AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTEGRATED HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 23-2428312
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
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10065 Red Run Boulevard, Owings Mills, Maryland 21117, (410) 998-8400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Marshall A. Elkins, Esq., Executive Vice President and General Counsel
Integrated Health Services, Inc., 10065 Red Run Boulevard, Owings Mills,
Maryland 21117, (410) 998-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies of all communications, including all communications sent
to the agent for service, should be sent to:
<TABLE>
<S> <C>
Carl E. Kaplan, Esq. Leslie A. Glew, Esq.
Fulbright & Jaworski L.L.P. Senior Vice President and
Associate General Counsel Integrated Health Services, Inc.
666 Fifth Avenue 10065 Red Run Boulevard
New York, New York 10103 Owings Mills, Maryland 21117
(212) 318-3000 (410) 998-8400
(212) 752-5958(FAX) (410) 998-8500(FAX)
</TABLE>
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Approximate Date of Commencement of Proposed Sale to the Public:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C>
====================================================================================================================================
TITLE OF EACH CLASS OF AOUMNT OF SHARES PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share
(including the Preferred Stock Purchase
Rights)(2) ............................ 1,396,691 $ 34.28125 $ 47,880,313.34 $ 12,927.69
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee. Such
estimates have been calculated in accordance with Rule 457(c) under the
Securities Act of 1933 and are based upon the average of the high and low
prices per share of the Registrant's Common Stock on the New York Stock
Exchange Composite Transaction Tape on July 23, 1998.
(2) The Preferred Stock Purchase Rights, which are attached to the shares of
Common Stock being registered, will be issued for no additional
consideration; no additional registration fee is required.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 24, 1998
PROSPECTUS
1,396,691 SHARES
[GRAPHIC OMITTED]
INTEGRATED HEALTH SERVICES, INC.
COMMON STOCK
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This Prospectus relates to 1,396,691 shares (the "Shares") of Common Stock,
par value $0.001 per share (together with the Preferred Stock Purchase Rights
associated therewith, the "Common Stock"), of Integrated Health Services, Inc.
("IHS" or the "Company") which are being offered for sale by certain selling
stockholders (the "Selling Stockholders"). See "Selling Stockholders." The
Company's Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "IHS." On July 23, 1998, the closing price of the Common Stock, as
reported in the NYSE consolidated reporting system, was $32.875 per share.
The Company will not receive any of the proceeds from sales of the Shares
by the Selling Stockholders. The Shares may be offered from time to time by the
Selling Stockholders (and their donees and pledgees) through ordinary brokerage
transactions, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution."
The Selling Stockholders may be deemed to be "Underwriters" as defined in
the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used to effect sales, any commissions paid to broker-dealers
and, if broker-dealers purchase any of the Shares as principals, any profits
received by such broker-dealers on the resale of the Shares, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Stockholders may be deemed to be underwriting
commissions. All costs, expenses and fees in connection with the registration of
the Shares will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of the Shares will be borne by the Selling Stockholders
(or their donees and pledgees).
--------------
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 6 OF THIS PROSPECTUS, FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is , 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration becomes effective.
This prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities law of any such State.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also may be obtained by mail from the
Public Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
materials and other information concerning the Company may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. Additionally,
the Commission maintains a Web site on the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the offices of the
Commission as indicated above without charge and copies thereof may be obtained
therefrom upon payment of a prescribed fee.
Private Securities Litigation Reform Act Safe Harbor Statement. This
Prospectus (including the documents incorporated by reference herein) contains
certain forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) and information relating to IHS that
are based on the beliefs of the management of IHS, as well as assumptions made
by and information currently available to the management of IHS. When used in
this Prospectus, the words "estimate," "project," "believe," "anticipate,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current views of IHS
with respect to future events and are subject to risks and uncertainties,
including those discussed under "Risk Factors," that could cause actual results
to differ materially from those contemplated in such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. IHS does not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information in the following documents filed by IHS with the Commission
(File No. 1-12306) pursuant to the Exchange Act is incorporated by reference in
this Prospectus:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997, as amended by Form 10-K/A filed May 29, 1998;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, as amended by Form 10-Q/A filed May 29, 1998;
(c) The Company's Current Report on Form 8-K dated October 17, 1996 and
filed October 25, 1996, reporting the acquisition of First American Health
Care of Georgia, Inc., as amended by Form 8-K/A filed November 26, 1996 and
Amendment No. 1 to Form 8-K/A filed July 11, 1997;
(d) The Company's Current Report on Form 8-K dated September 25, 1997 and
filed October 10, 1997, reporting the Company's acquisition of Community Care
of America, Inc. and the Lithotripsy Division of Coram Healthcare
Corporation, as amended by Form 8-K/A filed November 25, 1997 and Amendment
No. 1 to Form 8-K/A filed May 29, 1998;
(e) The Company's Current Report on Form 8-K dated October 21, 1997 and
filed November 5, 1997, reporting the Company's acquisition of RoTech Medical
Corporation, as amended by Form 8-K/A filed November 25, 1997;
(f) The Company's Current Report on Form 8-K dated December 31, 1997 and
filed January 14, 1998, reporting the acquisition of 139 owned, leased or
managed long-term care facilities, 12 specialty hospitals and certain other
businesses from HEALTHSOUTH Corporation, as amended by Form 8-K/A filed March
16, 1998 and Amendment No. 1 to Form 8-K/A filed May 29, 1998;
(g) The Company's Current Report on Form 8-K dated March 4, 1998 and
filed March 12, 1998, reporting the Company's revenues and operating results
for the fourth quarter and year ended December 31, 1997;
(h) The description of the Company's Common Stock contained in Item 1 of
the Company's Registration Statement on Form 8-A dated September 1, 1993; and
(i) The description of the Company's Preferred Stock Purchase Rights
contained in Item 1 of the Company's Registration Statement on Form 8-A dated
September 28, 1995.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the filing of a post-effective amendment which indicates that all
Shares offered have been sold or which deregisters all Shares then remaining
unsold shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained herein or in a previously filed document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or was deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The information relating to IHS contained in this Prospectus should be read
together with the information in the documents incorporated by reference.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE
DIRECTED TO INTEGRATED HEALTH SERVICES, INC., 10065 RED RUN BOULEVARD, OWINGS
MILLS, MARYLAND 21117, ATTENTION: MARC B. LEVIN, EXECUTIVE VICE
PRESIDENT-INVESTOR RELATIONS, TELEPHONE: (410) 998-8400.
3
<PAGE>
THE COMPANY
Integrated Health Services, Inc. ("IHS" or the "Company") is one of the
nation's leading providers of post-acute healthcare services. Post-acute care is
the provision of a continuum of care to patients following discharge from an
acute care hospital. IHS' post-acute care services include subacute care,
skilled nursing facility care, home respiratory care, home health nursing care,
other homecare services and contract rehabilitation, hospice, lithotripsy and
diagnostic services. The Company's post-acute care network is designed to
address the fact that the cost containment measures implemented by private
insurers and managed care organizations and limitations on government
reimbursement of hospital costs have resulted in the discharge from hospitals of
many patients who continue to require medical and rehabilitative care. IHS'
post-acute healthcare system is intended to provide cost-effective continuity of
care for its patients in multiple settings and enable payors to contract with
one provider to provide all of a patient's needs following discharge from acute
care hospitals. The Company believes that its post-acute care network can be
extended beyond post-acute care to also provide "pre-acute" care, i.e., services
to patients which reduce the likelihood of a need for a hospital stay. IHS'
post-acute care network currently consists of approximately 2,000 service
locations in 47 states and the District of Columbia.
The Company's post-acute care network strategy is to provide cost-effective
continuity of care for its patients in multiple settings, using geriatric care
facilities as platforms to provide a wide variety of subacute medical and
rehabilitative services more typically delivered in the acute care hospital
setting and using home healthcare to provide those medical and rehabilitative
services which do not require 24-hour monitoring. To implement its post-acute
care network strategy, IHS has focused on (i) developing market concentration
for its post-acute care services in targeted states due to increasing payor
consolidation and the increased preference of payors, physicians and patients
for dealing with only one service provider; (ii) expanding the range of home
healthcare and related services it offers to patients directly in order to
provide patients with a continuum of care throughout their recovery, to better
control costs and to meet the growing desire by payors for one-stop shopping;
and (iii) developing subacute care units. Given the increasing importance of
managed care in the healthcare marketplace and the continued cost containment
pressures from Medicare, Medicaid and private payors, the Company has been
restructuring its operations to enable IHS to focus on obtaining contracts with
managed care organizations and to provide capitated services. IHS' strategy is
to become a preferred or exclusive provider of post-acute care services to
managed care organizations and other payors.
In implementing its post-acute care network strategy, IHS has recently
focused on expanding its home healthcare services to take advantage of
healthcare payors' increasing focus on having healthcare provided in the
lowest-cost setting possible, recent advances in medical technology which have
facilitated the delivery of medical services in alternative sites and patients'
desires to be treated at home. Consistent with the Company's strategy, IHS in
October 1996 acquired First American Health Care of Georgia, Inc. ("First
American"), a provider of home health services, principally home nursing, in 21
states, primarily Alabama, California, Florida, Georgia, Michigan, Pennsylvania
and Tennessee. IHS in October 1997 acquired RoTech Medical Corporation
("RoTech"), a provider of home healthcare products and services, with an
emphasis on home respiratory, home medical equipment and infusion therapy,
principally to patients in non-urban areas (the "RoTech Acquisition"). In
October 1997, IHS also acquired (the "Coram Lithotripsy Acquisition") the
lithotripsy division (the "Coram Lithotripsy Division") of Coram Healthcare
Corporation ("Coram"), which provided lithotripsy services and equipment
maintenance in 180 locations in 18 states, in order to expand the mobile
diagnostic treatment and services it offers to patients, payors and other
providers. Lithotripsy is a non-invasive technique that utilizes shock waves to
disintegrate kidney stones. IHS intends to use the home healthcare setting and
the delivery franchise of the home healthcare branch and agency network to (i)
deliver sophisticated care, such as skilled nursing care, home respiratory
therapy and rehabilitation, outside the hospital or nursing home; (ii) serve as
an entry point for patients into the IHS post-acute care network; and (iii)
provide a cost-effective site for case management and patient direction.
IHS has also continued to expand its post-acute care network by increasing
the number of facilities it operates or manages. In September 1997, IHS acquired
Community Care of America, Inc. ("CCA"), which develops and operates skilled
nursing facilities in medically underserved rural communities (the
4
<PAGE>
"CCA Acquisition"). IHS believes that CCA will broaden its post-acute care
network to include more rural markets and will complement its existing home care
locations in rural markets as well as RoTech's business. In addition, in
December 1997, IHS acquired from HEALTHSOUTH Corporation ("HEALTHSOUTH") 139
owned, leased or managed long-term care facilities and 12 specialty hospitals,
as well as a contract therapy business having over 1,000 contracts and an
institutional pharmacy business serving approximately 38,000 beds (the "Facility
Acquisition").
The Company provides subacute care through medical specialty units
("MSUs"), which are typically 20 to 75 bed specialty units with physical
identities, specialized medical technology and staffs separate from the
geriatric care facilities in which they are located. MSUs are designed to
provide comprehensive medical services to patients who have been discharged from
acute care hospitals but who still require subacute or complex medical
treatment. The levels and quality of care provided in the Company's MSUs are
similar to those provided in the hospital but at per diem treatment costs which
IHS believes are generally 30% to 60% below the cost of such care in acute care
hospitals. Because of the high level of specialized care provided, the Company's
MSUs generate substantially higher net revenue and operating profit per patient
day than traditional geriatric care services.
IHS presently operates 359 geriatric care facilities (303 owned or leased
and 56 managed), excluding 10 facilities acquired in the CCA Acquisition and 19
facilities acquired in the Facility Acquisition which are being held for sale,
and 158 MSUs located within 84 of these facilities. Specialty medical services
revenues, which include all MSU charges, all revenue from providing
rehabilitative therapies, pharmaceuticals, medical supplies and durable medical
equipment to all its patients, all revenue from its Alzheimer's programs and all
revenue from its provision of pharmacy, rehabilitation therapy, home healthcare,
hospice care and similar services to third-parties, constituted approximately
65%, 70% and 79% of net revenues during the years ended December 31, 1995, 1996
and 1997, respectively, and 79% and 71% of net revenues in the six months ended
June 30, 1997 and 1998, respectively. IHS also offers a wide range of basic
medical services as well as a comprehensive array of respiratory, physical,
speech, occupational and physiatric therapy in all its geriatric care
facilities. For the year ended December 31, 1997 and the six months ended June
30, 1998, approximately 35% and 31%, respectively, of IHS' revenues were derived
from home health and hospice care, approximately 44% and 41%, respectively, were
derived from subacute and other ancillary services, approximately 19% and 28%,
respectively, were derived from traditional basic nursing home services, and
approximately 2% and 1%, respectively, were derived from management and other
services. On a pro forma basis after giving effect to the acquisitions
consummated by IHS in 1997, for the year ended December 31, 1997, approximately
30% of IHS' revenues were derived from home health and hospice care,
approximately 43% were derived from subacute and other ancillary services,
approximately 26% were derived from traditional basic nursing home services and
the remaining approximately 1% were derived from management and other services.
Integrated Health Services, Inc. was incorporated in March 1986 as a
Pennsylvania corporation and reorganized as a Delaware corporation in November
1986. IHS' principal executive offices are located at 10065 Red Run Boulevard,
Owings Mills, Maryland 21117 and its telephone number is (410) 998-8400. Unless
the context indicates otherwise, the terms "IHS" and the "Company" include
Integrated Health Services, Inc. and its subsidiaries.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby. This
Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus (including the documents
incorporated by reference herein).
Risks Related to Substantial Indebtedness. The Company's indebtedness is
substantial in relation to its stockholders' equity. At June 30, 1998, IHS'
total long-term debt, including current portion, accounted for 68.7% of its
total capitalization. IHS also has significant lease obligations with respect to
the facilities operated pursuant to long-term leases, which aggregated
approximately $687.0 million at June 30, 1998. For the year ended December 31,
1997 and the six months ended June 30, 1998 the Company's rent expense was
$105.1 million ($163.7 million on a pro forma basis after giving effect to the
acquisitions consummated by IHS in 1997) and $71.0 million, respectively. In
addition, IHS is obligated to pay an additional $155 million in respect of the
acquisition of First American during 2000 to 2004, of which $117.3 million
(representing the present value thereof) has been recorded at June 30, 1998. The
Company's strategy of expanding its specialty medical services and growing
through acquisitions may require additional borrowings in order to finance
working capital, capital expenditures and the purchase price of any
acquisitions. The degree to which the Company is leveraged, as well as its rent
expense, could have important consequences to securityholders, including: (i)
IHS' ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired, (ii) a substantial portion of IHS' cash flow from operations may be
dedicated to the payment of principal and interest on its indebtedness and rent
expense, thereby reducing the funds available to IHS for its operations, (iii)
certain of IHS' borrowings bear, and will continue to bear, variable rates of
interest, which expose IHS to increases in interest rates, and (iv) certain of
IHS' indebtedness contains financial and other restrictive covenants, including
those restricting the incurrence of additional indebtedness, the creation of
liens, the payment of dividends and sales of assets and imposing minimum net
worth requirements. In addition, IHS' leverage may also adversely affect IHS'
ability to respond to changing business and economic conditions or continue its
growth strategy. There can be no assurance that IHS' operating results will be
sufficient for the payment of IHS' indebtedness. If IHS were unable to meet
interest, principal or lease payments, or satisfy financial covenants, it could
be required to seek renegotiation of such payments and/or covenants or obtain
additional equity or debt financing. If additional funds are raised by issuing
equity securities, the Company's stockholders may experience dilution. Further,
such equity securities may have rights, preferences or privileges senior to
those of the Common Stock. To the extent IHS finances its activities with
additional debt, IHS may become subject to certain additional financial and
other covenants that may restrict its ability to pursue its growth strategy and
to pay dividends on the Common Stock. There can be no assurance that any such
efforts would be successful or timely or that the terms of any such financing or
refinancing would be acceptable to IHS. See "-- Risks Related to Capital
Requirements."
In connection with IHS' offering of its 9 1/4% Senior Subordinated Notes
due 2008 in September 1997 (the "9 1/4% Senior Notes"), Standard & Poors ("S&P")
confirmed its B rating of IHS' other subordinated debt obligations, but with a
negative outlook, and assigned the same rating to the 9 1/4% Senior Notes. In
November 1997, S&P placed the Company's senior credit and subordinated debt
ratings on CreditWatch with negative implications due to the proposed Facility
Acquisition and in January 1998 S&P downgraded IHS' corporate credit and bank
loan ratings to B+ and its subordinated debt ratings to B- as a result of the
Facility Acquisition. S&P stated that the speculative grade ratings reflect the
Company's high debt leverage and aggressive acquisition strategy, uncertainties
with respect to future government efforts to control Medicare and Medicaid and
the unknown impact on IHS of recent changes in healthcare regulation providing
for a prospective payment system for both nursing homes and home healthcare. S&P
noted IHS' outlook was stable. In connection with the offering of the 9 1/4%
Senior Notes, Moody's Investors Service ("Moody's") downgraded to B2 the
Company's other senior subordinated debt obligations, but noted that the outlook
for the rating was stable, and assigned the new rating to the 9 1/4% Senior
Notes. Moody's stated that the rating action reflects Moody's concern about
6
<PAGE>
the Company's continued rapid growth through acquisitions, which has resulted in
negative tangible equity of $114 million, making no adjustment for the $259
million of convertible debt of IHS outstanding. Moody's also stated that the
availability provided by the Company's new credit facility and the 9 1/4% Senior
Notes positioned the Company to complete sizable acquisition transactions using
solely debt. Moody's further noted that the rating reflects that there are
significant changes underway in the reimbursement of services rendered by IHS,
and that the exact impact of these changes is uncertain.
Risks Associated with Growth Through Acquisitions and Internal Development.
IHS' growth strategy involves growth through acquisitions and internal
development and, as a result, IHS is subject to various risks associated with
this growth strategy. The Company's planned expansion and growth require that
the Company expand its home healthcare services through the acquisition of
additional home healthcare providers and that the Company acquire, or establish
relationships with, third parties which provide post-acute care services not
currently provided by the Company and that the Company acquire, lease or acquire
the right to manage for others additional facilities. Such expansion and growth
will depend on the Company's ability to create demand for its post-acute care
programs, the availability of suitable acquisition, lease or management
candidates and the Company's ability to finance such acquisitions and growth.
The successful implementation of the Company's post-acute healthcare system,
including the capitation of rates, will depend on the Company's ability to
expand the amount of post-acute care services it offers directly to its patients
rather than through third-party providers. There can be no assurance that
suitable acquisition candidates will be located, that acquisitions can be
consummated, that acquired facilities and companies can be successfully
integrated into the Company's operations, or that the Company's post-acute
healthcare system, including the capitation of rates, can be successfully
implemented. The post-acute care market is highly competitive, and the Company
faces substantial competition from hospitals, subacute care providers,
rehabilitation providers and home healthcare providers, including competition
for acquisitions. The Company anticipates that competition for acquisition
opportunities will intensify due to the ongoing consolidation in the healthcare
industry. See "-- Risks Related to Managed Care Strategy" and "-- Competition."
The successful integration of acquired businesses, including First
American, RoTech, CCA, the Coram Lithotripsy Division and the facilities and
other businesses acquired from HEALTHSOUTH, is important to the Company's future
financial performance. The anticipated benefits from any of these acquisitions
may not be achieved unless the operations of the acquired businesses are
successfully combined with those of the Company in a timely manner. The
integration of the Company's recent acquisitions will require substantial
attention from management. The diversion of the attention of management, and any
difficulties encountered in the transition process, could have a material
adverse effect on the Company's operations and financial results. In addition,
the process of integrating the various businesses could cause the interruption
of, or a loss of momentum in, the activities of some or all of these businesses,
which could have a material adverse effect on the Company's operations and
financial results. There can be no assurance that the Company will realize any
of the anticipated benefits from its acquisitions. The acquisition of service
companies that are not profitable, or the acquisition of new facilities that
result in significant integration costs and inefficiencies, could also adversely
affect the Company's profitability.
IHS' current and anticipated future growth has placed, and will continue to
place, significant demands on the management, operational and financial
resources of IHS. The Company's ability to manage its growth effectively will
require it to continue to improve its operational, financial and management
information systems and to continue to attract, train, motivate, manage and
retain key employees. There can be no assurance that IHS will be able to manage
its expanded operations effectively. See "-- Risks Related to Capital
Requirements."
There can be no assurance that the Company will be successful in
implementing its strategy or in responding to ongoing changes in the healthcare
industry which may require adjustments to its strategy. If IHS fails to
implement its strategy successfully or does not respond timely and adequately to
ongoing changes in the healthcare industry, the Company's business, financial
condition and results of operations will be materially adversely affected.
7
<PAGE>
Risks Related to Managed Care Strategy. Managed care payors and traditional
indemnity insurers have experienced pressure from their policyholders to curb or
reduce the growth in premiums paid to such organizations for healthcare
services. This pressure has resulted in demands on healthcare service providers
to reduce their prices or to share in the financial risk of providing care
through alternate fee structures such as capitation or fixed case rates. Given
the increasing importance of managed care in the healthcare marketplace and the
continued cost containment pressures from Medicare and Medicaid, IHS has been
restructuring its operations to enable IHS to focus on obtaining contracts with
managed care organizations and to provide capitated services. The Company
believes that its home healthcare capabilities will be an important component of
its ability to provide services under capitated and other alternate fee
arrangements. However, to date there has been limited demand among managed care
organizations for post-acute care network services, and there can be no
assurance that demand for such services will increase. Further, IHS has limited
experience in providing services under capitated and other alternate fee
arrangements and setting the applicable rates. Accordingly, there can be no
assurance that the fees received by IHS will cover the cost of services
provided. If revenue for capitated services is insufficient to cover the
treatment costs, IHS' operating results could be adversely affected. As a
result, the success of IHS' managed care strategy will depend in large part on
its ability to increase demand for post-acute care services among managed care
organizations, to obtain favorable agreements with managed care organizations
and to manage effectively its operating and healthcare delivery costs through
various methods, including utilization management and competitive pricing for
purchased services. Additionally, there can be no assurance that pricing
pressures faced by healthcare providers will not have a material adverse effect
on the Company's business, results of operations and financial condition.
Further, pursuing a strategy focused on risk-sharing fee arrangements
entails certain regulatory risks. Many states impose restrictions on a service
provider's ability to provide capitated services unless it meets certain
financial criteria, and may view capitated fee arrangements as an insurance
activity, subjecting the entity accepting the capitated fee to regulation as an
insurance company rather than merely a licensed healthcare provider accepting a
business risk in connection with the manner in which it is charging for its
services. The laws governing risk-sharing fee arrangements for healthcare
service providers are evolving and are not certain at this time. If the
risk-sharing activities of IHS require licensure as an insurance company, there
can be no assurance that IHS could obtain or maintain the necessary licensure,
or that IHS would be able to meet any financial criteria imposed by a state. If
the Company were precluded from providing services under risk-sharing fee
arrangements, its managed care strategy would be adversely affected. See
"-Uncertainty of Government Regulation."
Risks Related to Capital Requirements. IHS' growth strategy requires
substantial capital for the acquisition of additional home healthcare and
related service providers and geriatric care facilities. The effective
integration, operation and expansion of the existing businesses will also
require substantial capital. The Company expects to finance new acquisitions
from a combination of funds from operations, borrowings under its bank credit
facility and the issuance of debt and equity securities. IHS may raise
additional capital through the issuance of long-term or short-term indebtedness
or the issuance of additional equity securities in private or public
transactions, at such times as management deems appropriate and the market
allows. Any of such financings could result in dilution of existing equity
positions, increased interest and amortization expense or decreased income to
fund future expansion. There can be no assurance that acceptable financing for
future acquisitions or for the integration and expansion of existing businesses
and operations can be obtained. The Company's bank credit facility limits the
Company's ability to make acquisitions, and certain of the indentures under
which the Company's outstanding senior subordinated debt securities were issued
limit the Company's ability to incur additional indebtedness unless certain
financial tests are met. See "-- Risks Related to Substantial Indebtedness."
Risks Related to Recent Acquisitions. IHS has recently completed several
major acquisitions, including the acquisitions of First American, RoTech, CCA
and the Coram Lithotripsy Division and the Facility Acquisition, and is still in
the process of integrating those acquired businesses. The IHS Board of Directors
and senior management of IHS face a significant challenge in their efforts to
integrate the acquired businesses, including First American, RoTech, CCA, the
Coram Lithotripsy Division and the facilities and other businesses acquired from
HEALTHSOUTH. The dedication of management re-
8
<PAGE>
sources to such integration may detract attention from the day-to-day business
of IHS. The difficulties of integration may be increased by the necessity of
coordinating geographically separated organizations, integrating personnel with
disparate business backgrounds and combining different corporate cultures. There
can be no assurance that there will not be substantial costs associated with
such activities or that there will not be other material adverse effects of
these integration efforts. Further, there can be no assurance that management's
efforts to integrate the operations of IHS and newly acquired companies will be
successful or that the anticipated benefits of the recent acquisitions will be
fully realized.
IHS has recently expanded significantly its home healthcare operations.
During the years ended December 31, 1996 and 1997 and the six months ended June
30, 1997 and 1998, home healthcare accounted for approximately 16.3%, 35.4%,
30.8% and 29.9%, respectively, of IHS' total revenues. On a pro forma basis,
after giving effect to the acquisitions and divestitures consummated by IHS in
1996 and 1997, home healthcare accounted for approximately 28.8% and 29.6% of
IHS' total revenues in 1996 and 1997, respectively. On a pro forma basis,
approximately 70.7% and 73.0% of IHS' home healthcare revenues were derived from
Medicare in the years ended December 31, 1996 and 1997, respectively. On a pro
forma basis, after giving effect to the acquisitions and divestitures
consummated by IHS in 1996 and 1997, home nursing services accounted for
approximately 64.2% and 56.2%, respectively, of IHS' home healthcare revenues in
these periods. Medicare has developed a national fee schedule for infusion
therapy and home medical equipment which provides reimbursement at 80% of the
amount of any fee on the schedule. The remaining 20% is paid by other third
party payors (including Medicaid in the case of "medically indigent" patients)
or patients. With respect to home nursing, Medicare generally reimburses for the
cost of providing such services, up to a regionally adjusted allowable maximum
per visit and per discipline with no fixed limit on the number of visits prior
to 1998. There generally is no deductible or coinsurance. As a result, there is
no reward for efficiency, provided that costs are below the cap, and traditional
home healthcare services carry relatively low margins. The Balanced Budget Act
of 1997 (the "BBA"), enacted in August 1997, provides for a reduction in current
cost reimbursement for home nursing care pending implementation of a prospective
payment system for home nursing services for cost reporting periods beginning on
or after October 1, 1999. Implementation of a prospective payment system will be
a critical element to the success of IHS' expansion into home nursing services.
Based upon prior legislative proposals, IHS believes that a prospective payment
system would most likely provide a healthcare provider a predetermined rate for
a given service, with providers that have costs below the predetermined rate
being entitled to keep some or all of this difference. There can be no assurance
that Medicare will implement a prospective payment system for home nursing
services in the next several years or at all. The implementation of a
prospective payment system requires IHS to make contingent payments related to
the First American Acquisition of $155 million over a period of five years.
Until a prospective payment system for home nursing services is introduced, IHS
anticipates that margins for home nursing will remain low and may adversely
impact its financial performance. IHS is currently exploring ways to reduce the
impact of its home nursing business on its financial performance, which may
include a "spin-off" of such operations. In addition, the BBA reduces the
Medicare national payment limits for oxygen and oxygen equipment used in home
respiratory therapy by 25% in 1998 and 30% (from 1997 levels) in 1999 and each
subsequent year. Approximately 50% of RoTech's total revenues for 1997 were
derived from the provision of oxygen services to Medicare patients. The
inability of IHS to realize operating efficiencies and provide home healthcare
services at a cost below the established Medicare fee schedule could have a
material adverse effect on IHS' home healthcare operations and its post-acute
care network. See "-- Risk of Adverse Effect of Healthcare Reform."
Reliance on Reimbursement by Third Party Payors. The Company receives
payment for services rendered to patients from private insurers and patients
themselves, from the Federal government under Medicare, and from the states in
which it operates under Medicaid. The healthcare industry is experiencing a
trend toward cost containment, as government and other third party payors seek
to impose lower reimbursement and utilization rates and negotiate reduced
payment schedules with service providers. These cost containment measures,
combined with the increasing influence of managed care payors and competition
for patients, has resulted in reduced rates of reimbursement for services
provided by IHS, which has adversely affected, and may continue to adversely
affect, IHS' margins, particularly in its skilled nursing and subacute
facilities. Aspects of certain healthcare reform proposals, such as cutbacks
9
<PAGE>
in the Medicare and Medicaid programs, reductions in Medicare reimbursement
rates and/or limitations on reimbursement rate increases, containment of
healthcare costs on an interim basis by means that could include a short-term
freeze on prices charged by healthcare providers, and permitting greater state
flexibility in the administration of Medicaid, could adversely affect the
Company. There can be no assurance that adequate reimbursement levels will
continue to be available for services to be provided by IHS which are currently
being reimbursed by Medicare, Medicaid or private payors. Significant limits on
the scope of services reimbursed and on reimbursement rates and fees could have
a material adverse effect on the Company's results of operations and financial
condition. See "-- Risk of Adverse Effect of Healthcare Reform." During the
years ended December 31, 1995, 1996 and 1997 and the six months ended June 30,
1997 and 1998, the Company derived approximately 55%, 60%, 66%, 67% and 63%,
respectively, of its patient revenues from Medicare and Medicaid. On a pro forma
basis after giving effect to the acquisitions and divestitures consummated by
IHS in 1996 and 1997, approximately 69% of the Company's patient revenues have
been derived from Medicare and Medicaid in each of the years ended December 31,
1996 and 1997.
The sources and amounts of the Company's patient revenues derived from the
operation of its geriatric care facilities and MSU programs are determined by a
number of factors, including licensed bed capacity of its facilities, occupancy
rate, the mix of patients and the rates of reimbursement among payor categories
(private, Medicare and Medicaid). Changes in the mix of the Company's patients
among the private pay, Medicare and Medicaid categories can significantly affect
the profitability of the Company's operations. The Company's cost of care for
its MSU patients generally exceeds regional reimbursement limits established
under Medicare. The success of the Company's MSU strategy will depend in part on
its ability to obtain per diem rate approvals for costs which exceed the
Medicare established per diem rate limits and by obtaining waivers of these
limitations. There can be no assurance that the Company will be able to obtain
the waivers necessary to enable the Company to recover its excess costs.
Managed care organizations and other third party payors have continued to
consolidate to enhance their ability to influence the delivery of healthcare
services. Consequently, the healthcare needs of a large percentage of the United
States population are provided by a small number of managed care organizations
and third party payors. These organizations generally enter into service
agreements with a limited number of providers for needed services. To the extent
such organizations terminate IHS as a preferred provider and/or engage IHS'
competitors as a preferred or exclusive provider, the business of IHS could be
materially adversely affected.
Risk of Adverse Effect of Healthcare Reform. In addition to extensive
existing government healthcare regulation, there are numerous initiatives on the
federal and state levels for comprehensive reforms affecting the payment for and
availability of healthcare services, including a number of proposals that would
significantly limit reimbursement under Medicare and Medicaid. It is not clear
at this time what proposals, if any, will be adopted or, if adopted, what effect
such proposals would have on the Company's business. Aspects of certain of these
healthcare proposals, such as cutbacks in the Medicare and Medicaid programs,
containment of healthcare costs on an interim basis by means that could include
a short-term freeze on prices charged by healthcare providers, and permitting
greater state flexibility in the administration of Medicaid, could adversely
affect the Company. IHS expects that there will continue to be numerous
initiatives on the federal and state levels for comprehensive reforms affecting
the payment for and availability of healthcare services, including proposals
that will further limit reimbursement under Medicare and Medicaid. It is not
clear at this time what proposals, if any, will be adopted or, if adopted, what
effect such proposals will have on IHS' business. See "-- Risks Related to
Recent Acquisitions" and "-- Reliance on Reimbursement by Third Party Payors."
There can be no assurance that currently proposed or future healthcare
legislation or other changes in the administration or interpretation of
governmental healthcare programs will not have an adverse effect on the Company
or that payments under governmental programs will remain at levels comparable to
present levels or will be sufficient to cover the costs allocable to patients
eligible for reimbursement pursuant to such programs. Concern about the
potential effects of the proposed reform measures has contributed to the
volatility of
10
<PAGE>
prices of securities of companies in healthcare and related industries,
including the Company, and may similarly affect the price of the Company's
securities in the future. See "-- Uncertainty of Government Regulation."
The BBA provides, among other things, for a prospective payment system for
skilled nursing facilities to be implemented for cost reporting periods
beginning on or after July 1, 1998, a prospective payment system for home
nursing to be implemented for cost reporting periods beginning on or after
October 1, 1999, a reduction in current cost reimbursement for home nursing care
pending implementation of a prospective payment system, reductions (effective
January 1, 1998) in Medicare reimbursement for oxygen and oxygen equipment for
home respiratory therapy and a shift of the bulk of home health coverage from
Part A to Part B of Medicare. The BBA also instituted consolidated billing for
skilled nursing facility services, under which payments for non-physician Part B
services for beneficiaries no longer eligible for Part A skilled nursing
facility care will be made to the facility, regardless of whether the item or
service was furnished by the facility, by others under arrangement or under any
other contracting or consulting arrangement, effective for items or services
furnished on or after July 1, 1997. With respect to Medicaid, the BBA repeals
the so-called Boren Amendment, which required state Medicaid programs to
reimburse nursing facilities for the costs that are incurred by efficiently and
economically operated providers in order to meet quality and safety standards.
As a result, states now have considerable flexibility in establishing payment
rates. The inability of IHS to provide home healthcare and/or skilled nursing
services at a cost below the established Medicare fee schedule could have a
material adverse effect on IHS' home healthcare operations, post-acute care
network and business generally.
Under the new prospective payment system for Medicare reimbursement to
skilled nursing facilities, facilities will receive a pre-established daily rate
for each individual Medicare beneficiary being cared for, based on the activity
level of the patient. The pre-established daily rate will cover all routine,
ancillary and capital costs. The prospective payment system will be phased in
over four years on a blended rate of the facility-specific costs and the new
federal per diem rate. The blended rate for the first year of transition will
take 75% of the facility-specific per diem rate and 25% of the federal per diem
rate. In each subsequent transition year, the facility-specific per diem rate
component will decrease by 25% and the federal per diem rate component will
increase by 25%, ultimately resulting in a rate based 100% upon the federal per
diem. The facility-specific per diem rate is based upon the facility's 1995 cost
report for routine, ancillary and capital services, updated using a skilled
nursing market basket index. The federal per diem is calculated by the weighted
average of each facility's standardized costs, based upon the historical
national average per diem for freestanding facilities. Prospective payment for
IHS' owned and leased skilled nursing facilities will be effective beginning
January 1, 1999 for all facilities other than the facilities acquired from
HEALTHSOUTH, which will become subject to prospective payment on June 1, 1999.
Prospective payment for skilled nursing facilities managed by IHS will be
effective for each facility at the beginning of its first cost reporting period
beginning on or after July 1, 1998. The new prospective payment system will also
cover ancillary services provided to patients at skilled nursing facilities.
IHS anticipates that the prospective payment system for home nursing will
provide for prospectively established per visit payments to be made for all
covered services, which will then be subject to an annual aggregate per episode
limit at the end of the year. Home health agencies that are able to keep their
total expenses per visit during the year below their per episode annual limits
will be able to retain a specified percentage of the difference, subject to
certain aggregate limitations. Such changes could have a material adverse effect
on the Company and its growth strategy. The implementation of a prospective
payment system requires the Company to make contingent payments related to the
acquisition of First American of $155 million over a period of five years. The
failure to implement a prospective payment system for home nursing services in
the next several years could adversely affect IHS' post- acute care network
strategy. See "-- Risks Related to Recent Acquisitions."
Uncertainty of Government Regulation. The Company and the healthcare
industry generally are subject to extensive federal, state and local regulation
governing licensure and conduct of operations at existing facilities,
construction of new facilities, acquisition of existing facilities, additions of
new ser-
11
<PAGE>
vices, certain capital expenditures, the quality of services provided and the
manner in which such services are provided and reimbursement for services
rendered. Changes in applicable laws and regulations or new interpretations of
existing laws and regulations could have a material adverse effect on licensure,
eligibility for participation, permissible activities, operating costs and the
levels of reimbursement from governmental and other sources. There can be no
assurance that regulatory authorities will not adopt changes or new
interpretations of existing regulations that could adversely affect the Company.
The failure to maintain or renew any required regulatory approvals or licenses
could prevent the Company from offering existing services or from obtaining
reimbursement. In certain circumstances, failure to comply at one facility may
affect the ability of the Company to obtain or maintain licenses or approvals
under Medicare and Medicaid programs at other facilities. In addition, in the
conduct of its business the Company's operations are subject to review by
federal and state regulatory agencies to assure continued compliance with
various standards, their continued licensing under state law and their
certification under the Medicare and Medicaid programs. In the course of these
reviews, problems are from time to time identified by these agencies. The
Company has to date been able to resolve these problems in a manner satisfactory
to the regulatory agencies without a material adverse effect on its business,
and the Company believes that it will be able to resolve all current reviews in
a manner satisfactory to the regulatory agencies without a material adverse
effect on its business. However, there can be no assurance that IHS will be able
to satisfactorily resolve all current or future reviews.
In 1995 the Health Care Financing Administration ("HCFA") implemented
stricter guidelines for annual state surveys of long-term care facilities and
expanded remedies available to enforce compliance with the detailed regulations
mandating minimum healthcare standards. Remedies include fines, new patient
admission moratoriums, denial of reimbursement, federal or state monitoring of
operations, closure of facilities and termination of provider reimbursement
agreements. These provisions eliminate the ability of operators to appeal the
scope and severity of any deficiencies and grant state regulators the authority
to impose new remedies, including monetary penalties, denial of payments and
termination of the right to participate in the Medicare and/or Medicaid
programs. The Company believes these new guidelines may result in an increase in
the number of facilities that will not be in "substantial compliance" with the
regulations and, as a result, subject to increased disciplinary actions and
remedies, including admission holds and termination of the right to participate
in the Medicare and/or Medicaid programs. In ranking facilities, survey results
subsequent to October 1990 are considered. As a result, the Company's
acquisition of poorly performing facilities could adversely affect the Company's
business to the extent remedies are imposed at such facilities.
In September 1997, President Clinton, in an attempt to curb Medicare fraud,
imposed a moratorium on the certification under Medicare of new home healthcare
companies, which moratorium expired in January 1998, and implemented rules
requiring home healthcare providers to reapply for Medicare certification every
three years. In addition, HCFA will double the number of detailed audits of home
healthcare providers it completes each year and increase by 25% the number of
home healthcare claims it reviews each year. IHS cannot predict what effect, if
any, these new rules will have on IHS' business and the expansion of its home
healthcare operations.
