall be obligated for such Third Party Claim
and if the Seller shall have placed the disputed amount of the Third Party Claim
(which amount shall be the full amount of the Third Party Claim or, in the
exercise of the Buyer's sole discretion, an amount specified by Buyer which is
less than the full amount of the Third Party Claim) in a separate escrow fund at
Buyer's direction pending resolution of the Third Party Claim (the failure of
Seller to place such amount in escrow shall cause the full amount of Damages to
be immediately due and payable by Seller in full), then the Seller shall be
entitled, if Seller so elects, to take control of the defense and investigation
of such lawsuit or action and to employ and engage attorneys of its own choice
to handle and defend the same, at the Seller's cost, risk and expense, provided
that the Seller and its counsel shall proceed with diligence and in good faith
with respect thereto. Buyer shall cooperate in all reasonable respects with the
Seller and their attorneys in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom; provided, however, that
Buyer may, at Buyer's expense, participate in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom. If the
Seller has acknowledged to Buyer its obligation to Buyer hereunder and has
placed the disputed amount (or such lesser amount specified by Buyer in the
exercise of its sole discretion) of the Third Party Claim in a separate escrow
fund as required hereunder, Buyer shall not settle such lawsuit or enforcement
action without the prior written consent of the Seller and, if the Seller has ot
so acknowledged its obligation or has failed to place the required amount in
escrow, Buyer shall not settle such lawsuit or enforcement action without ten
(10) days prior notice to the Seller. In the event the final settlement of the
Third Party Claim is for an amount less than the
18
<PAGE>
amount in escrow, the balance shall be refunded to the Seller; and in the event
the final settlement of the Third Party Claim is for an amount greater than the
amount in escrow, the Seller shall be liable for the excess, which amount shall
be immediately due and payable.
19. Use of Corporate Name. Seller agrees to take all actions reasonably
----------------------
necessary to assist Buyer in obtaining the rights to utilize the corporate name
"Physician Management Group, Inc.," 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, except for receivables from shareholders, 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. Brokers. On the Closing Date, ONE HUNDRED FIFTY-FIVE THOUSAND DOLLARS
-------
($155,000.00) in cash will be paid by Buyer directly to Cain Brothers by wired
funds to Cain Brothers' bank account (as designated by Cain Brothers and
communicated to Buyer) for services rendered the Buyer and Seller in connection
with the transactions contemplated by this Agreement. All negotiations relative
to this Agreement and the transactions contemplated hereby have been carried on
directly between Buyer and Seller without the intervention or assistance of any
party other than Cain Brothers (other than to provide accounting or legal
counsel). No party to this Agreement, nor any third party other than Cain
Brothers, has any right or claim to any commission, brokerage fee or other
compensation relative to this Agreement or the transactions contemplated hereby.
Seller agrees that Buyer shall have no obligation for payment of any fees or
commissions to Cain Brothers in the event the transactions contemplated by this
Agreement are not consummated.
22. Miscellaneous. This Agreement shall not be assignable by any party
-------------
hereto without the consent of the other party hereto. 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.
23. 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.
24. 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.
25. Notices. Any notice, request, demand or other communication given by
-------
a party under this Agreement (each a "notice") shall be in writing, may be given
by a party or its legal counsel, and shall be deemed to have been duly given (i)
when personally delivered, or (ii) upon delivery by United States Express Mail
or similar overnight courier service which provides evidence of delivery, or
(iii) when five days have elapsed after its transmission by registered or
certified mail, postage
19
<PAGE>
prepaid, return receipt requested, addressed to the party to whom directed at
that party's address as it appears below or another address of which that party
has given written notice, or (iv) when delivered by facsimile transmission and a
copy thereof is also delivered in person or by overnight carrier. Notices of
address change shall be effective only upon receipt notwithstanding the
provisions of the foregoing sentence. All notices of request, demand and other
communications hereunder shall be addressed to the parties as follows:
TO SELLER: PHYSICIAN MANAGEMENT GROUP, INC.
7356 West Roadway
New Orleans, Louisiana 70124
Attn: John W. McDaniel
Fax: (504) 283-1228
WITH COPIES TO: Lawrence J. Genin
The Meadowcrest Center
Suite 200
2600 Belle Chasse Highway
Gretna, Louisiana 70056
Fax: (504) 394-1077
20
<PAGE>
TO BUYER: DOCTORS MANAGEMENT GROUP, INC.
4506 L.B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
Fax: (407) 841-9318
WITH COPIES TO: Winderweedle, Haines, Ward &
Woodman, P.A.
Suite 600
390 North Orange Avenue
Orlando, Florida 32801
Fax: (407) 423-7014
26. Choice of Law. The laws of the State of Louisiana shall govern the
-------------
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties, without reference to applicable
principles of conflicts of law. Any action involving or relating to this
Agreement shall be brought in the court of appropriate jurisdiction located in
Orleans Parish, Louisiana.
27. 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.
28. 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
shall 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.
29. 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.
30. 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.
31. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter contained herein
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.
21
<PAGE>
Signed, sealed and delivered PHYSICIAN MANAGEMENT GROUP,
in the presence of: INC., a Louisiana corporation
By: /s/ John W. McDaniel
- ------------------------------ -----------------------------
John W. McDaniel, President
Date Executed:
- ------------------------------ ------------------
"Seller"
DOCTORS MANAGEMENT GROUP, INC.,
a Louisiana corporation
By: /s/ Stephen P. Griggs
- ------------------------------ -------------------------------
Stephen P. Griggs, President
Date Executed:
- ------------------------------ --------------------
"Buyer"
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this ___ day of
December, 1995, by JOHN W. McDANIEL, as President of PHYSICIAN MANAGEMENT GROUP,
INC., a Louisiana corporation, on behalf of the corporation. He ( ) is
personally known to me; or ( ) has produced _____________________________ as
identification.
------------------------------------
Notary Signature
------------------------------------
Notary Name Printed
Notary Public, State of Florida
My Commission Expires:
STATE OF FLORIDA
COUNTY OF ORANGE
22
<PAGE>
The foregoing instrument was acknowledged before me this 20th day of
December, 1995, by STEPHEN P. GRIGGS, as President of DOCTORS MANAGEMENT GROUP,
INC., a Louisiana corporation, on behalf of the corporation. He (X) is
personally known to me; or ( ) has produced ____________________________________
as identification.
/s/ Gwendolyn Shirley
-------------------------------------
Notary Signature
Gwendolyn Shirley
-------------------------------------
Notary Name Printed
Notary Public, State of Florida
My Commission Expires: 8/7/98
23
<PAGE>
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
-----------------------------------------
AND COVENANT NOT TO COMPETE
---------------------------
THIS AGREEMENT is made as of the 1st day of January, 1996, by and between
PREFERRED MEDICAL EQUIPMENT CO., INC., a Tennessee corporation, having its
principal place of business at 1646 Memorial Boulevard, Murfreesboro, Tennessee
37129 (hereinafter referred to as the "Seller" or "Corporation"), and HOME
MEDICAL SYSTEMS, INC., a South Carolina 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 durable medical equipment business in the
State of Tennessee (the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller, certain assets of
the Business (together as herein described sometimes referred to as the
"Assets"), including but not limited to accounts 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 (to the extent assignable) listed on the Schedule of Provider Numbers
and Telephone Numbers attached hereto as Exhibit "A"; (b) the Patients' List of
the Business attached hereto as Exhibit "B"; (c) the telephone numbers listed on
the Schedule of Provider Numbers and Telephone Numbers attached hereto as
Exhibit "A"; (d) all of the Seller's prepaid assets; and (e) all other assets of
any kind owned and utilized by Seller in the Business. 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 14 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 as of
------------------------------------------
the Effective Date referred to below:
(a) Accounts Receivable. Sell, assign and transfer to the Buyer all
-------------------
of the Seller's rights, title and interest in the accounts receivable of the
Business set forth on the Schedule of Accounts Receivable Data attached hereto
as Exhibit "C" 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 Schedule of Inventory and Fixed Assets attached
hereto as Exhibit "D" and by this reference made a part hereof; and
<PAGE>
(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 "E" 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 (to the extent assignable) listed on the Schedule of
Provider Numbers and Telephone Numbers attached hereto as Exhibit "A"; (ii) the
Patients' List of the Business, as described in Exhibit "B"; (iii) the telephone
numbers listed on the Schedule of Provider Numbers and Telephone Numbers
attached hereto as Exhibit "A"; (iv) all of the Seller's prepaid assets; and (v)
all other assets of any kind owned and utilized by Seller in the Business.
(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 TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000.00), plus the assumption of only those liabilities listed on the
Schedule of Liabilities Assumed attached hereto as Exhibit "F," provided,
however, that the aggregate amount of such liabilities is not in excess of
$202,071.11 (the "Purchase Price").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 "G" and by this reference made a
part hereof, and both parties hereto expressly consent to the allocation stated
therein.
(b) Method of Payment; Escrow Agreement. $2,250,000.00 of the
-----------------------------------
Purchase Price will be paid to Seller on the Closing Date by wired funds to
Seller's account number 4000052229 at First American National Bank against and
in consideration of the Assets and Covenant Not to Compete.$250,000.00 of the
Purchase Price shall be escrowed at Closing to secure collection of accounts
receivable, any debts paid by Buyer and Seller's indemnification of Buyer
pursuant to paragraph 15 hereof, for the twelve (12) month period following the
Effective Date (the "Escrowed Cash").The Escrowed Cash shall be placed in escrow
for a period of twelve (12) months (the "Escrow Period") with the law firm of
Winderweedle, Haines, Ward & Woodman, P.A. ("WHWW"), to be maintained in an
account by WHWW pursuant to the terms of that certain Escrow Agreement, in the
form attached hereto as Exhibit "H" and by this reference made a part hereof
(the "Escrow Agreement").
(c) Indemnity Against Creditors Claims; Assumption of Certain
---------------------------------------------------------
Liabilities. The Seller has requested the Buyer to waive the requirements of the
- -----------
bulk sales and transfer laws of the State of Tennessee. 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.
2
<PAGE>
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 liabilities of any kind in connection with its purchase of the Assets,
except for those operating leases and debts (not to exceed $202,071.11.) set
forth on the Schedule of Liabilities Assumed attached hereto as Exhibit "F." The
Buyer is also assuming a durable medical equipment agreement by and between
Seller and Sentry Home Health Services, as more specifically described in
Exhibit "I," attached hereto and made a part hereof.
3. Existing Obligations. The Seller represents and warrants that, to the
--------------------
best of its knowledge and belief all of the Seller's debts, liabilities and
obligations are listed on the Schedule of Liabilities attached hereto as Exhibit
"J" and such schedule accurately reflects all of Seller's "Existing Obligations"
(as hereinafter defined) as of the Closing Date. The term "Existing Obligations"
shall mean and refer to all of the Seller'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, notes
payable, trade payables, lease obligations, indebtedness for borrowed money,
accrued interest, contractual obligations, etc. 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.
4. Right of Offset Against the Escrowed Amount. In the event that:
-------------------------------------------
(i) the Buyer pays for any debts or liabilities of Seller other than those
liabilities in the amounts listed on the Schedule of Liabilities Assumed
attached hereto as Exhibit "F" (the "Liabilities Deficiencies"), or (ii) the
aggregate value of the Corporation's collectible accounts receivable as of
December 31, 1995, are determined to be less than $250,000.00, as determined by
actual cash collections of such receivables during the twelve (12) month period
immediately following the Effective Date (the "Asset Value Deficiency"), or
(iii) the Corporation has, since December 1, 1995, 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 Effective 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 twelve (12) months from the
Effective Date, to make offset against the Escrowed Cash, in accordance with the
terms and conditions of the Escrow
3
<PAGE>
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 twelve (12) month period
after the Effective Date, and Seller agrees to pay said amounts to Buyer
immediately upon written request from Buyer to Seller. During the twelve (12)
month period following the Effective Date, in the event Buyer makes written
request to Seller 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 Escrowed Cash, in accordance with the terms and
conditions of the 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 twelve (12) month period following the Effective Date, and the
Corporation agrees to allow Buyer to make offset against the Escrowed Cash as
herein provided. In the event an offset against the Escrowed Cash is to occur,
an offset against one dollar ($1.00) of the Escrowed Cash shall have the effect
of reducing any amounts owed Buyer by Seller by one dollar ($1.00). Buyer's
right of offset against the Escrowed Cash shall terminate on that date which is
twelve (12) months from the Effective Date; provided, however, that
notwithstanding anything contained herein to the contrary, Seller shall remain
fully liable at all times for any and all debts and liabilities of Seller, and
in the event any debts or liabilities of Seller (including but not limited to
any Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency
or Contingent Liability) become known, are uncovered or arise at any time,
including any time after the end of the Escrow Period, Buyer may, at its option
in the exercise of its sole discretion, either refuse to pay any of such 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. The Buyer shall be entitled to reimbursement from Seller
of the amount of any 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.
5. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be January 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Seller and Buyer is herein sometimes referred to as the "Closing" or
"Closing Date."
6. Asset Condition and Quality. All Assets of Seller to the best of
---------------------------
Seller's knowledge are free of defects and in good working order, condition and
repair, except for ordinary wear and tear. All of the Assets on the Closing Date
shall conform in all material respects with all applicable ordinances,
regulations, zoning and other laws.
7. 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
4
<PAGE>
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. Seller will also deliver to Buyer instruments of
transfer necessary to transfer to Buyer any transferable manufacturer's warranty
with respect to the Assets.
(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.
8. 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.
9. Restrictions on Operations of Seller. Except as disclosed on Exhibits
------------------------------------
hereto, since December 1, 1995, 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; or
(e) Made any distribution of any kind to any of its shareholders,
except as disclosed on the Schedule of Distributions to Shareholders attached
hereto as Exhibit "K".
10. 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 Tennessee
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.
5
<PAGE>
(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 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. Seller agrees that Frank Strausser and Associates has
-------
acted as its representative and broker in connection with the transactions
contemplated by this Agreement. Accordingly, Seller agrees that it will pay all
brokers fees in accordance with its agreement with Frank Strausser and
Associates. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on directly between Buyer and Seller
without the intervention or assistance of any party other than Frank Strausser
and Associates (other than to provide accounting or legal counsel). No party to
this Agreement, nor any third party, other than Frank Strausser and Associates,
has any right or claim to any commission, brokerage fee or other compensation
relative to this Agreement or the transactions contemplated hereby. Seller
agrees that Buyer shall have no obligation for payment of any fees or
commissions to Frank Strausser and Associates. Buyer warrants that it has not
become obligated to any broker or agent for any fee or commission.
6
<PAGE>
(h) Employment Contracts; Employees. There are no written contracts
-------------------------------
of employment between Seller and any officer or other employee of the Business.
The information contained on the Schedule of Personnel Payrates and Advances
attached hereto as Exhibit "L" 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 and other
casualty through the Closing Date. The information contained on the Schedule of
Insurance Policies, attached hereto as Exhibit "M", 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,
------------------------------------
Mildred Goforth and Sheila Gilley are all of the shareholders of the Seller and
the following individuals are the officers and directors of the Seller:
<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
Bill Goforth President/Director
George Gilley Vice President/Director
Jim Monroe Secretary/Treasurer
</TABLE>
(m) Cash Receipts. The information contained on the Schedule of
-------------
Collections for the period commencing January 1, 1995, and ending December 31,
1995, attached hereto as Exhibit "N", is accurate and complete.
(n) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable and Notes Receivable Data as of December 31, 1995,
attached hereto as Exhibit "C", is accurate and complete, of which $250,000.00
is collectible within twelve (12) months.
(o) Inventory and Fixed Assets. The information contained on the
--------------------------
Schedule of Inventory and Fixed Assets as of December 31, 1995, attached hereto
as Exhibit "D", is accurate and complete.
7
<PAGE>
(p) Leases, Contracts and Agreements. The information contained on
--------------------------------
the Schedule of Leases, Contracts and Agreements as of December 31, 1995,
attached hereto as Exhibit "O", 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,
1993, December 31, 1994, and December 31, 1995 (as soon as available) and has
furnished Buyer with financial statements (the "Financial Statements") for the
periods ended December 31, 1994, November 30, 1995, and December 31, 1995 (the
"Financial Statement Dates"), copies of which are attached hereto as Exhibit "P"
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. To the best of Seller's
-----------------------------
knowledge (after diligent investigation and inquiry) no notice has been directly
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 "Q."
11. 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 South Carolina.
(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.
8
<PAGE>
(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.
12. 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:
(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 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. Bill Goforth, George Gilley, Mildred
----------------------
Goforth, Sheila Gilley, and Jim Monroe shall each have entered into a non-
compete agreement substantially in the forms attached hereto as Exhibit "R" and
by this reference made a part hereof. Also, in the event any shareholder,
director, officer or employee of Seller shall have entered into any employment,
non-compete and/or non-disclosure agreements with Seller, Seller shall assign to
Buyer, and hereby does assign to Buyer, all of Seller's rights under such
agreements; and
(d) Guaranty Agreements. Bill Goforth, George Gilley, Mildred
-------------------
Goforth and Sheila Gilley shall each have entered into a Guaranty Agreement
substantially in the forms attached hereto as Exhibit "S" and by this reference
made a part hereof; and
(e) Employment Agreement. Russ Goforth shall have entered into an
--------------------
Employment Agreement substantially in the form attached hereto as Exhibit "T"
and by this reference made a part hereof.
13. 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.
14. Corporate Covenant Not to Compete. The Corporation hereby agrees
---------------------------------
that for a period of sixty (60) months from January 1, 1996, 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 durable medical equipment business within
9
<PAGE>
fifty (50) miles of the office located at 1646 Memorial Boulevard, Murfreesboro,
Tennessee or within fifty (50) miles of the office located at 369 North Parkway,
Suite 200, Jackson, Tennessee.
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 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 Tennessee and any
action involving this Covenant Not to Compete shall be brought in the court of
appropriate jurisdiction in Rutherford County, Tennessee.
15. 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 other than those liabilities in the amounts listed on the Schedule of
Liabilities Assumed attached hereto as Exhibit "F," not to exceed $202,071.11.
The remedies of Buyer pursuant to this paragraph 15 shall include, but not be
limited to, the right of offset against the Escrowed Cash held in escrow
pursuant to paragraph 4 hereof.
16. Use of Corporate and Fictitious Names. Seller agrees to take all
--------------------------------------
actions necessary to assist Buyer in obtaining the rights to utilize the
corporate name "Preferred Medical Equipment Co., Inc." and any fictitious names
used in its conduct of the Business, including, but not limited to, the
execution of any assignments and consents to use.
17. 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,
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.
18. 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
10
<PAGE>
upon any person, other than the parties hereto, and their successors, any rights
or remedies under or by reason of this Agreement.
19. 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.
20. 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.
21. Notices. All notices of request, demand and other communications
-------
hereunder shall be addressed to the parties as follows:
TO SELLER: PREFERRED MEDICAL EQUIPMENT CO., INC.
1646 Memorial Boulevard
Murfreesboro, Tennessee 37129
Attn: Bill Goforth
TO BUYER: HOME MEDICAL SYSTEMS, INC.
4506 L.B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
22. Choice of Law. It is the intention of the parties that the laws of the
-------------
State of Tennessee 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 Rutherford County, Tennessee.
23. 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.
24. 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.
25. 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.
11
<PAGE>
26. 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.
27. 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 PREFERRED MEDICAL EQUIPMENT CO.,
in the presence of: INC., a Tennessee corporation
/s/ George Gilley By: /s/ Bill Goforth
- ------------------------------ ------------------------------------
Bill Goforth, President
/s/ Jim Monroe Dated Executed: January 5, 1996
- ------------------------------ -----------------
"Seller"
HOME MEDICAL SYSTEMS, INC., a South
Carolina corporation
/s/ George Gilley By: /s/ J. Michael Loftis
- ------------------------------ ------------------------------------
J. Michael Loftis, President
/s/ Jim Monroe Date Executed: January 5, 1996
- ------------------------------ ------------------
"Buyer"
12
<PAGE>
STATE OF TENNESSEE
COUNTY OF RUTHERFORD
The foregoing instrument was acknowledged before me this 5th day of
January, 1996, by BILL GOFORTH, as President of PREFERRED MEDICAL EQUIPMENT,
INC., a Tennessee corporation, on behalf of the corporation. He (X) is
personally known to me; or ( ) has produced drivers license as identification.
/s/ Mary Erickson Hodge
---------------------------------------
Notary Signature
Mary Erickson Hodge
----------------------------
Notary Name Printed
Notary Public, State of Tennessee
My Commission Expires:
STATE OF TENNESSEE
COUNTY OF RUTHERFORD
The foregoing instrument was acknowledged before me this 5th day of
January, 1996, by J. MICHAEL LOFTIS, as President of HOME MEDICAL SYSTEMS, INC.,
a South Carolina corporation, on behalf of the corporation. He (X) is personally
known to me; or ( ) has produced drivers license as identification.
/s/ Mary Erickson Hodge
----------------------------------------
Notary Signature
Mary Erickson Hodge
--------------------------
Notary Name Printed
Notary Public, State of Tennessee
My Commission Expires:
13
<PAGE>
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
-----------------------------------------
AND COVENANT NOT TO COMPETE
---------------------------
THIS AGREEMENT is made as of the 1st day of January, 1996, by and between
RESPIRATORY HOME CARE, INC., a Georgia corporation, having its principal place
of business at 511 North Cobb Street, Suite 6, Milledgeville, Georgia 31061
(hereinafter referred to as the "Seller" or "Corporation"), and RESPIRATORY
MEDICAL EQUIPMENT OF GA., INC., a Florida 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 Georgia
(the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller, certain assets of
the Business (together as herein described sometimes referred to as the
"Assets"), including but not limited to accounts 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 (to the extent assignable) listed on the Schedule of Provider Numbers
and Telephone Numbers attached hereto as Exhibit "A"; (b) the Patients' List of
the Business attached hereto as Exhibit "B"; (c) the telephone numbers listed on
the Schedule of Provider Numbers and Telephone Numbers attached hereto as
Exhibit "A"; (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 and cash
equivalents. 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 as of
------------------------------------------
the Effective Date referred to below:
(a) Accounts Receivable. Sell, assign and transfer to the Buyer all
-------------------
of the Seller's rights, title and interest in the accounts receivable of the
Business set forth on the Schedule of Accounts Receivable Data attached hereto
as Exhibit "C" 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 Schedule of Inventory and Fixed Assets attached
hereto as Exhibit "D" and by this reference made a part hereof; and
<PAGE>
(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 "E" 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 (to the extent assignable) listed on the Schedule of
Provider Numbers and Telephone Numbers attached hereto as Exhibit "A"; (ii) the
Patients' List of the Business, as described in Exhibit "B"; (iii) the telephone
numbers listed on the Schedule of Provider Numbers and Telephone Numbers
attached hereto as Exhibit "A"; (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 and cash equivalents.
(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 TWO MILLION SIX HUNDRED THOUSAND DOLLARS
($2,600,000.00) in cash (the "Cash Consideration"), plus 41,818 shares of the
common stock, par value $.0002, of RoTech Medical Corporation, a Florida
corporation (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
having the following legends printed thereon: the restrictive legend required by
paragraph 5(f) hereof. 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 "F" and by this reference made a part
hereof, and both parties hereto expressly consent to the allocation stated
therein.
(b) Method of Payment. Cash Consideration in the amount of
-----------------
$2,600,000.00 (less $65,000.00 payable to Steven Richards & Associates and less
$110,000.00 payable to Timothy Binkley) will be paid to Seller on the Closing
Date, by wired funds to Seller's account number 00039834 at Central Southern
Bank against and in consideration of the Assets and Covenant Not to Compete.
Seller agrees that each of Steven Richards & Associates and Timothy Binkley have
acted as their representative and broker in connection with the transactions
contemplated by this Agreement. Accordingly, Seller agrees that Buyer shall be
authorized to withhold from its payment of the Cash Consideration the amount of
$65,000.00, payable by Seller to Steven Richards & Associates and to disburse
said amount directly to Steven Richards & Associates, and Seller further agrees
that RoTech shall be authorized to withhold from its payment of the Cash
Consideration the amount of $110,000.00, payable by Seller to Timothy Binkley
and to disburse said amount directly to Timothy Binkley. The RoTech Stock shall
be pledged pursuant to the terms of that certain Stock Pledge and Security
Agreement, in the form attached hereto as Exhibit "G" 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,
2
<PAGE>
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 "H" and
by reference made a part hereof (the "Escrow Agreement"). The Buyer shall cause
the RoTech Stock to be delivered directly to Escrow Agent within thirty (30)
days from the Closing Date. The parties hereto acknowledge that the RoTech Stock
being placed in escrow is subject to reduction pursuant to paragraph 6(a)
hereof.
(c) Indemnity Against Creditors Claims; Assumption of Certain
---------------------------------------------------------
Liabilities. The Seller has requested the Buyer to waive the requirements of
- -----------
the bulk sales and transfer laws of the State of Georgia. 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 no trade liabilities of any nature that encumber the
Assets (accrued, absolute, contingent or otherwise), nor are there any other
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 liabilities of any kind in connection with its
purchase of the Assets, except those certain liabilities set forth on the
Schedule of Liabilities Assumed attached hereto as Exhibit "U," and those
certain leases, contracts and agreements set forth on the Schedule of Leases,
Contracts and Agreements attached hereto as Exhibit "O."