The Company is also subject to federal and state laws which govern
financial and other arrangements between healthcare providers. These laws often
prohibit certain direct and indirect payments or fee-splitting arrangements
between healthcare providers that are designed to induce or encourage the
referral of patients to, or the recommendation of, a particular provider for
medical products and services. These laws include the federal "Stark Acts,"
which prohibit, with limited exceptions, financial relationships between
ancillary service providers and referring physicians, and the federal
"anti-kickback law," which prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for the referral
of Medicare and Medicaid patients. The Office of Inspector General of the
Department of Health and Human Services, the Department of Justice and other
federal agencies interpret these fraud and abuse provisions liberally and
enforce them aggressively. The BBA contains new civil monetary penalties for
violations of these laws and imposes an affirmative duty on providers to insure
that they do not employ or contract with persons excluded from the Medicare
program. The BBA also provides a minimum 10 year period for exclusion from
participation in Federal healthcare programs of persons convicted of a prior
healthcare violation. In addition, some states restrict
12
<PAGE>
certain business relationships between physicians and other providers of
healthcare services. Many states prohibit business corporations from providing,
or holding themselves out as a provider of, medical care. Possible sanctions for
violation of any of these restrictions or prohibitions include loss of licensure
or eligibility to participate in reimbursement programs (including Medicare and
Medicaid), asset forfeitures and civil and criminal penalties. These laws vary
from state to state, are often vague and have seldom been interpreted by the
courts or regulatory agencies. The Company seeks to structure its business
arrangements in compliance with these laws and, from time to time, the Company
has sought guidance as to the interpretation of such laws; however, there can be
no assurance that such laws ultimately will be interpreted in a manner
consistent with the practices of the Company. In addition to these anti-kickback
and self-referral prohibitions, there are various federal and state laws
prohibiting other types of fraud by healthcare providers, including criminal
provisions which prohibit filing false claims or making false statements to
receive payment or certification under Medicare or Medicaid. The false claims
statutes include the Federal False Claims Act, which allows any person to bring
a suit, known as a qui-tam action, alleging false or fraudulent Medicare and
Medicaid claims or other violations of the statute and to share in any amounts
paid by the entity to the government in fines or settlement. The federal and
state governments are devoting increasing attention and resources to anti-fraud
initiatives against healthcare providers.
Many states have adopted certificate of need or similar laws which
generally require that the appropriate state agency approve certain acquisitions
or capital expenditures in excess of defined levels and determine that a need
exists for certain new bed additions, new services and the acquisition of such
medical equipment or capital expenditures or other changes prior to beds and/or
services being added. Many states have placed a moratorium on granting
additional certificates of need or otherwise stated their intent not to grant
approval for new beds. To the extent certificates of need or other similar
approvals are required for expansion of the Company's operations, either through
facility acquisitions or expansion or provision of new services or other
changes, such expansion could be adversely affected by the failure or inability
to obtain the necessary approvals, changes in the standards applicable to such
approvals and possible delays in, and the expenses associated with, obtaining
such approvals.
The Company is unable to predict the future course of federal, state or
local regulation or legislation, including Medicare and Medicaid statutes and
regulations. Further changes in the regulatory framework could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "-- Risk of Adverse Effect of Healthcare Reform."
Competition. The healthcare industry is highly competitive and is subject
to continuing changes in the provision of services and the selection and
compensation of providers. The Company competes on a local and regional basis
with other providers on the basis of the breadth and quality of its services,
the quality of its facilities and, to a more limited extent, price. The Company
also competes with other providers in the acquisition and development of
additional facilities and service providers. The Company's current and potential
competitors include national, regional and local operators of geriatric care
facilities, acute care hospitals and rehabilitation hospitals, extended care
centers, retirement centers and community home health agencies, other home
healthcare companies and similar institutions, many of which have significantly
greater financial and other resources than the Company. In addition, the Company
competes with a number of tax-exempt nonprofit organizations which can finance
acquisitions and capital expenditures on a tax-exempt basis or receive
charitable contributions unavailable to the Company. New service introductions
and enhancements, acquisitions, continued industry consolidation and the
development of strategic relationships by IHS' competitors could cause a
significant decline in sales or loss of market acceptance of IHS' services or
intense price competition or make IHS' services noncompetitive. Further,
technological advances in drug delivery systems and the development of new
medical treatments that cure certain complex diseases or reduce the need for
healthcare services could adversely impact the business of IHS. There can be no
assurance that IHS will be able to compete successfully against current or
future competitors or that competitive pressures will not have a material
adverse effect on IHS' business, financial condition and results of operations.
IHS also competes with various healthcare providers with respect to attracting
and retaining qualified management and other personnel. Any significant failure
by IHS to attract and retain qualified employees could have a material adverse
effect on its business, results of operations and financial condition.
13
<PAGE>
Effect of Certain Anti-Takeover Provisions. IHS' Third Restated Certificate
of Incorporation and By-laws, as well as the Delaware General Corporation Law
(the "DGCL"), contain certain provisions that could have the effect of making it
more difficult for a third party to acquire, or discouraging a third party from
attempting to acquire, control of IHS. These provisions could limit the price
that certain investors might be willing to pay in the future for shares of
Common Stock. Certain of these provisions allow IHS to issue, without
stockholder approval, preferred stock having voting rights senior to those of
the Common Stock. Other provisions impose various procedural and other
requirements that could make it more difficult for stockholders to effect
certain corporate actions. In addition, the IHS Stockholders' Rights Plan, which
provides for discount purchase rights to certain stockholders of IHS upon
certain acquisitions of 20% or more of the outstanding shares of Common Stock,
may also inhibit a change in control of IHS. As a Delaware corporation, IHS is
subject to Section 203 of the DGCL, which, in general, prevents an "interested
stockholder" (defined generally as a person owning 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) for three years following the date such person became
an interested stockholder unless certain conditions are satisfied.
Possible Volatility of Stock Price. There may be significant volatility in
the market price of the Common Stock. Quarterly operating results of IHS,
changes in general conditions in the economy, the financial markets or the
healthcare industry, or other developments affecting IHS or its competitors,
could cause the market price of the Common Stock to fluctuate substantially. In
addition, in recent years the stock market and, in particular, the healthcare
industry segment, has experienced significant price and volume fluctuations.
This volatility has affected the market price of securities issued by many
companies for reasons unrelated to their operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been initiated against such
company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon IHS' business, operating results and financial condition.
14
<PAGE>
RECENT DEVELOPMENTS
Set forth below is certain unaudited summary information with respect to
the Company's operations for the three and six months ended June 30, 1997 and
1998 and balance sheet data as of June 30, 1998.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
============================ ==============================
1998 1997 1998 1997
------------- ------------ -------------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues
Basic medical services ........................ $ 232,349 $ 88,055 $ 467,248 $ 176,810
Specialty medical services .................... 575,829 360,113 1,188,025 722,802
Management services and other ................. 8,680 9,722 16,735 19,402
--------- -------- ----------- ---------
Total revenues .............................. 816,858 457,890 1,672,008 919,014
--------- -------- ----------- ---------
Costs and expenses
Operating, general and administrative ......... 607,739 356,871 1,257,876 727,299
Depreciation and amortization ................. 39,180 15,814 77,771 30,844
Rent .......................................... 35,580 25,786 70,994 49,795
Interest, net ................................. 64,025 23,224 130,490 44,645
Non-recurring charges(1) ...................... -- 21,072 -- 20,047
--------- -------- ----------- ---------
Total costs and expenses .................... 746,524 442,767 1,537,131 872,630
--------- -------- ----------- ---------
Earnings before income taxes and ex-
traordinary items .......................... 70,334 15,123 134,877 46,384
Federal and state income taxes ................. 28,837 5,898 55,300 18,090
--------- -------- ----------- ---------
Earnings before extraordinary items ......... 41,497 9,225 79,577 28,294
Extraordinary items(2) ......................... -- 18,168 -- 18,168
--------- -------- ----------- ---------
Net earnings (loss) ......................... $ 41,497 $ (8,943) $ 79,577 $ 10,126
========= ======== =========== =========
Per Common Share -- (Basic)
Earnings before extraordinary items ......... $ 0.90 $ 0.37 $ 1.78 $ 1.17
========= ======== =========== =========
Net earnings (loss) ......................... $ 0.90 $ (0.36) $ 1.78 $ 0.42
========= ======== =========== =========
Per Common Share -- (Diluted)
Earnings before extraordinary items ......... $ 0.76 $ 0.32 $ 1.50 $ 0.95
--------- -------- ----------- ---------
Net earnings (loss) ......................... $ 0.76 $ (0.18) $ 1.50 $ 0.43
========= ======== =========== =========
Weighted average shares (Basic) ................ 44,770 24,273
=========== =========
Weighted average shares (Diluted) .............. 56,081 34,951
=========== =========
</TABLE>
- ----------
(1) Consists primarily of (i) a gain in the first quarter of $7,578,000 realized
on the shares of Capstone Pharmacy Services, Inc. common stock received in
the sale of the Company's pharmacy division, (ii) the write-off in the first
quarter of $6,555,000 of accounting, legal and other costs resulting from
the proposed merger transaction with Coram and (iii) the payment in the
second quarter to Coram of $21,000,000 in connection with the termination of
the proposed merger transaction with Coram.
(2) Extraordinary items relate to extinguishment of debt. During the three and
six months ended June 30, 1997, IHS recorded a loss on extinguishment of
debt of $29,784,000, representing approximately (i) $23,554,000 of cash
payments of premium and consent fees relating to the early extinguishment of
$214,868,000 aggregate principal amount of IHS' senior subordinated notes
and (ii) $6,230,000 of deferred financing costs written-off in connection
with the early extinguishment of such debt. Such loss, reduced by the
related income tax effect of $11,616,000, is presented in the statement of
operations for three and six months ended June 30, 1997 as an extraordinary
loss of $18,168,000.
15
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
JUNE 30,
1998
-----------------
($ IN THOUSANDS)
<S> <C>
Cash and temporary investments .................... $ 88,669
Working capital ................................... 231,552
Total assets ...................................... 5,392,875
Long-term debt, including current portion ......... 3,187,277
Stockholders' equity .............................. 1,454,779
</TABLE>
In March 1998 the Company sold five long-term care facilities to Omega
Healthcare Investors, Inc. ("Omega"), a publicly-traded real estate investment
trust, for approximately $50.5 million. Omega immediately leased these
facilities to Lyric Health Care LLC ("Lyric") at an annual rent of approximately
$4.95 million. Lyric is a newly-formed company 50% owned by IHS and 50% owned by
TFN Healthcare Investors, Inc., an entity controlled by Timothy Nicholson, a
director of the Company. The Company manages these facilities as well as five
other long-term care facilities which the Company sold to Omega and Omega leased
to Lyric in January 1998. The Company receives a base management fee of 3% of
gross revenues, subject to increase if gross revenues exceed $350 million, and a
franchise fee of 1% of gross revenues. The management agreement with Lyric
provides for an incentive management fee equal to 70% of annual net cash flow
(as defined in the management agreement). IHS did not recognize a gain or loss
on the sale.
In April 1998 the Company reached an agreement in principle to sell 44
facilities to Monarch Properties, Inc., a newly-formed real estate investment
trust ("Monarch"), for an aggregate purchase price of approximately $371
million. It is currently contemplated that Monarch will lease 42 of these 44
facilities to Lyric, and that Lyric will engage the Company to manage the
facilities pursuant to the arrangements described above. The transactions with
Monarch and Lyric are subject to completion of definitive documentation and
completion of Monarch's initial public offering, and there can be no assurance
that the transaction will be completed on these terms, on different terms or at
all. Dr. Robert N. Elkins, the Company's Chairman of the Board, Chief Executive
Officer and President, is Chairman of the Board of Directors of Monarch, and it
is currently contemplated that he will beneficially own between five and ten
percent of Monarch following completion of Monarch's public offering.
In April 1998 IHS acquired a company that operates 12 skilled nursing
facilities for approximately $15.9 million. In April 1998 the Company also
purchased, for an aggregate of approximately $5.5 million, seven companies which
provide respiratory therapy services. The sellers of two of these respiratory
businesses are Selling Stockholders hereunder. See "Selling Stockholders --
Transactions Involving Selling Stockholders."
In May 1998 the Company acquired eight companies which provide respiratory
therapy services for an aggregate of approximately $17.1 million and one company
which provides mobile diagnostic services for approximately $2.8 million. The
stockholders of the mobile diagnostic services company are Selling Stockholders
hereunder. See "Selling Stockholders -- Transactions Involving Selling
Stockholders."
In June 1998 the Company purchased a skilled nursing facility which it had
previously leased for approximately $12.0 million, eight companies which provide
respiratory therapy services for an aggregate of approximately $9.5 million, a
company which operates 30 skilled nursing facilities for approximately $53.0
million and a lithotripsy operation for approximately $11.9 million. The
stockholders of the owner of the skilled nursing facility, the stockholders of
the skilled nursing facility operator and the stockholders of the lithotripsy
operation are Selling Stockholders hereunder. See "Selling Stockholders --
Transactions Involving Selling Stockholders."
The Company has reached agreements in principle to purchase two skilled
nursing facilities for approximately $16.7 million, a lithotripsy operation for
approximately $10.2 million and 19 respiratory
16
<PAGE>
companies for an aggregate of approximately $33.4 million. There can be no
assurance that any of these acquisitions will be consummated on these terms, on
different terms or at all.
In July 1998 the Company acquired a 69.03% partnership interest in a
general partnership which provides lithotripsy services for $1,000,000. The
seller of the partnership interest is a Selling Stockholder hereunder. See
"Selling Stockholders -- Transactions Involving Selling Stockholders."
On May 29, 1998, the Company called for redemption on June 29, 1998 all of
its outstanding 6% Convertible Subordinated Debentures due 2003 (the "6%
Debentures"). Of the $115,000,000 principal amount of 6% Debentures outstanding,
holders of $114,799,000 principal amount of the 6% Debentures converted their 6%
Debentures into an aggregate of 3,573,446 shares of Common Stock. Holders of the
remaining $201,000 principal amount of 6% Debentures received a cash redemption
aggregating $213,026 ($1,059.83 per $1,000 principal amount of the 6%
Debentures), equal to approximately $34.05 per underlying share of Common Stock
in lieu of conversion.
17
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information as of June 25, 1998
(except as otherwise indicated) and as adjusted to reflect the sale of the
Common Stock in the offering, as to the security ownership of the Selling
Stockholders. Except as set forth below, none of the Selling Stockholders has
held any position or office or had any other material relationship with the
Company or any of its predecessors or affiliates within the past three years.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED PRIOR SHARES OWNED AFTER
TO OFFERING BEING SOLD OFFERING
-------------- ------------ -------------
<S> <C> <C> <C>
AMERICAN MOBILE HEALTH SYSTEMS, INC.(1)
Peter Hanson ................................................... 32,050 32,050 0
Sol Lewin ...................................................... 27,667 27,667
CoreStates Bank, N.A., as escrow agent(2) ...................... 12,982 12,982 0
FIRST COMMUNITY CARE, INC.(3) ................................... 59,376 59,376 0
REGIONAL MEDICAL SUPPLY, INC.(4)
Regional Medical Supply, Inc. ................................... 12,856 12,856 0
Crestar Bank, as escrow agent ................................... 1,895 1,895 0
MEDICARE CONVALESCENT AIDS OF PINELLAS, INC. D/B/A/ MEDAIDS(5)
Arthur Tepper and Elizabeth Tepper, as Trustees FBO Arthur
Tepper UTD 7/14/78, as amended ............................... 29,857 29,857 0
Joseph D. Valenti, as Trustee FBO Joseph D. Valenti Revoca-
ble Trust DTD 6/10/88 ........................................ 28,573 28,573 0
Samuel J. Jarczynski and Helen Leann Jarczynski JTWROS ......... 10,901 10,901 0
Thomas A. Valenti, as Trustee FBO Thomas A. Valenti, Trust
DTD 5/22/96 .................................................. 2,785 2,785 0
Steven G. Tepper ............................................... 557 557 0
CoreStates Bank, N.A., as escrow agent(2) ...................... 10,384 10,384 0
PRIME MEDICAL SERVICES, INC.(6)
Lee T. McCarger ................................................ 25,972 25,972 0
Helen Leann Jarczynski ......................................... 4,328 4,328 0
Elizabeth Tepper ............................................... 2,597 2,597 0
Bernice Brieley ................................................ 1,731 1,731 0
CoreStates Bank, N.A. as escrow(2) ............................. 4,691 4,691 0
METROPOLITAN LITHOTRIPSY BUSINESS(7)
Downstate Lithotripter LLC ..................................... 89,253 89,253 0
Lithotripter Corporation ....................................... 32,993 32,993 0
Long Island Lithotripter, LLC .................................. 9,941 9,941 0
Metro/Litho L.P. ............................................... 155,475 155,475 0
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED PRIOR SHARES OWNED AFTER
TO OFFERING BEING SOLD OFFERING
-------------- ------------ -------------
<S> <C> <C> <C>
PREMIERE ASSOCIATES, INC.(8)
Angell Family Limited Partnership .................. 3,219 3,219 0
Jewel Austin ....................................... 17,358 17,358 0
Bruce W. Covell, Jr. ............................... 17,358 17,358 0
Troy L. Curry, Jr. ................................. 17,358 17,358 0
Laverne P. Herzog(9) ............................... 316,769 316,769 0
M. Rebecca Muenchow ................................ 17,358 17,358 0
W. Stuart Swain(9) ................................. 316,769 316,769 0
HIALEAH(10)
Medical Associates IV, Limited Partnership ......... 68,259 68,259 0
INCON DEVELOPMENT, INC.(11) ......................... 39,012 39,012 0
CORAM HEALTHCARE CORPORATION(12) .................... 26,367 26,367 0
</TABLE>
- ----------
(1) The shares of Common Stock offered hereby represent shares received in
connection with the Company's acquisition of American Mobile Health Systems,
Inc. pursuant to an Agreement and Plan of Reorganization dated as of May 7,
1998. Of the shares of Common Stock being registered hereunder, 12,982
shares are currently being held in escrow to secure indemnification
obligations and post-closing adjustments based on the collectibility of
receivables.
(2) Does not include shares of Common Stock held in escrow for other
acquisitions.
(3) The shares of Common Stock offered hereby represent shares received in
connection with the Company's acquisition of substantially all the assets of
First Community Care, Inc. pursuant to an Agreement for Sale and Purchase of
Assets and Restrictive Covenants dated as of April 29, 1998.
(4) The shares of Common Stock offered hereby represent shares received in
connection with the Company's acquisition of substantially all the assets of
Regional Medical Supply, Inc. pursuant to an Agreement for Sale and Purchase
of Assets and Restrictive Covenants dated as of March 20, 1998. Of the
shares of Common Stock being registered hereunder, 1,895 shares are
currently being held in escrow to secure indemnification obligations and
post-closing adjustments based on the collectibility of receivables.
(5) The shares of Common Stock offered hereby represent shares received in
connection with the acquisition by the Company of Medicare Convalescent Aids
of Pinellas, Inc. d/b/a Medaids pursuant to the Agreement and Plan of
Reorganization dated as of February 10, 1998. Of the shares of Common Stock
being registered hereunder, 10,384 shares are currently being held in escrow
to secure indemnification obligations and post-closing adjustments based on
the collectibility of receivables.
(6) The shares of Common Stock offered hereby represent shares received in
connection with the acquisition by the Company of Prime Medical Services,
Inc. pursuant to the Agreement and Plan of Reorganization dated as of
February 10, 1998. Of the shares of Common Stock being registered hereunder,
4,691 shares are currently being held in escrow to secure indemnification
obligations and post-closing adjustments based on the collectibility of
receivables.
(7) The shares of Common Stock offered hereby were received in connection with
the acquisition by the Company of substantially all the assets of Downstate
Lithotripter LLC, Lithotripter Corporation, Long Island Lithotripter, LLC
and Metro/Litho L.P. pursuant to the Membership Interest
Purchase Agreement dated as of April 7, 1998.
(8) The shares of Common Stock offered hereby represent shares received in
exchange for the stock of Premiere Associates, Inc. ("Premiere") pursuant to
an Agreement and Plan of Merger dated as of February 27, 1998. Under the
agreement, IHS is obligated to issue additional shares of Common Stock if
the working capital exceeds, and/or long-term liabilities are less than,
specified levels.
(9) Of the 316,769 shares being registered hereunder on behalf of the Selling
Stockholder, 23,087 shares are being held in escrow to secure
indemnification obligations and post-closing adjustments to the merger
consideration based on the levels of Premiere's working capital and
long-term liabilities, 65,964 shares are pledged to Premiere to secure loans
from Premiere and 47,953 shares are pledged to a subsidiary of Premiere to
secure the purchase price of certain assets purchased by the Selling
Stockholder from such subsidiary. The Selling Stockholders will use the
proceeds from the sale of the pledged shares to repay such obligations.
(10) The shares of Common Stock offered hereby represent shares received in
connection with the acquisition by the Company of the Hialeah Convalescent
Home skilled nursing facility pursuant to the Property Purchase Agreement
dated as of June 30, 1998.
(11) The shares of Common Stock offered hereby represent shares received in
settlement of certain litigation between the Company and Incon Development,
Inc..
(12) The shares of Common Stock offered hereby represent shares received in
connection with the acquisition by the Company of a 69.03% partnership
interest in South Georgia Lithotripsy Partners pursuant to a Partnership
Interest Purchase Agreement dated as of June 1, 1998.
19
<PAGE>
TRANSACTIONS INVOLVING SELLING STOCKHOLDERS
On February 11, 1998, the Company acquired through merger all of the
outstanding capital stock of Medicare Convalescent Aids of Pinellas, Inc. d/b/a
Medaids, which operates a home respiratory and durable medical equipment
business in the State of Florida. The merger consideration was $3.3 million, of
which $2,683,000 was paid through the issuance of 83,057 shares of the Company's
Common Stock (the "Medaids Shares"). The Medaids Shares are being offered
hereby.
On February 11, 1998, the Company acquired through merger all of the
outstanding capital stock of Prime Medical Services, Inc., which operates a home
respiratory and durable medical equipment business in the State of Florida. The
merger consideration was $1.4 million, of which $1,174,000 was paid through the
issuance of 39,319 shares of the Company's Common Stock (the "Prime Medical
Shares"). The Prime Medical Shares are being offered hereby.
On April 8, 1998, the Company acquired substantially all the assets of
Regional Medical Supply, Inc., which operates a home respiratory and durable
medical equipment business in the State of New Mexico. The purchase price for
the assets and certain restrictive covenants agreed to by the seller and its
shareholders was $725,000, of which $575,000 was paid through the issuance of
14,751 shares of the Company's Common Stock (the "Regional Medical Shares").The
Regional Medical Shares are being offered hereby.
On April 30, 1998, the Company acquired substantially all the assets of
First Community Care, Inc., which operates a home respiratory and durable
medical equipment business in the State of New York. The purchase price for the
assets and certain restrictive covenants agreed to by the seller and its
shareholders was $8.6 million, of which $2,282,000 was paid through the issuance
of 59,376 shares of the Company's Common Stock (the "FCC Shares"). The FCC
Shares are being offered hereby.
On May 12, 1998, the Company acquired through merger all the outstanding
capital stock of American Mobile Health Systems, Inc., which provides mobile
x-ray, EKG, ultrasound, holter monitor, vision and audiology services and other
fixed site examinations. The merger consideration was $2.8 million, which was
paid through the issuance of 72,699 shares of the Company's Common Stock (the
"AMHS Shares"). The AMHS Shares are being offered hereby.
On June 18, 1998, the Company acquired all the assets of Downstate
Lithotripter LLC, Metro/ Litho L.P. and Long Island Lithotripter, LLC and all
the stock of Lithotripter Corporation, which provide office facilities,
equipment and management services to Metropolitan Lithotripter Associates, PC, a
professional corporation composed of approximately 200 urologists that provide
renal lithotripsy and other services in the Greater New York metropolitan area.
The purchase price for the assets and stock was $11.9 million, which was paid
through the issuance of 40% of the membership interests of Allied Urological
Services, LLC, a subsidiary of the Company which acquired the assets and stock,
and 287,662 shares of the Company's Common Stock (the "Litho Shares"). The Litho
Shares are being offered hereby.
On June 25, 1998, the Company acquired all the outstanding stock of
Premiere Associates Inc., which operates 30 skilled nursing facilities. The
merger consideration was $53.0 million, of which $26.2 million represents net
assumed liabilities and $26.8 million was paid through the issuance of 706,189
shares of Common Stock (the "Premiere Shares"). The Premiere Shares are being
offered hereby.
On June 30, 1998, the Company acquired the Hialeah Convalescent Home, a 276
bed skilled-nursing facility in Hialeah, Florida. The purchase price for the
facility was $12.0 million, of which $2.5 million was paid through the issuance
of 68,259 shares of the Company's Common Stock (the "Hialeah Shares"), $6.5
million was paid in cash and $3.0 million was paid through the issuance of
promissory notes due in five equal annual installments beginning January 1,
1999. The Company may, at its election, pay such notes in cash or through the
issuance of shares of Common Stock. The Hialeah Shares are being offered hereby.
20
<PAGE>
On July 8, 1998, the Company settled certain litigation brought by Incon
Development, Inc. ("Incon") alleging breach of contract and other theories of
recovery under an agreement between the Company and Incon. The settlement
payment was $1.5 million, which was paid through the issuance of 39,012 shares
of the Company's Common Stock (the "Incon Shares"). The Incon Shares are being
offered hereby.
On July 9, 1998, the Company acquired a 69.03% partnership interest in
South Georgia Lithotripsy Partners, a Georgia general partnership engaged in the
lithotripsy services business, and certain related assets. The purchase price
for the partnership interest and the related assets was $1,000,000, which was
paid through the issuance of 26,367 shares of the Company's Common Stock (the
"Coram Shares"). The Coram Shares are being offered hereby.
21
<PAGE>
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. All costs, expenses and fees in connection with the registration
of the Shares offered hereby will be borne by the Company. Brokerage
commissions, if any, attributable to the sale of Shares will be borne by the
Selling Stockholders (or their donees and pledgees).
Sales of Shares may be effected from time to time in transactions (which
may include block transactions) on the New York Stock Exchange, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Selling Stockholders have advised the Company that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. The
Selling Stockholders may effect such transactions by selling Common Stock
directly to purchasers or to or through broker-dealers which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of Common Stock for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that act in connection with the sale of the
Common Stock might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the shares of Common Stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. Liabilities
under the federal securities laws cannot be waived.
The holders of the Medaids Shares, as a group, and the holders of the Prime
Medical Shares, as a group, have each agreed not to sell in excess of 30,000
shares of Common Stock during any 30-day period, the holders of the AMHS Shares,
as a group, have agreed not to sell in excess of 50,000 shares of Common Stock
during any 30-day period, the holders of the Premiere Shares, as a group, have
agreed not to sell in excess of 130,000 shares in any 30-day period during the
first 120 days after the date of this Prospectus and thereafter not more than
100,000 shares in any 30-day period, and the holders of the Litho Shares, as a
group, have agreed not to sell more than 35,000 shares per day during the first
15 trading days after the date of this Prospectus and not more than 75,000
shares in any 30-day period thereafter. Each Selling Stockholder (other than
Incon and the holder of the Coram Shares) has agreed to effect sales solely
through Salomon Smith Barney.
Because the Selling Stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the Selling Stockholders
will be subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a "distribution" of the Shares, such Selling
Stockholder, any selling broker or dealer and any "affiliated purchasers" may be
subject to Regulation M under the Securities Exchange Act of 1934, as amended,
which Regulation would prohibit, with certain exceptions, any such person from
bidding for or purchasing any security which is the subject of such distribution
until his participation in that distribution is completed. In addition,
Regulation M under the Exchange Act prohibits, with certain exceptions, any
"stabilizing bid" or "stabilizing purchase" for the purpose of pegging, fixing
or stabilizing the price of Common Stock in connection with this offering.
The Selling Stockholders may be entitled under agreements entered into with
the Company to indemnification against liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby have been passed upon for the Company by Marshall A. Elkins,
Esq., Executive Vice President and General Counsel of the Company. Mr. Elkins
is the brother of Robert N. Elkins, the Company's Chairman of the Board, Chief
Executive Officer and President. Mr. Elkins owns 17,299 shares of Common Stock
and options to purchase 336,535 shares of Common Stock.
22
<PAGE>
EXPERTS
The consolidated financial statements of Integrated Health Services, Inc.
and subsidiaries as of December 31, 1996 and 1997 and for each of the years in
the three-year period ended December 31, 1997 have been incorporated by
reference in this Prospectus and elsewhere in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
refers to changes in accounting methods, in 1995, to adopt Statement of
Financial Accounting Standards No. 121 related to impairment of long-lived
assets and, in 1996, from deferring and amortizing pre-opening costs of Medical
Specialty Units to recording them as expenses when incurred.
The consolidated financial statements of First American Health Care of
Georgia, Inc. as of December 31, 1994 and 1995 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference in
this Prospectus and in the Registration Statement from IHS' Current Report on
Form 8-K/A, as amended (dated October 17, 1996), in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP contains an explanatory
paragraph regarding the uncertainty with respect to certain contingent payments
which may be payable under a settlement agreement with the Health Care Financing
Administration.
The consolidated financial statements of Community Care of America, Inc. as
of December 31, 1995 and 1996 and for each of the years in the three-year period
ended December 31, 1996 have been incorporated by reference in this Prospectus
and in the Registration Statement from IHS' Current Report on Form 8-K (dated
September 25, 1997) in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to the change in accounting method in
1996 to adopt Statement of Financial Accounting Standards No. 121 relating to
the impairment of long-lived assets.
The financial statements of RoTech Medical Corporation as of July 31, 1996
and 1997 and for each of the years in the three year period ended July 31, 1997
incorporated in this Prospectus and in the Registration Statement by reference
from IHS' Current Report on Form 8-K (dated October 21, 1997) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of selected facilities operated by Horizon/CMS
Healthcare Corporation to be sold to Integrated Health Services, Inc. as of May
31, 1997 and 1996 and for each of the years in the two year period ended May 31,
1997 incorporated in this Prospectus and in the Registration Statement by
reference from IHS' Current Report on Form 8-K (dated December 31, 1997) have
been audited by Arthur Andersen LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
23
<PAGE>
<TABLE>
<CAPTION>
======================================================================== ===============================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY 1,396,691 Shares
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON IHS LOGO OMMITTED]
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR INTEGRATED HEALTH
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY SERVICES, INC.
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
-------------------------------
TABLE OF CONTENTS
PAGE COMMON STOCK
-----
<S> <C>
Available Information ............... 2
Incorporation of Certain Documents by
Reference ........................ 3
The Company ......................... 4 -----------------
Risk Factors ........................ 6 PROSPECTUS
Recent Developments ................. 15 -----------------
Use of Proceeds ..................... 18
Selling Stockholders ................ 18
Plan of Distribution ................ 22
Legal Matters ....................... 22
Experts ............................. 23 July , 1998
=================================================================== ===============================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Shares:
<TABLE>
<CAPTION>
ITEM AMOUNT
- --------------------------------------------------------------------- ---------------
<S> <C>
Registration Fee - Securities and Exchange Commission .......... $ 12,927.69
Legal, accounting and printing fees and expenses ............... 35,000.00*
Miscellaneous .................................................. 2,072.31*
-----------
Total ....................................................... $ 50,000.00*
============
</TABLE>
- ----------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the DGCL, a corporation may include provisions in its certificate of
incorporation that will relieve its directors of monetary liability for breaches
of their fiduciary duty to the corporation, except under certain circumstances,
including a breach of the director's duty of loyalty, acts or omissions of the
director not in good faith or which involve intentional misconduct or a knowing
violation of law, the approval of an improper payment of a dividend or an
improper purchase by the corporation of stock or any transaction from which the
director derived an improper personal benefit. The Company's Third Restated
Certificate of Incorporation, as amended, provides that the Company's directors
are not liable to the Company or its stockholders for monetary damages for
breach of their fiduciary duty, subject to the described exceptions specified by
the DGCL.
Section 145 of the DGCL grants to the Company the power to indemnify each
officer and director of the Company against liabilities and expenses incurred by
reason of the fact that he is or was an officer or director of the Company if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The Company's Third Restated Certificate of Incorporation, as amended,
and By-laws, as amended, provide for indemnification of each officer and
director of the Company to the fullest extent permitted by the DGCL. In
addition, IHS has entered into indemnity agreements with its directors and
executive officers, a form of which is included as Exhibit 10.72 to IHS's
Registration Statement on Form S-1, No. 33-39339, effective March 31, 1992.
Section 145 of the DGCL also empowers the Company to purchase and maintain
insurance on behalf of any person who is or was an officer or director of the
Company against liability asserted against or incurred by him in any such
capacity, whether or not the Company would have the power to indemnify such
officer or director against such liability under the provisions of Section 145.
The Company has purchased and maintains a directors' and officers' liability
policy for such purposes.
The agreements pursuant to which the AMHS Shares, the FCC Shares, the
Regional Medical Shares, the Medaids Shares, the Prime Medical Shares, the Litho
Shares, the Premiere Shares, the Hialeah Shares and the Coram Shares were issued
(Exhibits 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 2.10, respectively) provide
for indemnification by the sellers thereunder of the Company and its controlling
persons, directors and officers for certain liabilities, including liabilities
arising under the Securities Act.
ITEM 16. EXHIBITS.
2.1 -- Agreement and Plan of Reorganization dated as of May 7, 1998 among
Integrated Health Services, Inc., IHS Acquisition No. 37, Inc. and
American Mobile Health Systems, Inc. and Peter Hanson and Sol Lewin.
II-1
<PAGE>
2.2 -- Agreement for Sale and Purchase of Assets and Restrictive Covenants
made as of April 29, 1998 by and among First Community Care, Inc.
("Seller") each of the holders of capital stock of Seller, Northeast
Medical Equipment, Inc. and Integrated Health Services, Inc.
2.3 -- Agreement for Sale and Purchase of Assets and Restrictive Covenants
made as of March 20, 1998 by and among Regional Medical Supply, Inc.
("Seller"), Keith Thomas and Laurie Nuckols, the shareholders of
Seller, Integrated Health Services at Jefferson Hospital, Inc. and
Integrated Health Services, Inc.
2.4 -- Agreement and Plan of Merger dated as of February 10, 1998 among
Integrated Health Services, Inc. and RoTech Oxygen & Medical
Equipment, Inc. and Medicare Convalescent Aids of Pinellas, Inc.
d/b/a Medaids and the Shareholders of the Constituent Corporations.
2.5 -- Agreement and Plan of Merger dated as of February 10, 1998 among
Integrated Health Services, Inc. and RoTech Oxygen & Medical
Equipment, Inc. and Prime Medical Services, Inc. and the
Shareholders of the Constituent Corporations.
2.6 -- Membership Interest Purchase Agreement, dated as of April 7, 1998,
among Integrated Health Services, Inc., Downstate Lithotripter LLC,
Metro/Litho L.P., Long Island Lithotripter, LLC and Lithotripter
Corporation and Allied Urological Services, LLC, as amended as of
May 4, 1998.
2.7 -- Agreement and Plan of Merger dated as of February 27, 1998 among
Integrated Health Services, Inc., Integrated Health Services at
Hawthorne Nursing Center, Inc. Inc., and Pre- miere Associates, Inc.
and its shareholders.
2.8 -- Property Purchase Agreement dated as of June 30, 1998 among
Integrated Health Services, Inc., Integrated Health Services of
Florida at Hollywood Hills, Inc., Medical Associates IV Limited
Partnership, Hillco PCS (Hialeah) Limited Partnership, Medical Asset
Fund, LLC, Todd P. Robinson, Dr. John J. Sheehan, Sr. and Hialeah
Acquisition Fund, L.P.
2.9 -- Settlement Agreement, dated as of July 8, 1998, between Incon
Development, Inc. and Inte- grated Health Services, Inc.
2.10 -- Partnership Interest Purchase Agreement, dated as of June 1, 1998,
among West Coast Cam- bridge, Inc., Integrated Health Services,
Inc., T2 Medical, Inc. and Coram Healthcare Corporation.
4.1 -- Third Restated Certificate of Incorporation, as amended. (2)
4.2 -- Amendment to the Third Restated Certificate of Incorporation, dated
May 26, 1995. (3)
4.3 -- Certificate of Designation of Series A Junior Participating
Cumulative Preferred Stock (4)
4.4 -- By-laws, as amended. (5)
5 -- Opinion of Marshall A. Elkins, Esq.
23.1 -- Consents of KPMG Peat Marwick LLP.
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Arthur Andersen LLP
23.4 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5).
24 -- Power of Attorney (included on signature page).
99 -- Certified Resolution.
- ----------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-3 (No. 333-41973).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-3, No. 33-77754, effective June 29, 1994.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-4, No. 33-94130, effective September 15, 1995.
(4) Incorporated by reference to the Company's Current Report on Form 8-K dated
September 27, 1995.
(5) Incorporated by reference the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Owings Mills, State of Maryland on July 23, 1998.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ ROBERT N. ELKINS
------------------------------------
Robert N. Elkins, Chairman of the
Board, President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert N. Elkins and C. Taylor Pickett, jointly
and severally, his true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------------- --------------
<S> <C> <C>
/s/ ROBERT N. ELKINS Chairman of the Board, President July 23, 1998
- ----------------------------- and Chief Executive Officer
(Robert N. Elkins) (Principal Executive Officer)
/s/ EDWIN M. CRAWFORD Director July 23, 1998
- -----------------------------
(Edwin M. Crawford)
/s/ KENNETH M. MAZIK Director July 23, 1998
- -----------------------------
(Kenneth M. Mazik)
/s/ ROBERT A. MITCHELL Director July 23, 1998
- -----------------------------
(Robert A. Mitchell)
/s/ CHARLES W. NEWHALL, III Director July 23, 1998
- -----------------------------
(Charles W. Newhall, III)
/s/ TIMOTHY F. NICHOLSON Director July 23, 1998
- -----------------------------
(Timothy F. Nicholson)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ----------------------------------- --------------
<S> <C> <C>
/s/ JOHN L. SILVERMAN Director July 23, 1998
- -----------------------------
(John L. Silverman)
/s/ GEORGE H. STRONG Director July 23, 1998
- -----------------------------
(George H. Strong)
/s/ C. TAYLOR PICKETT Executive Vice President- July 23, 1998
- ----------------------------- Chief Financial Officer (Principal
(C. Taylor Pickett) Financial Officer)
/s/ W. BRADLEY BENNETT Executive Vice President- July 23, 1998
- ----------------------------- Chief Accounting Officer
(W. Bradley Bennett) (Principal Accounting Officer)
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
2.1 -- Agreement and Plan of Reorganization dated as of May 7, 1998 among
Integrated Health Services, Inc., IHS Acquisition No. 37, Inc. and
American Mobile Health Systems, Inc. and Peter Hanson and Sol Lewin.
2.2 -- Agreement for Sale and Purchase of Assets and Restrictive Covenants
made as of April 29, 1998 by and among First Community Care, Inc.
("Seller") each of the holders of capital stock of Seller, Northeast
Medical Equipment, Inc. and Integrated Health Services, Inc.
2.3 -- Agreement for Sale and Purchase of Assets and Restrictive Covenants
made as of March 20, 1998 by and among Regional Medical Supply, Inc.
("Seller"), Keith Thomas and Laurie Nuckols, the shareholders of
Seller, Integrated Health Services at Jefferson Hospital, Inc. and
Integrated Health Services, Inc.
2.4 -- Agreement and Plan of Merger dated as of February 10, 1998 among
Integrated Health Services, Inc. and RoTech Oxygen & Medical
Equipment, Inc. and Medicare Convalescent Aids of Pinellas, Inc.
d/b/a Medaids and the Shareholders of the Constituent Corporations.
2.5 -- Agreement and Plan of Merger dated as of February 10, 1998 among
Integrated Health Services, Inc. and RoTech Oxygen & Medical
Equipment, Inc. and Prime Medical Services, Inc. and the
Shareholders of the Constituent Corporations.
2.6 -- Membership Interest Purchase Agreement, dated as of April 7, 1998,
among Integrated Health Services, Inc., Downstate Lithotripter LLC,
Metro/Litho L.P., Long Island Lithotripter, LLC and Lithotripter
Corporation and Allied Urological Services, LLC, as amended as of
May 4, 1998.
2.7 -- Agreement and Plan of Merger dated as of February 27, 1998 among
Integrated Health Services, Inc., Integrated Health Services at
Hawthorne Nursing Center, Inc. Inc., and Pre- miere Associates, Inc.
and its shareholders.
2.8 -- Property Purchase Agreement dated as of June 30, 1998 among
Integrated Health Services, Inc., Integrated Health Services of
Florida at Hollywood Hills, Inc., Medical Associates IV Limited
Partnership, Hillco PCS (Hialeah) Limited Partnership, Medical Asset
Fund, LLC, Todd P. Robinson, Dr. John J. Sheehan, Sr. and Hialeah
Acquisition Fund, L.P.
2.9 -- Settlement Agreement, dated as of July 8, 1998, between Incon
Development, Inc. and Inte- grated Health Services, Inc.
2.10 -- Partnership Interest Purchase Agreement, dated as of June 1, 1998,
among West Coast Cam- bridge, Inc., Integrated Health Services,
Inc., T2 Medical, Inc. and Coram Healthcare Corporation.
4.1 -- Third Restated Certificate of Incorporation, as amended. (2)
4.2 -- Amendment to the Third Restated Certificate of Incorporation, dated
May 26, 1995. (3)
4.3 -- Certificate of Designation of Series A Junior Participating
Cumulative Preferred Stock (4)
4.4 -- By-laws, as amended. (5)
5 -- Opinion of Marshall A. Elkins, Esq.
23.1 -- Consents of KPMG Peat Marwick LLP.
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Arthur Andersen LLP
23.4 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5).
24 -- Power of Attorney (included on signature page).
99 -- Certified Resolution.
- ----------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-3 (No. 333-41973).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-3, No. 33-77754, effective June 29, 1994.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-4, No. 33-94130, effective September 15, 1995.
(4) Incorporated by reference to the Company's Current Report on Form 8-K dated
September 27, 1995.
<PAGE>
(5) Incorporated by reference the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 7, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
IHS ACQUISITION NO. 37, INC.
AND
AMERICAN MOBILE HEALTH SYSTEMS, INC.
AND
PETER HANSON
AND
SOL LEWIN
-----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: MERGER................................................................1
1.1 Merger................................................................1
1.2 Taking of Necessary Action............................................1
ARTICLE II: CONVERSION...........................................................2
2.1 Conversion of Stock...................................................2
2.2 Adjustments to the Merger Consideration...............................2
2.3 Escrow................................................................4
2.4 Assets................................................................5
2.5 Liabilities...........................................................5
2.6 Employees.............................................................7
ARTICLE III: IHS STOCK...........................................................7
3.1 IHS Stock.............................................................7
ARTICLE IV: THE CLOSING.........................................................12
4.1 Time and Place of Closing............................................12
4.2 Filings at Closing...................................................12
4.3 Effective Time.......................................................12
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
COMPANY.....................................................................12
5.1 Organization and Standing of the Company.............................12
5.2 Absence of Conflicting Agreements....................................13
5.3 Consents.............................................................13
5.4 Company Stock........................................................13
5.5 Assets...............................................................13
5.6 Trademarks...........................................................14
5.7 Contracts............................................................14
5.8 Financial Statements.................................................15
5.9 Material Changes.....................................................16
5.10 Licenses; Permits....................................................16
5.11 Title, Condition of Personal Property................................16
5.12 Legal Proceedings....................................................17
5.13 Employees............................................................18
5.14 Collective Bargaining, Labor Contracts, Employment Practices, Etc....18
5.15 ERISA................................................................19
5.16 Insurance and Surety Agreements......................................19
5.17 Relationships........................................................19
5.18 Absence of Certain Events............................................20
5.19 Compliance with Laws.................................................21
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
5.20 Finders..............................................................22
5.21 Tax Returns..........................................................22
5.22 Encumbrances Created by this Agreement...............................23
5.23 Subsidiaries and Joint Ventures......................................23
5.24 No Untrue Statement..................................................23
5.25 Reimbursement Matters................................................23
5.26 Medicare/Medicaid Participation......................................23
5.27 Leasehold Interests..................................................23
5.28 Power and Authority..................................................24
5.29 Binding Effect.......................................................24
5.30 Questionnaires.......................................................24
5.31 Questionable Payments................................................24
5.32 Customers............................................................24
5.33 Fee Schedules and Reimbursement......................................24
5.34 Complete Disclosure..................................................24
5.35 Books of Account; Records............................................25
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS ..........................25
6.1 Authority............................................................25
6.2 Binding Effect.......................................................25
6.3 Absence of Conflicting Agreements....................................25
6.4 Consents.............................................................25
6.5 Ownership of Company Stock...........................................26
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO .................26
7.1 Organization and Standing............................................26
7.2 Power and Authority..................................................26
7.3 Binding Agreement....................................................26
7.4 Absence of Conflicting Agreements....................................26
7.5 Consents.............................................................27
7.6 Securities and Exchange Commission Filings...........................27
7.7 Capital Stock........................................................27
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY AND
ITS SUBSIDIARIES............................................................27
8.1 Access to Information and Records before Closing.....................27
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING...........................28
9.1 Conduct of Business Pending Closing..................................28
9.2 Negative Covenants of the Company and its Subsidiaries...............28
9.3 Affirmative Covenants................................................28
9.4 Pursuit of Consents and Approvals....................................29
9.5 Exclusivity..........................................................30
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..........................30
10.1 Representations and Warranties.......................................30
10.2 Performance of Covenants.............................................30
10.3 Delivery of Closing Certificate......................................30
10.4 Opinion of Counsel...................................................30
10.5 Legal Matters........................................................30
10.6 Authorization Documents..............................................30
10.7 Material Change......................................................31
10.8 Approvals............................................................31
10.9 Consents.............................................................31
10.10 Undertaking..........................................................31
10.11 Real Property Consents...............................................31
10.12 Company's Subsidiaries and Options...................................31
10.13 Board and Lender Approvals...........................................31
10.14 Consulting Agreements................................................32
10.15 Employment Agreement.................................................32
10.16 Termination of Non-Retained Agreements...............................32
10.17 Escrow Agreement.....................................................32
10.18 Stock Certificates...................................................32
10.19 Dissenter's Rights...................................................32
10.20 Insurance............................................................32
10.21 Certificate of Status................................................32
10.22 Procedure and Customer Volume Summary................................32
10.23 Other Documents......................................................32
ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS........................33
11.1 Representations and Warranties.......................................33
11.2 Performance of Covenants.............................................33
11.3 Delivery of Closing Certificate......................................33
11.4 Opinion of Counsel...................................................33
11.5 Legal Matters........................................................33
11.6 Authorization Documents..............................................33
11.7 Consulting Agreements................................................33
11.8 Employment Agreement.................................................33
11.9 Escrow Agreement.....................................................33
11.10 Other Documents......................................................34
ARTICLE XII: SURVIVAL AND INDEMNIFICATION.......................................34
12.1 Survival of Representations and Warranties...........................34
12.2 Indemnification by Shareholders......................................34
12.3 Indemnification by Buyer.............................................35
12.4 Indemnity Cap........................................................35
12.5 Control of Defense of Indemnifiable Claims...........................35
12.6 Restrictions.........................................................36
12.7 Records..............................................................37
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
12.8 Dissenters' Rights...................................................37
12.9 Closing Date Balance Sheet...........................................37
ARTICLE XIII: TERMINATION.......................................................37
13.1 Termination..........................................................37
13.2 Effect of Termination................................................38
ARTICLE XIV: CASUALTY, RISK OF LOSS.............................................38
14.1 Casualty, Risk of Loss...............................................38
ARTICLE XV: MISCELLANEOUS.......................................................38
15.1 Costs and Expenses...................................................38
15.2 Performance..........................................................39
15.3 Benefit and Assignment...............................................39
15.4 Effect and Construction of this Agreement............................39
15.5 Cooperation - Further Assistance.....................................39
15.6 Notices..............................................................39
15.7 Waiver, Discharge, Etc...............................................40
15.8 Rights of Persons Not Parties........................................40
15.9 Governing Law........................................................41
15.10 Amendments, Supplements, Etc.........................................41
15.11 Severability.........................................................41
15.12 Counterparts.........................................................41
15.13 Arbitration..........................................................41
15.14 Public Announcements.................................................41
</TABLE>
(iv)
<PAGE>
SCHEDULES & EXHIBITS
--------------------
Schedule 2.1(b) - Allocation among Shareholders
Schedule 2.5 - Seller Liabilities
Schedule 5.3 - Consent List of Sellers
Schedule 5.4 - Company Stock
Schedule 5.5 - Liens on Assets
Schedule 5.6 - Trademarks
Schedule 5.7 - Contracts
Schedule 5.8(a) - Unaudited Financial Statements
Schedule 5.8(b) - Interim Financial Statements
Schedule 5.8(c) - Material Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits
Schedule 5.11(a) - Liens on Personal Property
Schedule 5.11(b) - Leases of Personal Property
Schedule 5.12 - Legal Proceedings
Schedule 5.13 - Employees
Schedule 5.14 - Collective Bargaining, etc.
Schedule 5.15(b) - Employee Benefit Plans
Schedule 5.15(c) - Employees on Leave of Absence
Schedule 5.16 - Insurance and Surety Agreements
Schedule 5.17 - Relationships
Schedule 5.18 - Absence of Certain Events
Schedule 5.19 - Compliance with Laws
Schedule 5.21 - Tax Returns
Schedule 5.23 - Subsidiaries, Joint Ventures, etc.
Schedule 5.25 - Reimbursement Matters
Schedule 5.27 - Leasehold Interests
Schedule 5.32 - Customers
Schedule 5.33 - Fee Schedules and Reimbursement
- Plan of Merger
Exhibit 2.3 - Escrow Agreement
Exhibit 5.30 - Questionnaire
Exhibit 10.4 - Opinion of Shareholders' Counsel
Exhibit 10.10 - Undertaking
Exhibit 10.14 - Consulting Agreements
Exhibit 10.15 - Employment Agreement
Exhibit 11.4 - Opinion of Buyer's Counsel
(v)
<PAGE>
--------------------------
AGREEMENT AND PLAN OF REORGANIZATION
--------------------------
This Agreement and Plan of Reorganization (the "Agreement") is
made as of the 7th day of May, 1998, among INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation ("Buyer"), IHS ACQUISITION NO. 37, INC., a Wisconsin
corporation ("Newco"), PETER HANSON and SOL LEWIN (collectively, the "Sellers"
or "Shareholders" and individually, a "Seller" or "Shareholder") and AMERICAN
MOBILE HEALTH SYSTEMS, INC. a Wisconsin corporation ("Company").
WHEREAS, Newco is a subsidiary of Buyer; and
WHEREAS, the Company is in the business of providing mobile
x-ray, EKG, ultrasound, holter monitor, vision and audiology services and other
fixed site examinations; and
WHEREAS, the Sellers are the owners or holders of all of the
issued and outstanding shares of the capital stock of the Company ("Company
Stock"); and
WHEREAS, the Shareholders and the Boards of Directors of Buyer,
Newco, and the Company deem it advisable to merge Newco with and into the
Company (the "Merger") pursuant to the Agreement and the Plan of Merger annexed
as Exhibit A hereto (the "Plan of Merger"); and
WHEREAS, pursuant to the Merger, all shares of Company Stock will
be converted into the right to receive the Merger Consideration (as defined in
Section 2.1(a) of this Agreement).
NOW, THEREFORE, Sellers, Buyer, Newco and the Company intending
to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time of Merger (as defined in Article IV, below),
Newco shall be merged with and into the Company and the separate existence of
Newco shall cease.
1.2 TAKING OF NECESSARY ACTION. Prior to and after the Effective
Time of Merger, subject to the provisions of this Agreement, each of the
Shareholders, Buyer, Newco, and the Company shall take all such action as may be
necessary or appropriate in order to effect the Merger as contemplated
hereunder. In case at any time after the Effective Time of Merger any further
action is necessary to carry out the purposes of this Agreement and to vest
Buyer with full title to Company Stock, the parties shall take all such
necessary action.
<PAGE>
ARTICLE II: CONVERSION
2.1 CONVERSION OF STOCK. At the Effective Time of Merger:
(A) The shares of Company Stock which are issued and
outstanding immediately prior to the Effective Time of Merger shall, without any
action by the holder thereof, be converted into the right to receive that number
of shares of the common stock, par value $.001, of Buyer ("IHS Stock")
determined as of the Closing Date in accordance with Section 3.1(a) as shall
have an aggregate value, subject to adjustment pursuant to Section 2.2 hereof,
of TWO MILLION EIGHT HUNDRED THOUSAND AND 00/100 ($2,800,000.00) DOLLARS (the
"Merger Consideration"). Each of the Shareholders whose shares are converted
into the Merger Consideration shall receive a portion of the Merger
Consideration as shall be equal to the aggregate Merger Consideration multiplied
by a fraction, the numerator of which is the number of shares of Company Stock
owned by such Shareholder immediately prior to the Effective Time of Merger, and
the denominator of which is the total number of shares of Company Stock that are
issued and outstanding immediately prior to the Effective Time of Merger.
(B) Each share of Newco common stock outstanding immediately
prior to the Effective Time of Merger, shall be converted into one share of
common stock of the Company.
(C) At the Effective Time of Merger, each holder of a
certificate theretofore evidencing outstanding shares of Company Stock, upon
surrender of such certificate, shall be entitled to receive in exchange therefor
his proportionate share of the Merger Consideration, calculated pursuant to
Section 2.1(a) above, represented by the certificate or certificates so
surrendered. Until so surrendered, each such outstanding certificate which,
prior to the Effective Time of Merger, represented shares of Company Stock, will
be deemed to evidence the right to receive the proportionate share of Merger
Consideration represented by such certificate or certificates. Upon the
surrender of such certificates, they shall be duly canceled.
(D) Immediately after the Effective Time of Merger, Buyer, as
the sole shareholder of Newco, upon surrender of stock certificate(s) evidencing
outstanding shares of Newco, shall be entitled to receive in exchange therefor a
certificate representing the shares of Company Stock, calculated on a one-to-one
basis. Until so surrendered, each such certificate which, prior to the Effective
Time of Merger, represented the outstanding shares of Newco stock will be deemed
to evidence such shares of Company Stock. Upon the surrender of such
certificate(s), they shall be duly canceled.
2.2 ADJUSTMENTS TO THE MERGER CONSIDERATION.
(A) (I) For purposes of this Section 2.2, the "Threshold
Amount" shall mean the amount of the Advanced Tech Liability (as defined in
Section 2.5, below) plus the amount of the Vehicle Lease Liability (as defined
in Section 2.5, below) plus $975,000, and the "Closing Date Receivables" shall
mean the amount of the Company's outstanding accounts receivable on the Closing
Date.
2
<PAGE>
(II) If the amount of the Closing Date Receivables that
is actually collected on or prior to the first anniversary of the Closing Date
shall be less than the Threshold Amount, then the amount of the Merger
Consideration shall be reduced by such deficiency and the Escrowee shall deliver
over to Buyer in cash or shares of IHS Stock valued in accordance with Section
3.1(a), below, or in any combination thereof, an amount equal to such
deficiency, subject to the dispute resolution mechanism set forth in Section
2.2(c), below. In the event the deficiency exceeds the Escrow Deposit held by
Escrowee, the Shareholders shall refund to Buyer the amount of such deficiency,
in the discretion of Shareholders, in cash or shares of IHS Stock valued in
accordance with Section 3.1(a), below, or in any combination thereof.
(B) RELEASE OF ESCROW. For purposes hereof, "Excess
Receivables Amount" shall mean the amount by which the amount of Closing Date
Receivables exceeds the amount of the Advanced Tech Liability plus the amount of
the Vehicle Lease Liability. During the twelve (12) month period following the
Closing Date, the Escrow Deposit shall be reduced according to the following
schedule:
(I) After the collection of twenty (20%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments (as
defined in Section 2.3, below), or in any combination thereof, in the discretion
of Shareholders) in an amount equal to $100,000 shall be released to the
Shareholders;
(II) After the collection of forty (40%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders;
(III) After the collection of sixty (60%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders; and
(IV) After the collection of eighty (80%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders.
(C) DISPUTE RESOLUTION. If there shall be any dispute
regarding the calculation of the adjustments to the Merger Consideration, then
such dispute shall be submitted to an independent "big six" public accounting
firm mutually agreeable to Buyer and Sellers, which public accounting firm shall
resolve any and all disputes with respect to the adjustments to the Merger
Consideration or prepaid expense calculation set forth in Schedule 2.4. If Buyer
and Sellers are unable to agree upon an independent "big six" public accounting
firm to be selected to resolve the dispute, each party shall name one firm and
the two firms so named shall choose a third
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independent "big six" public accounting firm which shall resolve the dispute.
Such determination shall be made within sixty (60) days after the dispute is
submitted to the independent "big six" public accounting firm in accordance with
the terms of this section and shall be final and binding upon Buyer and Sellers
in the absence of manifest error. The party against whom the independent "big
six" public accounting firm shall rule shall pay the costs and expenses of the
independent "big six" public accounting firm in connection therewith.
2.3 ESCROW.
(A) At the Closing, pursuant to an Escrow Agreement to be
entered into by the parties substantially in the form and substance of Exhibit
2.3, a portion of the IHS Stock included in the Merger Consideration as shall be
equal in value to FIVE HUNDRED THOUSAND ($500,000.00) DOLLARS (the "Escrow
Deposit") based upon the valuation described in Section 3.1(a), below, shall be
delivered by Buyer, on behalf of the Shareholders, to CoreStates Bank, N.A. as
escrow agent (the "Escrowee"). The Escrow Deposit shall be held and disbursed by
the Escrowee in accordance with the following:
(I) In the event that the Shareholders become obligated
to remit IHS Stock back to Buyer pursuant to the post-Closing adjustments set
forth in Section 2.2, the Escrowee shall release to Buyer that portion of the
Escrow Deposit as shall have a value equal to the amount by which the Merger
Consideration is so reduced.
(II) In the event that the Buyer becomes entitled to
indemnification pursuant to Section 12.2, the Escrowee shall release to Buyer
that portion of the Escrow Deposit as shall be equal in value to such
indemnification.
(III) If no claim for indemnification on the part of
Buyer remains outstanding upon the expiration of one (1) year following the
Closing Date, any remaining Escrow Deposit (less any amounts offset for claims
pursuant to Section 2.3(a)(i) and (ii) or any amounts previously released
pursuant to Section 2.3(c)) shall be released to the Shareholders.
(IV) If any claim for indemnification on the part of
Buyer does remain outstanding upon the expiration of one (1) year following the
Closing Date, then any Escrow Deposit (less any amounts offset for claims
pursuant to Section 2.3(a)(i) and (ii) or any amounts previously released
pursuant to Section 2.3(c)) (including all accrued interest thereon) remaining
(after resolution of the outstanding claim and payment in respect thereof, if
any is owing, shall be made), shall be released to the Shareholders no later
than thirty (30) business days after resolution of such claim.
(V) The value of any IHS Stock to be distributed to Buyer
from the Escrow Deposit shall be calculated based upon the average closing NYSE
price of such stock for its thirty (30) business day period immediately
preceding the date of such distribution.
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(B) The terms of the Escrow Agreement shall permit the
escrowed IHS Stock comprising the Escrow Deposit to be sold (subject to
applicable securities laws and Section 3.1(e), below) and reinvested in
investments to be approved by Buyer and Shareholders from Buyer's pre-approved
list of investments (the "Permitted Investments") as specified in the Escrow
Agreement. The Shareholders shall be entitled to receive, if and when paid, any
cash dividends paid in respect of IHS Stock included in the Escrow Deposit.
(C) The costs, fees and expenses of the Escrowee shall be
borne equally by Buyer, on the one hand, and the Shareholders, on the other
hand.
2.4 ASSETS. As of the Closing Date, the consolidated assets of
the Company (the "Assets") will include its ownership interests in all of its
current operating subsidiaries, as well as all of the tangible and intangible
assets necessary to operate the business of the Company and its subsidiaries as
presently constituted, including, without limitation, all contract rights,
leasehold interests, fixed and moveable equipment, vehicles, furnishings,
tangible personal property, inventory and supplies (other than inventory,
supplies, and other assets disposed of in the ordinary course of business,
consistent with prior practice), goodwill, trade names, trademarks, all patient
records, books and files, Medicare and Medicaid provider agreements and numbers,
IPL or IDTF provider numbers, provider agreements with third party payors,
telephone numbers, and to the extent permitted by law, all permits, licenses and
other governmental approvals. The Assets of the Company as of the Closing Date
shall also include accounts receivable, and prepaid expenses. Prepaid expenses
shall include, but are not limited to, office rent and insurance premiums will
be prorated and credited to the Sellers within ninety (90) days after Closing.
Notwithstanding the foregoing, except as provided in Section 2.5(b), below, the
Assets shall not include, and the Shareholders shall be entitled to retain and
distribute from the Company, the Company's cash on or prior to Closing, whether
on hand or in marketable securities, the two personal computers currently
located at the homes of the Shareholders, the two cellular telephones currently
used by the Shareholders, and the Canon video camera.
2.5 LIABILITIES.
(A) As of the Closing Date, the Company will not have any
liabilities (including the Marshall & Ilsley Bank note payable which shall be
paid off prior to or at Closing), other than the Advanced Tech long-term
liability (the "Advanced Tech Liability"), the unpaid portion attributable to
post-Closing matters of items to be prorated as of the Closing Date, post-
Closing liabilities arising under vehicle lease (the "Vehicle Lease Liability"),
and the post-Closing liabilities which arise under those certain contracts (the
"Retained Contracts"), specifically retained by Buyer, with respect to, and only
with respect to, services to be rendered or goods to be supplied to or benefits
to be conferred upon Buyer solely after the Closing Date (collectively, the
"Retained Liabilities"). Liabilities and obligations under such Retained
Contracts that have accrued, or the performance of which is due, on or prior to
the Closing, all liabilities and obligations under all other Contracts (as
defined below) with respect to any period on or prior to the Closing Date or
which are in payment or consideration for any excluded assets, and any other
claim, lawsuit, liability, obligation or debt of any kind or nature whatsoever,
whether absolute, accrued, due, direct or indirect, contingent or liquidated,
matured or unmatured, joint or several, whether or not for a sum
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certain, whether for the payment of money or for the performance or observance
of any obligation or condition, and whether or not of a type which would be
reflected as a liability on a balance sheet in accordance with GAAP, in each
case, arising out of any acts, omissions, facts, circumstances or matters that
occur on or prior to the Closing Date ("Seller Liabilities"), including, without
limitation, (i) any state or federal income tax on income earned with respect to
any matters that occur on or prior to the Closing; (ii) malpractice claims
asserted by patients or any other tort claims asserted, claims for breach of
contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions occurring on or
before the Closing Date to the extent not covered by insurance; (iii) amounts
due or that may become due to Medicare or Medicaid or any other health care
reimbursement or payment intermediary or any carrier, nursing home or other
facility, or other third party payor on account of Medicare cost report
adjustments or other payment adjustments attributable to any period on or prior
to the Closing Date, or any other form of Medicare or other health care
reimbursement recapture, adjustment or overpayment whatsoever, including fines
and penalties, with respect to any period on or prior to the Closing Date
("Excess Reimbursement Liabilities"); (iv) any accounts payable or employment or
other taxes, with respect to any period on or prior to the Closing Date; (v)
accrued but unpaid compensation or other benefits to any of the Company's or its
subsidiaries' employees, agents, consultants or advisers with respect to any
period on or prior to the Closing Date, including accrued vacation; and (vi) and
any undisclosed liability of the Company, shall, in each case, remain the sole
responsibility of the Sellers and shall be paid or performed on or prior to the
Closing Date. To the best of Sellers' knowledge, after diligent inquiry the
Seller Liabilities are as set forth on Schedule 2.5.
(B) At the Closing, any cash then held by the Company and not
distributed to Sellers shall be used by the Company to pay liabilities of the
Company that otherwise would constitute Seller Liabilities (the "Retained
Sellers' Liabilities"). The Company shall retain a minimum amount of $220,000 in
cash at Closing. Any of such cash retained at the Closing that is not so applied
to satisfy the Retained Sellers' Liabilities shall be paid to the Sellers on the
date that is one hundred eighty (180) days following the date hereof.
(C) Buyer shall be responsible for any and all liabilities of
the Company, including liabilities, obligations or debts of any kind or nature
whatsoever, whether absolute, accrued, direct or indirect, contingent or
liquidated, matured or unmatured, joint or several, whether or not for sum
certain, whether for the payment of money or the performance or observation of
any obligation or condition, in each case, arising out of acts, omissions, facts
or circumstances attributable to services provided after the Closing ,
including, without limitation, (i) any state or federal income taxes on income
earned with respect to services provided after the Closing Date or by reason of
the change of accounting method of the Company or any other tax or accounting
election, strategy or actions of the Buyer after the Closing; (ii) malpractice
claims asserted by patients or any other tort claims asserted, claims for breach
of contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions attributable to
services provided after the Closing Date to the extent not covered by insurance;
(iii) amounts due or that may become due to Medicare or Medicaid or any other
health care reimbursement or payment intermediary or any carrier, nursing home
or other facility, or other third party payor on account of Medicare cost report
adjustments or other payment adjustments attributable to services provided after
the Closing Date, or any other form of Medicare or other
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health care reimbursement recapture, adjustment or overpayment whatsoever,
including fines and penalties, attributable to services provided after the
Closing Date; and (iv) any accounts payable or employment or other taxes
attributable to any period after the Closing Date.
2.6 EMPLOYEES. Except as set forth below, it is expressly
understood and agreed that Newco's merger with and into the Company does not
involve any undertaking on the part of Buyer or Newco to retain any of the
employees of the Company, including the Shareholders, although Buyer shall have
the right to offer employment to any such employees, including the Shareholders.
Prior to the Closing Date, the Company shall be obligated to pay any severance,
benefits, costs or liabilities arising out of the termination by the Company of
any of its employees, including the Shareholders. Prior to the Closing Date, the
Company shall be obligated to pay any benefits, costs, or liabilities incurred
or accrued prior to the Closing Date with respect to each employee, including
the Shareholders hired as consultants by IHS.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. The entire Merger Consideration equal to TWO MILLION
EIGHT HUNDRED THOUSAND ($2,800,000.00) DOLLARS shall be payable by means of the
delivery to the Shareholders of newly issued shares of the Common Stock, par
value $.001, of Buyer in accordance with the following:
(A) SHARE VALUE. The number of shares of IHS Stock issuable at
Closing (the "Closing Date Share Count") pursuant to Section 2.1(b) shall be
calculated based upon a price per share of such stock equal to the average
closing NYSE price of such stock for the thirty (30) trading day period
immediately preceding the date which is two (2) trading days before the Closing
Date.
(B) REGISTRATION RIGHTS. Buyer will use its best efforts to
cause to be prepared, filed and declared effective by the Securities and
Exchange Commission (the "Commission") within one hundred twenty (120) days
following the Closing Date (the "REQUIRED EFFECTIVE DATE"), a registration
statement for the registration under the Securities Act of 1933 (the "Securities
Act") of the IHS Stock issued to Shareholders pursuant to this Agreement,
including the shares issuable under Section 3.1(c) in respect of any
re-calculation of the Closing Date Share Count (the "MERGER SHARES"), and Buyer
shall maintain the effectiveness of such registration statement for a period of
one (1) year following the date on which it becomes effective (the "Registration
Date"), or until no Shareholder shall own any of the IHS Stock issued pursuant
to this Agreement, whichever shall occur first, in each case except to the
extent that an exemption from registration is available and counsel to Buyer
provides a legal opinion to the Shareholders indicating the specific exemption
available (the "REGISTRATION PERIOD").
(C) SHARE ADJUSTMENT. Upon registration of the IHS Stock as
provided above, the number of shares deliverable as part of the Merger
Consideration under Section 2.1(a) hereof shall be re-calculated based upon the
average closing NYSE price of IHS Stock for the 30- trading day period
immediately preceding the Registration Date. If the number of shares as
recalculated under this subsection (the "Adjusted Share Count") exceeds the
Closing Date Share
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Count, the Buyer promptly shall deliver over to the Shareholders an additional
number of shares of IHS Stock as shall be equal to the amount of such excess,
and such additional shares shall be included in the aforementioned registration
statement by means of a post-effective amendment thereto. If the Closing Date
Share Count exceeds the Adjusted Share Count, the Shareholders promptly will
return to the Buyer that number of shares of IHS Stock as shall be equal to such
excess.
(D) REGISTRATION EXPENSES. Shareholders shall not be
responsible for, and Buyer shall bear, all of the reasonable expenses related to
such registration including, without limitation, the fees and expenses of
Buyer's counsel and accountants, all of its other costs, fees and expenses
incident to the preparation, printing, registration and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto, the cost of furnishing copies of each preliminary prospectus, each
final prospectus and each amendment or supplement thereto to underwriters,
dealers and other purchasers of IHS Stock and the costs and expenses (including
fees and disbursements of its counsel) incurred in connection with the
qualification of IHS Stock under the Blue Sky laws of various jurisdictions.
Buyer, however, shall not be required to pay underwriter's or brokerage
discounts, commissions or expenses, or to pay any costs and expenses in excess
in the aggregate of $20,000 for Blue Sky qualifications of such Shareholder's
(and any transfee's) IHS Stock, or to pay any costs or expenses arising out of
Shareholder's or any transferee's failure to comply with its obligations under
this Article III.
(E) RESALE LIMITATIONS. All resales of IHS Stock issued
pursuant to this Agreement shall be effected solely through Salomon Smith Barney
Inc., as broker, and sales by the Shareholders and, if any, their transferees of
such shares, shall not at any time, in the aggregate, exceed Fifty Thousand
(50,000) shares during any thirty (30) trading day period.
(F) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholders with respect to the IHS Stock as
provided in this Section 3.1, Buyer covenants and agrees as follows:
(I) At Buyer's expense, Buyer will keep the registration
and qualification under this Section 3.1 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate for the entire
Registration Period. Buyer will immediately notify the Shareholders, at any time
when a prospectus relating to a registration statement under this Section 3.1 is
required to be delivered under the Securities Act, of the happening of any event
known to Buyer as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
(II) Buyer shall furnish the Shareholders with such
number of prospectuses as shall reasonably be requested.
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(III) Buyer shall take all necessary action which may be
required in qualifying or registering IHS Stock included in a registration
statement for offering and sale under the securities or Blue Sky laws of such
states as reasonably are requested by the Shareholders, provided that Buyer
shall not be obligated to qualify as a foreign corporation or dealer to do
business under the laws of any such jurisdiction.
(IV) The information included or incorporated by
reference in the registration statement filed pursuant to this Section 3.1 will
not, at the time any such registration statement becomes effective, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein as necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing of such registration
statement or any amendments thereto. The registration statement will comply in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder. Buyer shall prepare and file with the Commission
such amendments (including post-effective amendments) and supplements to the
registration statement and the prospectus used in connection with the
registration statement as may be necessary to keep the registration statement
effective at all times during the Registration Period and, during such period,
shall comply with the provisions of the Securities Act applicable to Buyer with
respect to the disposition of all IHS Stock covered by the registration
statement until such time as all of such stock has been disposed of in
accordance with the intended methods of disposition by the Sellers thereof as
set forth in the registration statement. Buyer shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
the registration statement and, if such an order is issued, shall use its best
efforts to obtain the withdrawal of such order at the earliest possible time and
to notify each Shareholder of the issuance of such order and the resolution
thereof. Buyer shall indemnify the Shareholders of IHS Stock to be sold pursuant
to the registration statement, their successors and assigns, and each person, if
any, who controls such Shareholders within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities Exchange Act of 1934 ("Exchange
Act"), against all loss, claim, damage expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or otherwise,
or actions or proceedings whether commenced or threatened arising out of or
based upon: (a) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement or amendments thereto executed by
Buyer or based upon written information furnished by Buyer filed in any
jurisdiction in order to qualify IHS Stock under the securities laws thereof or
filed with the Commission, any state securities commission or agency, NYSE or
any securities exchange; (b) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading; or (c) any violation or alleged violation by
Buyer of the Securities Act, Exchange Act or any state securities law or any
rule or regulation; unless and only to the extent such statement or omission was
made in reliance upon and in conformity with written information furnished to
Buyer by any of the Shareholders expressly for use in such registration
statement, any amendment or supplement thereto or any application, as the case
may be. If any action is brought against the Shareholders or any controlling
person of the Shareholders in respect of which indemnity may be sought against
Buyer pursuant to this subsection 3.1(f)(iv), the Shareholders or such
controlling person shall within thirty (30) days after the receipt thereby of a
summons or complaint, notify Buyer in writing of the institution of such
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action and Buyer shall assume the defense of such actions, including the
employment and payment of fees and expenses of counsel (reasonably satisfactory
to the Shareholders or such controlling person). The Shareholders or such
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the Shareholders or such controlling person unless (A) the employment of such
counsel shall have been authorized in writing by Buyer in connection with the
defense of such action, or (B) Buyer shall not have employed counsel to have
charge of the defense of such action, or (C) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it or
them which are different from or additional to those available to Buyer (in
which case, Buyer shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys for the
Shareholders and/or such controlling person shall be borne by Buyer. Buyer
agrees promptly to notify the Shareholders of the commencement of any litigation
or proceedings against Buyer or any of its officers, directors or controlling
persons in connection with the resale of IHS Stock or in connection with such
registration statement.
(V) The Shareholders of IHS Stock to be sold pursuant to
a registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify Buyer, its officers and directors and each person, if
any, who controls Buyer within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Exchange Act against all loss, claim, damage, or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising solely from information furnished by or on behalf of
such Shareholders, or their successors or assigns in writing for specific
inclusion in such registration statement.
(G) NOTICE OF SALE. If the Shareholders desire to transfer all
or any portion of IHS Stock, the Shareholders will deliver written notice to
Buyer, describing in reasonable detail their intention to effect the transfer
and the manner of the proposed transfer. If the transfer is to be pursuant to an
effective registration statement as provided herein, the Shareholders will sell
the IHS Stock in compliance with the method of distribution disclosed therein
and discontinue any offers and sales thereunder upon notice from Buyer that the
registration statement relating to the IHS Stock being transferred is not
"current" until Buyer gives further notice that offers and sales may be
recommenced. In the event of any such notice from Buyer, Buyer agrees to file
expeditiously such amendments to the registration statement as may be necessary
to bring it current during the period specified in Section 3.1(b) and to give
prompt notice to the Shareholders when the registration statement has again
become current. If the Shareholders deliver to Buyer an opinion of counsel
reasonably acceptable to Buyer and its counsel and to the effect that the
proposed transfer of IHS Stock may be made without registration under the
Securities Act, the Shareholders will be entitled to transfer IHS Stock in
accordance with the terms of the notice and opinion of their counsel.
(H) FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Buyer to take any action pursuant to this Article III
that the Shareholders shall furnish to the Buyer such information regarding
themselves, the IHS Stock held by them, and the intended method of disposition
of such securities as shall be reasonably required to effect the
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registration of their IHS Stock. In that connection, each transferee of any
Shareholder shall be required to represent to the Buyer that all such
information which is given is both complete and accurate in all material
respects. Such Shareholders shall deliver to the Buyer a statement in writing
from the beneficial owners of such securities that they bona fide intend to
sell, transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify Buyer at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Section 3.1
is required to be delivered under the Securities Act, of the happening of any
event known to such transferee as a result of which information regarding the
transferee in the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the statements as then existing.
(I) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of Buyer. The Shareholders
represent and warrant to Buyer that the IHS Stock being issued hereunder is
being acquired, and will be acquired, by the Shareholders for investment for
their own accounts and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act or the applicable
state securities law except in compliance with the provisions of this Article
III; the Shareholders acknowledge that the IHS Stock constitutes restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and accordingly the resale of the IHS Stock will be restricted,
and the Shareholders agree that no shares of IHS Stock may be sold, transferred,
assigned, pledged or otherwise disposed of except pursuant to an effective
registration statement or an exemption from registration under the Securities
Act, the rules and regulations thereunder, and under all applicable state
securities laws. The Shareholders have the knowledge and experience in financial
and business matters, are capable of evaluating the merits and risks of the
investment, and are able to bear the economic risk of such investment. The
Shareholders have had the opportunity to make inquiries of and obtain from
representatives and employees of Buyer such other information about Buyer as it
deems necessary in connection with such investment.
(J) LEGEND. It is understood that, prior to sale of any shares
of IHS Stock pursuant to an effective registration pursuant to subsection (b)
above, the certificates evidencing such shares of IHS Stock shall bear the
following (or a similar) legend (in addition to any legends which may be
required in the reasonable opinion of Buyer's counsel by the applicable
securities laws of any state), and upon sale of such shares pursuant to such an
effective registration, new certificates shall be issued for the shares sold
without such legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
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(K) CERTAIN TRANSFEREES. Prior to the effective date of
registration of the IHS Stock, no transferee shall transfer any shares of IHS
Stock to any person or entity unless such transferee shall have agreed in
writing to be bound by the provisions applicable to the Shareholders under this
Article III.
ARTICLE IV: THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The Closing under this Agreement
(the "Closing") shall be held as promptly as practicable, but not more than
seven (7) business days following the satisfaction of all conditions precedent
specified in this Agreement, including receipt of all necessary regulatory
approvals, unless duly waived by the party entitled to satisfaction thereof. The
Closing shall take place by facsimile, or at such other time and place upon
which the parties may agree. The date on which the Closing is held is
hereinafter called the "Closing Date." Subject to the conditions set forth
herein, at the Closing (a) the Shareholders shall deliver for cancellation one
or more stock certificates representing the shares of Company Stock duly
endorsed, or accompanied by one or more stock powers duly endorsed, and (b)
Buyer, as agent for the Company, shall, subject to Sections 2.2 and 2.3, deliver
to the Shareholders the Merger Consideration pursuant to Section 2.1(a) hereof.