3. Existing Obligations. The Seller represents and warrants that, to the
--------------------
best of its knowledge and belief all of the Seller's debts, liabilities and
obligations are listed on the Schedule of Liabilities attached hereto as Exhibit
"I" and such schedule accurately reflects all of Seller's "Existing Obligations"
(as hereinafter defined) as of December 31, 1995, except for liabilities
incurred in the ordinary course of business between November 30, 1995, and
December 31, 1995, which will be provided to Buyer as soon as available. The
term "Existing Obligations" shall mean and refer to all of the Seller's debts,
liabilities and obligations of any nature (whether absolute, accrued,
contingent, or otherwise) on the Effective Date, including but not limited to
any and all accounts payable, notes payable, trade payables, lease obligations,
indebtedness for borrowed money, accrued interest, contractual obligations, etc.
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.
4. Right of Offset Against the RoTech Stock. Subject to the limitations
----------------------------------------
of paragraph 17 of this Agreement, in the event that: (i) the Buyer pays for any
debts or liabilities of Seller in excess of those certain liabilities, set forth
on the Schedule of Liabilities Assumed attached hereto as Exhibit "U," and those
certain leases, contracts and agreements set forth on the Schedule of Leases,
Contracts and Agreements attached hereto as Exhibit "O (amount in excess of the
amounts set forth on Exhibits "U" and "O" are herein referred to as the
"Liabilities Deficiency"), or (ii) the aggregate value of the Corporation's
collectible accounts receivable as of November 30, 1995, are determined to be
less than $_______, as determined by actual cash collections of such receivables
during the twelve (12) month period immediately following the Closing Date (the
3
<PAGE>
"Asset Value Deficiency"), or (iii) the Corporation has, since November 1, 1995
except as disclosed on an exhibit hereto, 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 except in
the ordinary course of business, 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 except in the ordinary course of business; 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
Effective 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 Effective
Date (subject, however, in the case of a "Dispute", to the provisions of
paragraph 17 hereof applicable to a "Dispute") 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 Effective Date, in the event
Buyer makes written request to Seller hereunder for Seller to pay any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency or
Contingent Liability, 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
Effective Date (subject, however, in the case of a "Dispute", to the provisions
of paragraph 17 hereof applicable to a "Dispute"), 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 $27.50. Buyer's right of offset against the RoTech Stock shall terminate on
that date which is twenty-four (24) months from the Effective 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.
In the event the right of offset is extended past the Release Date because a
claim is in dispute, RoTech Stock having a value equal to twice the amount of
the claim asserted by Buyer (using $27.50 per share in such calculation) shall
continue to be held in escrow
4
<PAGE>
past the Release Date until such claim is resolved, with the remaining shares of
RoTech Stock released to Seller within fifteen (15) days after the Release Date.
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. Notwithstanding anything contained in this paragraph 4 to the
contrary, in the case of a "Dispute" (as defined in paragraph 17 hereof), the
provisions of paragraph 17 hereof applicable to a "Dispute" shall govern, and no
offset against the RoTech Stock shall occur until the applicable "Dispute" is
resolved in accordance with the provisions of paragraph 17 hereof. The offset
provisions of this paragraph 4 shall also be subject to the threshold liability
provisions set forth in subparagraph (f) of paragraph 17 hereof.
5. 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 predicated 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 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, Seller or any subsequent
holder of the RoTech Stock shall bear the costs of obtaining such opinion of
counsel, up to $275.00 for each opinion of counsel issued in connection with
transfers under Rule 144. 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
5
<PAGE>
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 Legend. 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.
(g) No Registration Rights. Seller acknowledges that it possesses
----------------------
no rights whatsoever to have any of the RoTech Stock registered.
6. Contingent Reduction of Shares of RoTech Stock; Put Option.
----------------------------------------------------------
(a) Contingent Reduction of Shares of RoTech Stock.
----------------------------------------------
(1) Terms of Reduction. In the event the "First Two Year's
------------------
Average Operating Profits" of the "Purchased Entity" is less than SEVEN HUNDRED
FIFTY THOUSAND DOLLARS ($750,000.00) (the "Threshold Amount"), the number of
shares of RoTech Stock required to be delivered by Buyer to Seller at the end of
the Escrow Period shall be reduced by .1818 shares of RoTech Stock for every ONE
DOLLAR ($1.00) of the First Two Year's Average Operating Profits during the
Measurement Period below the Threshold Amount, rounded to the nearest full
share, with Buyer retaining complete title to and possession of such shares as
if Buyer were at all times the sole owner of such shares. For example, in the
event the First Two Year's Average Operating Profits of the Purchased Entity
during the Measurement Period is $650,000.00, the difference from the Threshold
Amount of $100,000.00 would result in a reduction hereunder of 18,181 shares of
RoTech Stock ($100,000.00 x .1818), with all of such shares being returned to
Buyer by the Escrow Agent upon final determination of the First
6
<PAGE>
Two Year's Average Operating Profits and with the balance of 23,637 shares of
RoTech Stock (less any offsets pursuant to paragraph 4 hereof) delivered to
Seller at the end of the Escrow Period. In the event that the First Two Year's
Average Operating Profits of the Purchased Entity are less than the Threshold
Amount, the parties agree that the sole consequence under this Agreement shall
be the reduction in the number of shares of RoTech Stock required to be
delivered by Buyer to Seller at the end of the Escrow Period. If said reduction
results in return of all of the RoTech Stock to Buyer, there shall be no other
liability of Seller to Buyer solely for failure to equal or exceed the Threshold
Amount. Both Buyer and Seller agree, that if at any time during the first two
(2) years following the Effective Date, the Purchased Entity achieves
$1,500,000.00 in Two Years' Average Operating Profits, all escrowed RoTech Stock
shall be released to Seller, subject to any extraordinary event, and any RoTech
Stock released shall remain subject to the restrictions set forth in paragraph 5
above.
(2) Certain Definitions. The term "First Two Year's Average
-------------------
Operating Profits" shall have the definition set forth on Exhibit "J" attached
hereto. The term "Purchased Entity" shall mean that division of the Buyer which
represents the Business purchased from Seller hereunder. The "Measurement
Period" shall mean that period commencing January 1, 1996 and ending December
31, 1997. During the term Measurement Period, the Buyer shall maintain separate
accounting records for the Purchased Entity to track the First Two Year's
Average Operating Profits during the Measurement Period. The term "Delivered
RoTech Shares" shall mean the total number of shares of RoTech Stock actually
delivered to Seller by Buyer by the end of the Escrow Period, reflecting all
reductions pursuant to paragraph 6(a)(1) hereof and all offsets pursuant to
paragraph 4 hereof. The Delivered RoTech Shares shall be issued with
certificates titled in the name of the Seller and having the following legends
printed thereon: the restrictive legend required by paragraph 5(f) hereof.
(b) Put Option.
----------
(1) Amount and Price. The Seller shall have the right to
----------------
require Buyer to repurchase some or all of the Delivered RoTech Shares received
by Seller pursuant to this Agreement (sometimes herein referred to as the
"Option Shares") at a repurchase price of $27.50 per share (the "Option Price").
(2) Restrictions On Exercise. This Put Option is not negotiable
------------------------
but Seller's may submit Option Shares for redemption by Buyer at the applicable
Option Price during the period commencing January 1, 1998 and ending December
31, 1998, but only with respect to Option Shares representing RoTech Stock which
has been released to Seller's from the escrow arrangement. This Put Option may
only be exercised in blocks of 5,000 shares or more, is not assignable in any
respect and can only be exercised by Seller's.
(3) Term of Option. All Option Shares submitted pursuant to
--------------
this Put Option must be delivered to the executive offices of Buyer, at the
address set forth on page 1 hereof (or at such other address as is communicated
by Buyer to Seller in writing). At 5:00 p.m.,
7
<PAGE>
E.S.T., December 31, 1998, this Put Option shall expire and shall thereafter
have no prospective effect.
(4) Exercise of Put Option and Delivery of Shares. To validly
---------------------------------------------
exercise this Put Option, Seller must execute a statement in which Seller
warrants that it has full and clear title to the applicable Option Shares, free
of all liens and encumbrances. Such statement must be accompanied by original
stock certificates evidencing not less than the number of Option Shares 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 (and who is also a member of the Medallion
Group) or a commercial bank who is a member of the Federal Reserve System (and
who is also a member of the Medallion Group).
(5) Settlement. Settlement for any Option Shares redeemed
----------
pursuant to this Put Option shall occur on that day which is thirty (30)
business days from the day such Option Shares are submitted to Buyer with all
required documentation. Such payment shall be made without interest.
7. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be January 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Seller and Buyer is herein sometimes referred to as the "Closing" or
"Closing Date".
8. Asset Condition and Quality. All Assets of Seller to the best of
---------------------------
Seller's knowledge are free of defects and in good working order, condition and
repair, except for ordinary wear and tear. All of the Assets on the Closing
Date shall conform in all material respects with all applicable ordinances,
regulations, zoning and other laws.
9. 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.
10. Sales and Transfer Taxes Fees. The transaction herein contemplated is
-----------------------------
exempt from sales tax pursuant to the "casual sale" exemption of the State of
Georgia. In the event, however, of the levy of any sales, transfer, use, filing
and other taxes and fees that may be due or payable
8
<PAGE>
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, then the cost thereof 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.
11. Restrictions on Operations of Seller. Except as disclosed on
------------------------------------
Exhibits hereto, since November 30, 1995, 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 this Agreement and 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 any of its shareholders,
except as disclosed on the Schedule of Distributions to Shareholders attached
hereto as Exhibit "K".
12. 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 Georgia 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
9
<PAGE>
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 respect under any of
----------
the contracts, agreements, leases, documents or other commitments to which it is
a party or otherwise bound, which default has an adverse affect on the Business.
(g) Brokers. Seller agrees that each of Steven Richards & Associates
-------
and Timothy Binkley have acted as Seller's representatives and brokers in
connection with the transactions contemplated by this Agreement. Accordingly,
Seller agrees that Buyer shall be authorized to withhold from its payment of the
Cash Consideration the amounts of $65,000.00, payable by Seller to Steven
Richards & Associates, and $110,000.00 payable by Seller to Timothy Binkley, and
to disburse said amount directly to each of them. In the event Seller is
entitled to receive shares of RoTech Stock at the end of the Escrow Period,
Seller shall convey over to Steven Richards & Associates 1,255 Shares of RoTech
Stock and to Timothy Binkley 2,509 Shares of RoTech Stock with such RoTech Stock
being placed in escrow and subject to prorata reduction pursuant to paragraphs 4
and 6(a) hereof (not to exceed the number of Shares being released from Escrow)
at the end of Escrow Period and hereby authorizes Buyer to deliver such Shares
directly to each of Steven Richards & Associates and Timothy Binkley. All
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly between Buyer and Seller without the intervention
or assistance of any party other than each of Steven Richards & Associates and
Timothy Binkley (other than to provide accounting or legal counsel). No party
to this Agreement, nor any third party, other than each of Steven Richards &
Associates and Timothy Binkley, has any right or claim to any commission,
brokerage fee or other compensation relative to this Agreement or the
transactions contemplated hereby. Seller agrees that Buyer shall have no
obligation for payment of any fees or commissions to Steven Richards &
Associates and Timothy Binkley other than to withhold a portion of the Purchase
Price as set forth in this paragraph (g) and to disburse the same. Buyer
warrants that it has not become obligated to any broker or agent for any fee or
commission.
10
<PAGE>
(h) Employment Contracts; Employees. There are no written contracts
-------------------------------
of employment between Seller and any officer or other employee of the Business.
The information contained on the Schedule of Personnel Payrates and Advances
attached hereto as Exhibit "L" 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 and other
casualty through the Closing Date. The information contained on the Schedule of
Insurance Policies, attached hereto as Exhibit "M", 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,
------------------------------------
Rick Whirley and Thomas E. Vogler are all of the shareholders of the Seller and
the following individuals are the officers and directors of the Seller:
<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
Rick Whirley President/Director
Thomas E. Vogler Secretary/Treasurer/Director
Timothy Binkley Director
</TABLE>
(m) Cash Receipts. The information contained on the Schedule of
-------------
Collections for the period commencing January 1, 1995, and ending December 31,
1995, attached hereto as Exhibit "N", is accurate and complete.
(n) Inventory and Fixed Assets. The information contained on the
--------------------------
Schedule of Inventory and Fixed Assets as of January 1, 1995, attached hereto as
Exhibit "D", is accurate and complete.
(o) Leases, Contracts and Agreements. The information contained on
--------------------------------
the Schedule of Leases, Contracts and Agreements as of November 30, 1995,
attached hereto as Exhibit "O", is accurate and complete.
11
<PAGE>
(p) Tax Returns and Financial Statements. Seller has furnished
------------------------------------
Buyer with tax returns (the "Tax Returns") for the periods ended December 31,
1993, December 31, 1994, and December 31, 1995 (as soon as available) and has
furnished Buyer with financial statements (the "Financial Statements") for the
periods ended December 31, 1994, September 30, 1995, October 31, 1995, and
November 30, 1995 (the "Financial Statement Dates"), copies of which are
attached hereto as Exhibit "P" 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 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 "Q."
13. 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 Florida.
(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.
12
<PAGE>
14. 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:
(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 Agreements. Rick Whirley and Thomas E. Vogler shall
----------------------
each have entered into a non-compete agreement substantially in the forms
attached hereto as Exhibit "R" and by this reference made a part hereof. Also,
in the event any shareholder, director, officer or employee of Seller shall have
entered into any employment, non-compete and/or non-disclosure agreements with
Seller, Seller shall assign to Buyer, and hereby does assign to Buyer, all of
Seller's rights under such agreements; and
(d) Guaranty Agreement. Rick Whirley shall have entered into a
------------------
Guaranty Agreement substantially in the forms attached hereto as Exhibit "S" and
by this reference made a part hereof; and
(e) Employment Agreement. Rick Whirley shall have entered into an
--------------------
Employment Agreement substantially in the form attached hereto as Exhibit "T"
and by this reference made a part hereof.
15. 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.
16. Corporate Covenant Not to Compete. The Corporation hereby agrees
---------------------------------
that for a period of sixty (60) months from January 1, 1996, 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 home care business within fifty (50) miles of
511 North Cobb Street, Suite 6, Milledgeville, Georgia and/or within fifty (50)
miles of 220 Alcovy Street, Monroe, Georgia.
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
13
<PAGE>
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 Georgia and any
action involving this Covenant Not to Compete shall be brought in the court of
appropriate jurisdiction in Baldwin County, Georgia.
17. Indemnification; Remedies.
-------------------------
(a) Indemnification of Seller. The Seller shall and hereby agrees
-------------------------
to indemnify and hold harmless at all times, Buyer and its directors, officers,
employees, agents and assigns, as to and against any Damages (as hereinafter
defined) resulting from: (i) any materially inaccurate representation made by
Seller in or under this Agreement; (ii) breach of any warranties made by Seller
in or under this Agreement; (iii) breach or default in the performance by Seller
of any of the covenants to be performed by Seller hereunder; and (iv) any debts,
liabilities or obligations of the Seller pertaining to the Business, whether
accrued, absolute, contingent or otherwise, due or to become due.
(b) Indemnification of Buyer. Buyer shall and hereby agrees to
------------------------
indemnify and hold harmless at all times the Seller, as to and against any
Damages resulting from: (i) any materially inaccurate representation made by
Buyer in or under this Agreement; (ii) breach of any warranties made by Buyer in
or under this Agreement; and (iii) breach or default in the performance by Buyer
of any of the covenants to be performed by Buyer hereunder.
(c) Definition of Damages. The term "Damages" as used herein, shall
---------------------
include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, penalties and damages, including counsel fees incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof. The term "Damages" shall include, but not be limited to, any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency and
Contingent Liability, as defined in paragraph 4 hereof.
(d) Remedies.
--------
(1) Buyer's Remedies. In the event Buyer makes written request
----------------
to the Seller for the payment of Damages and the 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: (i) if such request is made during the Escrow Period and
RoTech Stock sufficient to pay such Damages in full is held by Buyer in escrow,
to make offset against the RoTech Stock, in accordance with the terms and
conditions of this Agreement and the related Pledge Agreement and Escrow
Agreement; (ii) if such request is made during the Escrow Period and the amount
of RoTech Stock held by Buyer in escrow is insufficient to pay such Damages
14
<PAGE>
in full, to first make offset against any RoTech Stock held in escrow and then
to require Seller to pay Buyer the remaining balance in cash within the ten (10)
day period following the applicable Notice Period (and Seller shall be liable
for such balance and for the payment of such balance in full during such
period); and (iii) if such request is made during the Escrow Period and no
RoTech Stock is being held in escrow by Buyer at the time of such request, or if
such request is made after the Escrow Period, to require the Seller to pay Buyer
the full amount of such Damages in cash within the ten (10) day period following
the applicable Notice Period (and Seller shall be liable for such amount and for
the payment of such amount in full during such period); provided, however, that
in any of the events described in (i) through (iii) of this subparagraph (d),
the Seller shall have the option to provide written notice to Buyer within the
Notice Period that the Seller disputes the validity of the Damages triggering
the right of offset against the RoTech Stock and/or the requirement for payment
by Seller in cash, and in the event Buyer and the Seller cannot reach agreement
on the validity of such Damages by the end of the ten (10) day period following
the Notice Period, the dispute over the validity of such claim or liability (the
"Dispute") shall be settled as set forth in subparagraph (e) of this paragraph
17, with the non-prevailing party bearing the prevailing party's costs of
arbitration in the event any Dispute is resolved by arbitration.
(2) Seller's Remedies. In the event Seller makes written
-----------------
request to Buyer for the payment of Damages and Buyer 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"),
Seller shall have the right to require Buyer to pay Seller the full amount of
such Damages in cash within the ten (10) day period following the applicable
Notice Period (and Buyer shall be liable for such amount and for the payment of
such amount in full during such period); provided, however, that Buyer shall
have the option to provide written notice to Seller within the Notice Period
that Buyer disputes the validity of the Damages triggering the requirement for
payment by Buyer in cash, and in the event Seller and Buyer cannot reach
agreement on the validity of such Damages by the end of the ten (10) day period
following the Notice Period, the dispute over the validity of such Damages shall
be settled by arbitration, with the non-prevailing party bearing all of the
prevailing party's costs of arbitration. In the event an arbitration is required
pursuant to this subsection (2) of subparagraph (d), Buyer and Seller will each
select an arbitrator; those two arbitrators will then select a third arbitrator;
and the three arbitrators so chosen will determine the validity of the claim for
Damages. If Seller or Buyer delays in appointing an arbitrator when required,
and twenty (20) days or more has elapsed, the arbitrator appointed by the other
party shall arbitrate the dispute.Compete.
(e) Settlement of Disputes.
----------------------
(1) Disputes Involving Claims by Buyer Against the Seller (Not
----------------------------------------------------------
Involving Third Parties). In the event a Dispute arises which Dispute involves
- ------------------------
claims by Buyer against the Seller (i.e., not involving any third parties),
Buyer and the Seller shall settle the Dispute by submitting same to settlement
by arbitration. In the event arbitration is required pursuant to this
subsection (1) of subparagraph (e), the Seller shall immediately place cash in
the full amount of the requested Damages into a separate escrow fund at Buyer's
direction pending resolution of the Dispute, and Buyer and the Seller will each
select an arbitrator; those two arbitrators will then select
15
<PAGE>
a third arbitrator; and the three arbitrators so chosen will settle the Dispute
(the failure of Seller to place such amount in escrow shall cause the full
amount of Damages to be immediately due and payable by Seller in full). In the
event the final settlement of the Dispute is for an amount less than the amount
in escrow, the balance shall be refunded to the Seller; and in the event the
final settlement of the Dispute is for an amount greater than the amount in
escrow, the Seller shall be liable for the excess, which amount shall be
immediately due and payable.
(2) Disputes Involving Claims Made by Third Parties. In the
-----------------------------------------------
event a Dispute arises which Dispute involves claims made by a third party or
parties (the "Third Party Claim"), Buyer shall give written notice to the Seller
as soon as practical after Buyer receives notice of a Third Party Claim. If any
lawsuit or enforcement action is filed against Buyer by a person asserting a
Third Party Claim, written notice shall be given to the Seller as promptly as is
practicable (in any event, within ten (10) days after the service of citation or
summons). After such notice, if the Seller shall acknowledge in writing to Buyer
that the Seller shall be obligated for such Third Party Claim and if the Seller
shall have placed the disputed amount of the Third Party Claim (such amount
shall be the full amount of the Third Party Claim or, in the exercise of the
Buyer's sole discretion, an amount less than the full amount of the Third Party
Claim) in a separate escrow fund at Buyer's direction pending resolution of the
Third Party Claim (the failure of Seller to place such amount in escrow shall
cause the full amount of Damages to be immediately due and payable by Seller in
full), then the Seller shall be entitled, if Seller so elects, to take control
of the defense and investigation of such lawsuit or action and to employ and
engage attorneys of its own choice to handle and defend the same, at the
Seller's cost, risk and expense, provided that the Seller and its counsel shall
proceed with diligence and in good faith with respect thereto. Buyer shall
cooperate in all reasonable respects with the Seller and their attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that Buyer may, at Buyer's expense,
participate in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. If the Seller has acknowledged to Buyer its
obligation to Buyer hereunder and has placed the disputed amount of the Third
Party Claim in a separate escrow fund as required hereunder, Buyer shall not
settle such lawsuit or enforcement action without the prior written consent of
the Seller and, if the Seller has not so acknowledged its obligation or has
failed to place the required amount in escrow, Buyer shall not settle such
lawsuit or enforcement action without ten (10) days prior notice to the Seller.
In the event the final settlement of the Third Party Claim is for an amount less
than the amount in escrow, the balance shall be refunded to the Seller; and in
the event the final settlement of the Third Party Claim is for an amount greater
than the amount in escrow, the Seller shall be liable for the excess, which
amount shall be immediately due and payable.
(f) Threshold Amount. Unless specifically provided for elsewhere in
----------------
this Agreement, errors or omissions by the Seller pertaining to those items or
matters contained in or delivered pursuant to this Agreement shall not be deemed
breaches of warranty hereunder resulting in Damages unless such errors or
omissions exceed $10,000.00 in the aggregate.
18. Use of Corporate Name and Fictitious Name. Seller agrees to take all
-----------------------------------------
actions necessary to assist Buyer in obtaining the rights to utilize the
corporate name "Respiratory Home
16
<PAGE>
Care, Inc." and any fictitious names used in its conduct of the Business,
including, but not limited to, the execution of any assignments and consents to
use.
19. 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, 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.
20. 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.
21. 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.
22. 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.
23. Notices. All notices of request, demand and other communications
-------
hereunder shall be addressed to the parties as follows:
TO SELLER: RESPIRATORY HOME CARE, INC.
511 North Cobb Street, Suite 6
Milledgeville, Georgia 31061
Attn: Rick Whirley
With copy to: W. Hampton Morris, Esq.
Cushing, Morris, Armbruster & Jones
2110 Peachtree Center Cain Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
TO BUYER: RESPIRATORY MEDICAL EQUIPMENT OF GA., INC.
4506 L.B. McLeod Road, Suite F
Orlando, Florida 32811
Attn: Stephen P. Griggs
24. Choice of Law. It is the intention of the parties that the laws of
-------------
the State of Georgia shall govern the validity of this Agreement, the
construction of its terms and the interpretation of
17
<PAGE>
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
Baldwin County, Georgia.
25. 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.
26. 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.
27. 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.
28. 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.
29. 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 RESPIRATORY HOME CARE, INC.,
in the presence of: a Georgia corporation
/s/ By: /s/ Rick Whirley
- ------------------------------- --------------------------------------
Rick Whirley, President
/s/ Dated Executed: January 8, 1996
- ------------------------------ ----------------
"Seller"
18
<PAGE>
RESPIRATORY MEDICAL EQUIPMENT OF GA., INC.,
a Florida corporation
By: /s/ Stephen P. Griggs
- ------------------------------ --------------------------------------
Stephen P. Griggs, President
Date Executed: January 10, 1996
- ------------------------------ -----------------
"Buyer"
STATE OF GEORGIA
COUNTY OF FULTON
The foregoing instrument was acknowledged before me this 8th day of
January, 1996, by RICK WHIRLEY, as President of RESPIRATORY HOME CARE, INC., a
Georgia corporation, on behalf of the corporation. He (X) is personally known to
me; or ( ) has produced ________________________ as identification.
/s/ Margie W.
------------------------------------------
Notary Signature
Margie W.
---------------------------
Notary Name Printed
Notary Public, State of Georgia
My Commission Expires:
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 10th day of
January, 1996, by STEPHEN P. GRIGGS, as President of RESPIRATORY MEDICAL
EQUIPMENT OF GA., INC., a Florida corporation, on behalf of the corporation. He
(X) is personally known to me; or ( ) has produced ________________________ as
identification.
/s/ Dawn E Mulcahey
------------------------------------------
Notary Signature
Dawn E Mulcahey
----------------------------
Notary Name Printed
Notary Public, State of Florida
My Commission Expires:
19
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
THIS AGREEMENT is entered into as of the 4th day of January, 1996, by and
between Greg Coren and Jean Coren (hereinafter jointly and severally referred to
as "Shareholders" and individually as "Shareholder"), 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 G & G MEDICAL, INC., a Colorado
corporation, hereinafter referred to as the "Corporation," in that the
Corporation has 8,000 shares of its common capital stock outstanding, having no
par value, and Shareholders hold, in the aggregate, 8,000 shares, and there are
no shares of any other class of stock of any description issued and outstanding.
B. The Corporation is engaged in the business of providing respiratory
home care services in the State of Colorado and is fully licensed by all
applicable agencies to do so.