4.2 FILINGS AT CLOSING. At the Closing Date, Buyer and the Company
shall cause the Plan of Merger or such other certificate as required to be filed
in accordance with the Wisconsin Business Corporation Law, and each of the
Shareholders, Buyer and Company shall take any and all lawful actions to cause
the Merger to become effective.
4.3 EFFECTIVE TIME. Subject to the terms and conditions set forth
herein, including receipt of all required regulatory approvals, the Merger shall
become effective at the time the Plan of Merger or such other certificate as
required by the Wisconsin Secretary of State is made effective (the "Effective
Time of Merger").
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
THE COMPANY
The Company and the Sellers hereby jointly and severally represent
and warrant to Buyer and Newco as follows (it being understood that, for the
purposes of this Article V, "Company" shall be deemed to refer collectively to
the Company and any subsidiaries listed on Schedule 5.23):
5.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Wisconsin. Copies of the Company's Articles of Incorporation and
By-Laws, and all amendments thereof to date, have been delivered to Buyer and
are complete and correct. The Company has the power and authority to own the
properties and assets now owned by it and to conduct the business presently
being conducted by it. The Company is qualified to do business as a foreign
corporation in each state where the ownership of its assets or the conduct of
its business makes such qualification necessary.
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5.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement including all Schedules and Exhibits hereto, or any
of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by Sellers and the Company, nor the
performance by Sellers and the Company of the transactions contemplated hereby
and thereby, conflicts with, or constitutes a breach of or a default under (i)
the Articles of Incorporation or By-Laws of the Company; or (ii) any applicable
law, rule, judgment, order, writ, injunction, or decree of any court, currently
in effect, provided that the consents set forth in Schedule 5.3 are obtained
prior to the Closing; or (iii) to the Shareholders' knowledge, any applicable
rule or regulation of any administrative agency or other governmental authority
currently in effect; or (iv) any agreement, indenture, contract or instrument to
which the Company is now a party or by which any of the assets of the Company is
bound.
5.3 CONSENTS. Except as set forth in Schedule 5.3, no
authorization, consent, approval, license, exemption by, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by any of the Sellers or the Company.
5.4 COMPANY STOCK. Schedule 5.4 sets forth a complete list and
description of the authorized capital stock of the Company, the number of shares
issued and outstanding of each class or series of such capital stock, and the
identity of each shareholder of the Company, in each case indicating the class
and number of shares held. No shares of Company Stock are held in the treasury
of the Company. The Shareholders are the record owners of all of Company Stock
and all of such stock is duly authorized, validly issued, and, except as
provided in Chapter 180.0622(2)(b) of the Wisconsin Statutes fully paid and
non-assessable. On the Closing Date, there will be no preemptive or first
refusal rights to purchase or otherwise acquire shares of capital stock of the
Company pursuant to any provision of law or the Articles of Incorporation or
By-Laws of the Company or by agreement or otherwise. On the Closing Date, there
shall not be outstanding any warrants, options, or other rights to subscribe for
or purchase from the Company any shares of capital stock of the Company, nor
shall there be outstanding any securities convertible into or exchangeable for
such shares.
5.5 ASSETS. As of the Closing, the consolidated Assets of the
Company will include all of the tangible and intangible assets necessary to
operate the business of the Company as presently constituted, including, without
limitation, accounts receivable; provided, however, that Assets shall not
include cash, and inventory, supplies and other assets disposed of in the
ordinary course of business, consistent with the prior practice of the Company's
business. The quantities of inventory items included in the Assets are
reasonable in light of the present and anticipated volume of the Company's
business and the inventory is good, usable, merchantable, and salable in the
ordinary course of the Company's business, in each case, as determined by the
Company in good faith and consistent with past practice. The accounts receivable
of the Company have been billed or invoiced in the ordinary course of business
consistent with past practice. The Assets are not subject to any Liens (as
defined in Section 5.11) except for Permitted Liens (as defined in Section
5.11).
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5.6 TRADEMARKS. Schedule 5.6 sets forth a complete and accurate
list of all trademarks, service marks, or applications for any of the same,
copyrights, and other items of intellectual property that are owned, possessed
or used by the Company. There are no claims or proceedings pending or, to the
knowledge of the Company, overtly threatened against the Company asserting that
the use of any of the aforementioned properties or rights infringes the rights
of any other person, and, to the knowledge of any of the Sellers and the
Company, the Company is not infringing on the intellectual property rights of
any other person.
5.7 CONTRACTS. Schedule 5.7 sets forth a complete and correct list
of all agreements, contracts and commitments of the following type to which the
Company is a party or by which the Company or any of the Company's assets is
bound and as to which the Company has any outstanding material obligations as of
the date hereof (the "Contracts"):
(A) each contract or agreement for the employment or retention
of, or collective bargaining, severance or termination agreement with, any
director, officer, employee, consultant, agent or group of employees of the
Company;
(B) each profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement;
(C) each agreement or arrangement for the purchase or sale of
any of the Company's assets, properties or rights outside the ordinary course of
business (by purchase or sale of assets, purchase or sale of stock, merger or
otherwise) which is currently in effect;
(D) each contract currently in effect which contains any
provisions requiring the Company to indemnify or act for, or guarantee the
obligation of, any other person or entity;
(E) each agreement restricting the Company from conducting
business anywhere in the world;
(F) each partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing of profits or
future payments with respect to the Company's business or any portion thereof;
(G) each licensing, distributor, dealer, affiliate, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(H) each contract under which the Company performs mobile
x-ray, EKG, ultrasound, holter monitor, vision and audiology services and other
fixed site examinations;
(I) each lease of real property;
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(J) each agreement with a nursing home, health care facility
or any other customer with special pricing arrangements;
(K) any radiologist, cardiologist, optometrist, audiologist or
other physician's agreements;
(L) each agreement, consent order, settlement or similar
arrangement with any party, including any Governmental Authority (as defined in
Section 5.21);
(M) each agreement with a PPO; or
(N) any other agreement not made in the ordinary and normal
course of business which involves consideration of more than $10,000.
Except as indicated on Schedule 5.7, each of the Contracts was
entered into and requires performance in the ordinary course of business and is
in full force and effect. The Company is not in material default under any
Contract and there has not been asserted, either by or against the Company under
any Contract, any written notice of default, set-off or claim of default. To the
knowledge of the Company, the parties to the Contracts other than the Company
are not in material default of any of their respective obligations under the
Contracts, and there has not occurred any event which with the passage of time
or the giving of notice (or both) would constitute a material default or
material breach under any Contract. All amounts payable under the Contracts are,
or will at the Closing Date, be on a current basis. Except as set forth on
Schedule 5.7, the change of control in the Company to Buyer will not be deemed
an assignment of, or require consent under, any Contract.
5.8 FINANCIAL STATEMENTS.
(A) The unaudited balance sheet of the Company, on a
consolidated basis and by location, for the fiscal years ended March 31, 1995,
March 31, 1996 and March 31, 1997, and the related statements of operations for
the years then ended, annexed hereto as Schedule 5.8(a) (the "Unaudited
Financial Statements"), present fairly in all material respects the financial
condition and results of operations of the Company at and for the periods
therein specified.
(B) The unaudited balance sheets of the Company, on a
consolidated basis and by location, for the interim period ended January 31,
1998, and the related statements of operations for the period then ended,
annexed hereto as Schedule 5.8(b) ("Interim Financial Statements"), present
fairly in all material respects the financial condition and results of
operations of the Company at and for the period therein specified.
(C) Except as set forth on Schedule 5.8(c) or as expressly
set forth on the Interim Financial Statements, the Company has no material
non-recurring or extraordinary income or expense reduction not identified
therein or material liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any guarantees of any obligations of any other person or entity) of
any kind or nature whether or not required by GAAP to be reflected in a
corporate balance sheet and/or the notes thereto.
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5.9 MATERIAL CHANGES. Except as noted on Schedule 5.9, between the
ending date of the Interim Financial Statements and the date of this Agreement,
there has not been any material adverse change in the condition (financial or
otherwise) of the assets, properties, operations, operating results, Medicare
and Medicaid reimbursement, third party billing and/or direct billing, customer
and employee relations or business prospects of the Company or any damage or
destruction of any of the Company's Assets or its place of business by fire or
other casualty, whether or not covered by insurance, and during such period of
time the Company has conducted its business only in the ordinary and normal
course except with respect to this transaction. Sellers have identified and
communicated to Buyer all material information with respect to any fact or
condition that is reasonably likely to adversely affect the future prospects
(financial or otherwise) of the Company.
5.10 LICENSES; PERMITS. Schedule 5.10 sets forth (a) all licenses
and other governmental or other regulatory permits, authorizations or approvals
required for the operation of the Company's business that are now in effect,
including all certificates of occupancy issued with respect to the Company's
business and; (b) each other license, permit, or other authorization that is
necessary for the operation of the Company's business (a "License" and
collectively, the "Licenses"). The Licenses constitute all of the governmental,
quasi-governmental and regulatory licenses, permits and authorizations necessary
to the operation of the businesses of the Company and its subsidiaries as they
are operated on the date hereof. The Company has delivered to Buyer copies of
all of the Licenses. The Company and its subsidiaries own, possess or otherwise
have the exclusive legal right to use the Licenses, free and clear of all liens,
pledges, claims or other encumbrances of any nature whatsoever. The Company is
not in material default under any such License, and the Company and its
subsidiaries have not received any notice of any material default or any other
material claim or proceeding relating to any such License. Each License is in
full force and effect, and neither the Company nor any of its subsidiaries has
received written notice of any proceeding to terminate or suspend any License or
of any condition or event which, if uncured, would result in the termination or
suspension of any License. None of the Licenses are: (a) provisional,
probationary, or restricted in any way except to the extent qualified by any
outstanding deficiencies or citations, particulars of which have been set forth
on Schedule 5.10; or (b) subject to any investigation, cancellation, impairment,
limitation, order, complaint, proceeding, or suspension nor is such threatened
or pending. No Seller, director or officer, employee or former employee of the
Company, or any person, firm or corporation other than the Company owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part in any of the Licenses.
5.11 TITLE, CONDITION OF PERSONAL PROPERTY.
(A) Except for the security interests listed and described on
Schedule 5.11(a), the Company has good and marketable title to, or valid and
subsisting leasehold interests in, all of the personal property located at its
places of business owned by the Company or used in connection with the operation
of its business, subject to no mortgage, security interest, pledge, lien, claim,
encumbrance or charge, or restraint on transfer whatsoever (the "Liens") other
than Permitted Liens (as defined below). Except as set forth on Schedule
5.11(a), no other person has any right to the use or possession of any of such
property which is owned and, except as set forth on Schedule 5.11(a), no
currently effective financing statement with respect to such personal property
has been
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filed under the Uniform Commercial Code in any jurisdiction, and the Company has
not signed any such financing statement or any security agreement authorizing
any secured party thereunder to file any such financing statement. All of such
personal property comprising equipment, improvements, furniture and other
tangible personal property in use by the Company, whether owned or leased, is in
good operating condition and repair, subject to normal wear and tear, and is
sufficient to enable the Company to operate its business in a manner consistent
with its operation during the immediately preceding twelve (12) months.
(B) Except as set forth on Schedule 5.11(b), no tangible
personal property used by the Company in connection with the operation of its
business is subject to a lease, conditional sale, security interest or similar
arrangement. The Company has delivered to Buyer a complete and correct copy of
each of the leases and other agreements listed on Schedule 5.11(b). All of said
personal property leases are valid, binding and enforceable in accordance with
their respective terms and are in full force and effect. The Company is not in
material default under such leases and there has not been asserted, either by or
against the Company under any of such leases, any written notice of default,
set-off, or claim of default. To the best knowledge of Sellers and Company, the
parties to such leases other than the Company are not in default of their
respective obligations under any of such leases, and there has not occurred any
event which with the passage of time or giving of notice (or both) would
constitute such a default or breach under any of such leases.
(C) "Permitted Liens" shall mean:
(I) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are (i) not overdue for a period of more than 30 days or (ii) which are being
contested in good faith and by appropriate proceedings, provided that if such
contest shall continue for more than 30 days, the amount thereof shall be bonded
or properly reserved against at the end of such 30-day period;
(II) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business;
(III) rights of lessors under leases set forth on
Schedule 5.11(b);
(IV) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation.
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12,
there are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending, or, to the knowledge of the Company,
overtly threatened against or affecting the Company, or the Company's ability to
consummate the transactions contemplated herein, at law or in equity or
otherwise, before or by any court or governmental agency or body, domestic or
foreign, or before an arbitrator of any kind.
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5.13 EMPLOYEES. Attached hereto as Schedule 5.13 is the payroll
register of the Company dated March 31, 1998 indicating the names, positions,
current rates of compensation and any other compensation arrangements or fringe
benefits, and Federal W-2 Forms for the 1997 calendar year, of (i) each employee
of the Company, and (ii) any consultant or agent of the Company that is not
reflected in any agreement or document referred to in Schedule 5.7. Except as
set forth on Schedule 5.13, all of such information is materially correct as of
such date and there has been no material change since then. To the knowledge of
Sellers and Company, none of the employees, while in the employ of the Company,
has ever had his or her professional license or certification denied, suspended,
revoked, terminated, or voluntarily relinquished under threat of disciplinary
action, or has ever been restricted in any way from performing the duties he or
she is to provide for the Company, and there is no proceeding pending, or
threatened, pursuant to which any of the foregoing may occur. No such employee,
consultant or agent has any vested or unvested retirement benefits or other
termination benefits, except as described on Schedule 5.13.
5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC. During the two years prior to the Closing Date, there has been no material
adverse change in the relationship between the Company and its employees or
affiliates nor any strike or material labor disturbance by such employees
affecting the Company's business and, to the knowledge of the Company, there is
no indication that such a change, strike or labor disturbance is likely.
Company's employees or affiliates are not represented by any labor union or
similar organization and the Company has no reason to believe that there are
pending or threatened any activities, the purpose of which is to achieve such
representation, of all or some of the Company's employees or affiliates. Except
as set forth on Schedule 5.7 or Schedule 5.15(b), the Company has no collective
bargaining or other labor contracts, employment contracts, pension,
profit-sharing, retirement, insurance, bonus, deferred compensation or other
employee benefit plans, agreements or arrangements with respect to its
employees. Except as set forth on Schedule 5.14, the Company is in material
compliance with the requirements prescribed by all Federal, state and local
statutes, orders and governmental rules and regulations ("Government
Requirements") applicable to any of the employee benefit plans, agreements and
arrangements identified on Schedule 5.7 and Schedule 5.15(b), including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act of 1988, any such Government Requirements respecting
employment determination, equal opportunity, affirmative action, employee
privacy, wrongful or unlawful termination, workers' compensation, occupational
safety and health requirements, labor management relations and unemployment
insurance, or related matters and to the knowledge of the Company and
Shareholders, there are no threatened claims related thereto, and there are no
pending claims relating thereto, in each case. Except as set forth on Schedule
5.7(a), in the event of termination of employment of an employee of the Company,
the Company will not, after the Closing, pursuant to any agreement with any
Shareholder or the Company or by reason of any representation made or plan
adopted by any Shareholder or the Company prior to the Closing, be liable to any
employee of the Company for so-called "severance pay", parachute payments or any
other similar payments or benefits (excluding liabilities with respect to
post-Closing terminations under federal and state discrimination laws),
including, without limitation, post-employment healthcare (other than pursuant
to the continuation health care provisions of Section 4980B of the Internal
Revenue Code of 1986, as amended or Section 601 through 608 of ERISA ("COBRA"))
or insurance benefits, and accrued vacation and sick days or properly accrued
for on the Estimated Closing Date Balance Sheet in accordance with GAAP.
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5.15 ERISA.
(A) The Company does not maintain or make contributions to and
have not at any time in the past maintained or made contributions to, any
employee benefit plan which is subject to the minimum funding standards of
ERISA. The Company does not now maintain or make contributions to, and has not
at any time in the past maintained or made contributions to, any multi-employer
plan subject to the terms of the Multi-Employer Pension Plan Amendment Act of
1980 (the "Multi-Employer Act").
(B) Schedule 5.15(b) sets forth each severance agreement, and
each plan, agreement, arrangement or plan, bonus plan, deferred compensation
agreement, employee pension, profit sharing, savings or retirement plan, group
life, health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any commitment arising
under severance, holiday, vacation, Christmas or other bonus plans (including,
but not limited to, "employee benefit plans", as defined in Section 3(3) of
ERISA maintained by the Company for any employees of the Company, or with
respect to which the Company has liability with respect to any employees of the
Company, or make or have an obligation to make contributions on behalf of
employees of the Company ("Plans").
(C) Schedule 5.15(c) identifies all employees of the Company
on leave of absence eligible to receive health benefits, as required by COBRA.
Notice of the availability of COBRA coverage has been provided to all employees
of the Company on leave of absence entitled thereto, and all persons electing
such coverage are being (or have been, if applicable) provided such coverage.
5.16 INSURANCE AND SURETY AGREEMENTS. Schedule 5.16 contains a true
and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to medical
malpractice insurance, and any state sponsored plan or program for worker's
compensation); and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by the Company. Schedule 5.16 sets forth for each
such insurance policy the name of the insurer, the amount of coverage, the type
of insurance, the policy number, the annual premium and a brief description of
any claims made thereunder during the past two years. Such policies are owned by
and payable solely to the Company, and said policies or renewals or replacements
thereof will be outstanding and duly in force at the Closing Date. All insurance
policies listed on Schedule 5.16 are in full force and effect, all premiums due
on or before the Closing Date have been or will be paid, financed or accrued on
or before the Closing Date, the Company has not been advised by any of their
insurance carriers of an intention to terminate or modify any such policies
other than under circumstances where the Company has received a commitment for a
replacement policy, nor has the Company failed to comply with any of the
material conditions contained in any such policies.
5.17 RELATIONSHIPS. Except as disclosed on Schedule 5.17 hereto, no
Shareholder and no partner or any affiliate of any Shareholder has, or at any
time within the last two (2) years has had, a material ownership interest in any
business, corporate or otherwise, that is a party to, or in any property that is
the subject of, business relationships or arrangements of any kind relating to
the operation of the Company or its business.
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5.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule
5.18, since the ending date of the Interim Financial Statements, the Company has
not, and from the date of this Agreement through the Closing Date the Company
will not have:
(A) sold, assigned, or transferred any of its assets or
properties, other than in the ordinary course of business;
(B) mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other encumbrance of
any nature whatsoever, other than a Permitted Lien, any of the Company's assets;
(C) made or suffered any termination of any mobile x-ray, EKG,
ultrasound, holter monitor, vision and audiology services, Social Security,
correctional institutions, psychiatric facilities or any other fixed site
contracts or customers;
(D) sold or assigned, or made or suffered any termination of
any Contract, or made or suffered any modification or amendment of any Contract
except for terminations, modifications and amendments of Contracts made in the
ordinary course of business consistent with past practice and which would not
affect earnings or otherwise be material, and the Sellers and Company have not
received notice (written or oral) and have no knowledge that any Contract has
been terminated or will be terminated or modified or amended (as aforesaid);
(E) except in the ordinary course of business consistent with
past practices, or otherwise as necessary to comply with any applicable minimum
wage law, increased the salaries or other compensation of any of its employees,
or made any increase in, or any additions to, other benefits to which any of
such employees may be entitled;
(F) failed to pay or discharge when due any liabilities, the
failure to pay or discharge which has caused or will cause any actual damage or
give rise to the risk of a loss to the Company;
(G) changed any of the accounting principles followed by the
Company or the methods of applying such principles;
(H) entered into any transaction other than in the ordinary
course of business;
(I) dissolved, merged or entered into a share exchange with or
into any other entity;
(J) entered into any contract or agreement with union or other
collective bargaining representative representing any employees or affiliates
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld;
(K) made any change to its by-laws or articles of
incorporation;
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(L) failed to maintain its business in substantially the same
state of repair, order and condition as on the date hereof, reasonable wear and
tear or loss by casualty excepted;
(M) failed to maintain in full force and effect all Licenses
currently in effect with respect to its business unless such License is no
longer necessary for the operation of the Company;
(N) failed to maintain in full force and effect the insurance
policies and binders currently in effect, or the replacements thereof, including
without limitation those listed on Schedule 5.16;
(O) failed to preserve intact the present business
organizations of the Company; failed to keep available the services of the
Company's present employees, affiliates and agents necessary to the proper
functioning of the business of the Company; and failed to maintain the Company's
relations and goodwill with suppliers, employees, affiliates, affiliated medical
personnel and any others having business relating to the Company and where such
relationships are necessary to the proper functioning of the business of the
Company;
(P) failed to maintain all of the books and records in
accordance with its past practices;
(Q) failed to comply in all material respects with all
provisions of the Contracts listed in Schedule 5.7 and with any other material
agreements that the Company has entered into in the ordinary course of business
since the Interim Financial Statements, and failed to comply in all respects
with the provisions of all material laws, rules and regulations applicable to
the Company's business;
(R) failed to pay when due, all taxes, assessments and charges
or levies imposed upon it or on any of its properties for which it has been
required to be withheld or paid over;
(S) failed to promptly advise Buyer in writing of any threat
known to the Shareholders, or the commencement against the Company of any claim,
action, suit or proceeding, arbitration or investigation or any other event that
would materially adversely affect the operations, properties, assets or
prospects of the Company; and
(T) failed to notify the Buyer in writing of any event
involving the Company which has had or may be reasonably expected to have a
material adverse effect on the business or financial condition of the Company or
may involve the loss of contracts with any of the Company's customers.
5.19 COMPLIANCE WITH LAWS.
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(A) The Company is in compliance with all Governmental
Requirements (as defined herein). Except for notices of non-compliance as to
which the Company has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 5.19, the Company has not,
within the period of twenty-four months preceding the date of this Agreement,
received any written notice that the Company or the Assets fail to comply in any
material respect with any applicable Federal, state, local, Medicare, Medicaid,
or other governmental laws or ordinances, or any applicable order, rule or
regulation of any Federal, state, local or other governmental agency having
jurisdiction over its business ("Governmental Requirements"). The Company shall
report to Buyer, within five (5) business days after receipt thereof, any
written notices that the Company is not in compliance in any material respect
with any of the foregoing.
(B) Without limiting the generality of subsection (a) above,
the Company has at all times complied, and is complying in all respects, with
all federal, state and local environmental laws, rules or regulations applicable
to it, its leased properties, and all other real properties used by it in the
operation of its business, including, but not limited to, the Resource
Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act, and
subsequent amendments, the Federal Toxic Substances Control Act, as amended,
with respect to the environmental or healthful state, condition or quality of
any property (collectively "Environmental Laws"). The foregoing representation
and warranty applies to all aspects of the Company's operations and the use and
ownership of the Assets including, but not limited to, the use, handling,
treatment, storage, transportation and disposal of any hazardous, toxic or
infectious waste, material or substance (including medical waste), and to
petroleum products, material or waste, at any other location. No notice from any
Governmental Authority has ever been served upon the Company claiming any
violation of, or addressing any possible non-compliance with respect to, any
Environmental Law.
5.20 FINDERS. Shareholders and Company have been represented solely
by Geneva Business Services, Inc. ("Broker"), and as a result a brokerage
commission payable to the Broker by the Company or Shareholders immediately
prior to the Closing in connection with the transactions contemplated by this
Agreement is due, and no other broker or finder is entitled to any additional
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, understandings or arrangements with the Shareholders or the
Company.
5.21 TAX RETURNS.
(A) Except as set forth in Schedule 5.21, (i) all Tax (as
defined below) returns, statements, reports and forms or extensions with respect
thereto required to be filed with any Federal, state, local or other
governmental department or court or other authority having jurisdiction over it
("Governmental Authority") on or before the Closing Date by or on behalf of the
Company (collectively, the "Tax Returns"), have been or will be timely filed on
or before the Closing Date in accordance in all materials respects with all
applicable Governmental Requirements; and (ii) the Company has timely paid all
Taxes payable by it.
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(B) For purposes of this Agreement, "Tax" means any net
income, gross income, sales, use, franchise, personal, employment, pension or
real property tax.
5.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and
delivery of this Agreement, or any of the Company's Transaction Documents, does
not, and the consummation of the transactions contemplated hereby or thereby
will not, create any liens or other encumbrances on any of the Company's assets
in favor of third parties.
5.23 SUBSIDIARIES AND JOINT VENTURES. Schedule 5.23 sets forth a
complete list of all subsidiaries, joint ventures and partnerships in which the
Company is a record or beneficial owner. All of the issued and outstanding
capital stock of the subsidiaries listed on Schedule 5.23 hereto is owned of
record or beneficially by the Company or by one of the listed subsidiaries on
Schedule 5.23.
5.24 NO UNTRUE STATEMENT. None of the representations and
warranties made pursuant to this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such representation
not misleading in any material respect.
5.25 REIMBURSEMENT MATTERS. Except as disclosed on Schedule 5.25,
(i) the Company and Sellers have not received any notice of recoupment from the
Medicare or Medicaid programs, or any other third party reimbursement source
(inclusive of facility billing to nursing homes or other health care facilities,
and managed care organizations), (ii) the Shareholders and the Company are not
aware of any basis for the assertion after the Closing Date of any such
recoupment claim against the Company, and (iii) the Sellers have not received
notice from any Medicare or Medicaid program or any other third party
reimbursement source (inclusive of facility billing to nursing homes or other
health care facilities, and managed care organizations) of any pending or
threatened investigations or surveys, and neither the Sellers, nor the Company
have any reason to believe that any such investigation or survey is pending,
threatened or imminent.
5.26 MEDICARE/MEDICAID PARTICIPATION. All services provided by the
Company are certified for participation or enrollment in all Medicare and
Medicaid programs, have a current and valid provider contract with the Medicare
and Medicaid programs or other third party reimbursement source (inclusive of
managed care organizations), are in compliance with the conditions of
participation of such programs, and have received all approvals or
qualifications necessary for capital reimbursement.
5.27 LEASEHOLD INTERESTS. Schedule 5.27 hereto sets forth a
complete and correct list of all leases pursuant to which the Company or any of
its subsidiaries leases real property. Each of the Company and its subsidiaries
has valid leasehold interests in all such real property free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever, except for
Permitted Liens. The Company has provided access to the Buyer to complete and
correct copies of the leases identified in Schedule 5.27.
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5.28 POWER AND AUTHORITY. The Company and Sellers have all
requisite power and authority to execute, deliver and perform this Agreement,
and as of the Closing, the Company and Sellers will have all requisite power and
authority to execute and deliver the Transaction Documents required to be
delivered by each party to the Buyer at the Closing.
5.29 BINDING EFFECT. This Agreement and all Transaction Documents
executed by the Company and Sellers constitute the legal, valid and binding
obligations of such party, enforceable against such party in accordance with
their respective terms.
5.30 QUESTIONNAIRES. The health care law questionnaire heretofore
delivered to the Company by Buyer (the "Questionnaire") will be attached hereto
as Exhibit 5.30 and will as of the Closing Date have been fully and accurately
completed and will not contain any material misstatement of any fact and will
not omit any fact that would have to be stated in order not to render any
response to such questionnaire materially misleading.
5.31 QUESTIONABLE PAYMENTS. Neither the Company nor any
shareholder, director, officer, controlling person or employee of the Company,
and no affiliate of the Company, (a) has used any corporate funds of the Company
to make any illegal or unlawful payment to any officer, employee,
representative, agent of any government, or to any political party or official
thereof, including, without limitation, any of same that would violate the
Foreign Corrupt Practices Act of 1977, as amended; or (b) to the knowledge of
the Shareholders, has made or received any illegal payment, bribe, kickback,
political contribution or other similar questionable payment for any referrals
or recommendations or otherwise in connection with the operation of the
Company's business.
5.32 CUSTOMERS. Schedule 5.32 sets forth: (i) a complete and
correct list of the name and address of all current customers of the Company;
(ii) a complete and correct list of all contracts that the Company has with each
customer; and (iii) a summary of the x-ray, EKG, ultrasound, holter monitor,
vision and audiology patient volume and examinations for each patient of the
Company, on a consolidated basis and by location, for the calendar year ended
December 31, 1997 and the two (2) months ended February 28, 1998. As of the date
hereof, the Company and Shareholders have received no notice that any customer
or request a change of service.
5.33 FEE SCHEDULES AND REIMBURSEMENT. Schedule 5.33 sets forth (i)
a complete and correct list of the 1997 and 1998 fee schedules of the Company,
including the amounts charged and the Medicare and Medicaid allowable rates;
(ii) a complete and correct list of any and all Medicaid and Medicare refunds
paid by the Company or pending payment by the Company during the last three (3)
fiscal years; and (iii) a complete list of any customers having special rates or
fee arrangements with the Company, together with a list of such rates or
description of such arrangements.
5.34 COMPLETE DISCLOSURE. No representation or warranty by the
Company or the Shareholders in this Agreement or any Exhibit or Schedule
referred to herein and no written statement, certificate or other writing
furnished to the Buyer by or on behalf of the Company or the Shareholders
pursuant to this Agreement, when considered in conjunction with all other such
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representations, warranties, schedules, written statements, certificates or
other writings furnished to Buyer by or on behalf of the Company or the
Shareholders pursuant to this Agreement, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. To the best of the Company's and the
Shareholders' knowledge, there is no fact which materially and adversely affects
or may materially and adversely affect the business, operations, affairs,
condition, properties or assets of the Company which has not been set forth in
this Agreement or the Schedules or other documents delivered by the Company or
the Shareholders in connection with the transactions contemplated hereby.
5.35 BOOKS OF ACCOUNT; RECORDS. The Company's general ledgers,
stock record books, minute books and other material records relating to the
assets, properties, contracts and outstanding legal obligations of the Company
are, in all material respects, complete and correct, and have been maintained in
accordance with good business practices. All documents furnished to Buyer will
be correct and complete copies.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers, each as to himself, hereby severally
represents and warrants to Buyer and Newco as follows:
6.1 AUTHORITY. Such Seller has the full legal power and authority
to make, execute, deliver and perform this Agreement and the Transaction
Documents. Such execution, delivery, performance and consummation has been duly
authorized by all necessary action, corporate or otherwise, on the part of such
Seller, and any necessary consents of holders of indebtedness of such Seller
have been obtained.
6.2 BINDING EFFECT. This Agreement and all Transaction Documents
executed by such Seller constitute the legal, valid and binding obligations of
such party, enforceable against such Seller in accordance with their respective
terms.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by such Seller
nor the performance by such Seller of the transactions contemplated hereby and
thereby conflicts with, or constitutes a breach of or a default under (i) any
law, rule, judgment, order, writ, injunction, or decree of any court currently
in effect applicable to such Seller, or (ii) any rule or regulation of any
administrative agency or other governmental authority currently in effect
applicable to such Seller, or (iii) any agreement, indenture, contract or
instrument to which such party is now a party or by which any of the assets of
such Seller is bound.
6.4 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by such Seller.
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6.5 OWNERSHIP OF COMPANY STOCK. Shareholders are the lawful record
and beneficial owners of all of Company Stock shown as owned by Shareholders in
Schedule 5.4, with good and marketable title thereto, free and clear of all
liens and encumbrances, claims and other charges thereon of any kind. Such
Shareholders have the full legal power to transfer and deliver such Company
Stock in accordance with this Agreement, and delivery of such Company Stock to
Buyer pursuant hereto will convey good and marketable title thereto, free and
clear of all liens and encumbrances, claims and other charges thereon or any
kind. The shares of Company Stock indicated on Schedule 5.4 as being owned by
the Shareholders constitute all of the issued and outstanding shares of the
capital stock of the Company. On the Closing Date, there shall not be
outstanding any warrants, options, or other rights to subscribe for or purchase
from the Company any shares of capital stock of the Company, nor shall there be
outstanding any securities convertible into or exchangeable for such shares.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Buyer and Newco jointly and severally represent and warrant to the
Company and the Sellers as follows:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
7.2 POWER AND AUTHORITY. Buyer and Newco each have the corporate
power and authority to execute, deliver and perform this Agreement, and as of
the Closing, Buyer and Newco will have the corporate power and authority to
execute and deliver the Transaction Documents required to be delivered by them
to the Sellers at the Closing.
7.3 BINDING AGREEMENT. This Agreement has been duly executed and
delivered by Buyer and Newco. This Agreement is, and when executed and delivered
by Buyer and Newco at the Closing each of the Transaction Documents executed by
Buyer and Newco will be, the legal, valid and binding obligations of Buyer and
Newco, enforceable against Buyer and Newco in accordance with their respective
terms.
7.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by Buyer and
Newco nor the performance by the Buyer and Newco of the transactions
contemplated hereby and thereby conflicts with, or constitutes a breach of or a
default under (i) the formation documents of the Buyer and Newco, or (ii) any
law, rule, judgment, order, writ, injunction, or decree of any court currently
in effect applicable to Buyer and Newco, or (iii) any rule or regulation of any
administrative agency or other governmental authority currently in effect
applicable to Buyer and Newco, or (iv) any agreement, indenture, contract or
instrument to which the Buyer or Newco is now a party or by which any of the
assets of the Buyer or Newco is bound.
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7.5 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by Buyer and Newco.
7.6 SECURITIES AND EXCHANGE COMMISSION FILINGS. Buyer has made
available to the Sellers a correct and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by Buyer with the
Commission on or after January 1, 1997 (the "SEC Documents"), which are all the
documents (other than preliminary material) that Buyer was required to file with
the SEC on or after January 1, 1997. As of their respective dates, none of the
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statements or omissions
of a material fact necessary so as not to render the statements therein
misleading, in light of the circumstances under which they were made, and the
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the case
may be. The financial statements of the Buyer included in the SEC Documents
complied in all material respects with the then applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP during the periods
involved (except as may have been indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated by the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the Buyer
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. IHS has
been notified that the most recent registration statement on Form S-3 filed by
it with the Commission is under review.
7.7 CAPITAL STOCK. Buyer's Form 10-Q filed with the Commission with
respect to the fiscal quarter ended September 30, 1997 (the "Form 10-Q"), sets
forth a true and complete description of the authorized and outstanding shares
of capital stock of Buyer as of such date. All outstanding shares of IHS Stock
are validly issued, fully paid and non-assessable and not subject to preemptive
rights. Buyer has duly authorized and reserved for issuance the IHS Stock, and,
when issued in accordance with the terms of Article III, the IHS Stock will be
validly issued, fully paid and nonassessable and free and clear of preemptive
rights, liens, encumbrances, claims and other charges thereon.
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY
AND ITS SUBSIDIARIES
8.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to the
Closing Date, Buyer may make, or cause to be made, such investigation of the
Company's (it being understood that, for the purpose of this Article VIII,
"Company" shall be deemed to refer collectively to the Company and its
subsidiaries listed on Schedule 5.23) financial and legal condition as Buyer
deems necessary or advisable to familiarize itself with the Company and/or
matters relating to its history or operations. The Company shall permit Buyer
and its authorized representatives (including legal counsel and accountants), to
have full access to the Company's books and records upon
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reasonable notice and during normal business hours, and the Company will
furnish, or cause to be furnished, to Buyer such financial and operating data
and other information and copies of documents with respect to the Company's
products, services, operations and assets as Buyer shall from time to time
reasonably request. The documents to which Buyer shall have access shall
include, but not be limited to, the Company's tax returns and related work
papers since their inception; and the Company shall make, or cause to be made,
extracts thereof as Buyer or their representatives may request from time to time
to enable Buyer and their representatives to investigate the affairs of the
Company and the accuracy of the representations and warranties made in this
Agreement. The Company shall cause its accountants to cooperate with Buyer and
to disclose the results of audits relating to the Company and to produce the
working papers relating thereto. Without limiting any of the foregoing, it is
agreed that Buyer will have full access to any and all agreements between and
among the previous and current shareholders regarding their ownership of shares
or the management or operation of the Company.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Except with respect to
this transaction, between the date of this Agreement and the Closing, the
Company and its subsidiaries shall maintain their existence and shall conduct
their businesses in the customary and ordinary course of business consistent
with past practice.
9.2 NEGATIVE COVENANTS OF THE COMPANY AND ITS SUBSIDIARIES. Without
the prior written approval of Buyer, neither the Company nor any of its
subsidiaries shall, between the date hereof and the Closing:
(A) cause or permit to occur any of the events or occurrences
described in Section 5.18 (Absence of Certain Events) of this Agreement;
(B) dissolve, merge or enter into a share exchange with or
into any other entity;
(C) enter into any contract or agreement with any union or
other collective bargaining representative representing any employees or
affiliates without the prior written consent of Buyer, which consent shall not
be unreasonably withheld;
(D) sell off any Assets other than in the ordinary course of
business; or
(E) make any change to their by-laws or articles of
incorporation.
9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing,
the Company and each of its subsidiaries shall:
(A) maintain their businesses in substantially the same state
of repair, order and condition as on the date hereof, reasonable wear and tear
or loss by casualty excepted;
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(B) maintain in full force and effect all Licenses currently
in effect with respect to their businesses unless such License is no longer
necessary for the operation of the Company and its subsidiaries;
(C) maintain in full force and effect the insurance policies
and binders currently in effect, or the replacements thereof, including without
limitation those listed on Schedule 5.16;
(D) utilize their reasonable efforts to: (i) preserve intact
the present business organization of the Company and its subsidiaries; (ii) keep
available the services of the Company's and its subsidiaries' present employees,
affiliates and agents; and maintain the Company's and its subsidiaries'
relations and goodwill with suppliers, employees, affiliates, affiliated medical
personnel and any others having business relating to the Company and its
subsidiaries;
(E) maintain all of the books and records in accordance with
their past practices;
(F) comply in all material respects with all provisions of the
Contracts listed in Schedule 5.7 and with any other material agreements that the
Company and its subsidiaries have entered into in the ordinary course of
business since the date of this Agreement, and comply in all respects with the
provisions of all material laws, rules and regulations applicable to the
Company's and its subsidiaries' businesses;
(G) cause to be paid when due, all taxes, assessments and
charges or levies imposed upon them or on any of their properties for which they
are required to withhold and pay over;
(H) promptly advise Buyer in writing of any threat known to
the Sellers, or the commencement against the Company or its subsidiaries or
affiliates of any claim, action, suit or proceeding, arbitration or
investigation or any other event that would materially adversely affect the
operations, properties, assets or prospects of the Company or its subsidiaries
or affiliates; and
(I) notify the Buyer in writing of any event involving the
Company or its subsidiaries or affiliates which has had or may be reasonably
expected to have a material adverse effect on the business or financial
condition of the Company or its subsidiaries or affiliates or may involve the
loss of contracts with the Company's or its subsidiaries' customers.
9.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, Buyer
shall use its reasonable efforts to obtain all consents and approvals of
governmental agencies and all other parties necessary for the lawful
consummation of the transactions contemplated hereby and the lawful use,
occupancy and enjoyment of the Company's and its subsidiaries' businesses by
Buyer in accordance herewith ("Required Approvals"). The Company and its
subsidiaries shall cooperate with and use their reasonable efforts to assist
Buyer in obtaining all such approvals.
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9.5 EXCLUSIVITY. Until the earlier of Closing or the termination of
this Agreement pursuant to Section 13.1, neither the Company nor any
Shareholder, nor any of their respective affiliates, shall enter into any
agreement, commitment or understanding with respect to, or engage in any
discussions or negotiations directly or indirectly with, or encourage or respond
to any solicitations from, any other party with respect to the sale, lease or
management of any of the Assets, or in respect of the sale of any shares of
capital stock in the Company.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's and Newco's obligations to consummate the Merger are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Buyer or Newco in writing.