C. Shareholders desire to transfer to RoTech and RoTech desires to
acquire from Shareholders, all of the issued and outstanding shares of the
common capital stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock. 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 8,000 shares
of the common capital stock, having no par value, issued by the Corporation (the
"Stock"), such Stock constituting all of the issued and outstanding common
capital stock of the Corporation. At the Closing, Shareholders will deliver to
RoTech certificates evidencing the Stock duly endorsed to RoTech.
2. Purchase Price.
--------------
(a) The consideration from RoTech to Shareholders in exchange for the
Stock shall be $1,250,000.00 in cash ("cash consideration"), plus that number of
whole shares of the common stock, par value $.0002, of RoTech Medical
Corporation, a Florida corporation (the "RoTech Stock"), resulting from dividing
the closing NASDAQ quote on RoTech common stock as of January 3, 1996, into
$1,350,000.00, which RoTech Stock shall be issued with certificates titled in
the name of Shareholders and having printed thereon the restrictive legend
required by paragraph 5(f) hereof.
<PAGE>
(b) Method of Payment; Pledge of RoTech Stock. The Cash Consideration
-----------------------------------------
of $1,250,000.00 (less the $97,500.00 payable to Baker and Associates) will be
will be paid to Shareholders on the Closing Date by wired funds to account
number 6061659755 at Norwest Bank - North Avenue. Shareholders agree that Baker
and Associates has acted as their representative and broker in connection with
the transactions contemplated by this Agreement. Accordingly, Shareholders agree
that RoTech shall be authorized to withhold from its payment of the Cash
Consideration the amount of $97,500.00, payable by Shareholders to Baker and
Associates and to disburse said amount directly to Baker and Associates. The
RoTech Stock to the extent of $250,000.00 initial value shall be pledged
pursuant to the terms of that certain Stock Pledge and Security Agreement, in
the form attached hereto as Exhibit "B" and by reference made a part hereof (the
"Pledge Agreement"), and shall be placed in escrow for a period of six (6)
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 "C" and by reference
made a part hereof (the "Escrow Agreement"). RoTech shall cause the RoTech Stock
to be issued to Shareholders within thirty (30) days after January 4, 1996, and
thereupon deliver those shares above allocated to escrow/pledge directly to
Escrow Agent and the balance of the shares directly to Shareholders. The parties
hereto acknowledge that the RoTech Stock being placed in escrow is subject to
reduction pursuant to paragraph 4 hereof.
3. Existing Obligations. Shareholders represent and warrant that, to
--------------------
the best of their knowledge and belief, all of the debts, liabilities and
obligations of the Corporation are listed on the Schedule of Liabilities
attached hereto as Exhibit "D" and such exhibit accurately reflects all of
Corporation's "Existing Obligations" (as hereinafter defined) as of the November
30, 1995. 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 November 30, 1995, including but
not limited to any and all accounts payable, trade payables, lease obligations,
indebtedness for borrowed money, accrued interest, contractual obligations, etc.
Shareholders warrant and represent that the aggregate amount of the Existing
Obligations is not in excess of $1,457,096.26. The Shareholders acknowledge that
the purchase price for the Stock is based on the accuracy of Shareholders'
representations and warranties contained in this Agreement, including but not
limited to the Shareholders' representations and warranties contained in this
paragraph 3.
4. Right of Offset Against the RoTech Stock. In the event that: (i)
----------------------------------------
RoTech pays for any debts or liabilities, exceeding an aggregate amount of
$1,457,096.26 plus any additional liabilities incurred in the ordinary course of
business between November 30, 1995, and Closing, (the amount paid by RoTech in
excess of $1,681,545.61 is herein referred to as the "Liabilities Deficiency"),
or (ii) the aggregate value of the Corporation's collectible accounts receivable
as of November 30, 1995, are determined to be less than $441,572.69, as
determined by actual cash collections of such receivables during the six (6)
month period immediately following the Closing Date (the "Asset Value
Deficiency"), or (iii) the Corporation has since November 30, 1995 and on or
before the Closing Date, except as disclosed in writing, 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 payment or distribution to any Shareholder
2
<PAGE>
or purchased or redeemed any of its common capital stock or agreed to do so
except as disclosed on the Schedule of Shareholders, Distributions, and Exempted
Transactions attached hereto as Exhibit "E"; mortgaged, pledged or subjected to
lien or encumbrance any of its assets; sold or transferred any assets except in
the ordinary course of business; 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"), which become known, are uncovered or arise
after the Closing Date, which Obligations pertain to any actions, omissions,
debts, liabilities or obligations (including accrued tax liabilities not
reflected on the books of the Corporation as of November 30, 1995) 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, RoTech shall have the right to recover same from Shareholders and
Shareholders jointly and severally agree to pay said amounts to RoTech within
twenty (20) days after written request from RoTech to Shareholders. During the
six (6) month period following the Closing Date, in the event RoTech makes
written request to Shareholders hereunder and Shareholders fail to make the
requested payment within twenty (20) days from the date of such written request
(said twenty (20) day period hereinafter referred to as the "Notice Period"),
RoTech shall have the immediate 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 six (6) month
period following the Closing Date. Shareholders shall permit RoTech 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 (1) share of RoTech
Stock shall have the effect of reducing any amounts owed to RoTech by $27.50.
RoTech's right of offset against the RoTech Stock shall terminate no later than
July 4, 1996 (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. In the event the right of offset is extended
past the Release Date because a claim is in dispute, RoTech Stock having a value
of twice the amount of the claim asserted by RoTech using the per share closing
price of RoTech common stock as of January 3, 1996, shall continue to be held in
escrow past the Release Date until such claim is resolved , with the remaining
shares of RoTech Stock released to Shareholders within fifteen (15) days after
the Release Date.
5. Characteristics of RoTech Stock; Put Option.
-------------------------------------------
(a) Investment. The RoTech Stock which Shareholders are acquiring
----------
hereunder is being acquired for Shareholders' 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").
3
<PAGE>
(b) Securities Not Registered. Shareholders understand 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 RoTech's reliance on such exemption is predicated on
Shareholders' representations set forth in this paragraph 5.
(c) Rule 144. Shareholders acknowledges that the RoTech Stock must be
--------
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Shareholders are 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
Shareholders intending to sell under the Rule hold the shares for at least two
(2) years. In the event any of the RoTech Stock held by Shareholders becomes
eligible for sale pursuant to Rule 144, and an opinion of RoTech's counsel is
necessary to effectuate the transfer of RoTech Stock thereunder, Shareholders
shall bear the costs of obtaining such opinion of counsel, up to $275.00 for
each opinion of counsel issued in connection with transfers under Rule 144.
RoTech shall process any requests for transfer of RoTech Stock pursuant to Rule
144 in an efficient and prompt manner. Notwithstanding the foregoing, all costs
of the first request shall be fully paid by RoTech.
(d) Access to Data. Shareholders have received and reviewed
--------------
information about RoTech and have had an opportunity to ask questions of, and
receive answers from RoTech concerning RoTech's business, management, legal and
financial affairs and to obtain additional information (to the extent RoTech
possesses such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished.
Shareholders also had the opportunity to inspect RoTech's facilities.
Shareholders understand 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. Shareholders are experienced in evaluating and investing
-----
in high risk companies such as RoTech and by reason of their business and
financial experience have the capacity to protect their own interests in
connection with the transactions contemplated by this Agreement and have the
ability to bear the economic risk of their 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
4
<PAGE>
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.
(g) No Registration Rights. Shareholders acknowledge that they
----------------------
possess no rights whatsoever to have any of the RoTech Stock registered.
(h) Put Option.
----------
(1) Amount and Price. Shareholders shall have the right to
----------------
require RoTech to repurchase some or all of the RoTech Stock actually released
to Shareholders from escrow arrangement received by Shareholders pursuant to
this Agreement (sometimes herein referred to as the "Option Shares") at a
repurchase price equal to the closing price of RoTech Stock as of January 3,
1996 per share (the "Option Price").
(2) Restrictions on Exercise. This Put Option is not negotiable
------------------------
but Shareholders may submit Option Shares for redemption by RoTech at the
applicable Option Price during the period commencing January 4, 1997 and ending
twenty-five (25) months after the issue date of the Option Shares, but only with
respect to Option Shares representing RoTech Stock which has been released to
Shareholders from the escrow arrangement. This Put Option may only be exercised
in blocks of 5,000 shares or more (unless the party seeking to exercise the put
is at the time of exercise the record owner of less than 5,000 shares), is not
assignable in any respect and can only be exercised by Shareholders.
(3) Term of Option. All Option Shares submitted pursuant to this
--------------
Put Option must be delivered to the executive offices of RoTech, at the address
set forth in paragraph 22 hereof (or at such other address as is communicated by
RoTech to Shareholders in writing). At 5:00 p.m., E.S.T., on the date which is
twenty-five (25) months after the issue date of the Option Shares this Put
Option shall expire and shall thereafter have no prospective effect.
(4) Exercise of Put Option and Delivery of Shares. To validly
---------------------------------------------
exercise this Put Option, Shareholders must execute a statement in which
Shareholders warrant that they have full and clear title to the applicable
Option Shares, free of all liens and encumbrances. Such statement must be
accompanied by original stock certificates evidencing not less than the number
of Option Shares 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 (and who is also
a member of the Medallion Group) or a commercial bank who is a member of the
Federal Reserve System (and who is also a member of the Medallion Group).
(5) Settlement. Settlement for any Option Shares redeemed
----------
pursuant to this Put Option shall occur on that day which is thirty (30)
business days from the day such Option
5
<PAGE>
Shares are submitted to RoTech with all required documentation. Such payment
shall be made without interest.
6. The Closing and Closing Date. The date for the transaction
----------------------------
contemplated under this Agreement will be January 4, 1996, herein sometimes
referred to as the "Effective Date." The date on which this Agreement is fully
executed by both the Shareholders and RoTech is herein sometimes referred to as
the "Closing" or "Closing Date".
7. Representations and Warranties by Shareholders. Shareholders jointly
----------------------------------------------
and severally represent and warrant to RoTech that, to the best of Shareholder's
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 Colorado 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 50,000 shares of common capital stock, having no
value, of which 8,000 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, nor are any unissued shares committed to any
party by Corporation or any Shareholder. 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, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
6
<PAGE>
(iv) All FICA, Federal and state withholding tax deposits have
been timely and fully reported and paid.
(v) There are no outstanding or unpaid loans to stockholders,
directors or officers other than as listed on Exhibit "E" hereof.
(d) Financial Statements. Shareholders have furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated March 31, 1993, March 31, 1994, and
November 30, 1995, and the related statements of income (the "Income
Statements") for the periods ended March 31, 1994 and November 30, 1995, copies
of which are attached hereto as Exhibit "F" 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, do not reflect reserves for any 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, or contingent) of the Corporation at the balance sheet dated
November 30, 1995, and include entry for all accrued income 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 4 hereof.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "E", since November 30, 1995, 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 Shareholders 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 except in the ordinary course of
business; 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
Colorado. In the event that a deficiency is determined in the amount of Federal
or State or Local tax payable by the Corporation, which
7
<PAGE>
deficiency relates to periods ending on or before the Closing Date, then, in
that event, the Shareholders jointly and severally 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. Shareholders 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,
which are not reflected in the balance sheet of November 30, 1995, plus awards
for business activity during the period commencing November 30, 1995, and ending
on the Closing Date. Copies of the Corporation's Federal Income tax returns for
the periods ending December 31, 1993 and December 31, 1994, are attached hereto
as part of Exhibit "F."
(g) Litigation. There are no legal actions, suits, arbitrations, or
----------
other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation, and no Shareholder is aware of any facts
which to the knowledge of such Shareholder might result in any such action,
suit, arbitration, or other proceedings, except as disclosed on the Schedule of
Litigation and Other Proceedings attached hereto as Exhibit "G" 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 any Shareholder is 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, and the property described in
the Schedule of Property attached hereto as Exhibit "H" 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(s), its patient
list, and its provider number. Shareholders hereby agree to undertake whatever
steps are necessary to assure that 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 on the Closing Date shall be in good operating condition and repair,
reasonable wear and tear
8
<PAGE>
excepted and which are being repaired in the ordinary course of business, 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 "I" 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. 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 service marks, service 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 "J" 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, 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 thirty
(30) 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.
(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) Brokers. Shareholders agree that Baker and Associates has acted
-------
as their representative and broker in connection with the transactions
contemplated by this Agreement. Accordingly, Shareholders agree that RoTech
shall be authorized to withhold from its payment of the Cash Consideration the
amount of $97,500.00, payable by RoTech to Baker and Associates and to disburse
said amount directly to Baker and Associates. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on directly
between RoTech and Shareholders without the intervention or assistance of any
party other than Baker and Associates (other than to provide accounting or legal
counsel). No party to this Agreement, nor
9
<PAGE>
any third party, other than Baker and Associates, has any right or claim to any
commission, brokerage fee or other compensation relative to this Agreement or
the transactions contemplated hereby. Shareholders agree that RoTech shall have
no obligation for payment of any fees or commissions to Baker and Associates
other than to withhold a portion of the Purchase Price as set forth in this
paragraph (o) and to disburse the same. RoTech warrants that it has not become
obligated to any broker or agent for any fee or commission.
(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 November 30, 1995, attached
hereto as Exhibit "K", is accurate and complete.
(r) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data as of November 30, 1995, attached hereto as Exhibit
"L", is accurate and complete. The Shareholders further warrant and represent
that none of the Corporation's accounts receivable shown on Exhibit "L" are
false claims.
(s) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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
November 30, 1995, 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 November 30, 1995,
------------------------------------
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.
(v) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel, Payrates and Non-Compete Agreements as
of November 30, 1995, attached hereto as Exhibit "M", 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.
10
<PAGE>
(w) Employee Benefit Plans. Shareholders have no pension, bonus,
----------------------
profit-sharing, or retirement plans for officers or employees of the
Corporation, except for a 401(k) plan, which Shareholders shall terminate at
Shareholders' expense.
(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. Corporation or any Shareholder
-----------------------------
has not 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 or any
Shareholder 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 Adverse Business Development attached hereto as Exhibit "N."
8. Representations and Warranties by RoTech. RoTech represents, warrants
----------------------------------------
and covenants to Shareholders as of the date of this Agreement as follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and authority to consummate the transactions contemplated by this
Agreement and has by proper corporate proceedings duly authorized the same.
(b) Authority Relative to this Agreement. The execution, delivery and
------------------------------------
performance of this Agreement and all agreements and documents contemplated
hereby and the issuance of the RoTech stock do not and will not violate any
provision of RoTech's Articles of Incorporation or Bylaws or to RoTech's
knowledge any provisions of any judicial or governmental law, decree, order or
judgment, or conflict with, or result in a breach of or constitute a default
under any material agreement or instrument to which RoTech is a party or by
which it is bound, including agreements with lending institutions.
(c) Validity and Binding Effect. This Agreement and the provisions
---------------------------
thereunder will be valid and legally binding obligations of RoTech and the same
shall be enforceable in accordance with their respective terms, subject as to
the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws that affect the enforcement of
creditors, rights generally and possible limitations on the availability for
equitable remedies including specific performance.
9. Resignation of Officers and Directors. Shareholders shall deliver to
-------------------------------------
RoTech, at the Closing, the undated written resignations of all of the directors
and officers of the Corporation.
11
<PAGE>
Immediately following Closing, RoTech shall appoint such Registered Agent for
Corporation as it shall elect and as shall be acceptable to such agent.
10. Employment Agreement. Greg Coren shall enter into an employment
--------------------
agreement substantially in the form attached hereto as Exhibit "O."
11. Non-Compete Agreements. Shareholders shall each cause to be executed,
----------------------
at closing, individual noncompetition agreements in the form attached as
Exhibits "P-1" and "P-2."
12. Indemnification. Shareholders hereby jointly and severally agree to
---------------
indemnify RoTech and hold RoTech harmless against all damages, as such term is
hereinafter defined resulting from: (i) any material misrepresentation made in
this Agreement or in any exhibit thereto, or (ii) any breach of any warranty
made by any Shareholder in this Agreement, or (iii) any breach in the
performance by any Shareholder of any of his or her obligations under this
Agreement, or (iv) any debts, liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) of Corporation. As used herein, the
term "damages" includes any loss, cost or liability, excluding any attorneys'
fees and court costs (whether incurred at trial or on appeal), and less any
insurance recoveries received by RoTech.
13. 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.
14. Amendment and Waiver. This Agreement may be amended or modified
--------------------
at any time in all respects by an instrument in writing executed by Shareholders
and RoTech.
15. Assignment. Neither this Agreement nor any right created hereby
----------
shall be assignable by 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 Shareholder's death, a transfer
to the legal representatives of such Shareholder's estate or to such
Shareholder's legal heirs. 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. 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.
16. 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.
17. 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 instrument.
12
<PAGE>
18. 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 Shareholders, and their respective heirs, executors, administrators,
successors and assigns.
19. 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.
20. Survival of Agreement. The provisions of this Agreement shall survive
---------------------
the Closing for the sale and purchase of the Stock. However, all representations
and warranties and indemnifications of Shareholders shall expire January 4,
1998.
21. Choice of Law and Venue. This Agreement, shall be construed under and
-----------------------
in accordance with the Uniform Commercial Code and other applicable laws of the
State of Colorado and all obligations of the parties created hereunder are
performable in Mesa County, Colorado. Both parties submit themselves to the
jurisdiction of the State of Colorado sitting in Mesa County, Colorado and
stipulate that such courts hold proper venue.
22. 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: With a copy to:
Greg Coren Tim Foster, Esq.
Jean Coren 422 White Avenue, Suite 2323
595 21-1/8 Road Grand Junction, Colorado 81501
Grand Junction, Colorado 81503
As to RoTech Medical Corporation:
RoTech Medical Corporation
Attn: William P. Kennedy, Chief Executive Officer
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
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.
23. 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.
13
<PAGE>
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/ /s/ Greg Coren
- ------------------------------- ---------------------------------------
Greg Coren
/s/
- -------------------------------
/s/ /s/ Jean Coren
- ------------------------------- ---------------------------------------
Jean Coren
/s/
- -------------------------------
"Shareholders"
ROTECH MEDICAL CORPORATION,
a Florida corporation
- ------------------------------- By: /s/ William P. Kennedy
------------------------------------
William P. Kennedy, Chief Executive
Officer
- -------------------------------
"RoTech"
14
<PAGE>
STATE OF COLORADO
COUNTY OF MESA
The foregoing instrument was acknowledged before me this 4th day of January
1996, by Greg Coren. He (X) is personally known to me or ( ) has produced
as identification.
- -------------------------
/s/ Cathleen Cannizzaro
------------------------------
NOTARY SIGNATURE
Cathleen Cannizzaro
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
STATE OF COLORADO
COUNTY OF MESA
The foregoing instrument was acknowledged before me this 4th day of
January, 1996, by Jean Coren. She (X) is personally known to me or ( ) has
produced ___________________________ as identification.
/s/ Cathleen Cannizzaro
------------------------------
NOTARY SIGNATURE
Cathleen Cannizzaro
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
STATE OF COLORADO
COUNTY OF MESA
The foregoing instrument was acknowledged before me this 3rd day of
January, 1996, by WILLIAM P. KENNEDY, as Chief Executive Officer of RoTech
Medical Corporation, a Florida corporation, on behalf of the corporation. He (X)
is personally known to me or has produced _______________ as identification.
/s/ Cathleen Cannizzaro
------------------------------
NOTARY SIGNATURE
Cathleen Cannizzaro
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
15
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
THIS AGREEMENT is entered into as of the 1st day of January, 1996, by and
between Robert H. Lauver and W. Donald Fisher (hereinafter individually referred
to as "Shareholder" and together referred to as "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 the common stock of CPO2, Inc., a Pennsylvania
corporation, hereinafter referred to as the "Corporation," in that the
Corporation has 1,000 shares of its common capital stock outstanding, and
Shareholders hold, in the aggregate, 1,000 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 Pennsylvania and fully licensed by all applicable
agencies to do so.
C. Shareholders desire to transfer to RoTech and RoTech desires to
acquire from Shareholders, all of the issued and outstanding shares of the
common capital stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock. 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 1,000 shares
of the common capital stock, having no par value issued by the Corporation (the
"Stock"), such Stock constituting all of the issued and outstanding common
capital stock of the Corporation. At the Closing, Shareholders will deliver to
RoTech certificates evidencing the Stock duly endorsed to RoTech.
2. Purchase Price.
--------------
(a) Purchase Price. The total consideration from RoTech to
--------------
Shareholders in exchange for the Stock is FOUR MILLION DOLLARS ($4,000,000.00)
in cash (the "Purchase Price"). The Purchase Price shall be allocated to the
Shareholders on a prorata basis pursuant to each Shareholder's percentage
ownership of Stock in the Corporation as set forth on Exhibit "A" hereto.
(b) Method of Payment; Escrow Agreement. $3,800,000.00 of the
-----------------------------------
Purchase Price will be paid to Shareholders on the Closing Date by wired funds
as specified on the Schedule of Wire Instructions attached hereto as Exhibit
"Q." $200,000.00 of the Purchase Price (the "Escrowed Cash") shall be escrowed
at Closing to secure collection of accounts receivable, any
<PAGE>
debts of Corporation paid by RoTech in excess of $20,000.00 in the aggregate,
other than as disclosed on the Schedule of Liabilities attached hereto as
Exhibit "C," and Shareholders' indemnification of RoTech pursuant to paragraph
10 hereof, for the three (3) month period following the Closing Date. The
Escrowed Cash shall be placed in escrow for a period of three (3) months from
the Closing Date (the "Escrow Period") with the law firm of Winderweedle,
Haines, Ward & Woodman, P.A. ("WHWW"), to be maintained in an account by WHWW
pursuant to the terms of that certain Escrow Agreement, in the form attached
hereto as Exhibit "B" and by this reference made a part hereof (the "Escrow
Agreement"). The total consideration described in paragraph 2 hereof, shall be
allocated to the respective Shareholders as follows:
<TABLE>
<CAPTION>
Shareholder Purchase Price - Cash
- ----------- ---------------------
<S> <C>
Robert H. Lauver $1,900,000.00
W. Donald Fisher $1,900,000.00
-------------
Total $3,800,000.00
=============
</TABLE>
3. Existing Obligations. Shareholders represent and warrant that, to
--------------------
the best of their knowledge and belief, all of the debts, liabilities and
obligations of the Corporation are listed on the Schedule of Liabilities
attached hereto as Exhibit "C" and such schedule accurately reflects all of
Corporation's "Existing Obligations" (as hereinafter defined) as of the
Effective 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 Effective Date, including
but not limited to any and all accounts payable, trade payables, lease
obligations, indebtedness for borrowed money, accrued interest, contractual
obligations, etc. Shareholders warrant and represent that the aggregate amount
of the Existing Obligations is not in excess of $ blank . The Shareholders
------------
acknowledge that the purchase price for the Stock is based on the accuracy of
Shareholders' representations and warranties contained in this Agreement,
including but not limited to the Shareholders' representations and warranties
contained in this paragraph 3.
4. Right of Offset Against the Escrowed Amount. In the event that: (i)
--------------------------------------------
the RoTech pays for any debts or liabilities of the Corporation in excess of
$20,000.00 in the aggregate, other than as disclosed on the Schedule of
Liabilities attached hereto as Exhibit "C," (amount in excess of $20,000.00 is
herein referred to as the "Liabilities Deficiency"), or (ii) the aggregate value
of the Corporation's collectible accounts receivable as of December 31, 1995,
are determined to be less than $600,000.00, as determined by actual cash
collections of such receivables during the twelve (12) month period immediately
following the Effective Date (the "Asset Value Deficiency"), or (iii) the
Corporation has, since December 1, 1995, 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 payment or distribution to any Shareholder 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
2
<PAGE>
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 Effective 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
Effective Date (said Obligations hereinafter referred to as the "Contingent
Liability"); then, and in any of such events, RoTech shall have the right, for a
period of three (3) months from the Closing Date, to make offset against the
Escrowed Cash, in accordance with the terms and conditions of the 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 three (3) month period
after the Closing Date, and Shareholders agree to pay said amounts to RoTech
immediately upon written request from RoTech to Shareholders. During the three
(3) month period following the Closing Date, in the event RoTech makes written
request to Shareholders hereunder and Shareholders 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"), RoTech shall
have the right to make offset against the Escrowed Cash, in accordance with the
terms and conditions of the 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 three (3) month period following the Closing Date, and the
Corporation agrees to allow RoTech to make offset against the Escrowed Cash as
herein provided. In the event an offset against the Escrowed Cash is to occur,
an offset against one dollar ($1.00) of the Escrowed Cash shall have the effect
of reducing any amounts owed RoTech by Shareholders by one dollar ($1.00).
RoTech's right of offset against the Escrowed Cash shall terminate on that date
which is three (3) months from the Closing Date; provided, however, that
notwithstanding anything contained herein to the contrary, Shareholders shall
remain fully liable at all times for any and all debts and liabilities of
Shareholders, and in the event any debts or liabilities of Shareholders
(including but not limited to any Liabilities Deficiency, Asset Value
Deficiency, Subsequent Event Deficiency or Contingent Liability) become known,
are uncovered or arise at any time, including any time after the end of the
Escrow Period, RoTech may, at its option in the exercise of its sole discretion,
either refuse to pay any of such debts or liabilities of Shareholders or,
alternatively, may pay one or more of such debts or liabilities, in which case
Shareholders shall immediately reimburse RoTech for the full amount paid by
RoTech. The RoTech shall be entitled to reimbursement from Shareholders of the
amount of any legal fees and expenses (including court costs and the costs of
appeal) incurred by RoTech to enforce the collection of amounts owed RoTech by
Shareholders hereunder.
5. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be January 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Shareholders and RoTech is herein sometimes referred to as the
"Closing"or "Closing Date".
6. Representations and Warranties by Shareholders. Shareholders (50%
----------------------------------------------
Lauver and 50% Fisher) represent and warrant to RoTech that, to the best of
Shareholder's knowledge and belief, each of the following representations and
warranties are true and correct and are made with
3
<PAGE>
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, except as disclosed on the Schedule of
Liabilities attached hereto as Exhibit "C." 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 Pennsylvania corporation in good standing, with all requisite corporate
power and authority to carry on its business as presently conducted. The
Corporation has no other subsidiaries except as disclosed on the Schedule of
Litigation and Other Legal Proceedings attached hereto as Exhibit "F," 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 10,000 shares of common stock, having no par value,
of which 1,000 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, nor are any unissued shares committed to any party
by Corporation or any Shareholder. 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, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
(iv) All FICA, Federal and state withholding tax deposits
have been timely and fully reported and paid.
(v) There are no outstanding or unpaid loans to or from
stockholders, directors or officers other than as listed on Exhibit "D"
hereof.
(d) Financial Statements. Shareholders have furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated December 31, 1993, December 31,
1994, and December 31, 1995, and the related statements of income (the "Income
Statements") for the periods ended December 31, 1994 and December 31, 1995,
copies of which are attached hereto as Exhibit "E" and by this reference made a
part hereof (the Balance Sheets and Income Statements are
4
<PAGE>
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, or 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 4
hereof.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "D" (any Shareholder loans, including the loan to Mrs. Fisher, will be
paid by wired funds on the Closing Date as specified on the Schedule of Wire
Instructions attached hereto as Exhibit "Q"), since December 1, 1995, 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 payment or distribution to Shareholders (except for a distribution
to be equal to twenty-five percent (25%) of the taxable profits (federal, state
and local) realized for the year ended December 31, 1995) 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 except in the ordinary course of business; 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
Pennsylvania. In the event that a deficiency is determined in the amount of
Federal or State 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 (50% Lauver and 50% Fisher) 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. Shareholders agree that RoTech
shall not be
5
<PAGE>
liable for any income taxes (and associated interest and penalties), net of tax
benefits received of Corporation payable or incurred by Corporation through the
Effective Date. Copies of the Corporation's Federal Income tax returns for the
periods ending December 31, 1994, and December 31, 1995, are attached hereto as
part of Exhibit "E."
(g) Litigation. There are no legal actions, suits, arbitrations,
----------
or other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation, and no Shareholder is aware of any facts
which to the knowledge of such Shareholder might result in any such action,
suit, arbitration, or other proceedings, except as disclosed on the Schedule of
Litigation and Other Legal Proceedings attached hereto as Exhibit "F" 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 any Shareholder is 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 (except those
disclosed on the Schedule of Liabilities attached hereto as Exhibit "C"),
including without limitation those reflected in the Balance Sheets, and the
property described in the Schedule of Property attached hereto as Exhibit "G"
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(s), its patient list, and its provider number. Shareholders hereby agree
to undertake whatever steps are necessary to assure that 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 except as
disclosed on the Schedule of Property attached hereto as Exhibit "G." All of the
properties and assets of Corporation on the Closing Date shall be in good
operating condition and repair, reasonable wear and tear accepted and which are
being repaired in the ordinary course of business, and shall conform in all
material respects with all applicable ordinances, regulations, zoning and other
laws.
6
<PAGE>
(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. 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 service marks, service 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 "I" 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 thirty (30) 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.
(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) Brokers. Shareholders and RoTech agree that Baker & Associates
-------
has acted as a representative and broker in connection with the transactions
contemplated by this Agreement. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on directly between
RoTech and Shareholders without the intervention or assistance of any party
other than Baker & Associates (other than to provide accounting or legal
counsel). No party to this Agreement, nor any third party, other than Baker &
Associates, has any right or claim to any commission, brokerage fee or other
compensation relative to this Agreement or the transactions contemplated hereby.
RoTech agrees to pay, and be solely responsible for the
7
<PAGE>
payment of any fees or commissions to Baker & Associates and to disburse the
same at Closing.
(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, 1995, attached
hereto as Exhibit "K", is accurate and complete.
(r) Cash Receipts. The information contained on the Schedule of
-------------
Collections for the period commencing January 1, 1995, and ending December 31,
1995, attached hereto as Exhibit "K", is accurate and complete.
(s) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data as of December 31, 1995, attached hereto as Exhibit
"L", is accurate and complete. The Shareholders further warrant and represent
that all of the Corporation's accounts receivable shown on Exhibit "L" are
legally billable.
(t) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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, 1995, 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.
(u) Absence of Certain Changes or Events. Since December 1, 1995,
------------------------------------
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.
(v) 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.
(w) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel, Payrates and Non-Compete Agreements as
of December 31, 1995, attached hereto as Exhibit "M", is accurate and complete,
and all rights of the Corporation under the non-compete agreements and
employment agreements listed thereon are enforceable by Corporation in
accordance with the terms of such agreements.
8
<PAGE>
(x) Employee Benefit Plans. The Corporation has no pension, bonus,
----------------------
or retirement plans for officers or employees of the Business, nor is the
Corporation required to contribute to any such plan except for a 401(k)
retirement plan participated in by Corporation's employees, which plan the
Shareholders shall terminate at their own expense. The Shareholders shall be
responsible for submitting appropriate information to its employees of rights,
obligations and duties caused by the sale of the stock of the Corporation
pursuant to the terms of this Agreement, and shall terminate the existing
profit-sharing plan at Shareholder's expense.
(y) 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.
(z) Adverse Business Developments. Neither Corporation nor any
-----------------------------
Shareholder has 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 or any
Shareholder 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 Adverse Business Development attached hereto as Exhibit "N."
7. Representations and Warranties by RoTech. RoTech represents,
----------------------------------------
warrants and covenants to Shareholders as of the date of this Agreement as
follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and authority to consummate the transactions contemplated by this
Agreement and has by proper corporate proceedings duly authorized the same.
(b) Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and all agreements and documents contemplated
hereby, including without limitation the Employment Agreement referenced in
paragraph 9 hereof, and will not violate any provision of RoTech's Articles of
Incorporation or Bylaws or to RoTech's knowledge any provisions of any judicial
or governmental law, decree, order or judgment, or conflict with, or result in a
breach of or constitute a default under any material agreement or instrument to
which RoTech is a party or by which it is bound, including agreements with
lending institutions.
(c) Validity and Binding Effect. This Agreement, the Employment
---------------------------
Agreement reference in paragraph 9 hereof, and the provisions thereunder will be
valid and legally binding obligations of RoTech and the same shall be
enforceable in accordance with their respective terms, subject as to the
enforcement of remedies, applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws that affect the enforcement of creditors,
rights generally and possible limitations on the availability for equitable
remedies including specific performance.
9
<PAGE>
8. Resignation of Officers and Directors. Shareholders shall deliver to
-------------------------------------
RoTech, at the Closing, the undated written resignations of all of the directors
and officers of the Corporation.
9. Employment Agreement. Robert H. Lauver shall execute, at closing, an
--------------------
employment agreement in the form attached hereto as Exhibit "O," and Robert H.
Lauver and W. Donald Fisher shall each execute, at closing, a non-competition
agreement in the form attached as Exhibit "P."
10. Indemnification. Shareholders (50% Lauver and 50% Fisher) hereby
---------------
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 any Shareholder in this Agreement, or (iii) any
breach in the performance by any Shareholder of any of his or her obligations
under this Agreement, or (iv) any debts, liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise) of Corporation 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), less any insurance
recoveries received by RoTech.
11. 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.
12. Amendment and Waiver. This Agreement may be amended or modified at
--------------------
any time in all respects by an instrument in writing executed by Shareholders
and RoTech.
13. Assignment. Neither this Agreement nor any right created hereby
----------
shall be assignable by 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 Shareholder's death, a transfer
to the legal representatives of such Shareholder's estate or to such
Shareholder's legal heirs. 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.
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.
14. 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.
15. 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 instrument.
10
<PAGE>
16. 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 Shareholders, and their respective heirs, executors, administrators,
successors and assigns.
17. 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.
18. Survival of Agreement. The provisions of this Agreement shall
---------------------
survive the Closing for the sale and purchase of the Stock.
19. Choice of Law and Venue. It is the intention of the parties that the
-----------------------
laws of the State of Pennsylvania 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 Union County, Pennsylvania.
20. 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:
Robert H. Lauver W. Donald Fisher
Post Office Box 276 7683 Fairway Woods Drive
Selinsgrove, Pennsylvania 17870 Sarasota, Florida 34238
With copy to:
Michael Hudock, Esq.
269 Chestnut Street
Mifflinburg, Pennsylvania 17844
As to RoTech Medical Corporation:
RoTech Medical Corporation
Attn: Stephen P. Griggs, President
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
11
<PAGE>
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.
21. 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/ /s/ Robert H. Lauver
- ----------------------------- -------------------------------------------
Robert H. Lauver
Date Executed: February 13, 1996
-----------------------------
/s/
- -----------------------------
/s/ /s/ W. Donald Fisher
- ----------------------------- -------------------------------------------
W. Donald Fisher
Date Executed:
-----------------------------
/s/
- -----------------------------
"Shareholders"
12
<PAGE>
ROTECH MEDICAL CORPORATION,
a Florida corporation
/s/ By: /s/ Stephen P. Griggs
- ----------------------------- -------------------------------------
Stephen P. Griggs, President
Date Executed:
/s/ --------------------------
- ------------------------------
"RoTech"
STATE OF PENNSYLVANIA
COUNTY OF UNION
The foregoing instrument was acknowledged before me this ___ day of
February, 1996, by ROBERT H. LAUVER. He ( ) is personally known to me or ( ) has
produced ________________________as identification.
----------------------------------
NOTARY SIGNATURE
----------------------------------
NOTARY NAME PRINTED
My Commission Expires:
STATE OF FLORIDA
COUNTY OF SARASOTA
The foregoing instrument was acknowledged before me this 13th day of
February, 1996, by W. DONALD FISHER. He (X) is personally known to me or ( ) has
produced _________________________as identification.
/s/ Annette J. Erny
-----------------------------------
NOTARY SIGNATURE
Annette J. Erny
-----------------------------------
NOTARY NAME PRINTED
My Commission Expires:
13
<PAGE>
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 16th day of
February, 1996, by STEPHEN P. GRIGGS, as President of RoTech Medical
Corporation, a Florida corporation, on behalf of the corporation. He (X) is
personally known to me or has produced _______________ as identification.
/s/ Gwendolyn Shirley
-------------------------------------
NOTARY SIGNATURE
Gwendolyn Shirley
-------------------------------------
NOTARY NAME PRINTED
My Commission Expires:
14
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT is entered into as of the 1st day of January, 1996,
by and between Boyce D. Harbour and Joyce A. Harbour (hereinafter jointly and
severally referred to as "Shareholders" and, where context requires,
individually as "Shareholder"); Rhema, Inc., a Texas Corporation (the
"Corporation"), RoTech Medical Corporation, a Florida corporation (hereinafter
referred to as "RoTech") and Merger Sub, Inc., a Texas corporation and wholly-
owned subsidiary of RoTech (the "Merger Sub").
R E C I T A L S:
A. Shareholders are all of the owners of all of the issued and
outstanding shares of the Corporation, in that the Corporation has 100 shares of
its $10.00 par common capital stock outstanding, and Shareholders hold, in the
aggregate, 100 shares (the "Stock"), 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 Texas (the "Business") and fully licensed by all
applicable agencies to do so.
C. The Boards of Directors of RoTech, Merger Sub and Rhema have
determined that it is in the best interests of their respective shareholders for
RoTech to acquire Rhema upon the terms and subject to the conditions set forth
in this Agreement. In order to effectuate the transaction, RoTech has organized
Merger Sub as a wholly-owned subsidiary, and the parties have agreed, subject to
the terms and conditions set forth in this Agreement, to merge Rhema into RoTech
Merger Sub with Merger Sub as the surviving corporation, so that each of the
Shareholders will be issued certain shares of common stock of RoTech.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement, at
----------
the Effective Time (as defined below), and pursuant to the terms and conditions
set forth in the Plan of Merger and Reorganization annexed hereto as Exhibit A
(the "Plan of Merger"), the Corporation will be merged into and with Merger
Sub. The terms and conditions of the Plan of Merger are incorporated herein by
reference as if fully set forth herein. As a result of the Merger, the separate
corporate existence of the Corporation shall cease and Merger Sub shall
continue as a surviving corporation and wholly-owned subsidiary of RoTech. In
conjunction with the merger, the name of Merger Sub, Inc. shall be changed to
"Rhema, Inc."
2. The Closing. Subject to the terms and conditions of this Agreement,
-----------
the consummation of the purchase and Merger (the "Closing") shall take place on
January ___, 1996 (the "Closing Date"). The Merger Agreement, Plan of Merger,
Articles of Merger, appropriate Corporate Minutes, Stock Transfers, Stock Pledge
and Security Agreement, Tri-Party Agreement, Pledge and Security Agreement,
Escrow Agreement, Employment Agreement, Covenant Not to
<PAGE>
Compete, and Lease Agreement, all as hereinafter defined, (the "Closing
Documents") shall be executed by Boyce Harbour and Joyce Harbour on or before
January 4, 1996 who shall in turn deliver the Closing Documents to Stephen P.
Griggs and Rebecca Irish for execution on January 5, 1996. All wire transfers
provided herein shall be made on January 5, 1996.
3. Plan of Merger.
--------------
(a) The total consideration from RoTech to Shareholders in exchange
for the Stock (the "Merger Consideration") shall be TWO MILLION FIVE HUNDRED
THOUSAND DOLLARS ($2,500,000.00) in cash ("Cash Consideration"), plus 109,091
shares of the common stock, par value $.0002, of RoTech Medical Corporation, a
Florida corporation (the "RoTech Stock"), which RoTech Stock shall be issued to
Shareholders at the Closing with certificates titled in the name of Shareholders
and having printed thereon the restrictive legend required by paragraph 7(f)
hereof. The Cash Consideration and the RoTech Stock shall be allocated to the
Shareholders on a pro rata basis pursuant to each Shareholder's percentage
ownership of Sto ck in the Corporation as set forth on Exhibit "B" hereto.
(b) Method of Payment; Pledge of RoTech Stock. Cash Consideration in
the amount of $2,500,000.00 (less the $390,000.00 payable to Baker and
Associates) will be paid to Shareholders on the Closing Date. On the Closing
Date, $2,000,000.00 (less the $390,000.00 payable to Baker and Associates) of
the Cash Consideration will be transferred by wired funds to account number
8708138816 at First Interstate Bank of Texas, Irving Branch, 800 W. Airport
Freeway, Irving, Texas 75062. Shareholders agree that Baker and Associates has
acted as their representative and broker in connection with the transactions
contemplated by this Agreement. Accordingly, Shareholders agree that RoTech
shall be authorized to withhold from its payment of the Cash Consideration the
amount of $390,000.00, payable by Shareholders to Baker and Associates and to
disburse said amount directly to Baker and Associates. The remaining $500,000.00
of Cash Consideration shall be transferred on the Closing Date to account number
_______________ at Waddell and Reed, 6300 Lamar Ave., P.O. Box 29217, Shawnee
Mission, KS 66201-921. The Shareholders' interests in such account, including
proceeds from sale of investments therein or other earnings thereon, (the "Cash
Collateral") shall be Pledged pursuant to the terms of that certain Pledge and
Security Agreement, in the form attached hereto as Exhibit "U," and by reference
made a part hereof for a period of twenty-four months (the "Escrow Period") to
be held and administered pursuant to the terms of that certain Tri-Party
Agreement, in the form attached hereto as Exhibit "V" and by reference made a
part hereof. 54,545 shares of the RoTech Stock shall be pledged pursuant to the
terms of that certain Stock Pledge and Security Agreement, in the form attached
hereto as Exhibit "C" and by reference made a part hereof (the "Pledge
Agreement"), and shall be placed in escrow for 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 "D" and by reference made a part hereof (the "Escrow
Agreement"). The portion of the RoTech Stock which is subject to the Escrow
Agreement shall be delivered to Escrow Agent within thirty (30) days from the
Closing Date. The parties hereto acknowledge that the portion of the RoTech
Stock and Cash Consideration being placed in escrow is subject to reduction
pursuant to paragraph 8(a) hereof. The total consideration
2
<PAGE>
described in paragraph 3 (a) hereof, net of the amount due Baker & Associates,
shall be allocated to the respective Shareholders as follows:
<TABLE>
<CAPTION>
Shareholder Cash RoTech Stock
- ----------- ---- ------------
<S> <C> <C>
Boyce Harbour $1,055,000 54,546 shares
Joyce Harbour $1,055,000 54,545 shares
Total $2,110,000 109,091 shares
</TABLE>
(c) Delivery of Rhema Certificates. At the Closing, the
------------------------------
Shareholder deliver the certificates representing all of the issued and
outstanding shares of capital stock of Rhema to RoTech for cancellation.
4. Filing of Articles of Merger. At the time of the Closing, the
----------------------------
parties shall cause the Merger to be consummated by filing duly executed
Articles of Merger (with the Plan of Merger respectively annexed thereto) with
the Secretary of State of the State of Texas, in such form as RoTech determines
is required by and is in accordance with the relevant provisions of the Texas
Business Corporation Act (the "Act") (the date and time of such filing is
referred to herein as the "Effective Date" or "Effective Time").
5. Existing Obligations. Shareholders represent and warrant that, to
--------------------
the best of their knowledge and belief, all of the Corporation's debts,
liabilities and obligations are listed on the Schedule of Liabilities attached
hereto as Exhibit "E" and such schedule 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. Shareholders
warrant and represent that the aggregate amount of the Existing Obligations is
not in excess of $3,129,418.14, plus accrued interest from December 31, 1995 at
the per diems set forth in Exhibit "E". The Shareholders acknowledge that the
purchase price for the Stock is based on the accuracy of Shareholders'
representations and warranties contained in this Agreement, including but not
limited to the Shareholders' representations and warranties contained in this
paragraph 5. On the Closing Date RoTech shall deposit by wire transfer in bank
account number 8709030483 of the Corporation at First Interstate Bank of Texas,
Irving Branch, 800 W. Airport Freeway, Irving, TX 75062, cash in the amount of
$2,189,016.97, from which Merger Sub shall satisfy the promissory note portion
of the Existing Obligations, other than the obligation to RoTech, franchise
taxes and $300,000 of accounts payable .
6. Right of Offset Against the RoTech Stock. In the event that: (i)
----------------------------------------
RoTech pays for any debts or liabilities of the Corporation created or arising
on or before the Closing Date other than the debts and liabilities listed on the
Schedule of Liabilities and which are not covered under (ii)-(iv) below, (herein
referred to as the "Liabilities Deficiency"), or (ii) the aggregate value of
3
<PAGE>
the Corporation's collectible accounts receivable as of December 31, 1995, are
less than $1,250,000, 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
October 1, 1995, except as disclosed in writing, 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 payment or distribution to Shareholders or
purchased or redeemed any of its common capital stock or agreed to do so except
as disclosed on the Schedule of Shareholders, Distributions, and Exempted
Transactions attached hereto as Exhibit "F"; mortgaged, pledged or subjected to
lien or encumbrance any of its assets; sold or transferred any assets except in
the ordinary course of business; 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 the Corporation of any nature (whether absolute,
accrued, contingent, or otherwise), other than those subject to subparagraphs
(i) through (iii) of this paragraph 6 (the "Obligations"), become known to
RoTech, 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 (excluding deferred income tax liabilities and
assets), 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, RoTech shall have the right to recover same from Shareholders on the
terms provided herein and in the Pledge Agreement and Escrow Agreement.
Shareholders jointly and severally agree to pay said amounts to RoTech
immediately upon written request from RoTech to Shareholders (the date of such
written request being hereinafter sometimes referred to as the "Request Date")
provided that the aggregate amounts under (i) - (iv) above plus the aggregate
Indemnifiable Damages under paragraph 14 exceed a threshold Claim amount of
$25,000.00 (the "Threshold Claim Amount") and do not exceed the Ceiling Amount,
as hereinafter defined. During the twenty-four (24) month period following the
Closing Date, in the event RoTech makes written request to Shareholders
hereunder and Shareholders fail 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"), RoTech shall have the right to make offset
against the RoTech Stock, and/or Cash Collateral 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. Shareholders shall permit RoTech to make offset against the
RoTech Stock, and/or Cash Collateral as herein provided, subject to the
Threshold Claim Amount limitations above. In the event an offset against the
RoTech Stock is to occur, an offset against one (1) share of RoTech Stock shall
have the effect of reducing any amounts owed to RoTech by $27.50. RoTech's
right of offset against the RoTech Stock shall terminate no later than December
31, 1997 (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. In the event the right of offset is extended past the
Release
4
<PAGE>
Date because a claim is in dispute, RoTech Stock, and/or Cash Collateral having
a value of twice the amount of the claim asserted by RoTech (using $27.50 as
previously defined) shall continue to be held in escrow past the Release Date
until such claim is resolved, with the remaining shares of RoTech Stock released
to Shareholders within fifteen (15) days after the Release Date. RoTech shall
be entitled to reimbursement from Shareholders of the amount of any reasonable
legal fees and expenses (including court costs and the costs of appeal) incurred
by RoTech to enforce the collection of amounts owed RoTech by Shareholders
hereunder.
7. Characteristics of RoTech Stock.
-------------------------------
(a) Investment. The RoTech Stock which Shareholders are acquiring
----------
hereunder is being acquired for Shareholders' 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. Shareholders understand 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 RoTech's reliance on such exemption is predicated on
Shareholders' representations set forth in this paragraph 7.
(c) Rule 144. Shareholders acknowledge that the RoTech Stock must be
--------
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Shareholders are 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
Shareholders intending to sell under the Rule hold the shares for at least two
(2) years. In the event any of the RoTech Stock held by Shareholders become
eligible for sale pursuant to Rule 144, and an opinion of RoTech's counsel is
necessary to effectuate the transfer of RoTech Stock thereunder, Shareholders
shall bear the costs of obtaining such opinion of counsel, up to $275.00 for
each opinion of counsel issued in connection with transfers under Rule 144.
RoTech shall process any requests for transfer of RoTech Stock pursuant to Rule
144 in an efficient and prompt manner.
(d) Access to Data. Shareholders have received and reviewed
--------------
information about RoTech and have had an opportunity to ask questions of, and
receive answers from RoTech concerning RoTech's business, management, legal and
financial affairs and to obtain additional information (to the extent RoTech
possesses such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished.
Shareholders also had the opportunity to inspect RoTech' s facilities.
Shareholders understand 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.
5
<PAGE>
(e) Risks. Shareholders are experienced in evaluating and investing
-----
in high risk companies such as RoTech and by reason of their business and
financial experience have the capacity to protect their own interests in
connection with the transactions contemplated by this Agreement and have 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.
(g) No Registration Rights. Shareholders acknowledge that they
----------------------
possess no rights whatsoever to have any of the RoTech Stock registered.
8. Contingent Return of Shares of RoTech Stock; Put Option.
-------------------------------------------------------
(a) Contingent Return of Shares of RoTech Stock.
-------------------------------------------
(i) Terms of Return. In the event the "First Two Year's Average
---------------
Operating Profits" of the "Acquired Entity" is less than ONE MILLION SIX HUNDRED
THOUSAND DOLLARS ($1,600,000.00) (the "Threshold Amount"), the number of shares
of RoTech Stock, and/or Cash Collateral under the terms of the Stock Pledge and
Security Agreement, required to be distributed to Shareholders at the end of the
Escrow Period shall be reduced by a factor of .1818 (or in the case of Cash
Collateral, a cash equivalent of $5.00) for every ONE DOLLAR ($1.00) of the
First Two Year's Operating Profits during the Measurement Period below the
Threshold Amount, rounded to the nearest full share, with Buyer receiving
complete title to and possession of such Shares and/or Cash Collateral. For
example, in the event the First Two Year's Average Operating Profits of the
Acquired Entity during the Measurement Period is $1,500,000.00, the difference
from the Threshold Amount of $100,000.00 would result in a reduction hereunder
of 18,180 shares of RoTech Stock ($100,000 x .1818), (or in the case of Cash
Collateral the full $500,000 held in escrow, calculated at $5.00 x $100,000) at
the exchange rate of $27.50 per share, with all of such shares (or in the case
of Cash Collateral
6
<PAGE>
the full $500,000 held in escrow, calculated at $5.00 x $100,000) being
distributed to RoTech by the Escrow Agent upon final determination of the First
Two Year's Average Operating Profits and with the balance of 36,365 shares of
RoTech Stock (less any offsets pursuant to paragraph 6 hereof) delivered to the
Shareholders at the end of the Escrow Period. In the event all of the assets or
capital stock of the RoTech is to be sold to a third party, the restriction
imposed by this subparagraph on the number of shares to be delivered to the
Shareholders at the end of the Escrow Period shall be null and void, and the
remainder of this subparagraph shall no longer apply, effective as of the
closing date of such sale by RoTech to a third party, unless RoTech successfully
negotiates as part of any such transaction, the preservation of all of the
remaining provisions of this subparagraph and Boyce D. Harbour continues to be
in charge of the supervision of financial reports of subsidiary identifiable or
division which succeeds to the business of the Corporation. In the event that
the First Two Years Average Operating Profits of the Acquired Entity are less
than the Threshold Amount, the parties agree that the sole consequence under
this Agreement shall be the reduction in the number of shares of RoTech Stock,
and/or Cash Collateral, required to be distributed by the Escrow Agent to
Shareholders at the end of the Escrow Period. If said reduction results in a
distribution of all of the RoTech Stock, and/or Cash Collateral, to RoTech,
there shall be no other liability of Shareholders to RoTech solely for failure
to equal or exceed the Threshold Amount.