Upon failure of any of the following conditions, Buyer and Newco may terminate
this Agreement pursuant to and in accordance with Article XIII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and Sellers made pursuant to this Agreement shall be
true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) at and as of the Closing Date, as though such representations and
warranties were made at and as of such time.
10.2 PERFORMANCE OF COVENANTS. Each of the Sellers and the Company
shall have performed or complied in all material respects with their respective
agreements and covenants required by this Agreement to be performed or complied
with by it prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Sellers and the
Company shall have executed and delivered to Buyer a certificate of its
president, dated the Closing Date, upon which Buyer and Newco may rely,
certifying that the conditions contemplated by Sections 10.1 and 10.2 applicable
to it have been satisfied.
10.4 OPINION OF COUNSEL. Each Seller and the Company shall have
delivered to Buyer and Newco an opinion, dated the Closing Date, of their
counsel, in substantially the form attached hereto as Exhibit 10.4.
10.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a
certificate of the Secretary or other officer of the Company certifying as of
the Closing Date a copy of resolutions of the Shareholders and of the Company's
board of directors authorizing the Company's execution and full performance of
the Transaction Documents and the incumbency of the Company's respective
officers.
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10.7 MATERIAL CHANGE. Since the ending date of the Interim
Financial Statements, there shall not have been any material adverse change in
the condition (financial or otherwise) of the assets, properties or operations
of the Company and its subsidiaries.
10.8 APPROVALS.
(A) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby shall have been granted,
including without limitation, the Required Approvals;
(B) None of the foregoing consents or approvals (i) shall have
been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Company's and its subsidiaries'
businesses, other than as disclosed or approved hereunder, or (ii) shall impose
on the Buyer or Newco any material condition or provision or requirement with
respect to the Company's and its subsidiaries' businesses or their operation
that is more restrictive than or different from the conditions imposed upon such
operation prior to Closing.
10.9 CONSENTS. Buyer shall have received the written consent to
assignment for each of the Retained Contracts set forth on Schedule 2.5, where
such consent is required by reason of the change of control of the Company and
its subsidiaries contemplated under this Agreement.
10.10 UNDERTAKING. The Shareholders shall assume and undertake in a
writing in the form and substance of Exhibit 10.10 (the "Undertaking") to
perform all Liabilities when and as the same become due in accordance with their
terms and Shareholders shall have executed and delivered the Undertaking to
Buyer.
10.11 REAL PROPERTY CONSENTS. The Company and the Sellers shall
have used their best efforts to obtain the written consent to assignment of each
landlord with whom the Company or any of its subsidiaries has a lease of real
property which, by its terms, requires consent in the event of a change of
control of the Company, and the written consent of such landlords shall have
been received by the Buyer. Alternatively, the Company and Sellers shall have
delivered a waiver from each such landlord of any provision contained in any of
such leases which would require the landlord's consent upon any change of the
voting stock of the tenant. Buyer shall have received notice from the Sellers by
the Closing Date, identifying any landlord that has not given any necessary
consent as of such date.
10.12 COMPANY'S SUBSIDIARIES AND OPTIONS. Each of the subsidiaries
of the Company as of the Closing Date will be one hundred (100%) percent owned
by the Company and there shall not be outstanding as of the Closing Date any
options, warrants or rights for the purchase of any capital stock of the Company
or its subsidiaries or any obligations to grant or issue any options, warrants
or rights for the purchase of any capital stock of the Company or its
subsidiaries.
10.13 BOARD AND LENDER APPROVALS. The Buyer will have received
all necessary Board of Director approvals and all required lender approvals.
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10.14 CONSULTING AGREEMENTS. Each of the Shareholders shall have
executed and delivered his consulting agreement in the form of Exhibit 10.14
hereto (the "Consulting Agreements").
10.15 EMPLOYMENT AGREEMENT. Norman A. Jensen shall have executed
and delivered his employment agreement in the form of Exhibit 10.15 hereto (the
"Employment Agreement").
10.16 TERMINATION OF NON-RETAINED AGREEMENTS. All Contracts, other
than the Retained Contracts, shall have been terminated, as well as any ongoing
obligations thereunder.
10.17 ESCROW AGREEMENT. The Sellers shall have executed and
delivered the Escrow Agreements in the form of Exhibit 2.3.
10.18 STOCK CERTIFICATES. Shareholders shall have delivered to
Buyer all stock certificates representing the Company Stock duly endorsed in
blank.
10.19 DISSENTER'S RIGHTS. Any rights of any holder of equity in
the Company to seek appraisal or to dissent to the transactions contemplated
hereby shall have been irrevocably waived.
10.20 INSURANCE. If the Company's existing general and professional
liability coverage is on a claim made basis, then the Shareholders shall have
paid for and delivered to Buyer a tail policy with respect to liability
insurance coverage satisfactory to Buyer, which policy shall name Buyer as an
additional insured. Shareholders shall have also provided evidence of full
payment of such policy satisfactory to Buyer.
10.21 CERTIFICATE OF STATUS. The Company shall have delivered to
Buyer a certificate of status issued by the Wisconsin Department of Financial
Institutions with respect to the Company, dated not more than thirty (30) days
prior to the Closing Date.
10.22 PROCEDURE AND CUSTOMER VOLUME SUMMARY. Company has provided
Buyer with a true and correct summary of the x-ray, EKG, ultrasound, holter
monitor, vision and audiology procedures for each of its customers, including
Social Security, correctional institutions and psychiatric facilities, on a
consolidated basis and by location, for the calendar year ended December 31,
1997 and the two (2) months ended February 28, 1998.
10.23 OTHER DOCUMENTS. The Sellers and the Company shall have
furnished Buyer and Newco with all other documents, certificates and other
instruments required to be furnished to Buyer and Newco by the Sellers and the
Company pursuant to the terms hereof.
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ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to consummate the Merger is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any one or more of which may be waived by Sellers in writing. Upon failure of
any of the following conditions, Sellers may terminate this Agreement pursuant
to and in accordance with Article XIII herein:
11.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Newco in this Agreement shall be true and correct in all
material respects (except those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) at
and as of the Closing Date as though such representations and warranties were
made at and as of such time.
11.2 PERFORMANCE OF COVENANTS. Buyer and Newco shall have performed
or complied with each of its agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer and Newco shall have
delivered to Sellers a certificate of an executive or senior vice president of
Buyer and Newco dated the Closing Date upon which Sellers can rely, certifying
that the conditions contemplated by Sections 11.1 and 11.2 applicable to it have
been satisfied.
11.4 OPINION OF COUNSEL. Buyer and Newco shall have delivered to
Sellers an opinion, dated the Closing Date, of Blass & Driggs, Esqs., counsel
for Buyer and Newco, in the form attached as Exhibit 11.4.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. Sellers shall have received a
certificate of the Secretary or other officer of Buyer and Newco certifying as
of the Closing Date a copy of resolutions of their respective boards of
directors authorizing their execution and full performance of the Transaction
Documents and the incumbency of their officers.
11.7 CONSULTING AGREEMENTS. Symphony Diagnostic Services No. 1,
Inc. ("Symphony"), a wholly-owned subsidiary of Buyer, shall have entered into
the Consulting Agreements with each of the Shareholders.
11.8 EMPLOYMENT AGREEMENT. Symphony shall have entered into the
Employment Agreement.
11.9 ESCROW AGREEMENT. Buyer shall have executed and delivered the
Escrow Agreement in the form of Exhibit 2.3.
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11.10 OTHER DOCUMENTS. Buyer and Newco shall have furnished Sellers
with all documents, certificates and other instruments required to be furnished
to Sellers by Buyer and Newco pursuant to the terms hereof.
ARTICLE XII: SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in any
Schedule and Transaction Document delivered by any such party pursuant hereto
shall survive the Closing Date and for a period of one (1) year after the
Closing, notwithstanding any investigation at any time made by or on behalf of
the other party, provided that Excess Reimbursement Liabilities referred to in
Section 2.5 and the representations and warranties contained in Section 5.31
(Questionable Payments"), Section 5.25 (Reimbursement Matters), Section 5.26
(Medicare/Medicaid Participation), and Section 5.21 (Tax Returns), shall survive
until thirty (30) days after the applicable period of limitations for audits by
the applicable Governmental Authority shall have expired, including extensions
for any necessary appeals. All representations and warranties related to any
claim asserted in writing prior to the expiration of the applicable survival
period shall survive (but only with respect to such claim) until such claim
shall be resolved and payment in respect thereof, if any is owing, shall be
made. Notwithstanding any investigation conducted before or after the Closing or
the decision of any party to consummate the Closing, each party hereto shall be
entitled to rely and is hereby declared to have reasonably relied upon the
representations and warranties of the other party.
12.2 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders, severally,
shall indemnify and defend Buyer and hold it harmless against and with respect
to any and all damage, loss, liability, deficiency, cost and expense (including,
without limitation, reasonable attorney's fees and expenses) (all of the
foregoing hereinafter collectively referred to as "Loss") resulting from:
(A) any inaccuracy in any representation or certification, or
breach of any warranty, made by any of the Sellers or the Company pursuant to
this Agreement; or
(B) the breach of any covenant or undertaking by any of the
Sellers or the Company in this Agreement; or
(C) subject to any qualifications contained in the
representations and warranties in this Agreement, the ownership or operation of
the Company or its subsidiaries or their business or assets prior to the Closing
Date, including, without limitation, (i) any Seller Liabilities, including
without limitation, Excess Reimbursement Liabilities (as defined in Section
2.5); (ii) any Taxes resulting from the operation of the business of the Company
or ownership of any of the Assets for any period ending on or before the Closing
Date; (iii) any Loss arising out of the noncompliance of the Company with COBRA
or any like statute; (iv) any claim of the type that would be covered by a
standard liability insurance policy, including, without limitation, professional
liability, malpractice, general liability, automobile liability, worker's
compensation or employer's liability insurance, arising out of the operation of
the Company's business prior to the Closing Date, including payments of any
deductibles applicable to the aforesaid policies, to the extent not covered by
any existing insurance policy; (v) any Loss arising from the matter set forth on
Schedule 5.19;
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and (vi) any and all actions, suits, proceedings, demands, assessments,
judgments, settlements (to the extent approved by the Company, such approval not
to be unreasonably withheld, delayed or conditioned), costs and legal expenses
incident to any of the foregoing.
12.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend
Shareholders and hold them harmless against and with respect to any and all Loss
resulting from:
(A) any inaccuracy in any representation or certification, or
breach of any warranty, made by Buyer pursuant to this Agreement; or
(B) the breach of any covenant or undertaking by Buyer in this
Agreement; or
(C) the ownership or operation of the Company or its
subsidiaries or their business or assets on or after the Closing Date.
12.4 INDEMNITY CAP. The maximum aggregate liability (excluding any
Loss arising from fraud, Tax liability, and Excess Reimbursement Liabilities) of
the Sellers for indemnification hereunder shall not exceed an amount equal to
the Merger Consideration.
12.5 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS.
(A) Each indemnified party (each, an "Indemnitee") shall give
the indemnifying party (the "Indemnitor") prompt notice of each claim for which
it seeks indemnification. Failure to give such prompt notice shall not relieve
any Indemnitor of its indemnification obligation, provided that such
indemnification obligation shall be reduced by any damages the Indemnitor
demonstrates it has suffered resulting from a failure to give prompt notice
hereunder. The Indemnitor shall be entitled to participate in the defense of
such claim. If at any time the Indemnitor acknowledges in writing that the claim
is fully indemnifiable by it under this Agreement, and, if requested by the
Indemnitee, the Indemnitor shall have the right to assume control of the defense
(but not the settlement) of such claim at its own expense; unless (i) Indemnitee
shall have been authorized in writing by the Indemnitor to defend such action
with counsel of its own choice in connection with the defense of such action, or
(ii) the Indemnitor shall not have employed counsel to have charge of the
defense of such action within twenty (20) days after the date of notice of the
claim for which indemnification is sought is given to the Indemnitor or (iii)
the Indemnitor shall have failed to undertake and reasonably pursue the defense
of such action, or (iv) the Indemnitee shall have reasonably concluded that
there may be material defenses available to it or them which are different from
or additional to those available to the Indemnitor. If any event described in
clauses (i) through (iv) above shall occur, then the Indemnitor shall not have
the right to direct the defense of such action on behalf of the Indemnitee with
counsel of its own choice, and the reasonable fees and expenses of the
Indemnitee shall be borne by the Indemnitor, provided that such counsel shall be
reasonably acceptable to the Indemnitor. If the Indemnitor does assume control
of the defense of any such claim in accordance with the foregoing, then: (x) the
Indemnitor shall not defend the claim for which indemnification is being sought
in any manner that would likely have a material adverse effect on the Indemnitee
or on any relationship that the Indemnitee may have with
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any customers, vendors, suppliers or others, and (y) the Indemnitee shall not
settle such claim without the written consent of the Indemnitor, which consent
shall not be unreasonably withheld, delayed or conditioned. Nothing contained in
this Section 12.5 shall prevent either party from assuming control of the
defense and/or settling any claim against it for which indemnification is not
sought under this Agreement.
(B) Notwithstanding anything to the contrary contained in this
Agreement, if there shall be any claim for Excess Reimbursement Liabilities with
respect to which Buyer shall be seeking indemnification, Buyer will have the
sole right to contest or appeal such claim (using at least the same standard of
care as it would apply to contests or appeals with respect to reimbursement
liabilities in general). Buyer may, in its sole and absolute discretion, at any
time discontinue any such contest or appeal or enter into a settlement with
respect thereto prior to the final determination thereof.
(C) In case any event shall occur which would otherwise
entitle either party to assert a claim for indemnification hereunder, no Loss
shall be deemed to have been sustained by the Indemnitee to the extent of any
proceeds received by Indemnitee from any insurance policies with respect
thereof.
(D) Except for claims related to intentional or knowing
breaches of the representations and warranties in this Agreement or for claims
related to fraud, from and after the Closing, the remedies provided in this
Article XII shall be the sole and exclusive remedies of Article XII Indemnitees
with respect to Losses from which indemnification is provided in this Article
XII.
12.6 RESTRICTIONS.
(A) From and after the Closing Date, none of the Sellers shall
disclose, directly or indirectly, to any person outside of Buyer's employ
without the express authorization of the Buyer, any patient lists, customer
lists, pricing strategies, customer files, or patient files and records of the
Company and its subsidiaries, any proprietary data or trade secrets owned by the
Company and its subsidiaries or any financial or other information about the
Company and its subsidiaries not then in the public domain; provided, however,
that Sellers shall be permitted to make such disclosures as may be required by
law or by a court or governmental authority.
(B) After the Closing Date, none of the Sellers shall engage
or participate in any effort or act to induce any of the customers, physicians,
suppliers, associates, employees, affiliates, or independent contractors of the
Company and its subsidiaries to cease doing business, or their association or
employment, with the Company and its subsidiaries.
(C) No Seller shall, anywhere within the States of Wisconsin
and the twenty-five (25) mile radius of Zion, Illinois, for a period of three
(3) years following the termination or expiration of the initial term such
Seller's Consulting Agreement, directly, or indirectly, for or on behalf of
himself or herself or any other person, firm, entity or other enterprise, be
employed by, be a director or manager of, act as a consultant for, be a partner
in, have a proprietary interest in, give advice to, loan money to, any person,
enterprise, partnership, association, corporation, joint venture
36
<PAGE>
or other entity which is directly or indirectly in the business of owning,
operating or managing any entity of any type, licensed or unlicensed, which is
engaged in or provides: (i) mobile x-ray, (ii) EKG, (iii) ultrasound, (iv)
holter monitor, (v) vision and audiology services or (vi) any other services
which the Company or either Shareholder is currently engaged in or otherwise
provides during the period commencing on the Closing Date and ending on the date
that is three (3) years following the termination or expiration of the initial
term of such Shareholder's Consulting Agreement or in any way competes with the
Buyer or its subsidiaries.
(D) The Sellers acknowledge that the restrictions contained in
this Section 12.6 are reasonable and necessary to protect the legitimate
business interests of Buyer and that any violation thereof by any of them would
result in irreparable harm to Buyer. Accordingly, Sellers agree that upon the
violation by any of them of any of the restrictions contained in this Section
12.6, Buyer shall be entitled to obtain from any court of competent jurisdiction
a preliminary and permanent injunction as well as any other relief provided at
law or equity, under this Agreement or otherwise. In the event any of the
foregoing restrictions are adjudged unreasonable in any proceeding, then the
parties agree that the period of time or the scope of such restrictions (or
both) shall be adjusted in such a manner or for such a time (or both) as is
adjudged to be reasonable.
12.7 RECORDS. On the Closing Date, Sellers and the Company shall
deliver, or cause to be delivered, to Buyer all records and files not then in
Buyer's possession relating to the operations of the Company and its
subsidiaries.
12.8 DISSENTERS' RIGHTS. In the event that any holder of Company
Stock asserts dissenter's rights with respect to the Merger under the Wisconsin
Business Corporation Law, the Shareholders, severally, shall indemnify and hold
harmless Buyer from and against (i) any amount which becomes payable to such
holder by the Company in satisfaction of such dissenter rights, to the extent
that such amount exceeds the Merger Consideration that would have been payable
to such holder had such holder not exercised his or her dissenter's rights, and
(ii) any costs or expenses, including reasonable attorneys fees, incurred by the
Company in investigating or litigating such dissenters' rights; provided,
however, that as a condition to the recovery of attorneys fees and expenses,
Buyer shall provide prompt notice to the Sellers of any exercise of dissenters'
rights and will permit Shareholders a reasonable opportunity to select and
direct counsel for the Company in respect of the investigation and litigation of
such rights.
12.9 CLOSING DATE BALANCE SHEET. Sellers and the Company shall
deliver to Buyer the balance sheet of the Company on a consolidated basis dated
as of the Closing Date, certified by the Company's Chief Financial Officer to be
his or her best good faith estimate thereof within thirty (30) days following
the Closing Date.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at
or prior to the Closing by:
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(A) Buyer or Newco, if any condition precedent to Buyer's or
Newco's obligations hereunder, including without limitation those conditions set
forth in Article X hereof, have not been satisfied by the Closing Date or
pursuant to Section 14.1 if any portion of the Assets is damaged or destroyed as
a result of fire, other casualty or for any reason whatsoever;
(B) Sellers, if any condition precedent to the obligations of
any Seller or the Company hereunder, including without limitation those
conditions set forth in Article XI hereof, have not been satisfied by the
Closing Date; or
(C) the mutual consent of Buyer, Newco and Sellers.
13.2 EFFECT OF TERMINATION. If a party terminates this Agreement
because one of its conditions precedent has not been fulfilled, or if this
Agreement is terminated by mutual consent, or if it is terminated pursuant to
Section 14.1, this Agreement shall become null and void without any liability of
any party to the other; provided, however, that if such termination is by reason
of the breach by any party of any of its representations, warranties or
obligations under this Agreement, the other party shall be entitled to be
indemnified for any Losses incurred by it by reason thereof in accordance with
Article XII hereof (and for such purposes such Article XII shall survive the
termination of this Agreement). Further, nothing in this Section 13.2 shall
affect Buyer's right to specific performance of the obligations of the Company
and Sellers at Closing hereunder.
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. The Company and Sellers shall bear the
risk of all loss or damage to any of the Assets from all causes which occur
prior to the Closing. If at any time prior to the Closing any portion of the
Assets is damaged or destroyed as a result of fire, other casualty or for any
reason whatsoever, the Company and Sellers shall immediately give notice thereof
to Buyer. Buyer shall have the right, in its sole and absolute discretion,
within ten (10) days of receipt of such notice, to (1) elect not to proceed with
the Closing and terminate this Agreement, or (2) proceed to Closing and
consummate the transactions contemplated hereby and receive any and all
insurance proceeds received or receivable by any Seller or the Company on
account of any such casualty. Nothing contained in this Section 14.1 shall limit
or adversely affect the right of Buyer to receive indemnification for any Losses
incurred by either of them by reason of any breach by any Seller or the Company
of any representation, warranty or obligation under this Agreement in accordance
with Section 12.2 hereof (and for such purposes such Section 12.2 shall survive
the termination of this Agreement).
ARTICLE XV: MISCELLANEOUS
15.1 COSTS AND EXPENSES. Except as expressly otherwise provided in
this Agreement, Buyer, Newco and Sellers shall bear their own costs and expenses
in connection with this Agreement and the transactions contemplated hereby;
provided, however, that no such pre- Closing costs and expenses of the Company
and its subsidiaries shall be paid by the Buyer or Newco.
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15.2 PERFORMANCE. In the event of a breach by any party of its
obligations hereunder, the other party shall have the right, in addition to any
other remedies which may be available, to obtain specific performance of the
terms of this Agreement, and the breaching party hereby waives the defense that
there may be an adequate remedy at law. Should any party default in its
performance, or other remedy, the prevailing party shall be entitled to its
reasonable attorneys' fees.
15.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party hereto and its successors, heirs, and proper assigns.
Buyer and Newco may not assign their interests under this Agreement to any other
person or entity without the prior written consent of Sellers; provided,
however, that Buyer and Newco may assign their rights, duties and obligations
hereunder to one or more subsidiaries or affiliates of Buyer; and further
provided that in the instance of such assignment Buyer shall guaranty the
performance of its assignee hereunder.
15.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and
the Exhibits and Schedules hereto embody the entire agreement and understanding
of the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein. The captions used herein
are for convenience only and shall not control or affect the meaning or
construction of the provisions of this Agreement. This Agreement may be executed
in one or more counterparts, and all such counterparts shall constitute one and
the same instrument.
15.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and
when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed and delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
requested or necessary to carry out the intent and purposes of this Agreement,
and to vest in Buyer good title to, possession of and control of all of the
Assets.
15.6 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given or made when personally
delivered to the party or parties entitled to receive the notice or within five
(5) days when sent by certified or registered mail, postage prepaid, or on the
next business day if sent for next day delivery by a nationally recognized
overnight courier, in either case, properly addressed to the party or parties
entitled to receive such notice at the address stated below:
If to the Company: Mr. Peter Hanson
Mr. Sol Lewin
American Mobile Health Systems, Inc.
2215 East North Avenue
Milwaukee, WI 53202
If to the Sellers: Mr. Peter Hanson
1308 E. Wabash Avenue
Waukesha, WI 53186
39
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Mr. Sol Lewin
10704 N. Beechwood Drive
Mequon, WI 53092
with a copy to: Daniel J. Brink, Esq.
Reinhart Boerner Van Deuren
Norris & Rieselbach
1000 North Water Street
Suite 2100
Milwaukee, WI 53202
If to Newco: IHS Acquisition No. 37, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Brian K. Davidson
Elizabeth B. Kelly
cc: Marshall A. Elkins, General Counsel
If to the Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Brian K. Davidson
Elizabeth B. Kelly
cc: Marshall A. Elkins, General Counsel
with a copy to: Michael S. Blass, Esq.
Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
15.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
15.8 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
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15.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, disregarding
any rules relating to the choice or conflict of laws.
15.10 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
15.11 SEVERABILITY. Any provision, or distinguishable portion of
any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 12.6 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties waive any provision of law which renders a provision
hereof prohibited or unenforceable in any respect.
15.12 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
together constitute one and the same instrument.
15.13 ARBITRATION. Any dispute or controversy between any of the
parties hereto pertaining to the performance or interpretation of this Agreement
shall be settled by binding arbitration pursuant to the rules of the American
Arbitration Association. The cost of such proceeding shall be shared equally by
all parties thereto, and each such party shall bear its own costs incurred as a
result of its participation in any such arbitration.
15.14 PUBLIC ANNOUNCEMENTS. Following the execution of this
Agreement, any general public announcements or similar media publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as Buyer shall determine; provided that nothing
herein shall prevent either party, upon as much prior notice as shall be
possible under the circumstances to the other, from making such written
announcements as such party's counsel may consider advisable in order to satisfy
the party's legal and contractual obligations in such regard.
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IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
WITNESS: AMERICAN MOBILE HEALTH
SYSTEMS, INC.
By: /s/ MICHAEL E. DELL By: /s/ PETER S. HANSON
------------------------- --------------------------------
Its: President
WITNESS: SELLERS:
By: /s/ MICHAEL E. DELL /s/ PETER S. HANSON
------------------------- -----------------------------------
Peter Hanson
WITNESS:
By:/s/ MICHAEL E. DELL /s/ SOL LEWIN
------------------------- -----------------------------------
Sol Lewin
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:
--------------------------------
Executive Vice President
Corporate Development
NEWCO:
IHS ACQUISITION NO. 37, INC.
By:
--------------------------------
Executive Vice President
42
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
WITNESS: AMERICAN MOBILE HEALTH
SYSTEMS, INC.
By: By:
------------------------- --------------------------------
Its: President
WITNESS: SELLERS:
By:
------------------------- -----------------------------------
Peter Hanson
WITNESS:
By:
------------------------- -----------------------------------
Sol Lewin
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By: [SIG]
--------------------------------
Executive Vice President
Corporate Development
NEWCO:
IHS ACQUISITION NO. 37, INC.
By: [SIG]
--------------------------------
Executive Vice President
43
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
THIS AGREEMENT is made as of April 29, 1998, by and among FIRST
COMMUNITY CARE, INC., a New York corporation, having its principal place of
business at 210 John Glenn Drive, Suite 12, Amherst, New York 14228 (the
"SELLER" or the "CORPORATION"), each of the holders of capital stock of Seller
who are executing this Agreement (the "SHAREHOLDERS"), NORTHEAST MEDICAL
EQUIPMENT, INC., a Florida corporation (the "BUYER"), and INTEGRATED HEALTH
SERVICES, INC., a Delaware corporation ("IHS").
W I T N E S S E T H :
WHEREAS, Seller operates a home respiratory care and durable medical
equipment business in the State of New York (the "BUSINESS"); and
WHEREAS, Shareholders are the shareholders of the Seller; and
WHEREAS, Seller wishes to sell, and Buyer desires to purchase from
Seller, substantially all of the assets of the Business; and Buyer also desires
to acquire from Seller and Shareholders, and each of Seller and Shareholders
desire to grant to Buyer, covenants not to compete and other restrictive
covenants as described in paragraph 17 hereof (the "RESTRICTIVE COVENANTS"); and
WHEREAS, Buyer is an indirect subsidiary of IHS; and
WHEREAS, the consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby has been obtained,
including without limitation, all approvals of governmental authorities and
parties to any contracts to be assigned to Buyer in connection herewith.
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 Restrictive Covenants.
(a) The Assets. On the Closing Date referred to below in paragraph
9, Seller shall sell, transfer, convey and assign, free and clear of all liens,
claims, security interests, pledges, restrictions on transfer or use and other
encumbrances of any kind or nature whatsoever ("LIENS"), other than Liens
granted after the date hereof with the concurrence of Buyer ("PERMITTED LIENS"),
all of Seller' rights, title and interest in, to or under:
(i) Accounts Receivable. All of the accounts receivable of the
Business, including, without limitation, all accounts receivable set
forth on the Schedule of Accounts Receivable Data attached hereto as
Schedule 1(a)(i); and
(ii) Inventory; Fixed Assets. All inventory and fixed assets
of the Business, including, without limitation, all of the same set
forth on the Schedule of Inventory and Fixed Assets attached hereto as
Schedule 1(a)(ii); and
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(iii) Motor Vehicles. All motor vehicles of the Business,
including without limitation, all of the same set forth on the Schedule
of Motor Vehicles attached hereto as Schedule 1(a)(iii); and
(iv) Property Rights. All real property, easements and rights
of way permitting access to the Business; and
(v) Other Assets. All other assets of any kind, tangible or
intangible, real, personal or mixed, owned and used or held for use by
Seller in connection with the Business, including, without limitation,
all of the following: (A) the Patients' List of the Business, as
described in Schedule 1(a)(v)(A); (B) the telephone numbers listed on
the Schedule of Telephone Numbers and Licenses attached hereto as
Schedule 1(a)(v)(B); (C) all personal property, machinery and
equipment; (D) capital stock or membership interests in the
Subsidiaries (as defined in paragraph 14(a)), including, without
limitation, all capital stock in First Community Care of Niagara, Inc.
and membership interests in Tri-County Home Care Services, LLC and
First Community Care of Bassett, LLC (the "JV INTERESTS"); (E) all of
Seller's prepaid assets; (F) rights under contracts, agreements,
including, without limitation, franchise agreements, and instruments;
(G) any Assets used in the operation of the Business, but not owned by
the Seller; (H) all intangible rights of Seller of every kind and
description used in, or held for use in connection with, the operation
of the Business, including, without limitation, all intangible assets,
and to the extent permitted by applicable law, all licenses, permits
and authorizations; and (I) all rights of Seller to receive payments
under the Consulting Services Agreement (the "MOHAWK VALLEY AGREEMENT")
dated September 15, 1994, among First Community Care, Inc., Mohawk
Valley Home Care, LLC and Mohawk Valley Network, Inc.; provided Buyer
shall not assume any obligations under the Mohawk Valley Agreement.
(b) Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and Seller shall not be deemed to have sold, transferred,
conveyed or assigned the following assets to Buyer: Seller's cash, Certificate
of Incorporation, qualification to do business in any jurisdiction, taxpayer
identification number, minute books, stock transfer records and other documents
related specifically to Seller's corporate organization and maintenance, and
Seller's equity interest in Mohawk Valley Home Care, L.L.C. (collectively,
"EXCLUDED ASSETS").
(c) Restrictive Covenants. Pursuant to paragraph 17 hereof, each of
Seller and each Shareholder is granting to Buyer the Restrictive Covenants.
2. Purchase Price; Method of Payment.
(a) Purchase Price. The aggregate "PURCHASE PRICE" for the Assets
and the Restrictive Covenants shall be Eight Million Six Hundred Dollars
($8,600,000). The Purchase Price shall be allocated among the Assets and the
Restrictive Covenants in the manner set forth on the Allocation Schedule
attached hereto as Schedule 2(a), and the parties hereto expressly consent to
the allocation stated therein.
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<PAGE>
(b) Method of Payment. Buyer shall pay the Purchase Price as
follows:
(i) Six Hundred Eighty-Eight Thousand Dollars ($688,000) (the
"BROKER'S FEE") shall be paid, on behalf of Seller, to Baker &
Associates, Inc. (the "BROKER"), in cash in satisfaction of all fees
and compensation due to the Broker in connection with the transactions
contemplated by this Agreement. Seller represents and warrants to Buyer
that the Broker has acted as Seller's representative and broker in
connection with the transactions contemplated by this Agreement, and
authorizes and directs Buyer to withhold such sum from the Purchase
Price and disburse such sum directly to the Broker. In addition, eight
percent (8%) of the Remaining Escrow Funds (as defined in paragraph
6(d)(ii)) and of the amount payable under the Notes (as hereinafter
defined) shall be disbursed to the Broker, on behalf of Seller, at the
end of the Escrow Period (as defined in paragraph 6(d)(i)) or when the
Notes become due, as the case may be; and
(ii) Four Hundred Thirty Thousand Dollars ($430,000) thereof
(the "ESCROWED CASH") shall be paid and delivered to CoreStates Bank,
N.A., as escrow agent ("ESCROW AGENT"), to be held by Escrow Agent
during the Escrow Period (as defined in paragraph 6(d), below, pursuant
to the terms of an Escrow Agreement, in the form attached hereto as
Exhibit 2(b)(ii) (the "ESCROW AGREEMENT"). The Escrowed Cash shall be
referred to as the "ESCROW FUND" shall be subject to the provisions of
paragraphs 6 and 18 hereof; and
(iii) Five Million Two Hundred Thousand Dollars ($5,200,000)
in cash, shall be paid and delivered to the "PAYING AGENT" designated
by Seller (and reasonably satisfactory to Buyer), to be held and
administered pursuant to the "PAYMENT ESCROW AGREEMENT" attached hereto
as Exhibit 2(b)(iii), as provided in paragraph 20 hereof; and
(iv) Two Million Two Hundred Eighty-Two Thousand Dollars
($2,282,000) shall be payable in newly issued shares of the common
stock, par value $.001, of IHS (the "IHS STOCK"). The parties agree
that IHS will issue such IHS Stock to the Corporation.
(c) Receipt. Upon delivery of the Purchase Price as set forth
above, Seller shall provide to Buyer a receipt confirming said delivery.
3. Further Payment; Reductions.
(a) In addition to the Purchase Price, an aggregate amount equal to
One Million Five Hundred Thousand Dollars ($1,500,000) (the "FURTHER PAYMENT")
shall, subject to offset as hereinafter provided, be paid by wired funds to
Peter Cummiskey ("CUMMISKEY") and David Verity ("VERITY"), collectively (the
"PRINCIPAL SHAREHOLDERS"), such obligation to be evidenced by the promissory
notes of the Buyer (the "PROMISSORY NOTES") to be executed and delivered to the
Principal Shareholders in the form of Exhibit 3; provided such Further Payment
shall be subject to the right of offset set forth in this paragraph 3 and in
paragraph 6, below; provided further the entire remaining Further Payment except
for $500,000 shall be paid on July 31, 2000 and the balance, if any, of the
Further Payment shall be paid on July 31, 2001. The parties acknowledge that the
Purchase Price was determined using a multiple of the expected Annual Operating
Profit (as hereinafter defined) of the Business after the Closing, and such
expected Annual Operating Profit was based upon the Seller's best good faith
estimate thereof. Accordingly, if the average Annual Operating Profit during the
two-year period commencing May 1, 1998 and ending April 30, 2000 (the
"APPLICABLE PERIOD") shall be less than One Million Eight Hundred Thousand
Dollars ($1,800,000),
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then, the Buyer shall be entitled to offset an amount from the Promissory Notes
equal to five times (5X) the amount of such deficiency; provided that if the
amount of the offset exceeds the Further Payment, the Promissory Notes shall be
cancelled and neither the Buyer nor the Principal Shareholders shall have any
payment obligations under this paragraph 3. For purposes hereof, the term
"ANNUAL OPERATING PROFIT" shall be determined as set forth on Exhibit A attached
hereto. Nothing contained in this paragraph 3 shall be deemed to limit Buyer's
right to recover Damages (as hereinafter defined) arising out of any breaches of
representations, warranties or covenants not contained in this paragraph 3.
(b) If the employment of Cummiskey or Verity is terminated prior to
the third anniversary of the date hereof other than by reason of a Permitted
Termination (as hereinafter defined) then the Buyer shall be entitled to reduce
the Further Payment (by offsetting against the Notes) by an amount equal to
$500,000, but only if the First Community Care of Bassett, LLC Joint Venture
(the "BASSETT JV") dissolves or is otherwise terminated other than by reason of
the purchase or sale by either party to the Bassett JV of the other party's
entire membership interest in the Bassett JV within a period of three (3) years
following the date hereof . For purposes hereof, a "Permitted Termination" shall
mean the termination by Cummiskey or Verity, as the case may be, of his
employment under his respective Employment Agreement for cause as provided in
such Employment Agreement or the termination by Buyer of the employment of
Cummiskey or Verity, as the case may be, under his respective Employment
Agreement other than for cause as provided in such Employment Agreement.
4. Indemnity Against Creditors Claims; No Assumption of Liabilities.
Seller has requested that Buyer waive the requirements of the bulk sales and
transfer laws of the State of New York. Except as set forth on Schedule 4,
Seller agrees to indemnify Buyer and save and hold Buyer harmless against all
Damages (as defined in paragraph 17(c)) arising out of any claims made by
creditors (including, without limitation, any Federal, state or local taxing
authority) of Seller that relate to the Business, or that arise out of the
failure to comply with any of such laws.
5. Closing Date Liabilities.
(a) Seller and Shareholders represent and warrant that, to the best
of Seller's and Shareholders' knowledge and belief after diligent inquiry, all
of Seller's liabilities, as of the date hereof are listed on the Schedule of
Liabilities attached hereto as Schedule 5(a) (the "LIMITED LIABILITIES"). For
purposes of this Agreement "LIABILITIES" shall mean and include all claims,
lawsuits, liabilities, obligations or debts of any kind or nature whatsoever,
whether absolute, accrued, due, direct or indirect, contingent or liquidated,
matured or unmatured, joint or several, whether or not for a sum certain,
whether for the payment of money or for the performance or observance of any
obligation or condition, and whether or not of a type which would be reflected
as a liability on a balance sheet (including, without limitation, federal, state
and local taxes of any nature) in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), including without limitation,
malpractice or other tort claims, claims for breach of contract, any claims of
any kind asserted by patients, former patients, employees of Seller or any other
party that are based on acts or omissions by Seller occurring on or before the
date hereof, amounts due or that may become due in connection with the
participation of Seller in the Medicare or Medicaid programs or due to any other
health care reimbursement or payment intermediary, or that may be due by Seller
to any other third party payor, accounts payable, notes payable, trade payables,
lease obligations, indebtedness for borrowed money, accrued interest, and
contractual obligations. Seller and Shareholders acknowledge that the Purchase
Price for the Assets is based on the accuracy of Seller's and Shareholders'
representations and warranties contained in this Agreement, including, but not
limited to, Seller's and Shareholders' representations and warranties contained
in this paragraph 5(a). Buyer will not assume any, and Seller and Shareholders
shall remain liable for each, liability of Seller existing on the Closing Date,
including, without limitation, any Limited
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Liabilities, and any liabilities that Seller may have by reason of its ownership
in any of the JVs (as defined in paragraph 14(a), below), including without
limitation, Mohawk Valley Home Care, L.L.C. (the "EXCLUDED LIABILITIES");
provided, however, notwithstanding the foregoing, Buyer will assume at Closing
such liabilities that are incurred between the date hereof and the Closing Date
(i) in the ordinary course of business consistent with past practice, or (ii) as
a direct result of Buyer's actions under the Management Agreement, or (iii)
contractual obligations (under assumed contracts or contracts entered into after
the date hereof in compliance with this Agreement) (the "ASSUMED LIABILITIES").
(b) Without limiting the generality of the provisions of
subparagraph (a) above, Buyer shall not assume the Contracts (as hereinafter
defined in paragraph 14(b)), if any, set forth on Schedule 5(b), or any
liabilities with respect thereto, and shall not, in any case, assume any
liabilities under any Contracts (whether or not such Contracts are assumed by
Buyer) to the extent such liabilities arise out of facts or circumstances, or
obligations to be satisfied, on or prior to the date hereof, all Taxes (as such
term is defined in paragraph 14(z)) that arise out of the transactions
contemplated hereby or out of any income earned by the Seller or any Subsidiary
on or prior to the Closing Date, and the Broker's Fee. Without limiting the
foregoing, Buyer shall not assume any obligations or liabilities (whether now
outstanding or hereafter arising) under the Merger Agreement , between First
Community Care, Inc. and North Country Medical Supplies, Inc., dated as of
November 1, 1997 and the Purchase Agreement, between First Community Care, Inc.
and First Community Care, L.L.C., dated as of April 1, 1998.
6. Right of Offset Against the Escrow Fund.
(a) Event of Deficiency. If:
(i) Buyer pays for any Excluded Liabilities, then Seller and
each Shareholder shall jointly and severally reimburse Buyer for such
payment (a "LIABILITIES DEFICIENCY"); or
(ii) the aggregate value of the Seller's collectible accounts
receivable as of the date hereof, are determined to be less than
$1,700,000, as determined by actual net cash collections of such
receivables during the twelve (12) month period immediately following
the date hereof, then Seller and each Shareholder, jointly and
severally, shall pay to Buyer the amount of such deficiency (an "ASSET
VALUE DEFICIENCY"); or
(iii) Buyer shall be entitled to be indemnified for any
Damages pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and
together with any Liabilities Deficiencies or, Asset Value
Deficiencies, collectively "CLAIMS" and each, a "CLAIM");
then, and in any of such events, Buyer may provide written notice to Seller of
the Claim, in which case Buyer shall be entitled to recover the amount of such
Claim in accordance with the following procedure.
(b) Procedure if Seller Fails to Pay. If Seller fails to pay any Claim
in full to Buyer within ten (10) business days from the date of such written
notice (said ten (10) business day period hereinafter referred to as the "NOTICE
PERIOD"), Buyer shall have the right to make offset against either or both of
the Notes or against the Escrow Fund in accordance with the terms and conditions
of the Escrow Agreement, in amounts from time to time equal to the amount of
such Claim (subject, however, in the case
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of a "DISPUTE", to the provisions of paragraph 18 hereof applicable thereto),
and Seller agrees to any such offset. Buyer's right to proceed against the Notes
or the Escrow Fund shall not be exclusive of any other rights or remedies that
it may have under this Agreement, law, equity or otherwise. In no event shall
Buyer be required to offset Claims against the Notes.
(c) Escrow Costs. The costs, fees and expenses of the Escrow Agent
shall be borne by the Buyer.
(d) Escrow Periods.
(i) The "ESCROW PERIOD" shall terminate twelve (12) months
following the date hereof.
(ii) The balance, if any, of the Escrow Fund remaining (the
"REMAINING ESCROW FUNDS") at the close of business on the last day of
the Escrow Period, shall be disbursed to Seller within fifteen (15)
days after the last day of the Escrow Period.
(iii) Notwithstanding anything to the contrary contained in this
subparagraph (d), if any Claim made by Buyer is in dispute at the time
that any amounts are otherwise to be disbursed to Seller, then there
shall be withheld from such amount to be paid under the Notes or to be
disbursed from the Escrow Fund, an amount such that there will be
remaining due under the Notes and in the Escrow Fund at least twice the
amount of the Claim asserted by Buyer until the final settlement of
such Claim or Claims.
7. IHS Stock. A portion of the Purchase Price equal to TWO MILLION TWO
HUNDRED EIGHTY-TWO THOUSAND DOLLARS ($2,282,000) shall be payable by means of
the delivery of IHS Stock issued to the Corporation in accordance with the
following:
(a) Share Value. The number of shares of IHS Stock issuable upon
execution of this Agreement (the "EXECUTION DATE SHARE COUNT") shall be
calculated based upon a price per share of such stock equal to the average
closing New York Stock Exchange ("NYSE") price of such stock for the thirty (30)
trading day period immediately preceding the date which is two (2) trading days
before the date hereof (the "TRADE PRICE").
(b) Registration Rights. IHS will prepare and use its reasonable
commercial efforts to cause to be filed within one-hundred and twenty (120) days
following the Closing Date, and will use its reasonable commercial efforts to
have declared effective by the Securities and Exchange Commission (the
"COMMISSION"), a registration statement for the registration of the IHS Stock
issued to the Seller in connection with this transaction, including the shares,
if any, issuable under paragraph 7(c) in respect of any re-calculation of the
Execution Date Share Count, under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and IHS shall maintain the effectiveness of each such
registration statement for a period of one (1) year following the date it became
effective (the "REGISTRATION DATE"), except to the extent that an exemption from
registration may be available.
(c) Share Adjustment. Promptly following the Share Adjustment Date
(as hereinafter defined), the number of shares deliverable as part of the
Purchase Price (and that have not previously been transferred by the Seller)
shall be re-calculated to be the number of shares of IHS Stock that would have
been delivered in lieu of such retained shares had the Recalculated Value (as
defined below) been used on the date
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hereof in lieu of the Trade Price with respect to the portion of the Purchase
Price represented by such retained shares. For purposes hereof, the
"RECALCULATED VALUE" shall mean the sum of: (x) the average closing NYSE price
for IHS Stock for the 30-trading day period immediately preceding the Share
Adjustment Date, plus (y) $2.00. Notwithstanding anything to the contrary
contained herein, such adjustment shall be made only if (i) the result shall be
an increase in the number of shares issuable to the Seller and (ii) the Trade
Price exceeds the Recalculated Value. If the number of shares as re-calculated
under this subparagraph (c) (the "ADJUSTED SHARE COUNT") exceeds the Execution
Date Share Count, IHS promptly shall deliver over to the Seller an additional
number of shares of IHS Stock as shall be equal to such excess, and such
additional shares shall be included in the aforementioned registration statement
by means of a post-effective amendment thereto. If the Execution Date Share
Count exceeds the Adjusted Share Count, no adjustment shall be made. For
purposes hereof, "SHARE ADJUSTMENT DATE" shall mean the day that is thirty (30)
days after the Registration Date.
(d) Registration Expenses. Sellers shall not be responsible for, and
Buyer shall bear, all of the reasonable expenses of IHS related to such
registration including, without limitation, the fees and expenses of its counsel
and accountants, all of its other costs, fees and expenses incident to the
preparation, printing, registration and filing under the Securities Act of the
registration statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and each
amendment or supplement thereto to underwriters, dealers and other purchasers of
IHS Stock and the costs and expenses (including fees and disbursements of its
counsel) incurred in connection with the qualification of IHS Stock under the
Blue Sky laws of various jurisdictions. Buyer, however, shall not be required to
pay underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs or expenses arising out of Seller's or any transferee's failure to comply
with its obligations under this Article 7.
(e) Resale Limitations. All sales by Seller shall be effected
solely through Salomon Smith Barney, Inc.
(f) Registration Procedures, etc. In connection with the
registration rights granted to the Sellers with respect to the IHS Stock as
provided in this Article 7, Buyer covenants and agrees as follows:
(i) At Buyer's expense, Buyer will keep the registration and
qualification under this Article 7 effective (and in compliance with
the Securities Act) by such action as may be necessary or appropriate
until the first anniversary of the Closing Date, except to the extent
that an exemption from registration may be available. Buyer will
promptly notify the Seller, at any time when a prospectus relating to a
registration statement under this Article 7 is required to be delivered
under the Securities Act, of the happening of any event known to Buyer
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(ii) Buyer shall furnish the Seller with such number of
prospectuses as shall reasonably be requested.
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(iii) Buyer shall take all necessary action which may be
required in qualifying or registering IHS Stock included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the Seller,
provided that Buyer shall not be obligated to qualify as a foreign
corporation or dealer to do business under the laws of any such
jurisdiction.
(iv) The information included or incorporated by reference in
the registration statement filed pursuant to this Article 7 will not,
at the time any such registration statement becomes effective, contain
any untrue statement of a material fact, or omit to state any material
fact required to be stated therein as necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in any
earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall indemnify the Seller, its
successors and assigns, and each person, if any, who controls such
Seller within the meaning of ss.15 of the Securities Act or ss.20(a) of
the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"),
against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in such
registration statement executed by Buyer or based upon written
information furnished by Buyer filed in any jurisdiction in order to
qualify IHS Stock under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to Buyer by the Seller expressly for use in such
registration statement, any amendment or supplement thereto or any
application, as the case may be. If any action is brought against the
Seller or any controlling person of the Seller in respect of which
indemnity may be sought against Buyer pursuant to this subparagraph
7(f)(iv), the Seller or such controlling person shall within thirty
(30) days after the receipt thereby of a summons or complaint, notify
Buyer in writing of the institution of such action and Buyer shall
assume the defense of such actions, including the employment and
payment of reasonable fees and expenses of counsel (reasonably
satisfactory to the Seller or such controlling person). The Seller or
such controlling person shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of the Seller or such controlling person unless
(A) the employment of such counsel shall have been authorized in
writing by Buyer in connection with the defense of such action, or (B)
Buyer shall not have employed counsel to have charge of the defense of
such action, or (C) such indemnified party or parties shall have
reasonably concluded (after notice to Buyer) that there may be defenses
available to it or them which are different from or additional to those
available to Buyer (in which case, Buyer shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than
one additional firm of attorneys for the Seller and such controlling
persons shall be borne by Buyer. Except as expressly provided in the
previous sentence, in the event that Buyer shall not previously have
assumed the defenses of any such action or claim, Buyer shall not
thereafter be liable to the Seller or such controlling person in
investigating, preparing or defending any such action or claim.
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(v) The Seller, and its successors and assigns, shall
severally, and not jointly, indemnify Buyer, its officers and directors
and each person, if any, who controls Buyer within the meaning of ss.15
of the Securities Act or ss.20(a) of the Exchange Act against all loss,
claim, damage, or expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the
Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising from information furnished by or on behalf of such
Sellers, or their successors or assigns for specific inclusion in such
registration statement.
(g) Notice of Sale. If the Seller desires to transfer all or any
IHS Stock, it will deliver prior written notice to Buyer, describing in
reasonable detail their intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Seller will sell the IHS Stock in
compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer that the registration statement relating to
the IHS Stock being transferred is not "current" until Buyer gives further
notice that offers and sales may be recommenced. In the event of any such notice
from Buyer, Buyer agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in paragraph 7(b) and to give prompt notice to the Seller when the
registration statement has again become current. Further, during such time that
the effectiveness of the registration statement relating to the IHS Stock is not
"current", then such period of time will be added to the one-year registration
period referred to in subparagraph 7(b), above. If the Seller delivers to Buyer
an opinion of counsel reasonably acceptable to Buyer and its counsel and to the
effect that the proposed transfer of IHS Stock may be made without registration
under the Securities Act, the Seller will be entitled to transfer IHS Stock in
accordance with the terms of the notice and opinion of their counsel.
(h) Furnish Information. It shall be a condition precedent to the
obligations of Buyer to take any action pursuant to this Article 7 that the
Seller shall furnish to Buyer such information regarding themselves, the IHS
Stock held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of its IHS Stock. In that
connection, each transferee of Seller shall be required to represent to Buyer
that all such information which is given is both complete and accurate in all
material respects. The Seller shall deliver to Buyer a statement in writing from
the beneficial owners of such securities that they bona fide intend to sell,
transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify Buyer at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Article 7 is
required to be delivered under the Securities Act, of the happening of any event
known to such transferee as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
statements as then existing.
(i) Investment Representations. All IHS Stock to be issued
hereunder will be newly issued shares of IHS. The Seller represents and warrants
to Buyer that the IHS Stock being issued hereunder are being acquired, and will
be acquired, by the Seller for investment for its own account and not with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act or the applicable state securities law; the Seller
acknowledges that the IHS Stock constitutes restricted securities under Rule 144
promulgated by the Commission pursuant to the Securities Act, and may have to be
held indefinitely, and the Seller agrees that no IHS Stock may be sold,
transferred, assigned, pledged or otherwise disposed of except pursuant to an
effective registration statement or an exemption from registration under
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the Securities Act, the rules and regulations thereunder, and under all
applicable state securities laws. The Seller has the knowledge and experience in
financial and business matters, is capable of evaluating the merits and risks of
the investment, and is able to bear the economic risk of such investment. The
Seller has had the opportunity to make inquiries of and obtain from
representatives and employees of Buyer such other information about IHS as they
deem necessary in connection with such investment.
(j) Legend. It is understood that the certificates evidencing the
IHS Stock shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
(k) Certain Transferees. Prior to the effective date of
registration of the IHS Stock, Seller shall not transfer any shares of IHS Stock
to any person or entity except as expressly permitted by this Agreement and
unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Seller under this Article 7.
8. Employees. It is expressly understood and agreed that Buyer's
purchase of the Assets does not involve any undertaking on the part of Buyer to
retain any of the employees of the Seller, although Buyer shall have the right
to offer employment to any such employees. Seller shall remain fully responsible
for any severance, benefits, costs or liabilities arising out of the termination
by Seller of any of its employees, all of which liabilities shall constitute
Excluded Liabilities. Seller shall also remain fully responsible for any
benefits, costs or liabilities incurred or accrued prior to the date hereof with
respect to each employee retained by Buyer. Without limiting the generality of
the foregoing, except for the Employment Agreements (as hereinafter defined),
any employment agreement, arrangement, commitment or understanding with any
Shareholder is being terminated concurrently therewith, and all liabilities
arising in connection therewith shall constitute Excluded Liabilities. Without
limiting the foregoing, at the Closing each of the Employment Agreements shall
be assigned to and assumed by Buyer.
9. Closing Date. The consummation of the transactions contemplated by
this Agreement is sometimes referred to as the "CLOSING", and the date on which
such consummation occurs, is sometimes referred to as the "CLOSING DATE". The
Closing with respect to the JV Interests shall take place concurrently herewith,
and with respect to all of the other Assets, the Closing shall take place on
such date as the Buyer shall select by notice to Seller, which date shall be no
more than one week after Buyer receives notification from the National Supplier
Clearinghouse that its supplier number is or will be issued. Promptly following
the date hereof, Buyer shall use its best efforts to obtain the issuance of such
supplier number, and Seller and Shareholders will cooperate with Buyer in their
efforts to obtain such supplier number. If, notwithstanding its use of its best
efforts, the Buyer shall not have obtained such supplier number by the date that
is 18 months after the date hereof, Buyer shall, in its sole discretion either
(i) shall be entitled to terminate this Agreement, in which case any Purchase
Price previously paid to Seller or any Shareholder shall be returned to Buyer
(without interest); provided, however, that Seller and the Shareholders shall
not be required to
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return any portion of the Purchase Price that shall have been used to pay any
Limited Liabilities and Broker's Fee or (ii) in lieu of taking the Assets, in
Buyer's sole discretion, Buyer will have the option to require the Shareholders
to deliver all issued and outstanding shares of capital stock of the
Corporation, free and clear of all Liens.
10. Asset Condition and Quality. Seller and Shareholders represent,
warrant and covenant that, as of the date hereof, all physical Assets of Seller
that are in use by patients of Seller are free of patent defects and in good
working order, condition and repair, except for ordinary wear and tear, and
conform in all material respects with all applicable ordinances, regulations,
zoning and other laws. Seller and Shareholders represent, warrant and covenant
that, as of the date hereof, all physical Assets of Seller that are not in use
by patients of Seller shall be taken by Buyer on an "as is" basis.
11. Instruments of Conveyance and Transfer.
(a) Concurrently herewith Seller is delivering to Buyer's attorney
to be held in escrow pending notice from Buyer that it has elected to close the
transactions contemplated hereby, all of the following:
(i) Such bills of sale, assignments, motor vehicle
certificates of title, and other good and sufficient instruments of conveyance
and transfer in form sufficient to sell, assign and transfer the Assets (other
than the JV Interests) to Buyer as of the Closing Date, such documents to
contain full warranties of title, and which documents shall be effective to vest
in Buyer good, absolute, and marketable title to the Assets of the Business
being transferred to Buyer by Seller, free and clear of all Liens (other than
Permitted Liens). Buyer or its attorneys are hereby authorized to fill in the
dates on each of the aforementioned documents as of the Closing Date.
Simultaneously with such delivery out of escrow, Seller will take all steps as
may be requisite to put Buyer in actual possession, operation and control of the
Assets to be transferred hereunder.
(b) Simultaneously herewith, Seller and Shareholders are
delivering to Buyer all of the following:
(i) Such bills of sale, assignments, motor vehicle
certificates of title, and other good and sufficient instruments of conveyance
and transfer in form sufficient to sell, assign and transfer the JV Interests to
Buyer as of the date hereof, such documents to contain full warranties of title,
and which documents shall be effective to vest in Buyer good, absolute, and
marketable title to the JV Interests being transferred to Buyer by Seller, free
and clear of all Liens.
(ii) An opinion, dated as of the date hereof, of Seller's
counsel, in substantially the form attached hereto as Exhibit 11(b)(ii);
(iii) A certificate of its Secretary or other officer
certifying as of the date hereof a copy of resolutions of its board of directors
and, if applicable, its stockholders, authorizing the execution, delivery and
full performance of this Agreement and the Transaction Documents (as defined in
paragraph 14(a) below), and the incumbency of its officers;
(iv) Peter Cummiskey's and David Verity's Employment
Agreements, substantially in the form of Exhibit 11(b)(iv) (the "EMPLOYMENT
AGREEMENTS"); and
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(v) All consents from the JVs (as defined in paragraph 14(a))
(other than Mohawk Valley Home Care, L.L.C.) related to the transactions
contemplated herein.
12. 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 Seller or
Buyer, shall be borne by Seller; provided however that Buyer shall be
responsible for the 8% sales tax that is incurred on the amounts allocated to
furniture and capital equipment as set forth on Schedule 2(a) and shall be
collected by Seller from Buyer and; provided further that Buyer shall be
responsible for payment of sales tax on any vehicles included in the Assets.
13. Restrictions on Operations of Seller.
(a) Seller and Shareholders, jointly and severally, represent,
warrant and covenant that, except as expressly disclosed on Schedule 13 hereto,
since the most recent Financial Statement Date referred to in paragraph 14(o)
below, through the date hereof, there has been no material adverse change in the
condition (financial or otherwise) or prospects of the Seller or the Business.
From the date hereof through the Closing Date, without the prior consent of
Buyer, subject to the provisions of the Management Agreement, the Shareholders
and Seller shall cause Seller and Subsidiaries (as defined in paragraph 14(a)
below) not to:
(i) sell, assign, transfer or dispose of any of its Assets,
except in the ordinary course of business consistent with past practice and
replace with Assets of at least the same quality, type and quantity having an
aggregate value at least equal to the aggregate value of the items sold or
otherwise disposed of;
(ii) mortgage, pledge or subject to any Lien of any nature
whatsoever any of the Assets;
(iii) enter into any contract, agreement, commitment,
understanding or arrangement or transaction binding the Business, or make or
suffer any termination of any contract, agreement, commitment, understanding or
arrangement, or make or suffer any modification or amendment of any contract,
agreement, commitment, understanding or arrangement except for terminations,
modifications and amendments of contracts made in the ordinary course of
business consistent with past practice and which would not affect earnings or
otherwise be material;
(iv) incur any liabilities;
(v) fail to collect, withhold and/or pay to any proper
Governmental Authority, any Taxes required by applicable law to be so collected,
withheld and/or paid;
(vi) pay any bonuses, increase the salaries or other
compensation of any of its employees, or make any increase in, or any additions
to, other benefits to which any of such employees may be entitled;
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(vii) discharge or satisfy any Lien or encumbrance, or
satisfy, pay or prepay any material liabilities, or fail to pay or discharge
when due any Liabilities, the failure to pay or discharge of which has caused or
may cause any actual damage or risk of loss to the Corporation or the Assets or
the Business;
(viii) fail to collect any accounts receivable in the ordinary
course of business, consistent with past practice;
(ix) change any of the accounting principles followed by it or
the methods of applying such principles;
(x) cancel, modify or waive any debts or claims held by it, or
waive any rights of substantial value;
(xi) issue any capital stock, or declare or pay or set aside
or reserve any amounts for payment of any dividend or other distribution in
respect of any equity interest or other securities, or redeem or repurchase any
of its capital stock or other securities, or make any payment to any of its
affiliates;
(xii) institute, settle or agree to settle any litigation,
action or proceeding before any Governmental Authority (as such term in defined
in paragraph 14(d) below) relating to it or its property or received any threat
thereof;
(xiii) enter into any material transaction other than in the
ordinary course of business, consistent with past practice;
(xiv) dissolve, reorganize, merge, consolidate or enter into a
share exchange with or into any other entity;
(xv) enter into any contract or agreement with any union or
other collective bargaining representative representing any employees;
(xvi) make any change to its by-laws or articles of
incorporation;
(xvii) perform, take or fail to take any action or incur or
permit to exist any of the acts, transactions, events or occurrences of a type
which would have been inconsistent with the representations, warranties and
covenants set forth in this Agreement had the same occurred prior to the date
hereof;
(xviii) take any action that would prevent any Shareholder or
Seller from consummating the transactions contemplated by this Agreement; or
(xix) agree or otherwise commit to do anything described in
any of subparagraphs (i) through and including (xviii) above.
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(b) Unless consented to by Buyer, between the date hereof and the
Closing, subject to the provisions of the Management Agreement, the Shareholders
and the Seller shall cause the Seller and Subsidiaries to:
(i) maintain the Assets in substantially the state of repair,
order and condition as on the date hereof, reasonable wear and tear or loss by
casualty excepted;
(ii) maintain in full force and effect all Licenses currently
in effect with respect to its business;
(iii) maintain in full force and effect the insurance policies
and binders currently in effect, or the replacements thereof;
(iv) use their reasonable efforts to preserve intact the
present business organization of the Seller and the Subsidiaries; keep available
the services of the present employees and agents of the Seller and the
Subsidiaries; and maintain the relations and goodwill with suppliers, Seller,
employees, affiliated medical personnel and any others having business relating
to the Seller or any Subsidiary;
(v) maintain all of the books and records in accordance with
its past practices;
(vi) comply in all material respects with all provisions of
the Contracts and with any other material agreements that the Seller or any
Subsidiary enters into in the ordinary course of business after the date of this
Agreement, and comply in all material respects with the provisions of all
Governmental Requirements applicable to the business of the Seller or any
Subsidiary;
(vii) cause to be paid when due, all Taxes, imposed upon it or
on any of its properties or which it is required to withhold and pay over;
(viii) promptly advise Buyer in writing of the threat or
commencement against the Seller or any Subsidiary of any claim, action, suit or
proceeding, arbitration or investigation or any other event that could
materially adversely affect the operations, properties, assets or prospects of
the Seller or any Subsidiary;
(ix) promptly notify the Buyer in writing of the termination
of any Contract; and
(x) promptly notify the Buyer in writing of any act, event or
occurrence that constitutes a breach by any Shareholder or the Seller of any
representation, warranty or covenant made pursuant to this Agreement; and
(xi) promptly notify the Buyer in writing of any event
involving the Company or any Subsidiary which has had or may be reasonably
expected to have a material adverse effect on the business or financial
condition of the Seller or any Subsidiary or may involve the loss of
relationships with any of the customers of the Seller or any Subsidiary.
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14. Representations and Warranties by Seller and Shareholders. As a
material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller and Shareholders hereby, jointly and severally, represent and
warrant to Buyer as follows as of the date hereof (it being understood that, for
the purposes of this Article 14, "Seller" shall be deemed to refer collectively
to the Seller and each of the Subsidiaries listed on Schedule 14(a) and "to the
knowledge of the Seller" shall be deemed to refer collectively to the Seller and
the Shareholders):
(a) Organization of Seller; Enforceability.
(i) Seller is a corporation, organized, and in good standing,
respectively, in the State of New York, and is qualified to do business and is
in good standing in each other State where the nature of its business or the
assets held by it requires such qualification, and has requisite corporate power
and authority to carry on its Business as presently being conducted, to enter
into this Agreement, and to carry out and perform the terms and provisions of
this Agreement. Each of this Agreement and each agreement, instrument,
certificate and document executed by Seller in connection with this Agreement or
the transactions contemplated hereby ("TRANSACTION DOCUMENTS") constitutes the
legal, valid and binding obligations of Seller, enforceable against it in
accordance with its respective terms. Schedule 14(a) sets forth a complete list
of all subsidiaries, joint ventures and partnerships in which the Seller is the
record or beneficial owner of any equity interest (collectively, the
"SUBSIDIARIES" and individually, a "SUBSIDIARY"). All of the issued and
outstanding capital stock or membership equity of the subsidiaries listed on
Schedule 14(a) hereto is owned of record or beneficially by the Seller or by one
of the listed subsidiaries on Schedule 14(a). Schedule 14(a) shall also set
forth all members, partners, shareholders and each of their ownership interests
in each joint venture and partnership (the "JV") in which the Seller is the
record or beneficial owner of any equity interest.
(ii) This Agreement and each Transaction Document to which
each Shareholder is a party constitutes the legal, valid and binding obligations
of such Shareholder, enforceable against such Shareholder in accordance with
their respective terms.
(b) Consents. Except as set forth on Schedule 14(b), no
authorization, consent, approval, license, exemption by, filing or registration
with any Governmental Authority or of any party to any contract, agreement,
instrument, commitment, lease, indenture or understanding (written, oral or
implied) by which Seller or any Shareholder or any of the Assets is bound
("CONTRACTS") is necessary in connection with the execution, delivery and
performance of this Agreement or any of the Transaction Documents by Seller or
any Shareholder.
(c) Litigation. Except as set forth on Schedule 14(c), there are no
actions, suits or proceedings affecting Seller or any of the Assets which are
pending or threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any Governmental Authority (as
hereinafter defined), nor is Seller or any of its respective officers or
directors or any Shareholder aware of any facts which to them or their knowledge
might reasonably be expected to result in any such action, suit or proceeding.
(d) Compliance with Laws and Contracts. Seller is not in violation
of, or in default under: any term or provision of its Articles of Incorporation
or By-Laws; or any judgment, order, writ, injunction, decree, statute, law,
rule, regulation, directive, mandate, ordinance or guideline ("GOVERNMENTAL
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<PAGE>
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
Seller and Shareholders of, and the performance and compliance by each of them
with this Agreement, and the Transaction Documents and the transactions
contemplated hereby and thereby, does not and will not result in the violation
of or conflict with or constitute a default under any such term or provision or
result in the creation of any Lien on any of the properties or assets of Seller
or Shareholders pursuant to any such term or provision.
(e) Corporate Acts and Proceedings. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the sale and transfer of
the Assets by Seller as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller and, if applicable, by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable Governmental Requirement by the stockholders of
Seller with regard thereto have been appropriately authorized and accomplished.
(f) Title to Assets. Seller has good and indefeasible title to all
of the Assets, free and clear of all Liens.
(g) Contracts. Set forth on Schedule 14(g) hereto is a list of all
material Contracts of Seller including, without limitation, each:
(i) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or termination of or with, any
director, officer, employee, consultant, sales representative, or agent or group
of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons;
(ii) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights outside the ordinary course of
business or requiring the consent of any party to the transfer and assignment of
any such assets, property or rights (by purchase or sale of assets, purchase or
sale of stock, merger or otherwise), that is executory or that was entered into
during the three (3) year period ending on the date hereof;
(iii) contract, agreement or commitment which contains any
provisions requiring the Seller or the Business to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
(iv) contract, agreement or commitment restricting the Seller
or the Business from, or in favor of either of the Seller or the Business and
restricting any other person or entity from, conducting business anywhere in the
world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(v) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to the Business or any portion thereof or the
business of any other person or entity;
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<PAGE>
(vi) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(vii) contract, agreement or arrangement granting a leasehold
or other interest in real property, including without limitation, subleases,
licenses and sublicenses (the "LEASES");
(viii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Seller or the Business
not covered by clause (i) above;
(ix) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(x) agreement with respect to the settlement of any litigation
or other proceeding with any third person or entity;
(xi) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Seller, or any other
entity, including without limitation, registration rights agreements, voting
trust agreements and shareholder and proxy agreements;
(xii) contract, agreement or commitment to provide services or
products; or
(xiii) agreement not made in the ordinary and normal course of
business and consistent with past practice, or involving consideration in excess
of $25,000 in each case, that is not set forth in subsections (i) through (xii)
above.
To the best of Seller's and Shareholders' knowledge, no party to any
Contract other than Seller is in default under any Contract. Seller has
delivered to Buyer true and complete copies of each written Contract (or a
description of each oral Contract) requested by Buyer.
(h) Brokers. Seller has been represented solely by the Broker, and
as a result a brokerage commission in the amount of $688,000 payable to the
Broker at the Closing in connection with the transactions contemplated by this
Agreement is due, and no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, understandings or arrangements with Seller. An additional amount
equal to eight percent (8%) of the Remaining Escrow Funds and Notes shall be
paid to the Broker.
(i) Employment Contracts; Employees. There are no Contracts of
employment between Seller and any officer or other employee of the Business,
except as set forth on Schedule 14(g)(i) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Seller,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 14(i) is accurate and complete. No employee, consultant or agent of the
Seller has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 14(i). Since the date that is two (2)
years prior to the date hereof, there has been no material adverse change in the
relationship between the Seller and its employees, nor any strike or labor
disturbance
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by any of such employees affecting the Business and there is no indication that
such a change, strike or labor disturbance is likely. No employees of the Seller
are represented by any labor union or similar organization in connection with
their employment by or relationship with, Seller, and to the knowledge of the
Seller and Shareholders, there are no pending or threatened activities the
purpose of which is to achieve such representation of all or some of such
employees, and there are no threats of strikes, work stoppages or pending
grievances by any such employees. Seller is not party to any collective
bargaining or other labor contracts.
(j) Employee Benefit Plans. Except as set forth on Schedule 14(j),
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. Without limiting the generality of the foregoing, Seller does not maintain
or make contributions to and has not at any time in the past maintained or made
contributions to any employee benefit plan which is subject to the minimum
funding standards of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or to any multi-employer plan subject to the terms of the
Multi-employer Pension Plan Amendment Act of 1980 (the "MULTI-EMPLOYER ACT").
(k) Insurance. All inventories, buildings and fixed assets owned or
leased by the 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 Schedule 14(k), is accurate and complete.
Schedule 14(k) also sets forth any claims made under any of the insurance
policies referred to above or increases in premiums therefore during the past
two years. True and complete copies of all policies of fire, liability and other
forms of insurance held or owned by the Seller or otherwise in force and
providing coverage for the Business or any of the Assets (including but not
limited to medical malpractice insurance, and any state sponsored plan or
program for worker's compensation) have been delivered to Buyer. Such policies
are owned by and payable solely to the Seller, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date,
and all premiums due on or before the Closing Date in respect thereof have been
paid.
(l) Disclosure. No representation or warranty by Seller or any
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
Shareholders or Seller or any of its officers, directors or stockholders has
knowledge or notice, required to make the statements herein or therein contained
not misleading.
(m) Officers, Directors and Shareholders of Seller. As of the
Closing Date, the Shareholders are the sole shareholders of Seller and the
following individuals are all of the officers and directors of Seller:
<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
David Verity President
Peter Cummiskey Vice President/Treasurer
John Young Vice President
Patricia Fox Secretary
</TABLE>
(n) Inventory and Fixed Assets. The information contained on the
Schedule of Inventory and Fixed Assets as of the most recent Financial Statement
Date, attached hereto as Schedule 1(a)(ii), is accurate and complete.
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(o) Financial Statements. Seller has furnished Buyer with its
financial statements (the "FINANCIAL STATEMENTS") for the periods ended December
31, 1996 and December 31, 1997, and the interim period ending February 28, 1998
(the "FINANCIAL STATEMENT DATES"), copies of which are attached hereto as
Schedule 14(o). The Financial Statements: (i) are in accordance with the books
and records of the Seller; (ii) fairly present 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 GAAP applied on a basis consistent with
prior accounting periods; (iv) with respect to all Contracts 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 liabilities 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 expressly disclosed on an Schedule to this Agreement. The
income statements included in the Financial Statements do not contain any items
of special or nonrecurring income or expense or any other income not earned or
expense not incurred in the ordinary course of business, consistent with past
practice, except as expressly specified therein, and such Financial Statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
(p) Supplemental Tax Information. Seller has furnished Buyer with
its most recent (i) tax registration certificates, and (ii) tax returns required
of it by each state or other locality in which it conducts business, which tax
returns in all instances where applicable include, but shall not be limited to
franchise taxes, state and local tangible personal property tax returns, and
state and local sales tax returns, which registration certificates and tax
returns are set forth, collectively, on the Schedule of Supplemental Tax
Information, attached hereto as Schedule 14(p).
(q) Adverse Business Developments. Except as set forth on Schedule
14(q), no notice has been received by Seller or any Shareholder 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 before
the date hereof. Except as set forth on Schedule 14(q), neither Seller nor any
Shareholder has received, either orally or in writing, any notice specific to it
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 in by Seller, nor has Seller or
any Shareholder received, or been threatened with, any claim for refund specific
to it in excess of $500.00 by a Medicare or Medicaid carrier, except as
disclosed on Schedule 14(q).
(r) Relationships. Except as disclosed on Schedule 14(r), neither
Seller, its officers, directors and employees, nor any Shareholder and no member
of any of their respective immediate families, and no person or entity which is
controlled by, under common control with, or controlling any of them (each, an
"AFFILIATE") has, or at any time within the last two (2) years has had, a
material ownership interest in any business, corporate or otherwise, that is a
party to, or in any property that is the subject of, business relationships or
arrangements of any kind relating to the operation of the Business. No Affiliate
of Seller or any Shareholder is guaranteeing any obligations of the Seller.
(s) Assets Comprising the Business. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Business as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Business of the Seller in the ordinary course of the business of
the Seller, consistent with past practice, as determined by the Seller in good
faith and consistent with past
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(t) Questionable Payments. Seller has not, and to the knowledge of
the Seller and Shareholders, none of their Affiliates or employees have offered,
made or received any illegal or unlawful payment, bribe, kickback, political
contribution or other similar questionable payment for any referrals or
otherwise in connection with the ownership or operation of the Business,
including, without limitation, any of the same that would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended.
(u) Reimbursement Matters. Seller, to the extent necessary to
conduct its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 14(u), (i) Seller and Shareholders have not received any notice of
denial or recoupment from the Medicare or Medicaid programs, or any other third
party reimbursement source (inclusive of managed care organizations) with
respect to products or services provided by it, (ii) to Seller's and
Shareholders' knowledge, there is no basis for the assertion after the Closing
Date of any such denial or recoupment claim, and (iii) Seller and Shareholders
have not received notice from any Medicare or Medicaid program or any other
third party reimbursement source (inclusive of managed care organizations) of
any pending or threatened investigations or surveys with respect to, or arising
out of, products or services provided by Seller or otherwise, and to the
knowledge of Seller and Shareholders, no such investigation or survey is
pending, threatened or imminent. Seller shall not be considered to be in breach
of the foregoing unless and until recoupment claims attributable to operations
prior to Closing exceed the sum of $40,000.00. Notwithstanding the foregoing
Seller shall be liable for repayment of all recoupment claims attributable to
Seller's operations prior to the Effective Date.
(v) Environmental Compliance. Except as disclosed on Schedule
14(v), at all times during Seller's ownership of the Business, the Business has
not been, and currently is not, in violation of any environmental Governmental
Requirement and no notice has ever been served upon any Shareholder or Seller,
its agents or representatives or any prior owner of the Business, claiming any
violation of any Governmental Requirement concerning the environmental state,
condition or quality of any real or personal property in any related to the
Business, or requiring or calling attention to the need for any work, repairs or
demolition on or in connection with any of the real property in order to comply
with any governmental requirement concerning the environmental or healthful
state, condition or quality of the real property.
(w) Cash Receipts. The information contained on the Schedule of
Collections for the period commencing on the most recent Financial Statement
Date, and ending on the Effective Date, attached hereto as Schedule 14(w), is
accurate and complete.
(x) Accounts Receivable. The information contained on the Schedule
of Accounts Receivable Data as of the most recent Financial Statement Date,
attached hereto as Schedule 14(x), is accurate and complete.
(y) Shareholders. Seller and Shareholders represent and warrant
that other than David Verity, Peter Cummiskey, Gregory Guay, Patricia Connell
Fox, Maureen DaCosta Redmond, and James Connell (the "MAJORITY SHAREHOLDERS'),
all other shareholders of Seller (the "MINORITY SHAREHOLDERS") are passive
investors in the Seller, are not employees, consultants or independent
contractors of Seller, and have less than a 10% ownership interest in the
Seller.
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(z) Tax Information. Each of the Seller and each Subsidiary has
furnished Buyer with its (a) most recent tax registration certificates, and (b)
tax returns for the periods ended December 31, 1995 and December 31, 1996
required of it by each state or other locality in which it conducts business,
which tax returns in all instances where applicable include, but shall not be
limited to, income, franchise taxes, state and local tangible personal property
tax returns, and state and local sales tax returns, which registration
certificates and tax returns are set forth, collectively, on the Schedule of Tax
Information, attached hereto as Schedule 14(z). The balance sheet included in
the most recent Financial Statements for the Seller and each Subsidiary on a
consolidated basis sufficiently provides for all accrued, deferred and unpaid
federal, state, local and foreign net or gross income, profits, property, sales,
use, excise, license, franchise, severance, stamp, occupation, premium, windfall
profits tax, alternative and add-on minimum taxes, customs duty, added value,
payroll, employer's income, withholding and social security taxes, excise or
other taxes ("TAXES") and any penalties, interest, governmental charges,
assessments and deficiencies related thereto, payable by the Company or the
Subsidiary. All Taxes payable by the Seller or each Subsidiary, and all interest
and penalties thereon, whether disputed or not, have been paid in full when due,
all tax returns, declarations of estimated tax and other reports required to be
filed in connection therewith ("TAX RETURNS") have been accurately prepared and
completed on an appropriate basis and duly and timely filed in accordance with
all Governmental Requirements, all computations and taxable income correctly and
accurately made and reported in accordance with all Government Requirements, and
all withholdings and deposits required by Governmental Requirements to be made
by the Seller or each Subsidiary with respect to employee's withholding taxes
have been duly made. Except as set forth on Schedule 14(z), none of the Seller
or each Subsidiary has been delinquent in the payment of any Tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such deficiency
or claim. The federal income tax returns of the Seller and each Subsidiary have
been filed with the Internal Revenue Service for all of the fiscal years though
the year ended December 31, 1996, and no objections with respect thereto have
been received by the Seller, the Subsidiaries, or any Shareholder. There is not
now in force any extension of time with respect to the date on which any Tax
Return was or is due to be filed by or with respect to the Seller or any
Subsidiary or any waiver or agreement by the Seller or any Subsidiary for the
extension of time for assessment of any Tax. Neither the Seller nor any
Subsidiary is a party to any pending action or proceeding, and, to the knowledge
of the Seller, each Subsidiary, and the Shareholders, no action or proceeding
has been threatened by any Governmental Authority for assessment or collection
of any Taxes, nor has any claim for assessment or collection of Taxes been
asserted against the Seller or any Subsidiary. Neither the Seller nor any
Subsidiary is a party to any tax sharing agreement or arrangement. Neither the
Seller nor any Subsidiary has elected to be taxed in accordance with Subchapter
S of the Internal Revenue Code of 1986, as amended.
(aa) Recent Acquisitions. As of the Closing Date, Seller shall own
100% of the membership interests of First Community Care, L.L.C. ("FCC-LLC").
Prior to the date hereof, North Country Medical Supply, Inc. ("NORTH COUNTRY")
was merged with and into the Seller. Both FCC-LCC and North Country are free of
all liens, claims and encumbrances and shall have been fully paid for prior to
the date hereof.
15. Representations and Warranties of Buyer and IHS. Each of Buyer and
IHS represent and warrant to Seller and Shareholders that:
(a) Due Organization. Buyer is a duly organized, valid corporation
under the laws of the State of Florida. IHS is a duly organized, valid
corporation under the laws of the State of Delaware.