(ii) Certain Definitions. The term "First Two Year's Average
-------------------
Operating Profits" shall have the definition set forth on Exhibit "G" attached
hereto. The term "Acquired Entity" shall mean Merger Sub, or any division of
RoTech which represents the Business acquired from the Shareholders hereunder.
The term "Measurement Period" shall mean that period commencing December 1, 1995
and ending November 30, 1997. During the Measurement Period, RoTech shall
maintain separate accounting records for the Acquired Entity to track the First
Two Year's Average Operating Profits during the Measurement Period. The term
"Delivered RoTech Shares" shall mean the total number of shares of RoTech Stock
actually delivered to Shareholders by the Escrow Agent by the end of the Escrow
Period, reflecting all reductions pursuant to paragraph 8(a)(i) hereof and all
offsets pursuant to paragraph 6 hereof and therefore does not include the RoTech
Stock issued to the Shareholders under Paragraph 3 which are not subject to the
Escrow Agreement. The Delivered RoTech Shares shall be issued with certificates
titled in the name of the applicable Shareholders and having the restrictive
legend required by paragraph 7(f) hereof printed thereon.
(b) Put Option.
----------
(i) Amount and Price. The Shareholders shall have the right to
----------------
require RoTech to repurchase some or all of the Delivered RoTech Shares received
by Shareholders pursuant to this Agreement (sometimes herein referred to as the
"Option Shares") at a repurchase price of $27.50 per share (the "Option Price").
(ii) Restrictions on Exercise. This Put Option is not
------------------------
negotiable but Shareholders may submit Option Shares for redemption by RoTech at
the applicable Option Price during the period commencing January 1, 1998 and
ending December 31, 1998, but only with
7
<PAGE>
respect to Option Shares representing RoTech Stock which has been released to
Shareholders from the escrow arrangement. This Put Option may only be exercised
in blocks of 5,000 shares or more, is not assignable in any respect and can only
be exercised by Shareholders.
(iii) Term of Option. All Option Shares submitted pursuant
--------------
to this Put Option must be delivered to the executive offices of RoTech, at the
address set forth in paragraph 26 hereof (or at such other address as is
communicated by RoTech to Shareholders in writing). At 5:00 p.m., E.S.T.,
December 31, 1998, this Put Option shall expire and shall thereafter have no
prospective effect.
(iv) Exercise of Put Option and Delivery of Shares. To validly
---------------------------------------------
exercise this Put Option, Shareholders must execute a statement in which
Shareholders warrant that they have full and clear title to the applicable
Option Shares, free of all liens and encumbrances. Such statement must be
accompanied by original stock certificates evidencing not less than the number
of Option Shares 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 (and who is also
a member of the Medallion Group) or a commercial bank who is a member of the
Federal Reserve System (and who is also a member of the Medallion Group).
(v) Settlement. Settlement for any Option Shares redeemed
----------
pursuant to this Put Option shall occur on that day which is thirty (30)
business days from the day such Option Shares are submitted to RoTech with all
required documentation. Such payment shall be made without interest .
9. Bookkeeping. Merger Sub, through the supervision of Boyce Harbour,
-----------
during the term of his Employment Agreement, shall be responsible for the
continued bookkeeping, and preparation of financial statements, for the business
of Merger Sub.
10. Representations and Warranties by Shareholders. Shareholders jointly
----------------------------------------------
and severally represent and warrant to RoTech that, to the best of each
Shareholder's 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 Texas 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.
8
<PAGE>
(c) Capitalization and Long Term Indebtedness.
-----------------------------------------
(i) The Corporation is authorized by its Articles of
Incorporation to issue 10,000 shares of common capital stock, having $10.00 par
value of which 100 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, nor are any unissued shares committed to any party by
Corporation or any Shareholder. 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 "B." 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, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
(iv) All FICA, Federal and state withholding tax deposits have
been timely and fully reported and paid.
(v) There are no outstanding or unpaid loans to stockholders,
directors or officers other than as listed on the Schedule of Shareholders
Distributions and Exempted Transactions attached hereto as Exhibit "F".
(d) Financial Statements. Shareholders have furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated December 31, 1993, December 31,
1994, and December 31, 1995, and the related statements of income (the "Income
Statements") for the periods ended December 31, 1994 and December 31, 1995,
copies of which are attached hereto as Exhibit "H" 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, except that such Financial Statements were not audited
and do not contain footnotes; (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, or 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
9
<PAGE>
Exhibit to this Agreement. The representations and warranties made in this
subparagraph are subject to the threshold liability provisions of paragraph 6
hereof.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "F", since October 1, 1995, 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 payment or distribution
to any Shareholder 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 except in the ordinary course of
business; 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
Texas. In the event that a deficiency is determined in the amount of Federal or
State 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 jointly and severally 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. Shareholders 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 except for such income tax
liabilities set forth on the Schedule of Liabilities attached hereto as Exhibit
"E". Copies of the Corporation's Federal Income tax returns for the periods
ending December 31, 1993 and December 31, 1994, are attached hereto as part of
Exhibit "I." The Federal income tax return of the Corporation for the period
ended December 31, 1995 shall be prepared within ninety (90) days after the
Closing Date.
(g) Litigation. There are no legal actions, suits, arbitrations, or
----------
other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation, and no Shareholder is aware of any facts
which to the knowledge of such Shareholder might result in any such action,
suit, arbitration, or other proceedings, except as disclosed on the Schedule of
Litigation and Other Proceedings attached hereto as Exhibit "J" 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
10
<PAGE>
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 any Shareholder is 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, and the property described in
the Schedule of Property attached hereto as Exhibit "K" 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(s), its patient
list, and its provider number. Shareholders hereby agree to undertake whatever
steps are necessary to assure that 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 except as
disclosed on the Schedule of Property attached hereto as Exhibit "K." All of
the properties and assets of Corporation on the Closing Date shall be in good
operating condition and repair, reasonable wear and tear accepted and which are
being repaired in the ordinary course of business, 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 "L" 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. 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 service marks, service names, and licenses necessary in the conduct of
its business.
11
<PAGE>
(m) Contracts. Except as set forth on the Schedule of Contracts
---------
attached hereto as Exhibit "M" 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 thirty (30) 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.
(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) Brokers. Shareholders agree that Baker and Associates has acted
-------
as their representative and broker in connection with the transactions
contemplated by this Agreement. Accordingly, Shareholders agree that RoTech
shall be authorized to withhold from its payment of the Cash Consideration the
amount of $390,000.00, payable by the Shareholders to Baker and Associates and
to disburse said amount directly to Baker and Associates. All negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried on directly between RoTech and Shareholders without the intervention or
assistance of any party other than Baker and Associates (other than to provide
accounting or legal counsel). No party to this Agreement, nor any third party,
other than Baker and Associates, has any right or claim to any commission,
brokerage fee or other compensation relative to this Agreement or the
transactions contemplated hereby. Shareholders agree that RoTech shall have no
obligation for payment of any fees or commissions to Baker and Associates other
than to withhold a portion of the Purchase Price as set forth in this paragraph
(o) and to disburse the same. RoTech warrants that it has not become obligated
to any broker or agent for any fee or commission.
(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, 1995, attached
hereto as Exhibit "N", is accurate and complete.
(r) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data as of December 31, 1995, attached hereto as Exhibit
"O", is accurate and complete. The Shareholders further warrant and represent
that all of the Corporation's accounts receivable shown on Exhibit "O" (the
"Receivables") are legally billable.
12
<PAGE>
(s) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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
October 1, 1995, 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 October 1, 1995,
------------------------------------
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.
(v) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel, Payrates and Non-Compete Agreements as
of December 31, 1995, attached hereto as Exhibit "P", 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) Qualified Plans. The Corporation has a 401(k) Plan and a
---------------
Cafeteria Plan, both of which shall be terminated as of the Closing Date. The
Shareholders shall be responsible for submitting appropriate information to the
employees of the Corporation of their rights, obligations and duties with regard
to the termination of the Plan. The Corporation has no other Qualified Deferred
Compensation, or similar plan in effect nor is any committed.
(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. Corporation or any Shareholder
-----------------------------
has not 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 or any
Shareholder 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 Adverse Business Development attached hereto as Exhibit "Q."
13
<PAGE>
11. Representations and Warranties by RoTech. RoTech represents, warrants
----------------------------------------
and covenants to Shareholders as of the date of this Agreement as follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and authority to consummate the transactions contemplated by this
Agreement and has by proper corporate proceedings duly authorized the same.
Merger Sub is a duly organized, validly existing Texas Corporation in good
standing and has full power and authority to consummate the transactions
contemplated by this Agreement and has by proper corporate proceedings duly
authorized the same. Merger Sub is a wholly owned subsidiary of RoTech.
(b) Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and all agreements and documents contemplated
hereby, including without limitation the Employment Agreement, described in
paragraph 12 hereof, and the issuance of the RoTech stock do not and will not
violate any provision of RoTech's Articles of Incorporation or Bylaws or to
RoTech's knowledge any provisions of any judicial or governmental law, decree,
order or judgment, or conflict with, or result in a breach of or constitute a
default under any material agreement or instrument to which RoTech is a party or
by which it is bound, including agreements with lending institutions.
(c) Validity and Binding Effect. This Agreement, the Employment
---------------------------
Agreement, described in paragraph 12 hereof, and the provisions thereunder will
be valid and legally binding obligations of RoTech and the same shall be
enforceable in accordance with their respective terms, subject as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws that affect the enforcement of creditors,
rights generally and possible limitations on the availability for equitable
remedies including specific performance.
(d) RoTech shall provide Shareholders with evidence of releases of
the guarantees referenced in the Schedule of Liabilities attached hereto as
Exhibit "E" no later than sixty (60) days following the Closing Date, and holds
Shareholders, jointly and severally, harmless under such financial obligations.
12. Employment Agreement and Employee Matters. Boyce Harbour and Merger
-----------------------------------------
Sub shall execute, at closing, an employment agreement (the "Employment
Agreement") in the form attached hereto as Exhibit "R," and Boyce Harbour and
Joyce Harbour shall enter into non-competition agreements in the form attached
as Exhibit "S." Existing employee sick time and vacation benefits for employees
of the Corporation shall be retained and continued by Merger Sub for the
employees of the Corporation as of the Closing Date which may continue as
employees of Merger Sub.
13. Lease Agreement. RoTech Merger Sub and Boyce Harbour shall execute,
---------------
at closing, a Lease Agreement (the "Lease Agreement") in the form attached as
Exhibit "T."
14. Indemnification.
---------------
14
<PAGE>
(a) Indemnifiable Damages. Shareholders hereby jointly and severally
---------------------
agree to indemnify RoTech and hold RoTech harmless against all Indemnifiable
Damages, as such term is hereinafter defined (Shareholder's joint and several
obligation to RoTech under this indemnification shall not exceed the full amount
of the Merger Consideration (the "Ceiling Amount") for a period not to exceed
the ending date of the statute of limitations applicable to any claims for
indemnification hereunder) 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 any Shareholder in this Agreement, or (iii) any
breach in the performance by any Shareholder of any of his or her obligations
under this Agreement, or (iv) any debts, liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise) of Corporation
created or arising on or before the Closing Date which Shareholders failed to
disclose to RoTech in this Agreement (all of which damages under (i) - (iv)
above are hereinafter collectively referred to as the "Indemnifiable Damages").
As used herein, the term "Indemnifiable Damages" includes any loss, cost or
liability, including any attorneys' fees and court costs (whether incurred at
trial or on appeal), less any insurance recoveries received by RoTech.
(b) Threshold Claim Amount. Notwithstanding anything to the contrary
----------------------
in this paragraph 14, the Shareholders shall not be liable to RoTech with
respect to any claim for Indemnifiable Damages unless the sum of all
Indemnifiable Damages incurred by RoTech plus the aggregate claims under
paragraph 6, herein exceed an aggregate of $25,000.00, in which case the
Shareholders shall be liable for the full amount of such Indemnifiable Damages
and claims under paragraph 16 hereof, not to exceed the Ceiling Amount.
15. Tax Treatment. RoTech Merger Sub, the Corporation, and the
-------------
Shareholders will use their respective best efforts to cause the Merger to
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code and will not take any action after the Merger is effected
to cause the Merger to lose its tax-free status. All parties hereto agree to
file the Plan of Merger with their respective federal income tax returns for the
year in which the Merger is effective, and to comply with the reporting
requirements of Treasury Regulation 1.368-3.
16. Distribution of Real Estate. On or prior to the Closing Date, the
---------------------------
Shareholders shall have certain of their Shares in the Corporation redeemed and
in exchange the Corporation shall transfer that certain real estate more fully
described on Exhibit "F".
17. 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.
18. Amendment and Waiver. This Agreement may be amended or modified at
--------------------
any time in all respects by an instrument in writing executed by all parties.
15
<PAGE>
19. Assignment. Neither this Agreement nor any right created hereby shall
----------
be assignable by any party to this Agreement without the prior written consent
of the other parties, except for an assignment incident to a merger,
consolidation or reorganization, or, in the event of any of the Shareholder's
death, a transfer to the legal representatives of such Shareholder's estate or
to such Shareholder's legal heirs. 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. 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.
20. 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.
21. 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 instrument.
22. 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 the
parties to this Agreement and their respective heirs, executors, administrators,
successors and assigns.
23. 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.
24. Survival of Agreement. The provisions of this Agreement shall survive
---------------------
the Closing for the merger of the Corporation into Merger Sub.
25. Choice of Law and Venue. It is the intention of the parties that the
-----------------------
laws of the State of Texas should govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties.
26. 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 Rhema, Inc. or the Shareholders:
Boyce Harbour
509 Vicksburg Way
Southlake, Texas 76092
16
<PAGE>
With copy to:
Thomas G Hineman, Esq.
Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P.
901 Main Street
3700 NationsBank Plaza
Dallas, Texas 75202
As to RoTech Medical Corporation or RoTech Merger Sub:
RoTech Medical Corporation
Attn: Stephen P. Griggs, President
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
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.
27. 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/ /s/ Boyce D. Harbour
- -------------------- ------------------------------
Boyce D. Harbour
/s/
- --------------------
17
<PAGE>
/s/ /s/ Joyce A. Harbour
- ------------------- ----------------------------------
Joyce A. Harbour
"Shareholders"
/s/
- -------------------
RHEMA, INC.
a Texas Corporation
/s/ By: /s/ Boyce Harbour
- ------------------- --------------------------------
Boyce Harbour, President
The "Corporation"
ROTECH MEDICAL CORPORATION,
a Florida corporation
/s/ By: /s/ Stephen P. Griggs
- ------------------- --------------------------------
Stephen P. Griggs, President
"RoTech"
MERGER SUB, INC.,
a Texas corporation
/s/ By: /s/ Stephen P. Griggs
- ------------------- --------------------------------
Stephen P. Griggs, Vice-President
"Merger Sub"
18
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
The foregoing instrument was acknowledged before me this 4th day of
January, 1996, by BOYCE D. HARBOUR. He (X ) is personally known to me or ( ) has
produced _____________________ as identification.
/s/ Vanessa G. Scott
------------------------------
NOTARY SIGNATURE
Vanessa G. Scott
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
The foregoing instrument was acknowledged before me this 4th day of
January, 1996, by JOYCE A. HARBOUR. She (X) is personally known to me or ( )
has produced ________________________ as identification.
/s/ Vanessa G. Scott
------------------------------
NOTARY SIGNATURE
Vanessa G. Scott
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
19
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
The foregoing instrument was acknowledged before me this 4th day of
January, 1996, by BOYCE D. HARBOUR, President of Rhema, Inc., a Texas
corporation, on behalf of the corporation. He (X) is personally known to me or
( ) has produced ________________________ as identification.
/s/ Vanessa G. Scott
------------------------------
NOTARY SIGNATURE
Vanessa G. Scott
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
The foregoing instrument was acknowledged before me this 5th day of
January, 1996, by STEPHEN P. GRIGGS. He (X) is personally known to me or ( ) has
produced _____________________ as identification.
/s/ Gwendolyn Shirley
------------------------------
NOTARY SIGNATURE
Gwendolyn Shirley
------------------------------
NOTARY NAME PRINTED
My Commission Expires:
20
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
The foregoing instrument was acknowledged before me this 5th day of
January, 1996, by STEPHEN P. GRIGGS, Vice-President of Merger Sub, Inc., a Texas
corporation, on behalf of the corporation. He (X) is personally known to me or
( ) has produced _____________________ as identification.
/s/ Gwendolyn Shirley
------------------------------
NOTARY SIGNATURE
/s/ Gwendolyn Shirley
- ----------- ------------------------------
NOTARY NAME PRINTED
My Commission Expires:
21
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
THIS AGREEMENT is entered into as of the 1st day of February, 1996, by and
between Dale Turk (hereinafter referred to as "Shareholder"), and RoTech Medical
Corporation, a Florida corporation (hereinafter referred to as "RoTech").
R E C I T A L S :
A. Shareholder is sole owner of all of the issued and outstanding shares
of the common stock of NATIONAL HOME CARE SERVICES, INC., a Florida corporation,
hereinafter referred to as the "Corporation," in that the Corporation has 1,000
shares of its common stock outstanding, and Shareholder holds, in the aggregate,
1,000 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 Florida and fully licensed by all applicable agencies
to do so.
C. Shareholder desires to transfer to RoTech and RoTech desires to
acquire from Shareholder, all of the issued and outstanding shares of the common
stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions of
--------------------------
this Agreement, Shareholder agrees to sell, transfer and assign to RoTech, and
RoTech agrees to purchase from Shareholder, an aggregate total of 1,000 shares
of the common stock, par value $1.00, issued by the Corporation (the "Stock"),
such Stock constituting all of the issued and outstanding common stock of the
Corporation. At the Closing, Shareholder will deliver to RoTech certificates
evidencing the Stock duly endorsed to RoTech.
2. Purchase Price.
--------------
(a) The total consideration from RoTech to Shareholder in exchange
for the Stock is TWO MILLION FIFTY-SIX THOUSAND DOLLARS ($2,056,000.00) in cash
(the "Cash Consideration"), plus 19,917 shares of the common stock, par value
$.0002, of RoTech Medical Corporation, a Florida corporation (the "RoTech
Stock"), which RoTech Stock shall be issued with certificates titled in the name
of Shareholder and having printed thereon the restrictive legend required by
paragraph 5(f) hereof. The Cash Consideration and the RoTech Stock (herein
collectively referred to as the "Purchase Price") shall be allocated to the
Shareholder as set forth on Exhibit "A" attached hereto. RoTech will assume
certain liabilities of the Corporation in an amount not to exceed $250,000.00,
as set forth on the Schedule of Liabilities Assumed attached hereto as Exhibit
"B."
<PAGE>
(b) Method of Payment; Pledge of RoTech Stock. Cash Consideration
-----------------------------------------
in the amount of $2,056,000.00 will be paid to Shareholder on the Closing Date
by wired funds to account number 02247092172-1 at Norwest Bank Minneapolis. The
RoTech Stock shall be pledged pursuant to the terms of that certain Stock Pledge
and Security Agreement, in the form attached hereto as Exhibit "C" and by
reference made a part hereof (the "Pledge Agreement"), and shall be placed in
escrow for a period of twenty-four (24) months from the Effective Date (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 "D" and by reference made a
part hereof (the "Escrow Agreement"). RoTech shall cause the RoTech Stock to be
delivered directly to Escrow Agent within thirty (30) days from Closing Date.
The parties hereto acknowledge that the RoTech Stock being placed in escrow is
subject to reduction pursuant to paragraph 6(a) hereof.
3. Existing Obligations. Shareholder represents and warrants that, to
--------------------
the best of his knowledge and belief, all of the debts, liabilities and
obligations of the Corporation are listed on the Schedule of Liabilities
attached hereto as Exhibit "E" and such schedule 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.
Shareholder warrants and represents that the aggregate amount of the Existing
Obligations is not in excess of $250,000.00. Shareholder acknowledges that the
purchase price for the Stock is based on the accuracy of Shareholder's
representations and warranties contained in this Agreement, including but not
limited to the Shareholder's representations and warranties contained in this
paragraph 3.
4. Right of Offset Against the RoTech Stock. In the event that: (i)
----------------------------------------
RoTech pays for any debts or liabilities, of the Corporation in excess of
$250,000.00, (amount in excess of $250,000.00 is herein referred to as the
"Liabilities Deficiency"), or (ii) the aggregate value of the Corporation's
collectible accounts receivable as of January 31, 1996, are determined to be
less than $587,000.00, as determined by actual cash collections of such
receivables during the twelve (12) month period immediately following the
Effective Date (the "Asset Value Deficiency"), or (iii) the Corporation has,
since December 1, 1995 through the Closing Date, except as disclosed in writing,
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 payment or distribution to
Shareholder or purchased or redeemed any of its common capital stock or agreed
to do so except as disclosed on the Schedule of Shareholders, Distributions, and
Exempted Transactions attached hereto as Exhibit "F"; mortgaged, pledged or
subjected to lien or encumbrance any of its assets; sold or transferred any
assets except in the ordinary course of business; 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,
2
<PAGE>
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 Effective Date, which Obligations pertain to any
actions, omissions, debts, liabilities or obligations of the Corporation or its
Shareholder, created or arising on or before the Effective Date (said
Obligations hereinafter referred to as the "Contingent Liability"); then, and in
any of such events, RoTech shall have the right to recover same from
Shareholder. Shareholder agrees to pay said amounts to RoTech immediately upon
written request from RoTech to Shareholder (the date of such written request
being hereinafter sometimes referred to as the "Request Date"). During the
twenty-four (24) month period following the Effective Date, in the event RoTech
makes written request to Shareholder hereunder and Shareholder 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"),
RoTech 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 Effective Date. Shareholder shall permit RoTech
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 (1) share of
RoTech Stock shall have the effect of reducing any amounts owed to RoTech by
$30.125. RoTech's right of offset against the RoTech Stock shall terminate no
later than January 31, 1998 (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. In the event the right of offset is extended
past the Release Date because a claim is in dispute, RoTech Stock having a value
of twice the amount of the claim asserted by RoTech (using $31.125 as previously
defined) shall continue to be held in escrow past the Release Date until such
claim is resolved, with the remaining shares of RoTech Stock released to
Shareholder within fifteen (15) days after the Release Date. RoTech shall be
entitled to reimbursement from Shareholder of the amount of any reasonable legal
fees and expenses (including court costs and the costs of appeal) incurred by
RoTech to enforce the collection of amounts owed RoTech by Shareholder
hereunder.
5. Characteristics of RoTech Stock.
-------------------------------
(a) Investment. The RoTech Stock which Shareholder is acquiring
----------
hereunder is being acquired for Shareholder'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. Shareholder 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 RoTech's reliance on such exemption is predicated on
Shareholder's representations set forth in this paragraph 5.
3
<PAGE>
(c) Rule 144. Shareholder acknowledges that the RoTech Stock must
--------
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. Shareholder 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 the Rule hold the shares for at least two
(2) years. In the event any of the RoTech Stock held by Shareholder becomes
eligible for sale pursuant to Rule 144, and an opinion of RoTech's counsel is
necessary to effectuate the transfer of RoTech Stock thereunder, Shareholder
shall bear the costs of obtaining such opinion of counsel, up to $275.00 for
each opinion of counsel issued in connection with transfers under Rule 144.
RoTech shall process any requests for transfer of RoTech Stock pursuant to Rule
144 in an efficient and prompt manner.
(d) Access to Data. Shareholder has received and reviewed
--------------
information about RoTech and have had an opportunity to ask questions of, and
receive answers from RoTech concerning RoTech's business, management, legal and
financial affairs and to obtain additional information (to the extent RoTech
possesses such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished.
Shareholder also had the opportunity to inspect RoTech's facilities. Shareholder
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. Shareholder is experienced in evaluating and investing
-----
in high risk companies such as RoTech and by reason of their business and
financial experience have the capacity to protect their own interests in
connection with the transactions contemplated by this Agreement and have 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.
4
<PAGE>
(g) No Registration Rights. Shareholder acknowledges that he
----------------------
possesses no rights whatsoever to have any of the RoTech Stock registered.
6. Contingent Reduction of Shares of RoTech Stock; Put Option.
----------------------------------------------------------
(a) Contingent Reduction of Shares of RoTech Stock.
----------------------------------------------
(1) Terms of Reduction. In the event the "First Two Year's
------------------
Average Operating Profits" of the Corporation is less than SIX HUNDRED THOUSAND
DOLLARS ($600,000.00) (the "Threshold Amount"), the number of shares of RoTech
Stock required to be delivered by RoTech to Shareholder at the end of the Escrow
Period shall be reduced by .1549 of shares of RoTech Stock for every ONE DOLLAR
($1.00) of the First Year's Operating Profits during the Measurement Period
below the Threshold Amount, rounded to the nearest full share, with RoTech
retaining complete title to and possession of such shares as if RoTech were at
all times the sole owner of such shares. For example, in the event the First Two
Year's Average Operating Profits of the Corporation during the Measurement
Period is $500,000.00), the difference from the Threshold Amount of $100,000.00
would result in a reduction hereunder of 15,590 shares of RoTech Stock ($100,000
x .1549), with all of such shares being returned to RoTech by the Escrow Agent
upon final determination of the First Two Year's Average Operating Profits and
with the balance of 4,327 shares of RoTech Stock (less any offsets pursuant to
paragraph 4 hereof) delivered to Shareholder at the end of the Escrow Period. In
the event that the First Two Year's Average Operating Profits of the Corporation
are less than the Threshold Amount, the parties agree that the sole consequence
under this Agreement shall be the reduction in the number of shares of RoTech
Stock required to be delivered by RoTech to Shareholder at the end of the Escrow
Period. If said reduction results in return of all of the RoTech Stock to
RoTech, there shall be no other liability of Shareholder to RoTech solely for
failure to equal or exceed the Threshold Amount.