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(b) Due Authority. Buyer and IHS are duly authorized by law and
corporate policy and approval to: (i) enter into this Agreement and each
Transaction Document; (ii) make all warranties and representations made by Buyer
and IHS herein; and (iii) deliver all consideration provided for under the terms
hereof.
(c) Binding Authority. All signatures and agents designated as
agents/officers for Buyer and IHS for signing purposes have the authority to
bind Buyer and IHS to the terms of this Agreement.
(d) Cash Payment Authority. Buyer has the authority to cause the
cash payment of the Purchase Price to be delivered in accordance with the terms
of this Agreement.
(e) Brokers. No broker or finder has acted for the Buyer or IHS in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any broker's or finder's fee or other commission in
respect thereof based in any way on agreements, understandings or arrangements
with the Buyer or IHS.
(f) IHS Stock. IHS has duly authorized and reserved for issuance
the IHS Stock to be issued in connection herewith, and, when issued in
accordance with the terms of Article 7, such IHS Stock will be validly issued,
fully paid, and non-assessable and free of preemptive rights.
16. Survival of Representations and Warranties. The representations and
warranties of Seller, Shareholders, and Buyer contained and made pursuant to
this Agreement shall survive the execution of the Closing Date and for a period
of five (5) years after the Closing, notwithstanding any investigation at any
time made by or on behalf of the other party, provided that the representations
and warranties contained in paragraph 14(u) (Reimbursement Matters) and
paragraph 14(z) (Tax Information), shall survive until thirty (30) days after
the applicable period of limitations for audits by the applicable Governmental
Authority shall have expired, including extensions for any necessary appeals.
17. Restrictive Covenants.
(a) Non-Compete.
(i) Seller and Shareholders hereby agree that commencing on
the date hereof until the fifth (5th) anniversary of the Closing Date (the
"RESTRICTED PERIOD"), it, he or she will not, directly or indirectly, own,
manage, operate, join, control or participate, or have a proprietary interest
in, the ownership, management, operation or control, of or be connected with, in
any manner, any home health care business within fifty (50) miles of any
location set forth on the Schedule of Locations attached hereto as Schedule
17(a).
(ii) Gregory Guay hereby agrees that until the expiration of
the Restricted Period, he will only act in his capacity as chief financial
officer in a home health care business.
(b) Confidential Information. Certain confidential and proprietary
information is included within the Assets ("TRADE SECRETS"), including, without
limitation, with respect to some or all of the following categories of
information: (i) financial information, including but not limited to information
relating to earnings, assets, debts, prices, pricing structure, reimbursement
matters, volume of purchases or sales or other financial data whether related to
Seller or generally, or to particular products, services, geographic areas, or
time periods; (ii) supply and service information, including but not limited to
information relating to goods and services, suppliers' names or addresses, terms
of supply or service
-22-
<PAGE>
contracts or of particular transactions, or related information about potential
suppliers to the extent that such information is not generally known to the
public, and to the extent that the combination of suppliers or use of a
particular supplier, though generally known or available, may yield advantages
to the Buyer, details of which are not generally known; (ii) marketing
information, including but not limited to information relating to details about
ongoing or proposed marketing programs or agreements by or on behalf of the
Seller, sales forecasts, advertising formats and methods or results of marketing
efforts or information about impending transactions; (iv) personnel information,
including but not limited to information relating to employees' personal or
medical histories, compensation or other terms of employment, actual or proposed
promotions, hirings, resignations, disciplinary actions, terminations or reasons
therefor, training methods, performance, or other employee information; (v)
customer and patient information, including but not limited to information
relating to names, addresses or backgrounds of past, existing or prospective
clients, customers, payors, referral sources, and patients, records of
agreements and prices, proposals or agreements between any of them and Seller,
status of accounts or credit, patients' medical histories or related information
as well as customer lists; and (vi) inventions and technological information,
including but not limited to information related to proprietary technology,
trade secrets, research and development data, processes, formulae, data and
know-how, improvements, inventions, techniques, and information that has been
created, discovered or developed, or has otherwise become known to Seller or any
Shareholder, and/or in which property rights have been assigned or otherwise
conveyed to Seller, which information has commercial value in the business in
which the Seller is engaged. Seller and Shareholders shall hold all Trade
Secrets in confidence and will not discuss, communicate or transmit to others,
or make any unauthorized copy of or use any of the Trade Secrets; and will take
all reasonable actions that Buyer deems reasonably necessary or appropriate, to
prevent unauthorized use or disclosure of or to protect the Buyer's interest in
the Trade Secrets. The foregoing does not apply to information that by means
other than deliberate or inadvertent disclosure, by Seller, Shareholders or any
of their respective Affiliates, becomes well known to the public; or disclosure
compelled by judicial or administrative proceedings after they diligently try to
avoid each disclosure and afford Buyer the opportunity to obtain assurance that
compelled disclosures will receive confidential treatment.
(c) Non-Solicitation and Non-Pirating. Seller and each Shareholder
hereby agree that, during the Restricted Period it or he will not, directly or
indirectly, for itself or himself or on behalf of any other person, firm, entity
or other enterprise: (i) solicit or in any way divert or take away any person or
entity that, prior to the Closing Date, was a patient, client, customer, payor,
referral source, facility or patient of the Seller; or (ii) hire, entice away or
in any other manner persuade any person who was an employee, consultant,
representative or agent of the Seller prior to the Closing Date, to alter,
modify or terminate their relationship with the Buyer.
(d) Necessary Restrictions. Seller and each Shareholder acknowledge
that the restrictions contained in this Agreement are reasonable and necessary
to protect the legitimate business interests of the Buyer and that any violation
thereof by any of them would result in irreparable harm to the Buyer, and that
damages in the event of any such breach of this Agreement will be difficult, if
not impossible, to ascertain. Accordingly, the Seller and each Shareholder agree
that upon the violation of any of the restrictions contained in this Agreement,
the Buyer shall be entitled to obtain from any court of competent jurisdiction a
preliminary and permanent injunction as well as any other relief provided at
law, equity, under this Agreement or otherwise, without the necessity of posting
any bond or other security whatsoever. In the event any of the foregoing
restrictions are adjudged unreasonable in any proceeding, then the parties agree
that the period of time or the scope of such restrictions (or both) shall be
adjusted to such a manner or for such a time (or both) as is adjudged to be
reasonable.
-23-
<PAGE>
(e) Remedies For Breach. The Seller and each Shareholder
acknowledge that the covenants contained in this Article 17 are independent
covenants and that any failure by the Buyer to perform its obligations under
this Agreement or any other agreement shall not be a defense to enforcement of
the covenants contained in this Agreement, including but not limited to a
temporary or permanent injunction.
(f) Exception. Notwithstanding anything to the contrary set forth
in this paragraph 17, until the Closing Date, the Buyer, Seller and Shareholders
acknowledge and agree that the Shareholders and the Seller shall continue to own
the Seller and the Assets, respectively.
18. Indemnification; Remedies.
(a) Indemnification by Seller and Majority Shareholders. Seller and
Majority Shareholders shall, jointly and severally, indemnify and hold harmless
at all times Buyer and its stockholders, directors, officers, employees, agents
and assigns, from and against any Damages (as hereinafter defined) resulting
from: (i) any inaccurate representation made by Seller or any Shareholder in,
pursuant to or under this Agreement or any Transaction Document; (ii) any breach
of any warranty made by Seller or any Shareholder in, pursuant to or under this
Agreement or any Transaction Document; (iii) any breach or default in the
performance by Seller or any Shareholder of any of the covenants to be performed
by Seller or any Shareholder hereunder or in any Transaction Document; (iv) any
Excluded Liabilities; and (v) any liabilities arising from the ownership or
operation of any Subsidiary.
(b) Indemnification by Principal Shareholders. Principal
Shareholders shall, jointly and severally, indemnify and hold harmless at all
times Buyer and its stockholders, directors, officers, employees, agents and
assigns, from and against any Damages resulting from any amounts due to Buyer
pursuant to paragraph 3, above.
(c) Indemnification by Buyer. Buyer shall indemnify and hold
harmless at all times Seller or Majority Shareholders from and against any
Damages resulting from: (i) any inaccurate representation made by Buyer in,
pursuant to or under this Agreement; (ii) any breach of any warranty made by
Buyer in, pursuant to or under this Agreement; and (iii) any breach or default
in the performance by Buyer of any of the covenants to be performed by Buyer
hereunder.
(d) 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, settlements, penalties, and damages, including, without limitation,
counsel fees incurred in investigating or in attempting to avoid or oppose the
imposition thereof. The term "Damages" shall include, but shall not be limited
to, any Liabilities Deficiency or Asset Value Deficiency, as defined in
paragraph 6 hereof.
(e) Indemnity Limitations. The maximum aggregate liability of the
Seller and Majority Shareholders for indemnification hereunder shall not exceed
an amount equal to $10,100,000. In no event shall each Majority Shareholder's
indemnification obligation under this paragraph 17 exceed 150% of the amount of
the Purchase Price payable to such Majority Shareholder (in accordance with his
or her pro rata ownership interest in the Seller).
(f) Remedies.
-24-
<PAGE>
(i) Buyer's Remedies. If Buyer makes written request to Seller
or the Majority Shareholders for the payment of Damages, then Seller
and/or Majority Shareholders shall pay to Buyer the amount of Damages
requested within ten (10) days from the date on which such request is
received (the "NOTICE PERIOD").
(ii) Seller's Remedies. If Seller or Majority Shareholders
make written request to Buyer for the payment of Damages, then Buyer
shall pay to Seller or Majority Shareholders the amount of Damages
requested within the Notice Period.
(iii) Notice of Dispute. Notwithstanding the foregoing
provisions of this subparagraph (d), if a party (the "DEMANDING PARTY")
serves a request for payment on the other party (the "OBLIGATED
PARTY"), the Obligated Party shall have the option to provide written
notice to the Demanding Party (the "NOTE OF DISPUTE") within the Notice
Period that the Obligated Party disputes, in good faith, the validity
or amount of the Damages set out in the request for payment of Damages,
and if the affected parties cannot agree on the validity or amount of
such Damages within ten (10) days following the Notice Period, the
dispute as to the validity or amount of such claim or liability (the
"DISPUTE") shall be settled as set forth in subparagraph (f) of this
paragraph 18.
(iv) Arbitration. If arbitration is required pursuant to this
paragraph 18, Buyer and Seller or the Majority Shareholders each shall
select an arbitrator within ten (10) business days after the Notice of
Dispute is delivered; 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 ten (10) days or more has
elapsed, the arbitrator appointed by the other party shall arbitrate
the dispute. If the Seller and the Majority Shareholders shall be
subject to a Dispute with Buyer, they shall, unless Buyer elects
otherwise in its sole and absolute discretion, be required to act as a
group with respect to any and all rights and obligations with respect
to the resolutions of the Dispute as provided in this paragraph 18.
(g) Settlement of Disputes.
(i) Disputes Not Involving Third Parties. If a Dispute
involves claims not involving any third party, Buyer and Seller or
Majority Shareholders shall settle the Dispute by submitting the same
to binding arbitration.
(ii) Disputes Involving Claims Made by Third Parties. If a
Dispute involves claims made by one or more third parties (a "THIRD
PARTY CLAIM"), the party asserting its right to indemnification for
such Third Party Claim shall give written notice to the other party as
soon as practical after such asserting party receives notice of such
Third Party Claim; provided, however the failure to timely give such
notice shall not affect such party's right to indemnification except to
the extent the party to receive the notice is damaged by such delay.
Upon such notice to Seller or Majority Shareholders, Buyer and Seller
and/or Majority Shareholders shall submit the Dispute to arbitration,
and the following procedures shall apply:
(A) Solely for purposes of determining the party
responsible for defending the Third Party Claim, the
arbitrators shall deem such Third Party Claim to be valid
(although such consideration shall not be an admission by any
party as to any liability to any party). The arbitrators then
shall decide which party shall be liable for the Third Party
Claim if it is successfully prosecuted by such
-25-
<PAGE>
third party or parties, and the decision of such arbitrators
with respect to such liability shall be final and binding as
among the parties. (Such party determined to be liable for
such claim sometimes shall be referred to herein as the
"RESPONSIBLE PARTY".)
(B) If the Responsible Party refuses to settle (and pay
the settlement amount of) the Third Party Claim immediately,
then the Responsible Party immediately shall select one of the
following two options:
Option One: The Responsible Party, at the Responsible
Party's sole expense and risk, can assume the defense of
the Third Party Claim, provided the Responsible Party first
places in escrow, in favor of the other party, adequate
collateral (as determined by the arbitrators on
consideration of all relevant facts including the amounts
of any already held in the Escrow Agreement (excluding the
Claw-back Amount) and Payment Escrow Agreement to protect
the other party from all Damages with respect to such Third
Party Claim (in which case the other party immediately
shall be reimbursed by the Responsible Party for any amount
the other party is required to pay with respect to such
Third Party Claim; or
Option Two: The Responsible Party, at the Responsible
Party's expense and risk, can co-defend the Third Party
Claim with the other party, with the Responsible Party also
responsible for paying all costs incurred by the other
Party in connection with such defense, including, without
limitation, the legal fees and expenses of the other
party's counsel for its reasonable involvement in such
defense. If the other party is found to be liable for any
portion of such Third Party Claim, the Responsible Party
immediately shall reimburse the other party for any amount
required to be paid by the other party with respect
thereto; provided, however, if the Responsible Party
selects this option, the Responsible Party shall attempt
diligently to have the other party removed as a party to
any legal action involving the Third Party Claim (and, upon
such removal, the involvement of the other party's counsel
shall cease unless requested by the Responsible Party or
the Responsible Party's counsel); and
(C) No party may settle any Third Party Claim without
the prior consent of the other parties hereto unless the
settlement will not have a material adverse effect on the
other party hereto. The parties will resolve any Dispute with
respect to any such proposed settlement in accordance with
this paragraph 18.
(D) Any party responsible for defending a Third Party
Claim shall proceed with diligence and in good faith with
respect thereto.
19. Use of Corporate and Fictitious Names. Seller and Shareholders
agree to take all actions necessary to assist Buyer in obtaining the rights to
use the corporate name and any fictitious names used in its conduct of any of
the Business, including but not limited to the execution of any assignments and
consents to use such name. If Buyer attempts to use such name, Seller shall
consent to Buyer's use of such name if such consent is required by any state,
county or local governmental authority.
-26-
<PAGE>
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, shall be considered to be part of the Assets being purchased by Buyer
and, on consummation of the transactions contemplated by this Agreement, shall
be the property of Buyer.
21. Post-Closing Requirements of Seller.
(a) Payment Escrow. On the date hereof, Buyer shall pay over and
deliver to or on behalf of Seller (and shall be credited, dollar-for-dollar, as
partial payment of the Purchase Price) to the Paying Agent, in escrow (the
"PAYMENT ESCROW"), an amount equal to the Limited Liabilities as specified in
paragraph 2(b)(iii), above, to be held by the Paying Agent subject to the terms,
conditions, and provisions of the Payment Escrow Agreement. The Paying Agent
shall be an attorney at law authorized to practice law in the State of New York
or a trust company or bank having trust powers in the State which Paying Agent
has been selected by Seller and approved by Buyer.
(i) Seller shall pay all costs and expenses of the Payment
Escrow, including without limitation, any fees or costs of the Paying
Agent.
(ii) Seller shall be obligated to see that the Paying Agent
timely and properly pays all Limited Liabilities, and that the Paying
Agent obtains and delivers to Buyer the "FINAL RELEASE" referred to in
the Payment Escrow Agreement, or other reasonable evidence of payment
acceptable to Buyer for all Limited Liabilities in excess of $5,000.
Additionally, Seller shall prepare and deliver UCC termination
statements, if applicable.
(iii) If any existing obligation has not been paid or
performed and a Final Release or other acceptable evidence of payment
therefor delivered or performance thereof to Buyer within nine (9)
months following the date hereof, then any unpaid portion of such
liability shall constitute "LIABILITIES" subject to the provisions of
paragraph 5, above.
(b) Final Financial Information. Not later than forty-five (45)
days following Closing, Seller, at Seller's sole cost and expense, shall deliver
to Buyer "FINAL FINANCIAL INFORMATION", which shall include:
(i) a balance sheet of Seller as of the date hereof, prepared
in accordance with GAAP;
(ii) an income statement of Seller for the period commencing
on the date succeeding the last day of the most recent Financial
Statement Date and ending on the Closing Date;
(iii) an inventory of fixed assets of Seller as of the Closing
Date;
(iv) an inventory of supplies of Seller as of the Closing
Date;
(v) an aged schedule of accounts receivable of Seller as of
the Closing Date;
and
(vi) a cash settlement of Seller, in the form provided by
Buyer.
-27-
<PAGE>
(c) Liabilities Deficiency. If all such Final Financial
Information is not delivered to Buyer within such forty-five (45) day period
following Closing, Seller and Shareholders shall be liable to Buyer in an amount
equal to $500.00 for each day after such thirty (30) day period until all such
Final Financial Information is delivered to Buyer, and such liability shall
constitute a Liabilities Deficiency under the provisions of paragraph 5, above.
22. Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer on any person, other than the parties hereto, and
their successors, any rights or remedies under or by reason of this Agreement
other the affiliates entitled to indemnification pursuant to paragraph 18.
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. Notices. All notices, consents, waivers and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
properly given when personally delivered to the party or parties entitled to
receive the notice or three (3) business days after sent by certified or
registered mail, postage prepaid, or on the business day after sent by
nationally recognized overnight courier, in each case, properly addressed to the
party or parties entitled to receive such notice at the address stated below:
to Seller: First Community Care, Inc.
210 John Glenn Drive
Suite 12
Amherst, NY 14228
Attn: Peter Cummiskey
and David Verity
to Shareholders: at the addresses set forth on Schedule 24
-----------
with a copy to: Williams, Stevens, McCarville & Frizzell, P.C.
420 Main Street
Buffalo, NY 14202-3687
Attn: Michael B. Sexton, Esq.
to Buyer: c/o RoTech Medical Corporations
4506 L.B. McLeod Road, Suite F
Orlando, FL 32811
Attn: Stephen P. Griggs
with copies to: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall Elkins
and
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<PAGE>
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attn: Andrew S. Bogen
25. Choice of Law. The laws of the State of New York applicable to
contracts executed, delivered and to be fully performed in such State govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
26. Sections and Other Headings. Section, paragraph, and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
27. Counterpart Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one instrument. Facsimile signatures may be
deemed binding for this Agreement, or any modification or amendment hereto, or
any leases or other documents contemplated hereby, provided that originals of
same are delivered within a reasonable time.
28. Gender. All gender employed in this Agreement shall include all
genders, and the singular shall include the plural and the plural shall include
the singular whenever and as often as may be appropriate.
29. Parties in Interest. This Agreement shall be binding on and shall
inure to the benefit of, and be enforceable by, Seller, Shareholders and Buyer
and their respective successors and assigns. Buyer shall be entitled to assign
its rights under this Agreement and the Transaction Documents after the Closing.
Seller and the Shareholders may not assign this Agreement or any of their rights
hereunder without the prior consent of Buyer.
30. Entire Agreement. This Agreement including all Schedules and
Exhibits hereto, and all Transaction Documents constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no agreements, understandings, restrictions, warranties, or representations
between the parties with respect to the subject matter hereof other than as set
forth herein or as herein provided.
31. Performance. In the event of a breach by Seller or any Shareholder
of any of their respective obligations hereunder, the Buyer shall have the
right, in addition to any other remedies which may be available, to obtain
specific performance of the terms of this Agreement, and Seller and each
Shareholder hereby waives the defense that there may be an adequate remedy at
law.
32. Waiver, Discharge, Etc. This Agreement and the Transaction
Documents and the obligations hereunder and thereunder shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement or any Transaction Document shall be held to be a waiver of any
other or subsequent breach.
-29-
<PAGE>
33. Cooperation Further Assistance. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed or delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably requested or
necessary to carry out the intent and purpose of this Agreement, and to vest in
Buyer good title to, possession of and control of all the Assets.
34. Joint and Several. Subject to the limitations set forth in
paragraph 18(e) of this Agreement, Seller and the Majority Shareholders shall be
jointly and severally liable for all representations, warranties and
obligations, including, without limitation, indemnification obligations, and
covenants made by any of them pursuant to this Agreement, including, without
limitation, any made pursuant to any Transaction Document. For all purposes of
this Agreement, any representation or warranty that is qualified to be "to the
knowledge of Seller" or by a requirement that Seller shall have received
"notice" of any matter, or any similar qualification shall be deemed to include
the knowledge of the Shareholders or notices to the Shareholders, as the case
may be.
35. Independent Legal Counsel. Seller and Shareholders represent and
warrant that each party has had the opportunity to seek the advice of
independent legal counsel prior to signing this Agreement, and that the Buyer
has recommended to Seller and Shareholders that such party obtain legal counsel.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
BUYER:
NORTHEAST MEDICAL
EQUIPMENT, INC.
By: /s/
----------------------------------
Name: Stephen P. Griggs
Title: President
IHS:
INTEGRATED HEALTH SERVICES,
INC.
By: /s/
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FIRST COMMUNITY CARE, INC..
By:/s/ DAVID M. VERITY
---------------------------------
Name: David Verity
Title: President
STATE OF NEW YORK
COUNTY OF ERIE
The foregoing instrument was acknowledged before me by David Verity, as
President of First Community Care, Inc., a New York corporation, on behalf of
the corporation, and who is personally known to me; or has produced ___
_________________ as identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- ------------------------------- ------------------------------------
Date Notary Signature
------------------------------------
Notary Name Printed
My Commission Expires:
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
-------
-31-
<PAGE>
SHAREHOLDERS:
/s/ PETER CUMMISKEY
--------------------------------------
Peter Cummiskey
STATE OF NEW YORK
COUNTY OF ERIE
-----------
The foregoing instrument was acknowledged before me by Peter Cummiskey,
a shareholder of First Community Care, Inc., a New York corporation, on behalf
of the corporation, and who is personally known to me; or has produced as
identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- -------------------------- ------------------------------------
Date Notary Signature
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
-------------------------------------
Notary Name Printed
My Commission Expires:
/s/ DAVID M. VERITY
-------------------------------------
David Verity
STATE OF NEW YORK
COUNTY OF ERIE
----------
The foregoing instrument was acknowledged before me by David Verity, a
shareholder of First Community Care, Inc., a New York corporation, on behalf of
the corporation, and who is personally known to me; or has produced ___
________________ as identification.
April 29, 1998 /s/ JAMES E. KELLY
- ----------------------------- -------------------------------------
Date Notary Signature
-------------------------------------
Notary Name Printed
My Commission Expires:
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
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<PAGE>
/s/ JOHN E. YOUNG
-------------------------------------
John Young
STATE OF NEW YORK
COUNTY OF ERIE
---------
The foregoing instrument was acknowledged before me by John Young, a
shareholder of First Community Care, Inc., a New York corporation, on behalf of
the corporation, and who is personally known to me; or has produced ___
_______________________ as identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- ---------------------------- ------------------------------------
Date Notary Signature
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
------------------------------------
Notary Name Printed
My Commission Expires:
/s/ GREGORY GUAY
-------------------------------------
Gregory Guay
STATE OF NEW YORK
COUNTY OF ERIE
----------
The foregoing instrument was acknowledged before me by Gregory Guay, a
shareholder of First Community Care, Inc.., a New York corporation, on behalf of
the corporation, and who is personally known to me; or has produced ___
_________________ as identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- ----------------------------- -------------------------------------
Date Notary Signature
-------------------------------------
Notary Name Printed
My Commission Expires:
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
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<PAGE>
/s/ PATRICIA CONNELL FOX
-------------------------------------
Patricia Connell Fox
STATE OF NEW YORK
COUNTY OF ERIE
----------
The foregoing instrument was acknowledged before me by Patricia Connell
Fox, a shareholder of First Community Care, Inc., a New York corporation, on
behalf of the corporation, and who is personally known to me; or has produced __
_________________ as identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- ---------------------------- -------------------------------------
Date Notary Signature
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
-------------------------------------
Notary Name Printed
My Commission Expires:
/s/ PATRICIA CONNELL FOX
-------------------------------------
Maureen Da Costa Redmond
By: Patricia Connell Fox
as Attorney-In-Fact
STATE OF NEW YORK
COUNTY OF ERIE
----------
The foregoing instrument was acknowledged before me by Patricia Connell
Fox, as Attorney-In-Fact for Maureen Da Costa Redmond, a shareholder of First
Community Care, Inc., a New York corporation, on behalf of the corporation, and
who is personally known to me; or has produced _________________________________
as identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
- -------------------------------- -------------------------------------
Date Notary Signature
-------------------------------------
Notary Name Printed
My Commission Expires:
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
-34-
<PAGE>
/s/ PATRICIA CONNELL FOX
------------------------------------
James Connell
By: Patricia Connell Fox
as Attorney-In-Fact
STATE OF NEW YORK
COUNTY OF ERIE
-----------
The foregoing instrument was acknowledged before me by Patricia Connell
Fox, as Attorney-In-Fact for James Connell, a shareholder of First Community
Care, Inc., a New York corporation, on behalf of the corporation, and who is
personally known to me; or has produced _____________________ as identification.
April 29, 1998 /s/ JAMES E. KELLY
- ------------------------------- -------------------------------------
Date Notary Signature
-------------------------------------
Notary Name Printed
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
----------
/s/ PATRICIA CONNELL FOX
-------------------------------------
Maurice Jack Connell
By: Patricia Connell Fox
as Attorney-In-Fact
STATE OF NEW YORK
COUNTY OF ERIE
------------
The foregoing instrument was acknowledged before me by Patricia Connell
Fox, as Attorney-In-Fact for Maurice Jack Connell, a shareholder of First
Community Care, Inc., a New York corporation, on behalf of the corporation, and
who is personally known to me; or has produced _______________________________as
identification.
APRIL 29, 1998 /s/ JAMES E. KELLY
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Date Notary Signature
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Notary Name Printed
My Commission Expires:
JAMES E. KELLY
NOTARY PUBLIC STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
MY COMMISSION EXPIRES 3-31-99
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SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(A) - Other Assets
Schedule 1(a)(v)(B) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(v) - Wire Instructions
Schedule 4 - North Country Indebtedness
Schedule 5(a) - Existing Obligations
Schedule 5(b) - Unassumed Contracts
Schedule 13 - Material Change
Schedule 14(a) - Subsidiaries, Joint Ventures, etc.
Schedule 14(b) - Consents
Schedule 14(c) - Litigation
Schedule 14(g) - Contracts
Schedule 14(i) - Personnel Payrates; Employee Benefits
Schedule 14(j) - Employee Benefit Plans
Schedule 14(k) - Insurance
Schedule 14(o) - Financial Statements
Schedule 14(p) - Supplemental Tax Information
Schedule 14(q) - Adverse Business Developments
Schedule 14(r) - Relationships
Schedule 14(u) - Reimbursement Matters
Schedule 14(v) - Environmental Compliance
Schedule 14(w) - Cash Receipts
Schedule 14(x) - Accounts Receivable
Schedule 14(z) - Tax Information
Schedule 17(a) - Locations
Schedule 24 - Shareholders' Address
Exhibit A - Annual Operating Profit
Exhibit 2(b)(ii) - Escrow Agreement
Exhibit 2(b)(iii) - Payment Escrow Agreement
Exhibit 3 - Promissory Notes
Exhibit 11(b)(ii) - Seller's Opinion
Exhibit 11(b)(iv) - Employment Agreements
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EXHIBIT "A"
OPERATING PROFIT
1. General Standards.
(a) Performance. Except as otherwise expressly agreed in
writing, the parties intend that the financial and economic performance to be
determined and measured pursuant to this Exhibit "A" shall be determined with
respect to Seller's Business during the period commencing on the date hereof and
ending on the Closing Date, and thereafter until the end of the Applicable
Period, solely with respect to so much of the business operations of Buyer as
consists of the business enterprise previously conducted by the Corporation
before being acquired by Buyer (collectively, the "ACQUIRED ENTERPRISE").
Accordingly, all references herein to revenues, expenses, costs, profits,
losses, and any other transaction or activity, whether by reference to "Buyer",
or in any other manner, shall mean and refer only to so much thereof as pertains
directly to the Acquired Enterprise, unless such reference specifically provides
otherwise. The parties expressly intend all such calculations to provide a
determination of the profitability of the Acquired Enterprise, determined as if
such Acquired Enterprise at all times operated as an autonomous entity.
(b) Determination of Operating Profit. The Operating Profit to
be determined hereunder shall be calculated on a pre-tax basis in accordance
with generally accepted accounting principles, consistently applied ("GAAP"), as
further defined, limited, or explained as set forth herein.
2. Income and Cost.
(a) Income and Revenue. Income shall be accounted for on the
accrual method consistent with the prior accounting methods of the Acquired
Enterprise, and shall consist of all direct revenues, defined as all "RENTAL
REVENUE" and "SALES REVENUE", plus or minus the net change in unbilled revenue,
plus or minus gain or loss from equipment sales, plus or minus sales credits and
allowances, plus investment income.
(b) Costs and Expenses. Costs shall include the following:
(1) DIRECT EXPENSES incurred as kept on the accrual
method, including salary paid to any employee and related payroll taxes.
(2) BAD DEBT expenses shall be the actual bad debts
written off, plus or minus the change in allowance for bad debts. For the
purpose of this calculation, the allowance for bad debts is considered equal to
the amount of all accounts receivable in excess of 120 days old.
(3) REASONABLE TRAVEL EXPENSES of employees or
representatives of ROTECH MEDICAL CORPORATION ("ROTECH") to and from its
corporate offices on behalf of Buyer's matters, to be allocated on a reasonable
basis.
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(4) INTEREST on all or any net intercorporate borrowing
from Integrated Health Services, Inc. ("IHS") at the cost of such funds to IHS;
provided that interest on any amounts borrowed by the Acquired Enterprise after
the Closing by reason of a reduction in the Acquired Enterprise's cash resulting
from the Buyer's delay in obtaining a supplier number from Medicare shall not be
included as expenses for purposes of determining costs.
(5) GROUP OR CONSOLIDATED PURCHASES for items benefitting
the Acquired Enterprise purchased by IHS, RoTech or by Buyer, to be allocated at
actual cost in accordance with usage. Costs to be allocated include costs, if
any, of transportation, storage, etc.
(6) DEPRECIATION EXPENSES will be limited, after the
Closing, to an amount not to exceed $37,000 per month.
(7) CORPORATION'S OVERHEAD. Prior to the Closing, the
general, administrative and overhead costs of Seller. The general,
administrative, and overhead costs of Buyer after the Closing, to the extent
allocable to the Acquired Enterprise on a reasonable basis.
(8) MANAGEMENT AGREEMENT FEES AND EXPENSES. Any management
fees that might be payable under any management agreement in effect with respect
to the operation of Seller's Business after the date hereof shall not be
deducted from revenue and shall not be treated as expenses. Any reimbursements
of expenses payable to the Buyer under a management agreement shall be treated
as expenses to the extent same would be treated as expenses if they had been
incurred by Buyer after the Closing Date.
(c) Excluded Items. Costs and expenses for purposes of
calculating operating profits shall not include the following:
(1) BRANCH OFFICES. All start-up costs, operating
profits, and operating losses incurred by Buyer in the initial six (6) months on
the start-up, opening, or operation of a branch office or location opened after
the date hereof shall be excluded from calculations of Operating Profits for
purposes of this Agreement.
(2) IHS/ROTECH OVERHEAD. Unless otherwise mutually agreed
by Buyer and the Seller, IHS and RoTech corporate overhead or costs will not be
allocated to Buyer or considered in Operating Profits.
(3) COSTS OF ACQUIRING THE ACQUIRED ENTERPRISE. The
calculation of Operating Profits will not include costs or amortization of costs
incurred in the acquisition of the Acquired Enterprise, and any liabilities
assumed by RoTech and subsequently paid off, which will be included in the
intercorporate borrowings in paragraph 2(b)(4), above.
(d) Acquisition of Enterprises. Buyer may from time to time
offer to acquire additional enterprises, in which case Buyer shall first seek
the consent thereto from the Seller. If the Seller consents thereto the
calculation of Operating Profits shall be adjusted in a mutually satisfactory
manner. If Seller does not so consent Buyer shall not acquire such enterprise.
Nothing contained herein shall be deemed to affect, limit or restrict the right
of RoTech or IHS to make any acquisitions.
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EXHIBIT 2.3
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
THIS AGREEMENT is made as of March 20, 1998, by and among REGIONAL
MEDICAL SUPPLY, INC., a New Mexico corporation, having its principal place of
business at 1402 Indian Wells Road, Alamogordo, New Mexico (the "SELLER" or the
"CORPORATION"), KEITH THOMAS AND LAURIE NUCKOLS, the shareholders of Seller (the
"SHAREHOLDERS"), INTEGRATED HEALTH SERVICES AT JEFFERSON HOSPITAL, INC., a
Delaware corporation (the "BUYER") and INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation ("IHS").
W I T N E S S E T H :
WHEREAS, Seller operates a home respiratory care and durable medical
equipment business in the State of New Mexico (the "BUSINESS"); and
WHEREAS, Shareholders are the sole shareholders of the Seller; and
WHEREAS, Buyer is a wholly owned subsidiary of IHS;
WHEREAS, the Seller wishes to transfer its business and substantially
all of its assets to the Buyer solely in exchange for voting shares of IHS in a
transaction intended to qualify as a "reorganization" within the meaning of
ss.368(a)(1)(c) of the Internal Revenue Code of 1986, as amended (the "CODE"),
it being contemplated by the Seller and Buyer that the Seller will thereafter,
as an integral part of the transaction, distribute the IHS Shares to the
Shareholders in complete liquidation of the Seller and dissolve; and Buyer also
desires to acquire from Seller and each Shareholder, and Seller and each
Shareholder desire to grant to Buyer, covenants not to compete and other
restrictive covenants as described in paragraph 16 hereof (the "RESTRICTIVE
COVENANTS"); and
WHEREAS, the consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby has been obtained,
including without limitation, all approvals of governmental authorities and
parties to any contracts to be assigned to Buyer in connection herewith.
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, Restrictive Covenants and Other Obligations.
(a) The Assets. As of the Effective Date referred to below in
paragraph 8, Seller shall be deemed to have sold, transferred, conveyed and
assigned, free and clear of all liens, claims, security interests, pledges,
restrictions on transfer or use and other encumbrances of any kind or nature
whatsoever ("LIENS"), all of Seller' rights, title and interest in, to or under:
(i) Accounts Receivable. All of the accounts receivable of
the Business including, without limitation, all accounts receivable set
forth on the Schedule of Accounts Receivable Data attached hereto as
Schedule 1(a)(i); and
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(ii) Inventory; Fixed Assets. All inventory and fixed
assets of the Business, including, without limitation, all of the same
set forth on the Schedule of Inventory and Fixed Assets attached hereto
as Schedule 1(a)(ii); and
(iii) Motor Vehicles. All motor vehicles of the Business,
including without limitation, all of the same set forth on the Schedule
of Motor Vehicles attached hereto as Schedule 1(a)(iii); and
(iv) Property Rights. All real property, easements and
rights of way permitting access to the Business; and
(v) Other Assets. All other assets of any kind, tangible
or intangible, real, personal or mixed, owned and used or held for use
by Seller in connection with the Business, including, without
limitation, all of the following: (A) all corporate compliance
materials; (B) the Patients' List of the Business, as described in
Schedule 1(a)(v)(B); (C) the telephone numbers listed on the Schedule
of Telephone Numbers and Licenses attached hereto as Schedule
1(a)(v)(C); (D) all personal property, machinery and equipment; (E) all
of Seller's prepaid assets; (F) rights under contracts, agreements, and
instruments; (G) any Assets used in the operation of the Business, but
not owned by the Seller; and (H) all intangible rights of Seller of
every kind and description used in, or held for use in connection with,
the operation of the Business, including, without limitation, all
intangible assets, and to the extent permitted by applicable law, all
licenses, permits and authorizations.
(b) Additional Assets. The Seller agrees and acknowledges that
the Assets also shall include all of the assets arising out of the operation of
the Business during the period commencing on the Effective Date and terminating
on the Closing Date (the "INTERIM PERIOD"), including without limitation, any
accounts receivable generated (whether or not billed) during the Interim Period
(the "INTERIM PERIOD RECEIVABLES"), any cash collected in respect of any
accounts receivable, and any inventory or equipment acquired by Seller during
such Interim Period in connection with the operation of the Business.
(c) Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and Seller shall not be deemed to have sold, transferred,
conveyed or assigned the following assets to Buyer: Seller's Certificate of
Incorporation, qualification to do business in any jurisdiction, taxpayer
identification number, minute books, stock transfer records and other documents
related specifically to Seller's corporate organization and maintenance, any
non-material tangible assets (such as inventory or supplies) used or disposed of
in the ordinary course of business consistent with past practice, and those
assets listed on Schedule 1(c) attached hereto (collectively, "EXCLUDED
ASSETS").
(d) Restrictive Covenants. Pursuant to paragraph 16 hereof,
each of Seller and Shareholder is granting to Buyer the Restrictive Covenants.
(e) Other Obligations. From and after the Closing Date, the
Seller will not engage in any business, will promptly liquidate and dissolve as
a corporation, and will distribute the IHS Shares received pursuant to paragraph
2 below to the Shareholders in complete cancellation and redemption of their
shares of the Seller's capital stock.
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2. Purchase Price; Method of Payment.
(a) Purchase Price. The aggregate "PURCHASE PRICE" for the
Assets and the Restrictive Covenants shall be Six Hundred Seventy Five Thousand
Dollars ($675,000), Five Hundred Forty Five Thousand Dollars ($545,000) of which
shall be payable in newly issued shares of voting common stock of IHS (the "IHS
SHARES") valued as set forth in paragraph 7(a) below. The Purchase Price shall
be allocated among the Assets and the Restrictive Covenants in the manner set
forth on the Allocation Schedule attached hereto as Schedule 2(a), and the
parties hereto expressly consent to the allocation stated therein.
(b) Method of Payment. At the Closing (as defined in paragraph
8), Buyer shall pay, disburse, and deliver the Purchase Price as follows:
(i) IHS Shares equal to Seventy Thousand Dollars
($70,000) thereof (having a value determined as of the date hereof in
accordance with Section 7(a) below) (the "ESCROWED SHARES" or "ESCROW
FUND"), together with a copy of a fully executed stock pledge agreement
in the form of Exhibit 2(b)(i)-A hereto (the "STOCK PLEDGE AGREEMENT"),
shall be delivered to Crestar Bank, as escrow agent ("ESCROW AGENT"),
to be held by Escrow Agent during the Escrow Period (as defined in
paragraph 5(d), below), pursuant to the terms of an Escrow Agreement,
in the form attached hereto as Exhibit 2(b)(i)-B (the "ESCROW
AGREEMENT"), pursuant to which, among other things, the Escrow Agent
shall acknowledge that it is holding the Escrowed Shares as the Agent
of Buyer pursuant to the Stock Pledge Agreement. The entire Escrow Fund
shall be subject to the provisions of paragraphs 5 and 17 hereof.