(2) Certain Definitions. The term "First Two Year's Average
-------------------
Operating Profits" shall have the definition set forth on Exhibit "G" attached
hereto. The term "Measurement Period" shall mean that period commencing February
1, 1996 and ending January 31, 1998. During the Measurement Period, RoTech shall
maintain separate accounting records for the Corporation to track the First Two
Year's Average Operating Profits during the Measurement Period. The term
"Delivered RoTech Shares" shall mean the total number of shares of RoTech Stock
actually delivered to Shareholder by RoTech by the end of the Escrow Period,
reflecting all reductions pursuant to paragraph 6(a)(1) hereof and all offsets
pursuant to paragraph 4 hereof. The Delivered RoTech Shares shall be issued with
certificates titled in the name of the Shareholder and having the restrictive
legend required by paragraph 5(f) hereof printed thereon.
(b) Put Option.
----------
(1) Amount and Price. Shareholder shall have the right to
----------------
require RoTech to repurchase some or all of the Delivered RoTech Shares received
by Shareholder
5
<PAGE>
pursuant to this Agreement (sometimes herein referred to as the "Option Shares")
at a repurchase price of $30.125 per share (the "Option Price").
(2) Restrictions on Exercise. This Put Option is not
------------------------
negotiable but Shareholder may submit Option Shares for redemption by RoTech at
the applicable Option Price during the period commencing February 1, 1998 and
ending January 31, 1999, but only with respect to Option Shares representing
RoTech Stock which has been released to Shareholder from the escrow arrangement.
This Put Option may only be exercised in blocks of 5,000 shares or more, is not
assignable in any respect and can only be exercised by Shareholder.
(3) Term of Option. All Option Shares submitted pursuant to
--------------
this Put Option must be delivered to the executive offices of RoTech, at the
address set forth on page 1 hereof (or at such other address as is communicated
by RoTech to Shareholder in writing). At 5:00 p.m., E.S.T., January 31, 1999,
this Put Option shall expire and shall thereafter have no prospective effect.
(4) Exercise of Put Option and Delivery of Shares. To validly
---------------------------------------------
exercise this Put Option, Shareholder must execute a statement in which
Shareholder warrants that he has full and clear title to the applicable Option
Shares, free of all liens and encumbrances. Such statement must be accompanied
by original stock certificates evidencing not less than the number of Option
Shares 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 (and who is also a member of the Medallion
Group) or a commercial bank who is a member of the Federal Reserve System (and
who is also a member of the Medallion Group).
(5) Settlement. Settlement for any Option Shares redeemed
----------
pursuant to this Put Option shall occur on that day which is thirty (30)
business days from the day such Option Shares are submitted to RoTech with all
required documentation. Such payment shall be made without interest.
7. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be February 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Shareholder and RoTech is herein sometimes referred to as the
"Closing" or "Closing Date".
8. Representations and Warranties by Shareholder. Shareholder
---------------------------------------------
represents and warrants to RoTech that, to the best of Shareholder's 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:
6
<PAGE>
(a) Title to the Stock. Shareholder has good, absolute and
------------------
marketable title to the Stock free and clear of all liens, claims, encumbrances
and restrictions of every kind. Shareholder has 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 Florida 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 common capital stock, having a par
value of $1.00, of which 1,000 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, nor are any unissued shares
committed to any party by Corporation or any Shareholder. The certificate
numbers held by the Shareholder, 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, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
(iv) All FICA, Federal and state withholding tax deposits
have been timely and fully reported and paid.
(v) There are no outstanding or unpaid loans to
stockholders, directors or officers other than as listed on Exhibit "F"
hereof.
(d) Financial Statements. Shareholder has furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated December 31, 1993, December 31,
1994, and December 31, 1995, and the related statements of income (the "Income
Statements") for the periods ended December 31, 1994 and December 31, 1995,
copies of which are attached hereto as Exhibit "H" 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
7
<PAGE>
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, or 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 4 hereof.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "F", since December 1, 1995, 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 payment or distribution to
Shareholder 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 except in the ordinary course of
business; 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
Florida. In the event that a deficiency is determined in the amount of Federal
or State or Local tax payable by the Corporation, which deficiency relates to
periods ending on or before the Effective Date, then, in that event, the
Shareholder hereby agrees 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
Effective Date, then, in that event, the Shareholder is entitled to such tax
refund and RoTech agrees to have the Corporation endorse and deliver such tax
refund. Shareholder agrees that RoTech shall not be liable for any income taxes
(and associated interest and penalties) of Corporation payable or incurred by
Corporation through the Effective Date. Copies of the Corporation's Federal
Income tax returns for the periods ending December 31, 1994, and December 31,
1995, are attached hereto as part of Exhibit "H."
(g) Litigation. There are no legal actions, suits, arbitrations,
----------
or other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation,
8
<PAGE>
and no Shareholder is aware of any facts which to the knowledge of such
Shareholder might result in any such action, suit, arbitration, or other
proceedings, except as disclosed on the Schedule of Litigation and Other
Proceedings attached hereto as Exhibit "I" 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 any Shareholder is 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, and the property
described in the Schedule of Property attached hereto as Exhibit "J" 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(s), its patient list, and its provider number. Shareholder hereby agrees
to undertake whatever steps are necessary to assure that 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 except as
disclosed on the Schedule of Property attached hereto as Exhibit "J." All of the
properties and assets of Corporation on the Closing Date shall be in good
operating condition and repair, reasonable wear and tear accepted and which are
being repaired in the ordinary course of business, 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 "K" 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. Shareholder has delivered to RoTech:
(i) The original of the lease, with amendments, covering the
property that the Corporation presently occupies.
9
<PAGE>
(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 service marks, service 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 "L" 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 thirty (30) 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.
(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) Brokers. Shareholder and RoTech agrees that Steven Richards &
-------
Associates has acted as a representative and broker in connection with the
transactions contemplated by this Agreement. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on directly
between RoTech and Shareholder without the intervention or assistance of any
party other than Steven Richards & Associates (other than to provide accounting
or legal counsel). No party to this Agreement, nor any third party, other than
Steven Richards & Associates, has any right or claim to any commission,
brokerage fee or other compensation relative to this Agreement or the
transactions contemplated hereby. RoTech agrees to pay Steven Richards &
Associates a cash amount not to exceed $144,000.00. Shareholder agrees to pay
two percent (2%) of the RoTech Stock released from escrow not to exceed $12,000
(subject to the same restrictions and reductions of Shareholder as described
herein), to Steven Richards & Associates.
(q) Checking Account Balances. The information contained on the
-------------------------
Schedule of Cash Accounts and Cash Balances as of December 31, 1995, attached
hereto as Exhibit "M", is accurate and complete.
10
<PAGE>
(r) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data as of January 31, 1996, attached hereto as Exhibit
"N", is accurate and complete. Shareholder further warrants and represents that
all of the Corporation's accounts receivable shown on Exhibit "N" are legally
billable.
(s) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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, 1995, 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, 1995,
------------------------------------
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.
(v) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel, Payrates and Non-Compete Agreements as
of January 31, 1996, attached hereto as Exhibit "O", 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) Employee Benefit Plans. Shareholder has no pension, bonus,
----------------------
profit-sharing, or retirement plans for officers or employees of the Business,
nor is Shareholder required to contribute to any such plan.
(x) Disclosure. No representation or warranty by the Shareholder
----------
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. Neither Corporation nor any
-----------------------------
Shareholder have 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 or any
Shareholder received nor been threatened with any claim for refund in excess of
$500.00 by
11
<PAGE>
a Medicare or Medicaid carrier, except as disclosed in the Schedule of Adverse
Business Development attached hereto as Exhibit "P."
9. Representations and Warranties by RoTech. RoTech represents,
----------------------------------------
warrants and covenants to Shareholder as of the date of this Agreement as
follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and authority to consummate the transactions contemplated by this
Agreement and has by proper corporate proceedings duly authorized the same.
(b) Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and all agreements and documents contemplated
hereby, including without limitation the Employment Agreement reference in
paragraph 11 hereof and the issuance of the RoTech stock do not and will not
violate any provision of RoTech's Articles of Incorporation or Bylaws or to
RoTech's knowledge any provisions of any judicial or governmental law, decree,
order or judgment, or conflict with, or result in a breach of or constitute a
default under any material agreement or instrument to which RoTech is a party or
by which it is bound, including agreements with lending institutions.
(c) Validity and Binding Effect. This Agreement, the Employment
---------------------------
Agreement reference in paragraph 11 hereof and the provisions thereunder will be
valid and legally binding obligations of RoTech and the same shall be
enforceable in accordance with their respective terms, subject as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws that affect the enforcement of creditors,
rights generally and possible limitations on the availability for equitable
remedies including specific performance.
10. Resignation of Officers and Directors. Shareholder shall deliver
-------------------------------------
to RoTech, at the Closing, the undated written resignations of all of the
directors and officers of the Corporation.
11. Employment Agreement. Dale Turk shall execute, at closing, an
--------------------
employment agreement in the form attached hereto as Exhibit "Q," and a non-
competition agreement in the form attached as Exhibit "R."
12. Indemnification. Shareholder hereby agrees 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 Shareholder in this Agreement, or (iii) any breach in the performance by
Shareholder of any of his obligations under this Agreement, or (iv) any debts,
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise) of Corporation which Shareholder. 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), less any insurance
recoveries received by RoTech.
12
<PAGE>
13. 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.
14. Amendment and Waiver. This Agreement may be amended or modified
--------------------
at any time in all respects by an instrument in writing executed by Shareholders
and RoTech.
15. Assignment. Neither this Agreement nor any right created hereby
----------
shall be assignable by Shareholder 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 Shareholder's death, a transfer to the legal
representatives of such Shareholder's estate or to such Shareholder's legal
heirs. 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. 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.
16. 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.
17. 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 instrument.
18. 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 Shareholder, and their respective heirs, executors,
administrators, successors and assigns.
19. 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.
20. Survival of Agreement. The provisions of this Agreement shall
---------------------
survive the Closing for the sale and purchase of the Stock.
21. Choice of Law and Venue. 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 Orange
County, Florida.
13
<PAGE>
22. 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 Shareholder:
Dale Turk
110 State Route 119, Suite 104
Winter Springs, Florida 32708
As to RoTech Medical Corporation:
RoTech Medical Corporation
Attn: Stephen P. Griggs, President
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
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.
23. 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.
14
<PAGE>
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/ /s/ Dale Turk
- ---------------------------- ----------------------------------------
Dale Turk
Date Executed: 2-12-96
-------------------------
/s/
- ----------------------------
"Shareholder"
ROTECH MEDICAL CORPORATION,
a Florida corporation
/s/ By: /s/ Stephen P. Griggs
- ---------------------------- ----------------------------------------
Stephen P. Griggs, President
Date Executed: 2-19-96
-------------------------
/s/
- ----------------------------
"RoTech"
STATE OF SEMINOLE
COUNTY OF SEMINOLE
The foregoing instrument was acknowledged before me this 2nd day of
February, 1996, by DALE TURK. He (X) is personally known to me or ( ) has
produced ___________________________ as identification.
/s/ David A. Sims
---------------------------
NOTARY SIGNATURE
/s/ David A. Sims
---------------------------
NOTARY NAME PRINTED
My Commission Expires:
15
<PAGE>
STATE OF FLORIDA
COUNTY OF SEMINOLE
The foregoing instrument was acknowledged before me this 26th day of
February, 1996, by STEPHEN P. GRIGGS, as President of RoTech Medical
Corporation, a Florida corporation, on behalf of the corporation. He (X) is
personally known to me or has produced _______________ as identification.
/s/ David A. Sims
---------------------------
NOTARY SIGNATURE
/s/ David A. Sims
---------------------------
NOTARY NAME PRINTED
My Commission Expires:
16
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
OF MURRAY MEDICAL, INC.
THIS AGREEMENT is entered into as of the 1st day of February, 1996, by and
among Leo Murray and Kathy J. Murray, JTWROS, Wayne H. Roth, Joyce Dearing, and
Jerald Johnson (hereinafter individually referred to as "Shareholder" and
together referred to as "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 Murray Medical, Inc., a Colorado
corporation, hereinafter referred to as the "Corporation," in that the
Corporation has 10,000 shares of its common capital stock outstanding, and
Shareholders hold, in the aggregate, 10,000 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 Colorado.
C. Shareholders desire to transfer to RoTech and RoTech desires to
acquire from Shareholders, all of the issued and outstanding shares of the
common capital stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock. 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 10,000 shares
of the common capital stock, having no par value issued by the Corporation (the
"Stock"), such Stock constituting all of the issued and outstanding common
capital stock of the Corporation. At the Closing, Shareholders will deliver to
RoTech certificates evidencing the Stock duly endorsed to RoTech.
2. Purchase Price.
--------------
(a) Purchase Price. The total consideration from RoTech to
--------------
Shareholders in exchange for the Stock is SEVEN HUNDRED TWENTY-SEVEN THOUSAND
TWO HUNDRED SIXTY DOLLARS ($727,260.00) in cash (the "Purchase Price"). The
Purchase Price shall be allocated to the Shareholders on a prorata basis
pursuant to each Shareholder's percentage ownership of Stock in the Corporation
as set forth on Exhibit "A" hereto.
(b) Bonus Payment. Subsequent to Closing, RoTech shall pay to
-------------
Shareholders twenty-three percent (23%) of the amounts to be paid pursuant to
the terms of paragraph 2(b) of that certain Agreement for Purchase and Sale of
Shares of Roth Medical, Inc.
<PAGE>
(c) Method of Payment; Escrow Agreement. SIX HUNDRED EIGHTY-ONE
-----------------------------------
THOUSAND TWO HUNDRED SIXTY DOLLARS ($681,260.00) of the Purchase Price will be
paid to Shareholders on the Closing Date by wired funds to account number
_______ at _______ Bank. FORTY-SIX THOUSAND DOLLARS ($46,000.00) of the Purchase
Price (the "Escrowed Cash") shall be escrowed at Closing. The Escrowed Cash
shall be placed in escrow for a period of twelve (12) months (the "Escrow
Period") with the law firm of Winderweedle, Haines, Ward & Woodman, P.A.
("WHWW"), to be maintained in an account by WHWW pursuant to the terms of that
certain Escrow Agreement, in the form attached hereto as Exhibit "C" and by this
reference made a part hereof (the "Escrow Agreement").
(d) Allocation to Covenant Not to Compete. $100,000.00 of the
-------------------------------------
purchase price paid to Leo Murray hereunder shall be allocated to payment of the
Covenant Not to Compete given to RoTech by Leo Murray pursuant to paragraph
11(c) hereof.
3. Existing Obligations. 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 "D" is complete
and accurately reflects all of Corporation's "Existing Obligations" (as
hereinafter defined) as of the Effective 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 Effective Date, including but not limited to any and all accounts
payable, trade payables, lease obligations (except operating leases),
indebtedness for borrowed money, accrued interest, contractual obligations, etc.
4. Right of Offset Against the Escrowed Amount. In the event that: (i)
-------------------------------------------
RoTech pays for any debts or liabilities of Corporation in excess of
$1,640,595.00, other than as disclosed on the January 31, 1996 Financial
Statement and Schedule of Liabilities attached hereto as Exhibit "D," (amount in
excess of $1,640,595.00 is herein referred to as the "Liabilities Deficiency"),
or (ii) the aggregate value of the Corporation's collectible accounts receivable
as of January 31, 1996, are determined to be less than $459,761.00 as determined
by actual cash collections of such receivables during the twelve (12) month
period immediately following the Closing Date using commercially reasonable
collection efforts (the "Asset Value Deficiency"), or (iii) the Corporation has,
since January 31, 1996, 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 payment or distribution to Shareholders 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, except in the ordinary course of
business; 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) 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, created or
2
<PAGE>
arising on or before the Closing Date (said Obligations hereinafter referred to
as the "Contingent Liability"); then, and in any of such events, RoTech shall
have the right, for a period of twelve (12) months from the Effective Date, to
make offset against the Escrowed Cash, in accordance with the terms and
conditions of the 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
twelve (12) month period after the Effective Date, (subject, however, in the
case of a "Dispute", to the provisions of paragraph 13 hereof applicable to a
"Dispute") and Shareholders agree to pay said amounts to RoTech immediately upon
written request from RoTech to Shareholders. During the twelve (12) month period
following the Effective Date, in the event RoTech makes written request to
Shareholders hereunder for Shareholders, and Shareholders fail 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"),
RoTech shall have the right to make offset against the Escrowed Cash, in
accordance with the terms and conditions of the 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 twelve (12) month period following the
Effective Date (subject, however, in the case of a "Dispute", to the provisions
of paragraph 13 hereof applicable to a "Dispute"), and the Shareholders agree to
allow RoTech to make offset against the Escrowed Cash as herein provided. In
the event an offset against the Escrowed Cash is to occur, an offset against
$1.00 of Escrowed Cash shall have the effect of reducing any amounts owed RoTech
by $1.00. RoTech's right of offset against the Escrowed Cash shall terminate on
that date which is twelve (12) months from the Effective Date (the "Release
Date"); provided, however, that notwithstanding anything contained in this
Agreement or in the 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. In the event the right of
offset is extended past the Release Date because a claim is in dispute, Escrowed
Cash having a value equal to that amount which is one hundred fifty percent
(150%) of the amount of the claim asserted by RoTech shall continue to be held
in escrow past the Release Date until such claim is resolved, with the remaining
Escrowed Cash released to Shareholders within fifteen (15) days after the
Release Date. RoTech shall be entitled to reimbursement from Shareholders of the
amount of any reasonable legal fees and expenses (including court costs and the
costs of appeal) incurred by RoTech to enforce the collection of amounts owed
RoTech by Shareholders hereunder. Notwithstanding anything contained in this
paragraph 4 to the contrary, in the case of a "Dispute" (as defined in paragraph
13 hereof), the provisions of paragraph 13 hereof applicable to a "Dispute"
shall govern, and no offset against the Escrowed Cash shall occur until the
applicable "Dispute" is resolved in accordance with the provisions of paragraph
13 hereof.
5. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be February 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Shareholders and RoTech is herein sometimes referred to as the
"Closing"or "Closing Date".
3
<PAGE>
6. Representations and Warranties by Shareholders. Shareholders jointly
----------------------------------------------
and severally represent and warrant to RoTech that, to the best of Shareholder's
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. Each Shareholder is the sole and
------------------
exclusive record and beneficial owner of title to the Stock reflected on the
Schedule of Stock Ownership attached hereto as Exhibit "A," as owned by such
Shareholder. Each Shareholder owns such Stock free and clear of all liens,
claims, encumbrances and restrictions of every kind. Each Shareholder by himself
or herself, or in conjunction with his or her respective joint tenant (to the
extent ownership is designated as JTWROS), has complete, absolute and
unrestricted right, power and authority to sell, assign or transfer the Stock
pursuant to this Agreement.
(b) Organization. The Corporation is a duly organized and validly
------------
existing Colorado 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, except that the Corporation
is the owner of 100% of the outstanding capital stock of Murray Medical of
Pueblo, Inc., a Colorado corporation (the "Subsidiary"), which Subsidiary is a
duly organized and validly existing Colorado corporation in good standing, with
all requisite corporate power and authority to carry on its business as
presently conducted.
(c) Capitalization.
--------------
(i) The Corporation is authorized by its Articles of
Incorporation to issue 50,000 shares of common capital stock, having no par
value of which 10,000 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, nor are any unissued shares committed to any
party by the Corporation or any Shareholder. 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 or debt securities.
(ii) The Corporation is not in any default or violation of
any provision of its outstanding long term or short term indebtedness;
provided, however this provision shall not apply to any indebtedness that
RoTech has agreed to pay in full pursuant to paragraph 8 hereof.
(iii) There are no outstanding options, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
4
<PAGE>
(iv) There are no outstanding or unpaid loans to
stockholders, directors or officers other than as listed on the Schedule of
Shareholders, Distributions, and Exempted Transactions attached as Exhibit
"F" hereto.
(d) Financial Statements. Shareholders have furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated May 31, 1993, May 31, 1994, May 31,
1995, October 31, 1995 and January 31, 1996, and the statements of income (the
"Income Statements") for the periods ended May 31, 1994 and May 31, 1995,
October 31, 1995, and January 31, 1996, copies of which are attached hereto as
Exhibit "G" 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 accounting principles applied
upon a consistent basis during each period except for a change in depreciation
to be consistent with that per the Corporation's tax return; and (iv) the
Balance Sheets disclose the debts, liabilities and obligations of the
Corporation at the last balance sheet date and include the appropriate accruals
for 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 the Schedule of Contingent Liabilities
attached hereto as Exhibit "P" to this Agreement.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "F", since January 1, 1996, 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 payment or distribution to
Shareholders 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 except in the ordinary course of
business; 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 the
taxes reflected thereon for the periods covered by such returns. All FICA,
Federal and state withholding tax deposits have been timely and fully reported
and paid, or if not timely paid, have been subsequently paid together with all
charges and interest penalties which were assessed. The Corporation has not been
delinquent in the payment of any tax, assessment or governmental charge except
for inadvertent delinquency in payment of payroll taxes all of which were
subsequently paid together with all charges, interest and penalties which were
assessed. 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 Income State
Tax Returns have not been audited by either the Internal Revenue Service or the
Department
5
<PAGE>
of Revenue of the State of Colorado. In the event that a deficiency is
determined in the amount of Federal or State 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 jointly and severally 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 to Wayne Roth, who shall receive
such tax refund on behalf of all of the Shareholders, and who will take care of
distributing same. Shareholders 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. Copies of the Corporation's
Federal Income tax returns for the periods ending May 31, 1994, and May 31,
1995, are attached hereto as part of Exhibit "G."
(g) Litigation. There are no legal actions, suits, arbitrations,
----------
or other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation, and no Shareholder is aware of any facts
which to the knowledge of such Shareholder might result in any such action,
suit, arbitration, or other proceedings, except as disclosed on the Schedule of
Litigation and Other Proceedings attached hereto as Exhibit "H" 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 any Shareholder is 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, other than defaults
on bank indebtedness resulting from change in ownership of the Corporation,
which default RoTech agrees to promptly cure by paying such bank indebtedness.
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 properties and assets owned by it,
including without limitation those reflected in the Balance Sheets, and the
property described in the Schedule of Property attached hereto as Exhibit "I"
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(s), its patient list, and its provider number.
6
<PAGE>
(j) Corporate Name. Shareholders hereby agree to undertake
--------------
whatever steps are necessary to assure that RoTech can utilize any name or names
under which the Corporation presently conducts its business.
(k) Asset Condition and Quality. All of the properties and assets
---------------------------
of Corporation are used in the ordinary course of the Corporation's business.
All of the properties and assets of Corporation on the Closing Date shall be in
good operating condition and repair, reasonable wear and tear accepted and have
been maintained in the ordinary course of business, and shall conform in all
material respects with all applicable ordinances, regulations, zoning and other
laws.
(l) Leases and Insurance Policies. The Schedule of Leases and
-----------------------------
Insurance Policies attached hereto as Exhibit "J" 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. Corporation has retained in its files, to be turned
over to RoTech, at Closing, a true and correct copy of:
(i) The lease, with amendments, covering the property that
the Corporation presently occupies.
(ii) All other leases, with amendments, to which the
Corporation is a party.
(iii) All fire and other casualty and liability policies of
the Corporation in effect at the date of this Agreement.
(m) Licenses, Trademarks, etc. The Corporation owns, possesses and
-------------------------
has good title to all licenses necessary in the conduct of its business as
currently being conducted. The Corporation owns no trademarks, service marks,
or service names.
(n) Contracts. Except as set forth on the Schedule of Contracts
---------
attached hereto as Exhibit "K" 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 thirty (30) 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>
(o) 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.
(p) Insurance Policies. There are in full force all policies of
------------------
insurance referred to above in subparagraph (l). Such policies are in amounts
and against such losses and risks as are generally maintained by comparable
businesses.
(q) Cash Balances. The information contained on the Schedule of
-------------
Cash Balances as of January 31, 1996, attached hereto as Exhibit "L", is
accurate and complete.
(r) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data attached hereto as Exhibits "B" is accurate and
complete. All of the Corporation's accounts receivable are legally billable.
(s) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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. The inventories of the Corporation that are
reflected on the Balances Sheets were determined at cost. Since January 31,
1996, 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. Other than as reflect on
------------------------------------
the Balance Sheets dated since January 31, 1996, 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 substantially in excess
of the then current market price being paid by the Corporation when incurred, or
contain terms and conditions more onerous than those usual and customary in the
industry at the time made.
(v) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel and Payrates as of January 31, 1996,
attached hereto as Exhibit "M", is accurate and complete. The Corporation has no
non-compete agreements.
(w) Employee Benefit Plans. The Corporation is not required to
----------------------
contribute to any pension, bonus, profit-sharing, or retirement plans for
officers or employees of the Corporation.
8
<PAGE>
(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. Corporation or any Shareholder
-----------------------------
has not 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 or any
Shareholder 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 Adverse Business Development attached hereto as Exhibit "N."
(z) Accuracy of Representations and Warranties. The Shareholders
------------------------------------------
acknowledge that the purchase price for the Stock is based on the accuracy of
Shareholders' representations and warranties contained in this Agreement,
including but not limited to the Shareholders' representations and warranties
contained in paragraph 3 hereof.
7. Representations and Warranties by RoTech. RoTech represents,
----------------------------------------
warrants and covenants to Shareholders as of the date of this Agreement as
follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and authority to consummate the transactions contemplated by this
Agreement and has by proper corporate proceedings duly authorized the same.
(b) Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and all agreements and documents contemplated
hereby, including without limitation the Employment Agreement and do not and
will not violate any provision of RoTech's Articles of Incorporation or Bylaws
or to RoTech's knowledge any provisions of any judicial or governmental law,
decree, order or judgment, or conflict with, or result in a breach of or
constitute a default under any material agreement or instrument to which RoTech
is a party or by which it is bound, including agreements with lending
institutions.
(c) Validity and Binding Effect. This Agreement, the Employment
---------------------------
Agreement and the provisions thereunder will be valid and legally binding
obligations of RoTech and the same shall be enforceable in accordance with their
respective terms, subject as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws that
affect the enforcement of creditors, rights generally and possible limitations
on the availability for equitable remedies including specific performance.
9
<PAGE>
(d) Business Purposes and Investment Intent. RoTech is purchasing
---------------------------------------
the Stock for business purposes and with investment intent and is not purchasing
the Stock with a view to redistributing or reselling the Stock.
8. Release of Certain Financial Obligations. On the day following the
----------------------------------------
Closing Date, RoTech shall cause the Corporation to pay in full those financial
obligations of Shareholders set forth on the Schedule of Liabilities attached
hereto as Exhibit "D." RoTech shall provide Shareholders with evidence of
releases of any guaranty executed by Shareholders in connection with such
liabilities.
9. Brokers. Shareholders and RoTech agree that Baker & Associates has
-------
acted as representative and broker in connection with the transactions
contemplated by this Agreement. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on directly between
RoTech and Shareholders without the intervention or assistance of any party
other than Baker & Associates (other than to provide accounting or legal
counsel). No party to this Agreement, nor any third party, other than Baker &
Associates, has any right or claim to any commission, brokerage fee or other
compensation relative to this Agreement or the transactions contemplated hereby.
RoTech agrees to pay, and be solely responsible for the payment of any fees or
commissions to Baker & Associates and to disburse the same at Closing.
10. Resignation of Officers and Directors. Shareholders shall deliver
-------------------------------------
to RoTech, at the Closing, the undated written resignations of all of the
directors and officers of the Corporation.
11. Conditions Precedent to Closing by RoTech. The obligation of the
-----------------------------------------
RoTech 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 the Shareholders on or
before the Closing Date, shall have been complied with and performed; and
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Shareholders in paragraph 6 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 Shareholders;
(c) Non-Compete Agreement. Leo Murray shall have entered into a
---------------------
non-compete agreement substantially in the form attached hereto as Exhibit "O"
and by this reference made a part hereof; and
(d) Employment Agreement. Leo Murray and Anne Easton shall each
--------------------
execute, at closing, an employment agreement in the form attached hereto as
Exhibit "E"; and
10
<PAGE>
(e) Roth Medical, Inc. Stock Purchase. RoTech and all of the
---------------------------------
Shareholders of Roth Medical, Inc. shall have executed an Agreement for Purchase
and Sale of Shares of Roth Medical, Inc. and all documents related thereto.
12. Payment of Shareholder Notes. Upon Closing, RoTech shall contribute
----------------------------
sufficient funds to the Corporation (not to exceed $276,740.00), which amount
the Shareholders represent is sufficient to allow the Corporation to repay in
full all principal and interest due and owing to Wayne Roth for the Shareholder
loans made to the Corporations by Wayne Roth as reflected on the January 31,
1996 Balance Sheet.
13. Indemnification; Remedies.
-------------------------
(a) Indemnification of Shareholders. Shareholders shall and hereby
-------------------------------
jointly and severally agree to indemnify and hold harmless at all times, RoTech
and its directors, officers, employees, agents and assigns, as to and against
any Damages (as hereinafter defined) resulting from: (i) any materially
inaccurate representation made by Shareholders in or under this Agreement; (ii)
material breach of any warranties made by Shareholders in or under this
Agreement; (iii) breach or default in the performance by Shareholders of any of
the covenants to be performed by Shareholders hereunder; and (iv) any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency or
Contingent Liability, all as set forth in paragraph 4 hereof; provided, however,
that the joint and several obligation of the Shareholders to indemnify RoTech
hereunder shall not, with respect to any claims made by RoTech against the
Shareholders exceed $230,000.00 in the aggregate for all such claims, for a
period not to exceed the ending date of the statute of limitations applicable to
the particular claim. In the event the Shareholders elect to defend, pursuant to
subparagraph (e)(2) hereof at the expense of the Shareholders, RoTech shall
cooperate in such defense, and shall cause the Corporation to cooperate in such
defense, including providing Shareholders and/or their legal counsel with
access, at reasonable times upon reasonable notice, to those documents and
records reasonably necessary to defend such claim.
(b) Indemnification of RoTech. RoTech shall and hereby agrees to
-------------------------
indemnify and hold harmless at all times the Shareholders, at the expense of
RoTech, as to and against any Damages resulting from: (i) any materially
inaccurate representation made by RoTech in or under this Agreement; (ii) breach
of any material warranties made by RoTech in or under this Agreement; and (iii)
breach or default in the performance by RoTech of any of the covenants to be
performed by RoTech hereunder.
(c) Definition of Damages. The term "Damages" as used herein,
---------------------
shall include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, penalties and damages, including reasonable attorneys' fees
incurred in investigating or in attempting to avoid the same or oppose the
imposition thereof. The term "Damages" shall include, but not be limited to, any
Labilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency and
Contingent Liability, as defined in paragraph 4 hereof.
11
<PAGE>
(d) Remedies.
--------
(1) RoTech's Remedies. In the event RoTech makes written
-----------------
request to Shareholders for the payment of Damages and Shareholders fail 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"),
RoTech shall have the right: (i) if such request is made during the Escrow
Period and Escrowed Cash is sufficient to pay such Damages in full is held by
RoTech in escrow, to make offset against the Escrowed Cash, in accordance with
the terms and conditions of this Agreement and the related Escrow Agreement;
(ii) if such request is made during the Escrow Period and the amount of Escrowed
Cash held by RoTech in escrow is insufficient to pay such Damages in full, to
first make offset against any Escrowed Cash held in escrow and then to require
Shareholders to pay RoTech the remaining balance in cash within the ten (10) day
period following the applicable Notice Period (and Shareholders shall be liable
for such balance and for the payment of such balance in full during such
period); and (iii) if such request is made during the Escrow Period and no
Escrowed Cash is being held in escrow by RoTech at the time of such request, or
if such request is made after the Escrow Period, to require the Shareholders to
pay RoTech the full amount of such Damages in cash within the ten (10) day
period following the applicable Notice Period (and Shareholders shall be liable
for such amount and for the payment of such amount in full during such period);
provided, however, that in any of the events described in (i) through (iii) of
this subparagraph (d), Shareholders shall have the option to provide written
notice to RoTech within the Notice Period that Shareholders dispute the validity
of the Damages triggering the right of offset against the Escrowed Cash and/or
the requirement for payment by Shareholders in cash, and in the event RoTech and
Shareholders cannot reach agreement on the validity of such Damages by the end
of the ten (10) day period following the Notice Period, the dispute over the
validity of such claim or liability (the "Dispute") shall be settled as set
forth in subparagraph (e) of this paragraph 13, with the non-prevailing party
bearing the prevailing party's costs of arbitration in the event any Dispute is
resolved by arbitration.
(2) Shareholder's Remedies. In the event Shareholders make
----------------------
written request to RoTech for the payment of Damages and RoTech 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"),
Shareholders shall have the right to require RoTech to pay Shareholders the full
amount of such Damages in cash within the ten (10) day period following the
applicable Notice Period (and RoTech shall be liable for such amount and for the
payment of such amount in full during such period); provided, however, that
RoTech shall have the option to provide written notice to Shareholders within
the Notice Period that RoTech disputes the validity of the Damages triggering
the requirement for payment by RoTech in cash, and in the event Shareholders and
RoTech cannot reach agreement on the validity of such Damages by the end of the
ten (10) day period following the Notice Period, the dispute over the validity
of such Damages shall be settled as set forth in subparagraph (e) of this
paragraph 13, with the non-prevailing party bearing the prevailing party's costs
of arbitration in the event any dispute is resolved by arbitration.
12
<PAGE>
(e) Settlement of Disputes.
----------------------
(1) Disputes Not Involving Third Parties. In the event a
------------------------------------
Dispute arises which Dispute involves claims not involving any third parties,
RoTech and Shareholders shall settle the Dispute by submitting same to
settlement by arbitration. In the event arbitration is required pursuant to this
subsection (1) of subparagraph (e), RoTech and Shareholders will each select an
arbitrator within ten (10) days after the ten (10) day period following the
Notice Period; those two arbitrators will then select a third arbitrator; and
the three arbitrators so chosen will settle the Dispute.
(2) Disputes Involving Claims Made by Third Parties. In the
-----------------------------------------------
event a Dispute arises which Dispute involves claims made by a third party or
parties (the "Third Party Claim"), RoTech or Shareholders shall give written
notice to the other ("Non-Aggrieved Party") as soon as practical after the
aggrieved party (the "Aggrieved Party") receives notice of a Third Party Claim.
If any lawsuit or enforcement action is filed against an Aggrieved Party by a
person asserting a Third Party Claim, written notice shall be given to the Non-
Aggrieved Party as promptly as is practicable (in any event, within ten (10)
days after the service of citation or summons). Upon such notice, RoTech and
Shareholders shall submit the Dispute to arbitration, with RoTech and
Shareholders each selecting an arbitrator; those two arbitrators then selecting
a third arbitrator; and the three arbitrators so chosen arbitrating the Dispute
as follows: (i) the Third Party Claim, solely for the purpose of determining the
party responsible for defending the Third Party Claim, shall be considered by
the arbitrators to be a valid claim (although such consideration is by no means
any admission by RoTech or Shareholders of any liability to any third party or
parties); (ii) assuming the Third Party Claim is determined by the arbitrators
to be valid, the arbitrators shall then decide whether RoTech or Shareholders is
the party responsible for paying the Third Party Claim in the event such Third
Party Claim is favorably contested by such third party or parties (with the
decision of such arbitrators final and binding as between RoTech and
Shareholders); (iii) in the event Shareholders are found by the arbitrators to
be the party responsible for paying the Third Party Claim, and Shareholders
refuse to immediately settle the Third Party Claim, Shareholders shall
immediately select one of the following two options: Option One: Shareholders
----------
can take on the sole defense, at their expense and risk, of the Third Party
Claim, provided Shareholders place in escrow in favor of RoTech adequate
collateral (as determined by the arbitrators upon consideration of all relevant
facts) protecting RoTech from an adverse judgment against RoTech in the event
RoTech is found to be liable to such third party or parties for any portion or
all of such Third Party Claim (in which case RoTech shall be immediately
reimbursed by Shareholders for any amount required to be paid by RoTech to such
third party or parties, with RoTech having such rights of offset as set forth in
paragraph 4 hereof and in the Escrow Agreement); or Option Two: Shareholders can
----------
co-defend, at its expense and risk, the Third Party Claim with RoTech, with
Shareholders also responsible for paying all costs incurred by RoTech in
connection with such defense, including without limitation, the legal fees and
expenses of RoTech's counsel for its reasonable involvement in such defense (in
the event RoTech is found to be liable to such third party or parties for any
portion or all of such Third Party Claim, RoTech shall be immediately reimbursed
by Shareholders for any amount required
13
<PAGE>
to be paid by RoTech to such third party or parties, with RoTech having such
rights of offset as set forth in paragraph 4 hereof and in the Escrow
Agreement), provided, however, in the event Shareholders select this option,
Shareholders shall diligently attempt to have RoTech removed as a party to any
legal action involving the Third Party Claim (and, upon such removal, the
involvement of RoTech's counsel shall cease unless requested by Shareholders or
Shareholders' counsel); and (iv) in the event RoTech is found by the arbitrators
to be the party responsible for paying the Third Party Claim, and RoTech refuses
to immediately settle the Third Party Claim, RoTech shall immediately select one
of the following two options: Option One: RoTech can take on the sole defense,
----------
at its expense and risk, of the Third Party Claim provided RoTech places in
escrow in favor of Shareholders adequate collateral (as determined by the
arbitrators upon consideration of all relevant facts) protecting Shareholders
from an adverse judgment against Shareholders in the event Shareholders are
found to be liable to such third party or parties for any portion or all of such
Third Party Claim (in which case Shareholder shall be immediately reimbursed by
RoTech for any amount required to be paid by Shareholders to such third party or
parties); or Option Two: RoTech can co-defend, at its expense and risk, the
-----------
Third Party Claim with Shareholders, with RoTech also responsible for paying all
costs incurred by Shareholders in connection with such defense, including
without limitation, the legal fees and expenses of Shareholders' counsel for its
reasonable involvement in such defense (in the event Shareholders are found to
be liable to such third party or parties for any portion or all of such Third
Party Claim, Shareholders shall be immediately reimbursed by RoTech for any
amount required to be paid by Shareholders to such third party or parties),
provided, however, in the event RoTech selects this option, RoTech shall
diligently attempt to have Shareholders removed as a party to any legal action
involving the Third Party Claim (and, upon such removal, the involvement of
Shareholders' counsel shall cease unless requested by RoTech or RoTech's
counsel). Any party responsible for defending a Third Party Claim shall proceed
with diligence and in good faith with respect thereto.
(3) Failure to Appoint Arbitrator. If either party delays in
-----------------------------
appointing an arbitrator when required by this subparagraph (e) of this
paragraph 13, and another twenty (20) day period has elapsed in which such party
does not cure such failure by appointing an arbitrator, the arbitrator appointed
by the other party shall arbitrate the Dispute, and in such case such
arbitrator's decision shall be binding upon all parties.
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 Shareholders
and RoTech.
16. Assignment. Neither this Agreement nor any right created hereby
----------
shall be assignable by Shareholders or RoTech without the prior written consent
of the other, except for
14
<PAGE>
an assignment incident to a merger, consolidation or reorganization, or, in the
event of any of the Shareholder's death, a transfer to the legal representatives
of such Shareholder's estate or to such Shareholder's legal heirs. 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. 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 instrument.
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 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.
22. Choice of Law and Venue. It is the intention of the parties that the
-----------------------
laws of the State of Colorado 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:
To Shareholders: Leo Murray and Kathy J. Murray, JTWROS
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Wayne H. Roth
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Joyce Dearing
15
<PAGE>
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Jerald Johnson
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
With a copy to: Castle & Castle, P.C.
1099 18th Street, Suite 2300
Denver, Colorado 80202
Attn: Lawrence E. Castle, Esq.
As to RoTech Medical Corporation: RoTech Medical Corporation
Attn: William P. Kennedy, Chief Executive
Officer
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
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 Assurances. The parties hereto will take such other actions,
------------------
and execute, acknowledge and deliver such further consent resolutions,
assurances or agreements as any party hereto may reasonably request in order to
fulfill the intent of this Agreement and the consummation of the transactions
contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
/s/ Leo Murray
----------------------------------
Leo Murray, as a joint tenant with
right of survivorship
Date Executed: February 22, 1996
16
<PAGE>
/s/ Kathy J. Murray
-----------------------------------
Kathy J. Murray, as a joint tenant
with right of survivorship
Date Executed: February 22, 1996
/s/ Wayne H. Roth
-----------------------------------
Wayne H. Roth
Date Executed: February 22, 1996
/s/ Joyce Dearing
-----------------------------------
Joyce Dearing
Date Executed: February 22, 1996
/s/ Jerald Johnson
-----------------------------------
Jerald Johnson
Date Executed: February 22, 1996
ROTECH MEDICAL CORPORATION,
a Florida corporation
By: /s/ William P. Kennedy
-----------------------------------
William P. Kennedy, Chief Executive Officer
Date Executed: February 22, 1996
17
<PAGE>
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Leo Murray.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: 3-31-97
------------------------------
/s/ Arlene M. Briody
--------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Kathy J. Murray.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: 3-31-97
------------------------------
/s/ Arlene M. Briody
--------------------------
Notary Public
STATE OF COLORADO )
CITY AND COUNTY )ss.
OF DENVER )
18
<PAGE>
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Wayne H. Roth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: March 31, 1997
------------------------------
/s/ Arlene M Briody
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Jerald Johnson.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: March 31, 1997
------------------------------
/s/ Arlene M Briody
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Joyce Dearing.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: March 31, 1997
------------------------------
19
<PAGE>
/s/ Arlene M Briody
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by William P. Kennedy, Chief Executive Officer of RoTech
Medical Corporation, a Florida corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: March 31, 1997
------------------------------
/s/ Arlene M Briody
------------------------------
Notary Public
20
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF SHARES
OF ROTH MEDICAL, INC.
THIS AGREEMENT is entered this 22nd day of February, 1996, by and among
Wayne H. Roth and Miriam Anne Roth, JTWROS, Susan Falk, Thomas Falk, Anne
Keener, Steven Keener, Kathleen Roth, and Wayne H. and Miriam Anne Roth
Charitable Remainder Unitrust dated January 31, 1996 (hereinafter individually
referred to as "Shareholder" and together referred to as "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 Roth Medical, Inc., a Colorado
corporation, hereinafter referred to as the "Corporation," in that the
Corporation has 10,000 shares of its common capital stock outstanding, and
Shareholders hold, in the aggregate, 10,000 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 Colorado.
C. Shareholders desire to transfer to RoTech and RoTech desires to
acquire from Shareholders, all of the issued and outstanding shares of the
common capital stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the parties hereto agree as follows:
1. Purchase and Sale of Stock. 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 10,000 shares
of the common capital stock, having no par value issued by the Corporation (the
"Stock"), such Stock constituting all of the issued and outstanding common
capital stock of the Corporation. At the Closing, Shareholders will deliver to
RoTech certificates evidencing the Stock duly endorsed to RoTech.
2. Purchase Price.
--------------
(a) Purchase Price. The total consideration from RoTech to
--------------
Shareholders in exchange for the Stock is TWO MILLION FOUR HUNDRED THIRTY-FOUR
THOUSAND SEVEN HUNDRED FORTY DOLLARS ($2,434,740.00) in cash (the "Purchase
Price"). The Purchase Price shall be allocated to the Shareholders on a prorata
basis pursuant to each
<PAGE>
Shareholder's percentage ownership of Stock in the Corporation as set forth on
Exhibit "A" hereto.
(b) Bonus Consideration. Subsequent to Closing, RoTech shall pay
-------------------
monthly to the Shareholders of Roth Medical, Inc., on a prorata basis, seventy-
seven percent (77%) of an amount to be paid pursuant to the terms of this
subparagraph (b) and to the Shareholders of Murray Medical, Inc., on a prorata
basis, twenty-three percent (23%) of an amount to be paid pursuant to the terms
of this subparagraph (b) (the "Bonus Consideration"). RoTech and Shareholders
will designate uncollected accounts receivable that are 120 days or older
("Delinquent Accounts") in the approximate amount of $601,116.00 as of January
31, 1996, which Delinquent Accounts are as set forth on the Schedule of Accounts
Receivable Data attached hereto as Exhibit "B." After Closing, RoTech shall
designate certain employees of the Corporation to assist Shareholders, at
Shareholders' request, in the collection of the Delinquent Accounts. All amounts
collected shall be retained by the Corporation, but RoTech shall pay to the
Shareholders, on the 5th day of each calender month after Closing, as Bonus
Consideration, an amount equal to the Delinquent Accounts collected during the
prior calender month, less the reasonable costs incurred by RoTech in assisting
in such collection. Shareholders may, upon reasonable notice and with reasonable
frequency, have reasonable access to information pertaining to the Delinquent
Accounts held by RoTech, and upon written request to RoTech, Shareholders may
receive from RoTech an assignment of any uncollected Delinquent Accounts to
pursue collection efforts thereon without assistance from RoTech, provided that
such efforts of Shareholders are designed not to damage any ongoing patient or
referral source relationships that RoTech has.
(c) Method of Payment; Escrow Agreement. TWO MILLION TWO HUNDRED
-----------------------------------
EIGHTY THOUSAND SEVEN HUNDRED FORTY DOLLARS ($2,280,740.00) of the Purchase
Price will be paid to Shareholders on the Closing Date by wired funds to account
number _______ at _______ Bank. ONE HUNDRED FIFTY-FOUR THOUSAND DOLLARS
($154,000.00) of the Purchase Price (the "Escrowed Cash") shall be escrowed at
Closing. The Escrowed Cash shall be placed in escrow for a period of twelve (12)
months (the "Escrow Period") with the law firm of Winderweedle, Haines, Ward &
Woodman, P.A. ("WHWW"), to be maintained in an account by WHWW pursuant to the
terms of that certain Escrow Agreement, in the form attached hereto as Exhibit
"C" and by this reference made a part hereof (the "Escrow Agreement").
(d) Allocation to Covenant Not to Compete. $250,000.00 of the
-------------------------------------
Purchase Price paid to Wayne H. Roth hereunder shall be allocated to payment of
the Covenant Not to Compete given to RoTech by Wayne H. Roth pursuant to
paragraph 11(c) hereof.
3. Existing Obligations. 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 "D" is complete
and accurately reflects all of Corporation's "Existing Obligations"
2
<PAGE>
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 Effective Date, including but not limited to any and all accounts
payable, trade payables, lease obligations (except operating leases),
indebtedness for borrowed money, accrued interest, contractual obligations, etc.
4. Right of Offset Against the Escrowed Amount. In the event that: (i)
-------------------------------------------
RoTech pays for any debts or liabilities of Corporation in excess of
$2,831,963.00, other than as disclosed on the January 31, 1996 Financial
Statements, and the Schedule of Liabilities attached hereto as Exhibit "D,"
(amount in excess of $2,831,963.00 is herein referred to as the "Liabilities
Deficiency"), or (ii) the aggregate value of the Corporation's collectible
accounts receivable as of January 31, 1996, are determined to be less than
$698,234.00 as determined by actual cash collections of such receivables during
the twelve (12) month period immediately following the Closing Date using
commercially reasonable collection efforts (the "Asset Value Deficiency"), or
(iii) the Corporation has, since January 31, 1996, 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 payment or distribution to Shareholders 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, except
in the ordinary course of business; 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) 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, 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, RoTech shall have the right, for a period of twelve (12) months from the
Effective Date, to make offset against the Escrowed Cash, in accordance with the
terms and conditions of the 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 twelve (12) month period after the Effective Date, (subject, however,
in the case of a "Dispute", to the provisions of paragraph 13 hereof applicable
to a "Dispute") and Shareholders agree to pay said amounts to RoTech immediately
upon written request from RoTech to Shareholders. During the twelve (12) month
period following the Effective Date, in the event RoTech makes written request
to Shareholders hereunder for Shareholders, and Shareholders fail 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"),
RoTech shall have the right to make offset against the Escrowed Cash, in
accordance with the terms and conditions of the 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 twelve (12) month period following the
Effective Date (subject, however, in the case of a "Dispute", to the provisions
of paragraph 13 hereof applicable to a
3
<PAGE>
"Dispute"), and the Shareholders agree to allow RoTech to make offset against
the Escrowed Cash as herein provided. In the event an offset against the
Escrowed Cash is to occur, an offset against $1.00 of Escrowed Cash shall have
the effect of reducing any amounts owed RoTech by $1.00. RoTech's right of
offset against the Escrowed Cash shall terminate on that date which is twelve
(12) months from the Effective Date (the "Release Date"); provided, however,
that notwithstanding anything contained in this Agreement or in the 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. In the event the right of offset is extended
past the Release Date because a claim is in dispute, Escrowed Cash having a
value equal to that amount which is one hundred fifty percent (150%) of the
amount of the claim asserted by RoTech shall continue to be held in escrow past
the Release Date until such claim is resolved, with the remaining Escrowed Cash
released to Shareholders within fifteen (15) days after the Release Date. RoTech
shall be entitled to reimbursement from Shareholders of the amount of any
reasonable legal fees and expenses (including court costs and the costs of
appeal) incurred by RoTech to enforce the collection of amounts owed RoTech by
Shareholders hereunder. Notwithstanding anything contained in this paragraph 4
to the contrary, in the case of a "Dispute" (as defined in paragraph 13 hereof),
the provisions of paragraph 13 hereof applicable to a "Dispute" shall govern,
and no offset against the Escrowed Cash shall occur until the applicable
"Dispute" is resolved in accordance with the provisions of paragraph 13 hereof.
5. Effective Date. The effective date for the transaction contemplated
--------------
under this Agreement will be February 1, 1996 (herein sometimes referred to as
the "Effective Date"). The date on which this Agreement is fully executed by
both the Shareholders and RoTech is herein sometimes referred to as the
"Closing"or "Closing Date".
6. Representations and Warranties by Shareholders. Shareholders jointly
----------------------------------------------
and severally represent and warrant to RoTech that, to the best of Shareholder's
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. Each Shareholder is the sole and
------------------
exclusive record and beneficial owner of title to the Stock reflected on the
Schedule of Stock Ownership attached hereto as Exhibit "A," as owned by such
Shareholder. Each Shareholder owns such Stock free and clear of all liens,
claims, encumbrances and restrictions of every kind. Each Shareholder by himself
or herself, or in conjunction with his or her respective joint tenant (to the
extent ownership is designated as JTWROS), has complete, absolute and
unrestricted right, power and authority to sell, assign or transfer the Stock
pursuant to this Agreement. The Wayne H. And Miriam Anne Roth Charitable
Remainder Unitrust dated January 31, 1996 (the "Trust"), a Shareholder of the
Corporation, is authorized by all applicable trust documents to sell the Stock
held by the Trust pursuant to this Agreement and Eric Kramer is independent
trustee of the Trust and has been given authority to execute this Agreement on
behalf of such Trust. A copy of the Trust document is attached hereto as Exhibit
"E."
4
<PAGE>
(b) Organization. The Corporation is a duly organized and validly
------------
existing Colorado 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, except that the Corporation
is the owner of 100% of the outstanding capital stock of Roth Medical, Inc. of
Boulder, a Colorado corporation (the "Subsidiary"), which Subsidiary is a duly
organized and validly existing Colorado corporation in good standing, with all
requisite corporate power and authority to carry on its business as presently
conducted.
(c) Capitalization.
--------------
(i) The Corporation is authorized by its Articles of
Incorporation to issue 50,000 shares of common capital stock, having no par
value of which 10,000 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, nor are any unissued shares committed to any
party by the Corporation or any Shareholder. 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 or debt securities.
(ii) The Corporation is not in any default or violation of
any provision of its outstanding long term or short term indebtedness;
provided, however this provision shall not apply to any indebtedness that
RoTech has agreed to pay in full pursuant to paragraph 8 hereof.
(iii) There are no outstanding options, warrants, contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's common capital stock or other securities.
(iv) There are no outstanding or unpaid loans to
stockholders, directors or officers other than as listed on the Schedule of
Shareholders, Distributions, and Exempted Transactions attached as Exhibit
"F" hereto.
(d) Financial Statements. Shareholders have furnished RoTech with
--------------------
balance sheets (the "Balance Sheets") dated May 31, 1993, May 31, 1994, May 31,
1995, October 31, 1995 and January 31, 1996, and the statements of income (the
"Income Statements") for the periods ended May 31, 1994 and May 31, 1995,
October 31, 1995, and January 31, 1996, copies of which are attached hereto as
Exhibit "G" 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 accounting principles applied
upon a consistent basis during each period except for a change in depreciation
to be consistent with that per the Corporation's tax return; and (iv) the
Balance Sheets disclose the debts, liabilities and obligations of the
Corporation at the last balance sheet date and include the
5
<PAGE>
appropriate accruals for 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 the Schedule of
Contingent Liabilities attached hereto as Exhibit "P" to this Agreement.
(e) Present Status. Except as discussed on the Schedule of
--------------
Shareholders, Distributions, and Exempted Transactions attached hereto as
Exhibit "F", since January 1, 1996, 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 payment or distribution to
Shareholders 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 except in the ordinary course of
business; 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 the
taxes reflected thereon for the periods covered by such returns. All FICA,
Federal and state withholding tax deposits have been timely and fully reported
and paid, or if not timely paid, have been subsequently paid together with all
charges and interest penalties which were assessed. The Corporation has not been
delinquent in the payment of any tax, assessment or governmental charge except
for inadvertent delinquency in payment of payroll taxes all of which were
subsequently paid together with all charges, interest and penalties which were
assessed. 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, except to the City of Lakewood with respect
to a City sales and use tax audit, currently being conducted. The Corporation's
Federal and Income State Tax Returns have not been audited by either the
Internal Revenue Service or the Department of Revenue of the State of Colorado.
In the event that a deficiency is determined in the amount of Federal or State
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
jointly and severally 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 to Wayne Roth, who shall receive such tax refund on behalf of all of the
Shareholders, and who will take care of distributing same. Shareholders 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. Copies of the Corporation's Federal Income tax returns for the
periods ending May 31, 1994, and May 31, 1995, are attached hereto as part of
Exhibit "G."
(g) Litigation. There are no legal actions, suits, arbitrations,
----------
or other legal, administrative, or other governmental proceedings pending or
threatened against the Corporation, and no Shareholder is aware of any facts
which to the knowledge of such Shareholder might result
6
<PAGE>
in any such action, suit, arbitration, or other proceedings, except as disclosed
on the Schedule of Litigation and Other Proceedings attached hereto as Exhibit
"H" 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 any Shareholder is 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, other than defaults
on bank indebtedness resulting from change in ownership of the Corporation,
which default RoTech agrees to promptly cure by paying off such bank
indebtedness. 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 properties and assets owned by it,
including without limitation those reflected in the Balance Sheets, and the
property described in the Schedule of Property attached hereto as Exhibit "I"
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(s), its patient list, and its provider number.
(j) Corporate Name. Shareholders hereby agree to undertake
--------------
whatever steps are necessary to assure that RoTech can utilize any name or names
under which the Corporation presently conducts its business.
(k) Asset Condition and Quality. All of the properties and assets
---------------------------
of Corporation are used in the ordinary course of the Corporation's business.
All of the properties and assets of Corporation on the Closing Date shall be in
good operating condition and repair, reasonable wear and tear accepted and have
been maintained in the ordinary course of business, and shall conform in all
material respects with all applicable ordinances, regulations, zoning and other
laws.
(l) Leases and Insurance Policies. The Schedule of Leases and
-----------------------------
Insurance Policies attached hereto as Exhibit "J" 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. Corporation has retained in its files, to be turned
over to RoTech at Closing, a true and correct copy of:
(i) The lease, with amendments, covering the property that
the Corporation presently occupies.
7
<PAGE>
(ii) All other leases, with amendments, to which the
Corporation is a party.
(iii) All fire and other casualty and liability policies of
the Corporation in effect at the date of this Agreement.
(m) Licenses, Trademarks, etc. The Corporation owns, possesses and
-------------------------
has good title to all licenses necessary in the conduct of its business as
currently being conducted. The Corporation owns no trademarks, service marks, or
service names.
(n) Contracts. Except as set forth on the Schedule of Contracts
---------
attached hereto as Exhibit "K" 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 thirty (30) 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.
(o) 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.
(p) Insurance Policies. There are in full force all policies of
------------------
insurance referred to above in subparagraph (l). Such policies are in amounts
and against such losses and risks as are generally maintained by comparable
businesses.
(q) Cash Balances. The information contained on the Schedule of
-------------
Cash Balances as of January 31, 1996, attached hereto as Exhibit "L", is
accurate and complete.
(r) Accounts Receivable. The information contained on the Schedule
-------------------
of Accounts Receivable Data attached hereto as Exhibits "B" is accurate and
complete. All of the Corporation's accounts receivable are legally billable.
(s) Inventories. The inventories of the Corporation which are
-----------
reflected in the Balance Sheets 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. The inventories of the Corporation that are
reflected on the Balances Sheets were determined at cost. Since January 31,
1996, 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.
8
<PAGE>
(t) Absence of Certain Changes or Events. Other than as reflect on
------------------------------------
the Balance Sheets dated since January 31, 1996, 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 substantially in excess
of the then current market price being paid by the Corporation when incurred, or
contain terms and conditions more onerous than those usual and customary in the
industry at the time made.
(v) Personnel Payrates and Non-Compete Agreements. The information
---------------------------------------------
contained on the Schedule of Personnel and Payrates as of January 31, 1996,
attached hereto as Exhibit "M", is accurate and complete. The Corporation has no
non-compete agreements.
(w) Employee Benefit Plans. The Corporation is not required to
----------------------
contribute to any pension, bonus, profit-sharing, or retirement plans for
officers or employees of the Corporation.
(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. Corporation or any Shareholder
-----------------------------
has not 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 or any
Shareholder 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 Adverse Business Development attached hereto as Exhibit "N."
(z) Accuracy of Representations and Warranties. The Shareholders
------------------------------------------
acknowledge that the purchase price for the Stock is based on the accuracy of
Shareholders' representations and warranties contained in this Agreement,
including but not limited to the Shareholders' representations and warranties
contained in paragraph 3 hereof.
7. Representations and Warranties by RoTech. RoTech represents,
----------------------------------------
warrants and covenants to Shareholders as of the date of this Agreement as
follows:
(a) Organization. RoTech is a duly organized, validly existing
------------
Florida corporation in good standing under the laws of the State of Florida and
has full power and
9
<PAGE>
authority to consummate the transactions contemplated by this Agreement and has
by proper corporate proceedings duly authorized the same.
(b) Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and all agreements and documents contemplated
hereby, including without limitation the Employment Agreement and do not and
will not violate any provision of RoTech's Articles of Incorporation or Bylaws
or to RoTech's knowledge any provisions of any judicial or governmental law,
decree, order or judgment, or conflict with, or result in a breach of or
constitute a default under any material agreement or instrument to which RoTech
is a party or by which it is bound, including agreements with lending
institutions.
(c) Validity and Binding Effect. This Agreement, the Employment
---------------------------
Agreement and the provisions thereunder will be valid and legally binding
obligations of RoTech and the same shall be enforceable in accordance with their
respective terms, subject as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws that
affect the enforcement of creditors, rights generally and possible limitations
on the availability for equitable remedies including specific performance.
(d) Business Purposes and Investment Intent. RoTech is purchasing
---------------------------------------
the Stock for business purposes and with investment intent and is not purchasing
the Stock with a view to redistributing or reselling the Stock.
8. Release of Certain Financial Obligations. On the day following the
----------------------------------------
Closing Date, RoTech shall cause the Corporation to pay in full those financial
obligations of Shareholders set forth on the Schedule of Liabilities attached
hereto as Exhibit "D." RoTech shall provide Shareholders with evidence of
releases of any guaranty executed by Shareholders in connection with such
liabilities.
9. Brokers. Shareholders and RoTech agree that Baker & Associates has
-------
acted as representative and broker in connection with the transactions
contemplated by this Agreement. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on directly between
RoTech and Shareholders without the intervention or assistance of any party
other than Baker & Associates (other than to provide accounting or legal
counsel). No party to this Agreement, nor any third party, other than Baker &
Associates, has any right or claim to any commission, brokerage fee or other
compensation relative to this Agreement or the transactions contemplated hereby.
RoTech agrees to pay, and be solely responsible for the payment of any fees or
commissions to Baker & Associates and to disburse the same at Closing.
10. Resignation of Officers and Directors. Shareholders shall deliver
-------------------------------------
to RoTech, at the Closing, the undated written resignations of all of the
directors and officers of the Corporation.
11. Conditions Precedent to Closing by RoTech. The obligation of the
-----------------------------------------
RoTech 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:
10
<PAGE>
(a) Compliance with Agreement. All of the terms and conditions of
-------------------------
this Agreement to be complied with and performed by the Shareholders on or
before the Closing Date, shall have been complied with and performed; and
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Shareholders in paragraph 6 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 Shareholders; and
(c) Non-Compete Agreement. Wayne H. Roth shall have entered into a
---------------------
non-compete agreement substantially in the form attached hereto as Exhibit "O"
and by this reference made a part hereof; and
(d) Murray Medical, Inc. Stock Purchase. RoTech and all of the
-----------------------------------
Shareholders of Murray Medical, Inc. shall have executed an Agreement for
Purchase and Sale of Shares of Murray Medical, Inc. and all documents related
thereto.
12. Payment of Shareholder Notes. Upon Closing, RoTech shall contribute
----------------------------
sufficient funds to the Corporation (not to exceed $772,860.00), which amount
the Shareholders represent is sufficient to allow the Corporation to repay in
full all principal and interest due and owing to Wayne Roth for the Shareholder
loans made to the Corporations by Wayne Roth as reflected on the January 31,
1996 Balance Sheet.
13. Indemnification; Remedies.
-------------------------
(a) Indemnification of Shareholders. Shareholders shall and hereby
-------------------------------
jointly and severally agree to indemnify and hold harmless at all times, RoTech
and its directors, officers, employees, agents and assigns, as to and against
any Damages (as hereinafter defined) resulting from: (i) any materially
inaccurate representation made by Shareholders in or under this Agreement; (ii)
material breach of any warranties made by Shareholders in or under this
Agreement; (iii) breach or default in the performance by Shareholders of any of
the covenants to be performed by Shareholders hereunder; and (iv) any
Liabilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency or
Contingent Liability, all as set forth in paragraph 4 hereof; provided, however,
that the joint and several obligation of the Shareholders to indemnify RoTech
hereunder shall not, with respect to any claims made by RoTech against the
Shareholders exceed $770,000.00 in the aggregate for all such claims, for a
period not to exceed the ending date of the statute of limitations applicable to
the particular claim. In the event the Shareholders elect to defend, pursuant to
subparagraph (e)(2) hereof at the expense of the Shareholders, RoTech shall
cooperate in such defense, and shall cause the Corporation to cooperate in such
defense, including providing Shareholders and/or their legal counsel with
access, at reasonable times upon reasonable notice, to those documents and
records reasonably necessary to defend such claim.
(b) Indemnification of RoTech. RoTech shall and hereby agrees to
-------------------------
indemnify and hold harmless at all times the Shareholders, at the expense of
RoTech, as to and against any Damages resulting from: (i) any materially
inaccurate representation made by RoTech in or under
11
<PAGE>
this Agreement; (ii) breach of any material warranties made by RoTech in or
under this Agreement; and (iii) breach or default in the performance by RoTech
of any of the covenants to be performed by RoTech hereunder.
(c) Definition of Damages. The term "Damages" as used herein,
---------------------
shall include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, penalties and damages, including reasonable attorneys' fees
incurred in investigating or in attempting to avoid the same or oppose the
imposition thereof. The term "Damages" shall include, but not be limited to, any
Labilities Deficiency, Asset Value Deficiency, Subsequent Event Deficiency and
Contingent Liability, as defined in paragraph 4 hereof.
(d) Remedies.
--------
(1) RoTech's Remedies. In the event RoTech makes written
-----------------
request to Shareholders for the payment of Damages and Shareholders fail 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"),
RoTech shall have the right: (i) if such request is made during the Escrow
Period and Escrowed Cash is sufficient to pay such Damages in full is held by
RoTech in escrow, to make offset against the Escrowed Cash, in accordance with
the terms and conditions of this Agreement and the related Escrow Agreement;
(ii) if such request is made during the Escrow Period and the amount of Escrowed
Cash held by RoTech in escrow is insufficient to pay such Damages in full, to
first make offset against any Escrowed Cash held in escrow and then to require
Shareholders to pay RoTech the remaining balance in cash within the ten (10) day
period following the applicable Notice Period (and Shareholders shall be liable
for such balance and for the payment of such balance in full during such
period); and (iii) if such request is made during the Escrow Period and no
Escrowed Cash is being held in escrow by RoTech at the time of such request, or
if such request is made after the Escrow Period, to require the Shareholders to
pay RoTech the full amount of such Damages in cash within the ten (10) day
period following the applicable Notice Period (and Shareholders shall be liable
for such amount and for the payment of such amount in full during such period);
provided, however, that in any of the events described in (i) through (iii) of
this subparagraph (d), Shareholders shall have the option to provide written
notice to RoTech within the Notice Period that Shareholders dispute the validity
of the Damages triggering the right of offset against the Escrowed Cash and/or
the requirement for payment by Shareholders in cash, and in the event RoTech and
Shareholders cannot reach agreement on the validity of such Damages by the end
of the ten (10) day period following the Notice Period, the dispute over the
validity of such claim or liability (the "Dispute") shall be settled as set
forth in subparagraph (e) of this paragraph 13, with the non-prevailing party
bearing the prevailing party's costs of arbitration in the event any Dispute is
resolved by arbitration.
(2) Shareholder's Remedies. In the event Shareholders make
----------------------
written request to RoTech for the payment of Damages and RoTech 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"),
Shareholders shall have the right to require RoTech to pay Shareholders the full
amount of such Damages in cash within the ten (10) day period following the
applicable Notice Period (and RoTech shall be liable for such amount and for the
payment of
12
<PAGE>
such amount in full during such period); provided, however, that RoTech shall
have the option to provide written notice to Shareholders within the Notice
Period that RoTech disputes the validity of the Damages triggering the
requirement for payment by RoTech in cash, and in the event Shareholders and
RoTech cannot reach agreement on the validity of such Damages by the end of the
ten (10) day period following the Notice Period, the dispute over the validity
of such Damages shall be settled as set forth in subparagraph (e) of this
paragraph 13, with the non-prevailing party bearing the prevailing party's costs
of arbitration in the event any dispute is resolved by arbitration.
(e) Settlement of Disputes.
----------------------
(1) Disputes Not Involving Third Parties. In the event a
------------------------------------
Dispute arises which Dispute involves claims not involving any third parties,
RoTech and Shareholders shall settle the Dispute by submitting same to
settlement by arbitration. In the event arbitration is required pursuant to this
subsection (1) of subparagraph (e), RoTech and Shareholders will each select an
arbitrator within ten (10) days after the ten (10) day period following the
Notice Period; those two arbitrators will then select a third arbitrator; and
the three arbitrators so chosen will settle the Dispute.
(2) Disputes Involving Claims Made by Third Parties. In the
-----------------------------------------------
event a Dispute arises which Dispute involves claims made by a third party or
parties (the "Third Party Claim"), RoTech or Shareholders shall give written
notice to the other ("Non-Aggrieved Party") as soon as practical after the
aggrieved party (the "Aggrieved Party") receives notice of a Third Party Claim.
If any lawsuit or enforcement action is filed against an Aggrieved Party by a
person asserting a Third Party Claim, written notice shall be given to the Non-
Aggrieved Party as promptly as is practicable (in any event, within ten (10)
days after the service of citation or summons). Upon such notice, RoTech and
Shareholders shall submit the Dispute to arbitration, with RoTech and
Shareholders each selecting an arbitrator; those two arbitrators then selecting
a third arbitrator; and the three arbitrators so chosen arbitrating the Dispute
as follows: (i) the Third Party Claim, solely for the purpose of determining the
party responsible for defending the Third Party Claim, shall be considered by
the arbitrators to be a valid claim (although such consideration is by no means
any admission by RoTech or Shareholders of any liability to any third party or
parties); (ii) assuming the Third Party Claim is determined by the arbitrators
to be valid, the arbitrators shall then decide whether RoTech or Shareholders
is the party responsible for paying the Third Party Claim in the event such
Third Party Claim is favorably contested by such third party or parties (with
the decision of such arbitrators final and binding as between RoTech and
Shareholders); (iii) in the event Shareholders are found by the arbitrators to
be the party responsible for paying the Third Party Claim, and Shareholders
refuse to immediately settle the Third Party Claim, Shareholders shall
immediately select one of the following two options: Option One: Shareholders
-----------
can take on the sole defense, at their expense and risk, of the Third Party
Claim, provided Shareholders place in escrow in favor of RoTech adequate
collateral (as determined by the arbitrators upon consideration of all relevant
facts) protecting RoTech from an adverse judgment against RoTech in the event
RoTech is found to be liable to such third party or parties for any portion or
all of such Third Party Claim (in which case RoTech shall be immediately
reimbursed by Shareholders for any amount required to be paid by RoTech to such
13
<PAGE>
third party or parties, with RoTech having such rights of offset as set forth in
paragraph 4 hereof and in the Escrow Agreement); or Option Two: Shareholders can
----------
co-defend, at its expense and risk, the Third Party Claim with RoTech, with
Shareholders also responsible for paying all costs incurred by RoTech in
connection with such defense, including without limitation, the legal fees and
expenses of RoTech's counsel for its reasonable involvement in such defense (in
the event RoTech is found to be liable to such third party or parties for any
portion or all of such Third Party Claim, RoTech shall be immediately reimbursed
by Shareholders for any amount required to be paid by RoTech to such third party
or parties, with RoTech having such rights of offset as set forth in paragraph 4
hereof and in the Escrow Agreement), provided, however, in the event
Shareholders select this option, Shareholders shall diligently attempt to have
RoTech removed as a party to any legal action involving the Third Party Claim
(and, upon such removal, the involvement of RoTech's counsel shall cease unless
requested by Shareholders or Shareholders' counsel); and (iv) in the event
RoTech is found by the arbitrators to be the party responsible for paying the
Third Party Claim, and RoTech refuses to immediately settle the Third Party
Claim, RoTech shall immediately select one of the following two options: Option
------
One: RoTech can take on the sole defense, at its expense and risk, of the Third
- ---
Party Claim provided RoTech places in escrow in favor of Shareholders adequate
collateral (as determined by the arbitrators upon consideration of all relevant
facts) protecting Shareholders from an adverse judgment against Shareholders in
the event Shareholders are found to be liable to such third party or parties for
any portion or all of such Third Party Claim (in which case Shareholder shall be
immediately reimbursed by RoTech for any amount required to be paid by
Shareholders to such third party or parties); or Option Two: RoTech can co-
----------
defend, at its expense and risk, the Third Party Claim with Shareholders, with
RoTech also responsible for paying all costs incurred by Shareholders in
connection with such defense, including without limitation, the legal fees and
expenses of Shareholders' counsel for its reasonable involvement in such defense
(in the event Shareholders are found to be liable to such third party or parties
for any portion or all of such Third Party Claim, Shareholders shall be
immediately reimbursed by RoTech for any amount required to be paid by
Shareholders to such third party or parties), provided, however, in the event
RoTech selects this option, RoTech shall diligently attempt to have Shareholders
removed as a party to any legal action involving the Third Party Claim (and,
upon such removal, the involvement of Shareholders' counsel shall cease unless
requested by RoTech or RoTech's counsel). Any party responsible for defending a
Third Party Claim shall proceed with diligence and in good faith with respect
thereto.
(3) Failure to Appoint Arbitrator. If either party delays in
-----------------------------
appointing an arbitrator when required by this subparagraph (e) of this
paragraph 13, and another twenty (20) day period has elapsed in which such party
does not cure such failure by appointing an arbitrator, the arbitrator appointed
by the other party shall arbitrate the Dispute, and in such case such
arbitrator's decision shall be binding upon all parties.
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.
14
<PAGE>
15. Amendment and Waiver. This Agreement may be amended or modified at
--------------------
any time in all respects by an instrument in writing executed by Shareholders
and RoTech.
16. Assignment. Neither this Agreement nor any right created hereby
----------
shall be assignable by 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 Shareholder's death, a transfer
to the legal representatives of such Shareholder's estate or to such
Shareholder's legal heirs. 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.
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 instrument.
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 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.
22. Choice of Law and Venue. It is the intention of the parties that the
-----------------------
laws of the State of Colorado 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:
To Shareholders: Wayne H. Roth and Miriam Anne Roth, JTWROS
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Susan Falk
1841 Wadsworth Boulevard
15
<PAGE>
Lakewood, Colorado 80215
Thomas Falk
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Anne Keener
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Steven Keener
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Kathleen Roth
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
Wayne H. and Miriam Anne Roth
Charitable Remainder Unitrust
Dated January 31, 1996
1841 Wadsworth Boulevard
Lakewood, Colorado 80215
With a copy to: Castle & Castle, P.C.
1099 18th Street, Suite 2300
Denver, Colorado 80202
Attn: Lawrence E. Castle, Esq.
As to RoTech Medical Corporation: RoTech Medical Corporation
William P. Kennedy, Chief Executive Officer
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
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.
16
<PAGE>
24. Further Assurances. The parties hereto will take such other actions,
------------------
and execute, acknowledge and deliver such further consent resolutions,
assurances or agreements as any party hereto may reasonably request in order to
fulfill the intent of this Agreement and the consummation of the transactions
contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
/s/ Wayne H. Roth
-----------------------------------------------
Wayne H. Roth
Date Executed: February 22, 1996
/s/ Miriam Anne Roth
-----------------------------------------------
Miriam Anne Roth
Date Executed: February 22, 1996
/s/ Susan Falk
-----------------------------------------------
Susan Falk
Date Executed: February 22, 1996
/s/ Thomas Falk
-----------------------------------------------
Thomas Falk
Date Executed: February 22, 1996
/s/ Anne Keener
------------------------------------------------
Anne Keener
Date Executed: February 22, 1996
17
<PAGE>
/s/ Steven Keener
-----------------------------------
Steven Keener
Date Executed: February 22, 1996
/s/ Kathleen Roth
-----------------------------------
Kathleen Roth
Date Executed: February 22, 1996
WAYNE H. AND MIRIAM ANNE ROTH
CHARITABLE REMAINDER UNITRUST DATED
JANUARY 31, 1996
By: /s/ Eric Kramer
-------------------------------
Eric Kramer, Trustee
Date Executed: February 22, 1996
ROTECH MEDICAL CORPORATION,
a Florida corporation
By: /s/ William P. Kennedy
----------------------------------------------
William P. Kennedy, Chief Executive Officer
Date Executed: February 22, 1996
STATE OF COLORADO )
18
<PAGE>
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Wayne H. Roth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
---------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me by Miriam Anne
Roth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
February, 1996.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
---------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
19
<PAGE>
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Susan Falk.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Thomas Falk.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Anne Keener.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
20
<PAGE>
/s/ Jeanne Simpson
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Steven Keener.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
------------------------------
Notary Public
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996 by Kathleen Roth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
------------------------------
Notary Public
21
<PAGE>
STATE OF COLORADO )
CITY AND )ss.
COUNTY OF DENVER )
The foregoing instrument was subscribed and sworn to before me this 22nd day
of February, 1996, by Eric Kramer, Trustee of the Wayne H. and Miriam Anne Roth
Charitable Remainder Trust dated January 31, 1996.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
My commission expires: December 30, 1997
------------------------------
/s/ Jeanne Simpson
------------------------------
Notary Public
22