(ii) One Hundred Thousand Dollars ($100,000) thereof,
in cash, shall be paid and delivered to the "PAYING AGENT" designated
by Seller (and reasonably satisfactory to Buyer), to be held and
administered pursuant to the "PAYMENT ESCROW AGREEMENT" attached hereto
as Exhibit 2(b)(ii); and
(iii) Thirty Thousand Dollars ($30,000) in cash shall
be paid to Seller by wired funds to Seller's account numbers as set
forth on the Schedule of Wire Instructions attached hereto as Schedule
2(b)(iii);
(iv) IHS Shares equal to Four Hundred Seventy-Five
Thousand Dollars ($475,000) (having a value determined as of the date
hereof in accordance with Section 7(a) below) (the balance of the
Purchase Price) shall be delivered to the Shareholders. The parties
agree that the Buyer shall deliver the IHS Stock pursuant to this
Section 2(b)(v) within a reasonable period of time following the
Closing, and that IHS will certify to each Shareholder that such
Shareholder is a shareholder of IHS upon Closing.
3. Indemnity Against Creditors Claims; No Assumption of
Liabilities. Seller has requested that Buyer waive the requirements of the bulk
sales and transfer laws of the State of New Mexico. Seller and Shareholder agree
to indemnify Buyer and save and hold Buyer harmless against all Damages (as
defined in paragraph 17(c)) arising out of any claims made by creditors
(including, without limitation, any Federal, state or local taxing authority) of
Seller that relate to the Business, or that arise out of the failure to comply
with any of such laws.
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4. Closing Date Liabilities.
(a) Seller and the Shareholders represent and warrant that, to
the best of Seller's and Shareholders' knowledge and belief after diligent
inquiry, all of Seller's liabilities, as of the Closing Date are listed on the
Schedule of Liabilities attached hereto as Schedule 4(a). For purposes of this
Agreement "LIABILITIES" shall mean and include all claims, lawsuits,
liabilities, obligations or debts of any kind or nature whatsoever, whether
absolute, accrued, due, direct or indirect, contingent or liquidated, matured or
unmatured, joint or several, whether or not for a sum certain, whether for the
payment of money or for the performance or observance of any obligation or
condition, and whether or not of a type which would be reflected as a liability
on a balance sheet (including, without limitation, federal, state and local
taxes of any nature) in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), including without limitation,
malpractice or other tort claims, claims for breach of contract, any claims of
any kind asserted by patients, former patients, employees and former employees
of Seller or any other party that are based on acts or omissions by Seller
occurring on or before the Closing Date, amounts due or that may become due in
connection with the participation of Seller in the Medicare or Medicaid programs
or due to any other health care reimbursement or payment intermediary, or that
may be due by Seller to any other third party payor, accounts payable, notes
payable, trade payables, lease obligations, indebtedness for borrowed money,
accrued interest, and contractual obligations. Seller and each Shareholder
acknowledges that the Purchase Price for the Assets is based on the accuracy of
Seller's and Shareholders' representations and warranties contained in this
Agreement, including, but not limited to, Seller's and Shareholders'
representations and warranties contained in this paragraph 4(a). Without
limiting the generality of the foregoing, Buyer will not assume any, and Seller
shall remain liable for each, liability of Seller arising out of any facts,
circumstances, matter or occurrences existing on or prior to the Closing Date
(whether or not known or disclosed) ("CLOSING DATE LIABILITIES").
(b) Without limiting the generality of the provisions of
subparagraph (a) above, Buyer shall not assume the Contracts (as hereinafter
defined in paragraph 13(g)), if any, set forth on Schedule 4(b), or any
liabilities with respect thereto, and shall not, in any case, assume any
liabilities under any Contracts (whether or not such Contracts are assumed by
Buyer) to the extent such liabilities arise out of facts or circumstances in
existence, or obligations to be satisfied, on or prior to the Closing Date.
5. Right of Offset Against the Escrow Fund.
(a) Event of Deficiency. If:
(i) Buyer pays for any debts or liabilities of Seller
then Seller shall reimburse Buyer for such payment (a "LIABILITIES
DEFICIENCY"); or
(ii) the aggregate value of the Corporation's
collectible accounts receivable as of the Effective Date and determined
to be less than $30,000, as determined by actual net cash collections
of such receivables during the twelve (12) month period immediately
following the Effective Date, then Seller shall pay to Buyer the amount
of such deficiency (an "ASSET VALUE DEFICIENCY"); or
(iii) Buyer shall be entitled to be indemnified for
any Damages pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and
together with any Liabilities Deficiencies and Asset Value
Deficiencies, collectively "CLAIMS" and each, a "CLAIM");
then, and in any of such events, Buyer may provide written notice to Seller of
the Claim, in which case Buyer shall be entitled to recover the amount of such
Claim in accordance with the following procedure.
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(b) Procedure if Seller Fails to Pay. If Seller fails to pay
any Claim in full to Buyer within ten (10) days from the date of such written
notice (said ten (10) day period hereinafter referred to as the "NOTICE
PERIOD"), Buyer shall have the right to make offset against the Escrow Fund, in
accordance with the terms and conditions of the Escrow Agreement, in amounts
from time to time equal to the amount of such Claim (subject, however, in the
case of a "DISPUTE", to the provisions of paragraph 17 hereof applicable
thereto), and Seller agrees to any such offset. Buyer's right to proceed against
the Escrow Fund shall not be exclusive of any other rights or remedies that it
may have under this Agreement, law, equity or otherwise.
(c) Escrow Costs. The fees of the Escrow Agent shall be borne
fifty percent (50%) by the Buyer and fifty percent (50%) by Seller.
(d) Escrow Period.
(i) The "ESCROW PERIOD" shall terminate twelve (12) months
following the Closing Date.
(ii) The balance, if any, of the Escrow Fund remaining
(the "REMAINING ESCROW FUNDS") at the close of business on the last day of the
Escrow Period, shall be disbursed to Seller within fifteen (15) days after the
last day of the Escrow Period.
(iii) Notwithstanding anything to the contrary contained
in this subparagraph (d), if any Claim made by Buyer is in dispute at the time
that any amounts are otherwise to be disbursed to Seller, then there shall be
withheld from such amount to be disbursed and there shall be retained in the
Escrow Fund, an amount such that there will be remaining in the Escrow Fund at
least twice the amount of the Claim asserted by Buyer until the final settlement
of such Claim or Claims.
6. Employees. It is expressly understood and agreed that Buyer's
purchase of the Assets does not involve any undertaking on the part of Buyer to
retain any of the employees of the Seller, although Buyer shall have the right
to offer employment to any such employees. Seller shall remain fully responsible
for any severance, benefits, costs or liabilities arising out of the termination
by Seller of any of its employees, all of which liabilities shall constitute
Closing Date Liabilities. Seller and the Shareholders shall also remain fully
responsible for any benefits, costs or liabilities incurred or accrued prior to
Closing with respect to each employee retained by Buyer.
7. IHS Stock. The Purchase Price shall be payable by means of the
delivery of IHS Shares in accordance with the following:
(a) Share Value. The number of IHS Shares issuable at Closing
(the "CLOSING DATE SHARE COUNT") or deliverable to any claimant from the Escrow
Fund shall be calculated based upon a price per share of such stock equal to the
average closing New York Stock Exchange ("NYSE") price of such stock for the
thirty (30) trading day period immediately preceding the Closing Date (the
"TRADE PRICE").
(b) Registration Rights. IHS will prepare and use its
reasonable commercial efforts to cause to be filed within one-hundred and twenty
(120) days following the Closing Date, and will use its reasonable commercial
efforts to have declared effective by the Securities and Exchange Commission
(the "COMMISSION"), a registration statement for the registration of the IHS
Shares issued to the Shareholders in connection with this transaction, under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and IHS shall
maintain the effectiveness of each such registration statement for a period of
one (1) year following the date it became effective (the "REGISTRATION DATE"),
except to the extent that an exemption from registration may be available.
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(c) Registration Expenses. Seller and the Shareholders shall
not be responsible for, and Buyer shall bear, all of the reasonable expenses of
IHS related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Shares and the costs and
expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Shares under the Blue Sky laws of
various jurisdictions. Buyer, however, shall not be required to pay
underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs or expenses arising out of Seller's or any transferee's failure to comply
with its obligations under this Section 7.
(d) Resale Limitations. The Shareholders hereby covenant with
Buyer that all sales by the Shareholders shall be effected solely through Smith
Barney, Inc.
(e) Registration Procedures, etc. In connection with the
registration rights granted to the Shareholders with respect to the IHS Shares
as provided in this Section 7, Buyer covenants and agrees as follows:
(i) At Buyer's expense, Buyer will keep the registration
and qualification under this Section 7 effective (and in compliance
with the Securities Act) by such action as may be necessary or
appropriate until the first anniversary of the Closing Date except to
the extent that an exemption from registration may be available. Buyer
will promptly notify the Shareholders, at any time when a prospectus
relating to a registration statement under this Section 7 is required
to be delivered under the Securities Act, of the happening of any event
known to Buyer as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(ii) Buyer shall furnish the Shareholders with such number
of prospectuses as shall reasonably be requested.
(iii) Buyer shall take all necessary action which may be
required in qualifying or registering IHS Shares included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the
Shareholders, provided that Buyer shall not be obligated to qualify as
a foreign corporation or dealer to do business under the laws of any
such jurisdiction.
(iv) The information included or incorporated by reference
in the registration statement filed pursuant to this Section 7 will
not, at the time any such registration statement becomes effective,
contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein as necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading or necessary to correct any statement in
any earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall indemnify the Shareholders, their
successors and assigns, and each person, if any, who controls such
Sellers within the meaning of ss.15 of the Securities Act or ss.20(a)
of the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"),
against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained
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in such registration statement executed by Buyer or based upon written
information furnished by Buyer filed in any jurisdiction in order to
qualify IHS Shares under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to Buyer by any of the Shareholders expressly for
use in such registration statement, any amendment or supplement thereto
or any application, as the case may be. If any action is brought
against the Shareholders in respect of which indemnity may be sought
against Buyer pursuant to this subsection 7(e)(iv), such Shareholder
shall within thirty (30) days after the receipt thereby of a summons or
complaint, notify Buyer in writing of the institution of such action
and Buyer shall assume the defense of such actions, including the
employment and payment of reasonable fees and expenses of counsel
(reasonably satisfactory such Shareholder). The Shareholders shall have
the right to employ their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the
Shareholders unless (A) the employment of such counsel shall have been
authorized in writing by Buyer in connection with the defense of such
action, or (B) Buyer shall not have employed counsel to have charge of
the defense of such action, or (C) such indemnified party or parties
shall have reasonably concluded (after notice to Buyer) that there may
be defenses available to it or them which are different from or
additional to those available to Buyer (in which case, Buyer shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and
expenses of not more than one additional firm of attorneys for the
Shareholders and such controlling persons shall be borne by Buyer.
Except as expressly provided in the previous sentence, in the event
that Buyer shall not previously have assumed the defenses of any such
action or claim, Buyer shall not thereafter be liable to the
Shareholders or such controlling person in investigating, preparing or
defending any such action or claim.
(v) The Shareholders, and their successors and
assigns, shall severally, and not jointly, indemnify Buyer, its
officers and directors and each person, if any, who controls Buyer
within the meaning of ss.15 of the Securities Act or ss.20(a) of the
Exchange Act against all loss, claim, damage, or expense or liability
(including all expenses reasonably incurred in investigating, preparing
or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from information furnished by
or on behalf of such Shareholders, or their successors or assigns for
specific inclusion in such registration statement.
(f) Notice of Sale. If the Shareholders desire to transfer all
or any IHS Shares, they will deliver prior written notice to Buyer, describing
in reasonable detail their intention to effect the transfer and the manner of
the proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Sellers will sell the IHS Shares
in compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer that the registration statement relating to
the IHS Stock being transferred is not "current" until Buyer gives further
notice that offers and sales may be recommenced. In the event of any such notice
from Buyer, Buyer agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in Section 7(b) and to give prompt notice to the Shareholders when the
registration statement has again become current. If the Shareholders deliver to
Buyer an opinion of counsel reasonably acceptable to Buyer and its counsel and
to the effect that the proposed transfer of IHS Shares may be made without
registration under the Securities Act, the Shareholders will be entitled to
transfer IHS Shares in accordance with the terms of the notice and opinion of
their counsel.
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(g) Furnish Information. It shall be a condition precedent to
the obligations of Buyer to take any action pursuant to this Section 7 that the
Shareholders shall furnish to Buyer such information regarding themselves, the
IHS Shares held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of their IHS Shares.
In that connection, each transferee of any Shareholder shall be required to
represent to Buyer that all such information which is given is both complete and
accurate in all material respects. Such Shareholders shall deliver to Buyer a
statement in writing from the beneficial owners of such securities that they
bona fide intend to sell, transfer or otherwise dispose of such securities. Each
transferee will, severally, promptly notify Buyer at any time when a prospectus
relating to a registration statement covering such transferee's shares under
this Section 7 is required to be delivered under the Securities Act, of the
happening of any event known to such transferee as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the statements as then existing.
(h) Investment Representations. All IHS Shares to be issued
hereunder will be newly issued shares of IHS. The Sellers represent and warrant
to Buyer that the IHS Shares being issued hereunder are being acquired, and will
be acquired, by the Shareholders for investment for their own accounts and not
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act or the applicable state securities law; the
Shareholders acknowledge that the IHS Shares constitute restricted securities
under Rule 144 promulgated by the Commission pursuant to the Securities Act, and
may have to be held indefinitely, and the Shareholders agree that no IHS Shares
may be sold, transferred, assigned, pledged or otherwise disposed of except
pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Shareholders have the knowledge
and experience in financial and business matters, are capable of evaluating the
merits and risks of the investment, and are able to bear the economic risk of
such investment. The Shareholders have had the opportunity to make inquiries of
and obtain from representatives and employees of Buyer such other information
about IHS as they deem necessary in connection with such investment.
(i) Legend. It is understood that the certificates evidencing
the IHS Shares shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(j) Certain Transferees. Prior to the effective date of
registration of the IHS Shares, no Shareholder shall transfer any shares of IHS
Shares to any person or entity except as expressly permitted by this Agreement
and unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Shareholders under this Section 7.
8. Effective Date. The effective date (the "EFFECTIVE DATE") for
the transaction contemplated under this Agreement will be March 20, 1998. The
consummation of the transactions contemplated by this Agreement is sometimes
referred to as the "CLOSING", and the date on which such consummation occurs,
including, without limitation, the execution and delivery of this Agreement by
each of the parties hereto, is sometimes referred to as the "CLOSING DATE".
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9. Asset Condition and Quality. Seller and each Shareholder,
jointly and severally, represent, warrant and covenant that, as of the Closing
Date, all physical Assets of Seller are free of defects and in good working
order, condition and repair, except for ordinary wear and tear, and conform in
all material respects with all applicable ordinances, regulations, zoning and
other laws.
10. Instruments of Conveyance and Transfer. At the Closing:
(a) Seller will deliver to Buyer such bills of sale,
assignments, motor vehicle certificates of title, and other good and sufficient
instruments of conveyance and transfer in form sufficient to sell, assign and
transfer the Assets to Buyer as of the Effective Date, such documents to contain
full warranties of title, and which documents shall be effective to vest in
Buyer good, absolute, and marketable title to the Assets of the Business being
transferred to Buyer by Seller, free and clear of all Liens.
(b) Simultaneously with such delivery, Seller will take all
steps as may be requisite to put Buyer in actual possession, operation and
control of the Assets to be transferred hereunder.
(c) Seller will deliver to Buyer an opinion, dated the Closing
Date, of its counsel, in substantially the form attached hereto as Schedule
10(c).
(d) Seller will deliver a certificate of its Secretary or
other officer certifying as of the Closing Date a copy of resolutions of its
board of directors and, if applicable, its stockholders, authorizing the
execution, delivery and full performance of this Agreement and the Transaction
Documents (as defined in paragraph 13(a) below), and the incumbency of its
officers.
(e) Keith Thomas will deliver to Buyer a mutually acceptable
two year employment agreement between Buyer and Keith Thomas.
11. Sales and Transfer Taxes; Fees. All applicable sales,
transfer, use, filing and other taxes and fees that may be due or payable as a
result of the conveyance, assignment, transfer or delivery of the Assets of the
Business to be conveyed and transferred as provided herein, whether levied on
Seller or Buyer, shall be borne by Seller.
12. Restrictions on Operations of Seller. Seller and the
Shareholders, jointly and severally, represent, warrant and covenant that,
except as expressly disclosed on Schedules hereto, since the most recent
Financial Statement Date referred to in paragraph 13(o) below, through the
Closing Date, there has been no material adverse change in the condition
(financial or otherwise) or prospects of the Seller or the Business, and Seller
has not:
(i) sold, assigned or transferred any Assets, except in the
ordinary course of business, consistent with past practice;
(ii) subjected any Assets to any Liens;
(iii) entered into any contract or transaction binding the
Business other than contracts or transactions entered into in the ordinary
course of business, consistent with past practice;
(iv) incurred any liabilities or indebtedness other than in
the ordinary course of business, consistent with past practice;
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(v) except in the ordinary course of business, consistent with
past practice, or otherwise to comply with any applicable minimum wage law, paid
any bonuses, increased the salaries or other compensation of any of its
employees, or made any increase in, or any additions to, other benefits to which
any of such employees may be entitled;
(vi) discharged or satisfied any Lien or encumbrance, or
satisfied, paid or prepaid any material liabilities, other than in the ordinary
course of business consistent with past practice, or failed to pay or discharge
when due any liabilities, the failure to pay or discharge of which has caused or
may cause any actual damage or risk of loss to the Corporation or the Assets;
(vii) failed to collect any accounts receivable in the
ordinary course of business, consistent with past practice;
(viii) changed any of the accounting principles followed by it
or the methods of applying such principles;
(ix) canceled, modified or waived any debts or claims held by
it, other than in the ordinary course of business, consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business; or
(x) issued any capital stock, or declared or paid or set aside
or reserved any amounts for payment of any dividend or other distribution in
respect of any equity interest or other securities, or redeemed or repurchased
any of its capital stock or other securities, or made any payment to any of its
affiliates except for payments of compensation in the ordinary course of
business, consistent with past practice and disclosed to Buyer as such;
(xi) instituted, settled or agreed to settle any litigation,
action or proceeding before any Governmental Authority (as such term in defined
in paragraph 13(d) below) relating to it or its property or received any threat
thereof; or
(xii) entered into any material transaction other than in the
ordinary course of business, consistent with past practice.
13. Representations and Warranties by Seller and the Shareholders. As a
material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller and the Shareholders hereby, jointly and severally, represent
and warrant to Buyer as follows as of the Closing Date:
(a) Organization of Seller; Enforceability.
(i) Seller is a corporation, organized, and in good
standing, respectively, in the State of New Mexico, and is qualified to do
business and is in good standing in each other State where the nature of its
business or the assets held by it requires such qualification, and has requisite
corporate power and authority to carry on its Business as presently being
conducted, to enter into this Agreement, and to carry out and perform the terms
and provisions of this Agreement. Each of this Agreement and each agreement,
instrument, certificate and document executed by Seller in connection with this
Agreement or the transactions contemplated hereby ("TRANSACTION DOCUMENTS")
constitutes the legal, valid and binding obligations of Seller, enforceable
against it in accordance with its respective terms. Seller does not have any
subsidiaries.
(ii) This Agreement and each Transaction Document to which
each Shareholder is a party constitutes the legal, valid and binding obligations
of Shareholder, enforceable against such Shareholder in accordance with its
terms.
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(b) Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any Governmental Authority or of any
party to any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which Seller or any of the Assets is
bound ("CONTRACTS") or by which any such Shareholder or any such Shareholder's
assets is bound ("SHAREHOLDER CONTRACTS") is necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by Seller or any Shareholder.
(c) Litigation. Except as set forth on Schedule 13(c), there
are no actions, suits or proceedings affecting Seller or any of the Assets which
are pending or threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any Governmental Authority (as
hereinafter defined), nor is Seller or any of its respective officers or
directors or any Shareholder aware of any facts which to them or their knowledge
might reasonably be expected to result in any such action, suit or proceeding.
(d) Compliance with Laws and Contracts. Seller is not in
violation of, or in default under: any term or provision of its Articles of
Incorporation or By-Laws; or any judgment, order, writ, injunction, decree,
statute, law, rule, regulation, directive, mandate, ordinance or guideline
("GOVERNMENTAL REQUIREMENTS") of any Federal, state, local or other governmental
or quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
Seller and the Shareholders of, and the performance and compliance by each of
them with this Agreement, and the Transaction Documents and the transactions
contemplated hereby and thereby, does not and will not result in the violation
of or conflict with or constitute a default under any such term or provision or
result in the creation of any Lien on any of the properties or assets of Seller
or any Shareholder pursuant to any such term or provision or any term or
provision of any Governmental Requirement by which any Shareholder is bound or
of any Shareholder Contract.
(e) Corporate Acts and Proceedings. The execution, delivery
and performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the sale and transfer of
the Assets by Seller as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller and, if applicable, by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable Governmental Requirement by the stockholders of
Seller with regard thereto have been appropriately authorized and accomplished.
(f) Title to Assets. Seller has good and indefeasible title to
all of the Assets, free and clear of all Liens.
(g) Contracts. Set forth on Schedule 13(g) hereto is a list of
all material Contracts of Seller including, without limitation, each:
(i) contract, agreement or commitment for the employment
or retention of, or collective bargaining, severance or termination of or with,
any director, officer, employee, consultant, sales representative, or agent or
group of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons;
(ii) contract, agreement or arrangement for the
acquisition or disposition of any assets, property or rights outside the
ordinary course of business or requiring the consent of any party to the
transfer and assignment of any such assets, property or rights (by purchase or
sale of assets, purchase or sale of stock, merger or otherwise), that is
executory or that was entered into during the three (3) year period ending on
the date hereof;
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<PAGE>
(iii) contract, agreement or commitment which contains any
provisions requiring the Seller or the Business to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
(iv) contract, agreement or commitment restricting the
Seller or the Business from, or in favor of either of the Seller or the Business
and restricting any other person or entity from, conducting business anywhere in
the world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(v) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to the Business or any portion thereof or the
business of any other person or entity;
(vi) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(vii) contract, agreement or arrangement granting a
leasehold or other interest in real property, including without limitation,
subleases, licenses and sublicenses (the "LEASES");
(viii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Seller or the Business
not covered by clause (i) above;
(ix) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(x) agreement with respect to the settlement of any
litigation or other proceeding with any third person or entity;
(xi) agreement relating to the ownership, transfer, voting
or exercise of other rights with respect to any equity in the Seller, or any
other entity, including without limitation, registration rights agreements,
voting trust agreements and shareholder and proxy agreements;
(xii) contract, agreement or commitment to provide
services or products, or
(xiii) agreement not made in the ordinary and normal
course of business and consistent with past practice, or involving consideration
in excess of $25,000 in each case, that is not set forth in subsections (i)
through (xii) above.
To the best of Seller's and Shareholders' knowledge, no party to any
Contract other than Seller is in default under any Contract. Seller has
delivered to Buyer true and complete copies of each written Contract (or a
description of each oral Contract) requested by Buyer.
(h) Brokers. Upon the receipt by Baker & Associates, Inc. (the
"BROKER") of $50,000 (the "BROKERS FEE") in connection with the transactions
contemplated by this Agreement, no broker or finder will be entitled to any
additional broker's or finder's fee or other commission in respect thereof based
in any way on agreements, understandings or arrangements.
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(i) Employment Contracts; Employees. There are no Contracts of
employment between Seller and any officer or other employee of the Business,
except as set forth on Schedule 13(g)(i) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Seller,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 13(i) is accurate and complete. No employee, consultant or agent of the
Seller has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 13(i). Since the date that is two (2)
years prior to the Closing Date, there has been no material adverse change in
the relationship between the Seller and its employees, nor any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of the Seller are represented by any labor union or similar
organization in connection with their employment by or relationship with,
Seller, and to the knowledge of the Seller and the Shareholders, there are no
pending or threatened activities the purpose of which is to achieve such
representation of all or some of such employees, and there are no threats of
strikes, work stoppages or pending grievances by any such employees. Seller is
not party to any collective bargaining or other labor contracts.
(j) 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. Without limiting the
generality of the foregoing, Seller does not maintain or make contributions to
and has not at any time in the past maintained or made contributions to any
employee benefit plan which is subject to the minimum funding standards of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or to any
multi-employer plan subject to the terms of the Multi-employer Pension Plan
Amendment Act of 1980 (the "MULTI-EMPLOYER ACT").
(k) Insurance. All inventories, buildings and fixed assets
owned or leased by the 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 Schedule 13(k), is accurate
and complete. Schedule 13(k) also sets forth any claims made under any of the
insurance policies referred to above or increases in premiums therefore during
the past two years. True and complete copies of all policies of fire, liability
and other forms of insurance held or owned by the Seller or otherwise in force
and providing coverage for the Business or any of the Assets (including but not
limited to medical malpractice insurance, and any state sponsored plan or
program for worker's compensation) have been delivered to Buyer. Such policies
are owned by and payable solely to the Seller, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date,
and all premiums due on or before the Closing Date in respect thereof have been
paid. Seller purchased title insurance as set forth on Schedule 13(k).
(l) Disclosure. No representation or warranty by Seller or any
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
any Shareholder or Seller or any of its officers, directors or stockholders has
knowledge or notice, required to make the statements herein or therein contained
not misleading.
(m) Officers, Directors and Shareholders of Seller. As of the
Closing Date, the Shareholders are the shareholders of Seller and the following
individuals are all of the officers and directors of Seller:
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<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
Keith Thomas President
Laurie Nuckols Vice President/Secretary/Treasurer
</TABLE>
(n) Inventory and Fixed Assets. The information contained on
the Schedule of Inventory and Fixed Assets as of the most recent Financial
Statement Date, attached hereto as Schedule 1(a)(ii), is accurate and complete.
(o) Tax Returns and Financial Statements. Seller has furnished
Buyer with its tax returns (the "TAX RETURNS") for the periods ended December
31, 1995 and December 31, 1996, and has furnished Buyer with its financial
statements (the "FINANCIAL STATEMENTS") for the periods ended December 31, 1995,
December 31, 1996 and January 31, 1998 (the "FINANCIAL STATEMENT DATES"), copies
of which are attached hereto as Schedule 13(o). The Financial Statements: (i)
are in accordance with the books and records of the Seller; (ii) fairly present
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
GAAP applied on a basis consistent with prior accounting periods; (iv) with
respect to all Contracts 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 liabilities 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 expressly disclosed on an Schedule
to this Agreement. The income statements included in the Financial Statements do
not contain any items of special or nonrecurring income or expense or any other
income not earned or expense not incurred in the ordinary course of business,
consistent with past practice, except as expressly specified therein, and such
Financial Statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(p) Supplemental Tax Information. Seller has furnished Buyer
with its most recent (i) tax registration certificates, and (ii) tax returns
required of it by each state or other locality in which it conducts business,
which tax returns in all instances where applicable include, but shall not be
limited to franchise taxes, state and local tangible personal property tax
returns, and state and local sales tax returns, which registration certificates
and tax returns are set forth, collectively, on the Schedule of Supplemental Tax
Information, attached hereto as Schedule 13(p).
(q) Adverse Business Developments. No notice has been received
by Seller or any Shareholder 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 before the date hereof. Neither Seller nor
any Shareholder has received, either orally or in writing, any notice specific
to it 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 in by Seller, nor has Seller or
any Shareholder received, or been threatened with, any claim for refund specific
to it in excess of $500.00 by a Medicare or Medicaid carrier, except as
disclosed in the Schedule of Proceedings attached hereto as Schedule 13(q).
(r) Relationships. Except as disclosed on Schedule 13(r),
neither Seller, its officers, directors and employees, nor any Shareholder and
no member of any of their respective immediate families, and no person or entity
which is controlled by, under common control with, or controlling any of them
(each, an "AFFILIATE") has, or at any time within the last two (2) years has
had, a material ownership interest in any business, corporate or otherwise, that
is a party to, or in any property that is the subject of, business relationships
or arrangements of any kind relating to the operation of the Business. No
Affiliate of Seller or any Shareholder is guaranteeing any obligations of the
Seller.
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(s) Assets Comprising the Business. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Business as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Business of the Seller in the ordinary course of the business of
the Seller, consistent with past practice, as determined by the Seller in good
faith and consistent with past practice.
(t) Questionable Payments. Seller has not, and to the
knowledge of the Seller and the Shareholders, none of their Affiliates or
employees have offered, made or received any illegal or unlawful payment, bribe,
kickback, political contribution or other similar questionable payment for any
referrals or otherwise in connection with the ownership or operation of the
Business, including, without limitation, any of the same that would constitute a
violation of the Foreign Corrupt Practices Act of 1977, as amended.
(u) Reimbursement Matters. Seller, to the extent necessary to
conduct its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 13(u), (i) Seller and Shareholder have not received any notice of
denial or recoupment from the Medicare or Medicaid programs, or any other third
party reimbursement source (inclusive of managed care organizations) with
respect to products or services provided by it, (ii) to Seller's and
Shareholder's knowledge, there is no basis for the assertion after the Closing
Date of any such denial or recoupment claim, and (iii) Seller and the
Shareholders have not received notice from any Medicare or Medicaid program or
any other third party reimbursement source (inclusive of managed care
organizations) of any pending or threatened investigations or surveys with
respect to, or arising out of, products or services provided by Seller or
otherwise, and to the knowledge of Seller and the Shareholders, no such
investigation or survey is pending, threatened or imminent.
(v) Environmental Compliance. Except as disclosed on Schedule
13(v), at all times during Seller's ownership of the Business, the Business has
not been, and currently is not, in violation of any environmental Governmental
Requirement and no notice has ever been served upon any Shareholder or Seller,
their agents or representatives or any prior owner of the Business, claiming any
violation of any Governmental Requirement concerning the environmental state,
condition or quality of any real or personal property in any related to the
Business, or requiring or calling attention to the need for any work, repairs or
demolition on or in connection with any of the real property in order to comply
with any governmental requirement concerning the environmental or healthful
state, condition or quality of the real property.
14. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller and the Shareholders that:
(a) Due Organization. Buyer is a duly organized, valid
corporation under the laws of the State of New Mexico.
(b) Due Authority. Buyer is duly authorized by law and
corporate policy and approval to: (i) enter into this Agreement and each
Transaction Document; (ii) make all warranties and representations made by Buyer
herein; and (iii) deliver all consideration provided for under the terms hereof.
(c) Binding Authority. All signatures and agents designated as
agents/officers for Buyer for signing purposes have the authority to bind Buyer
to the terms of this Agreement.
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(d) Cash Payment Authority. Buyer has the authority to cause
the cash payment of the Purchase Price to be delivered in accordance with the
terms of this Agreement.
(e) Brokers. Upon receipt by the Broker of the Broker's Fee,
no broker or finder will be entitled to any additional broker's or finder's fee
or other commission in respect thereof based in any way on agreements,
understandings or arrangements.
(f) IHS Stock. IHS has duly authorized and reserved for
issuance the IHS Shares to be issued in connection herewith, and, when issued in
accordance with the terms of Section 7, such IHS Shares will be validly issued,
fully paid, and nonassessable and free of preemptive rights. IHS has complied,
or will comply in a timely manner, and will act in compliance, with all
applicable Governmental Requirements with respect to the issuance of the IHS
Shares.
15. Survival of Representations and Warranties. The
representations and warranties of Seller, each Shareholder, and Buyer contained
and made pursuant to this Agreement shall survive the execution of this
Agreement.
16. Restrictive Covenants.
(a) Non-Compete. Seller and each Shareholder hereby agree that
until the fifth (5th) anniversary of the Closing Date (the "RESTRICTED PERIOD"),
it, he or she will not, directly or indirectly, own, manage, operate, join,
control or participate, or have a proprietary interest in, the ownership,
management, operation or control, of or be connected with, in any manner, any
home health care business within fifty (50) miles of any location set forth on
the Schedule of Locations attached hereto as Schedule 16(a).
(b) Confidential Information. Certain confidential and
proprietary information is included within the Assets ("TRADE SECRETS"),
including, without limitation, with respect to some or all of the following
categories of information: (i) financial information, including but not limited
to information relating to earnings, assets, debts, prices, pricing structure,
reimbursement matters, volume of purchases or sales or other financial data
whether related to Seller or generally, or to particular products, services,
geographic areas, or time periods; (ii) supply and service information,
including but not limited to information relating to goods and services,
suppliers' names or addresses, terms of supply or service contracts or of
particular transactions, or related information about potential suppliers to the
extent that such information is not generally known to the public, and to the
extent that the combination of suppliers or use of a particular supplier, though
generally known or available, may yield advantages to the Buyer, details of
which are not generally known; (ii) marketing information, including but not
limited to information relating to details about ongoing or proposed marketing
programs or agreements by or on behalf of the Seller, sales forecasts,
advertising formats and methods or results of marketing efforts or information
about impending transactions; (iv) personnel information, including but not
limited to information relating to employees' personal or medical histories,
compensation or other terms of employment, actual or proposed promotions,
hirings, resignations, disciplinary actions, terminations or reasons therefor,
training methods, performance, or other employee information; (v) customer and
patient information, including but not limited to information relating to names,
addresses or backgrounds of past, existing or prospective clients, customers,
payors, referral sources, and patients, records of agreements and prices,
proposals or agreements between any of them and Seller, status of accounts or
credit, patients' medical histories or related information as well as customer
lists; and (vi) inventions and technological information, including but not
limited to information related to proprietary technology, trade secrets,
research and development data, processes, formulae, data and know-how,
improvements, inventions, techniques, and information that has been created,
discovered or developed, or has otherwise become known to Seller or any
Shareholder, and/or in which property rights
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<PAGE>
have been assigned or otherwise conveyed to Seller, which information has
commercial value in the business in which the Seller is engaged. Seller and any
Shareholder shall hold all Trade Secrets in confidence and will not discuss,
communicate or transmit to others, or make any unauthorized copy of or use any
of the Trade Secrets; and will take all reasonable actions that Buyer deems
reasonably necessary or appropriate, to prevent unauthorized use or disclosure
of or to protect the Buyer's interest in the Trade Secrets. The foregoing does
not apply to information that by means other than deliberate or inadvertent
disclosure by Seller, any Shareholder or any of their respective Affiliates,
becomes well known to the public; or disclosure compelled by judicial or
administrative proceedings after they diligently try to avoid each disclosure
and afford Buyer the opportunity to obtain assurance that compelled disclosures
will receive confidential treatment.
(c) Non-Solicitation and Non-Pirating. Seller and each
Shareholder hereby agree that, during the Restricted Period it, he or she will
not, directly or indirectly, for itself or himself or on behalf of any other
person, firm, entity or other enterprise: (i) solicit or in any way divert or
take away any person or entity that, prior to the Closing Date, was a patient,
client, customer, payor, referral source, facility or patient of the Seller; or
(ii) hire, entice away or in any other manner persuade any person who was an
employee, consultant, representative or agent of the Seller prior to the Closing
Date, to alter, modify or terminate their relationship with the Buyer.
(d) Necessary Restrictions. Each of Seller and each
Shareholder acknowledge that the restrictions contained in this Agreement are
reasonable and necessary to protect the legitimate business interests of the
Buyer and that any violation thereof by any of them would result in irreparable
harm to the Buyer, and that damages in the event of any such breach of this
Agreement will be difficult, if not impossible, to ascertain. Accordingly, the
Seller and each Shareholder agree that upon the violation of any of the
restrictions contained in this Agreement, the Buyer shall be entitled to obtain
from any court of competent jurisdiction a preliminary and permanent injunction
as well as any other relief provided at law, equity, under this Agreement or
otherwise, without the necessity of posting any bond or other security
whatsoever. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such restrictions (or both) shall be adjusted to such a manner
or for such a time (or both) as is adjudged to be reasonable.
(e) Remedies For Breach. Seller and each Shareholder
acknowledge that the covenants contained in this Agreement are independent
covenants and that any failure by the Buyer to perform its obligations under
this Agreement or any other agreement shall not be a defense to enforcement of
the covenants contained in this Agreement, including but not limited to a
temporary or permanent injunction.
17. Indemnification; Remedies.
(a) Indemnification by Seller and the Shareholders. Seller and
the Shareholders shall, jointly and severally, indemnify and hold harmless at
all times Buyer and its stockholders, directors, officers, employees, agents and
assigns, from and against any Damages (as hereinafter defined) resulting from:
(i) any inaccurate representation made by Seller or any Shareholder in, pursuant
to or under this Agreement or any Transaction Document; (ii) any breach of any
warranty made by Seller or any Shareholder in, pursuant to or under this
Agreement or any Transaction Document; (iii) any breach or default in the
performance by Seller or any Shareholder of any of the covenants to be performed
by Seller or any Shareholder hereunder or in any Transaction Document; and (iv)
any Closing Date Liabilities.
-17-
<PAGE>
(b) Indemnification by Buyer. Buyer shall indemnify and hold
harmless at all times Seller or the Shareholders from and against any Damages
resulting from: (i) any inaccurate representation made by Buyer in, pursuant to
or under this Agreement; (ii) any breach of any warranty made by Buyer in,
pursuant to or under this Agreement; and (iii) any 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, settlements, penalties, and damages, including, without limitation,
counsel fees incurred in investigating or in attempting to avoid or oppose the
imposition thereof. The term "Damages" shall include, but shall not be limited
to, any Liabilities Deficiency, as defined in paragraph 5 hereof.
(d) Remedies.
(i) Buyer's Remedies. If Buyer makes written request
to Seller or any Shareholder for the payment of Damages, then Seller
and/or such Shareholder shall pay to Buyer the amount of Damages
requested within ten (10) days from the date on which such request is
received (the "NOTICE PERIOD").
(ii) Seller's Remedies. If Seller or any Shareholder
makes written request to Buyer for the payment of Damages, then Buyer
shall pay to Seller or such Shareholder the amount of Damages requested
within the Notice Period.
(iii) Notice of Dispute. Notwithstanding the
foregoing provisions of this subparagraph (d), if a party (the
"DEMANDING PARTY") serves a request for payment on the other party (the
"OBLIGATED PARTY"), the Obligated Party shall have the option to
provide written notice to the Demanding Party (the "NOTE OF DISPUTE")
within the Notice Period that the Obligated Party disputes, in good
faith, the validity or amount of the Damages set out in the request for
payment of Damages, and if the affected parties cannot agree on the
validity or amount of such Damages within ten (10) days following the
Notice Period, the dispute as to the validity or amount 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 if such Dispute is
resolved by arbitration.
(iv) Arbitration. If arbitration is required pursuant
to this paragraph 17, Buyer and Seller or the applicable Shareholder
each shall select an arbitrator within ten (10) business days after the
Notice of Dispute is delivered; 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 ten (10) days or more has
elapsed, the arbitrator appointed by the other party shall arbitrate
the dispute. If the Seller and the applicable Shareholder shall be
subject to a Dispute with Buyer, they shall, unless Buyer elects
otherwise in its sole and absolute discretion, be required to act as a
group with respect to any and all rights and obligations with respect
to the resolutions of the Dispute as provided in this paragraph 17.
(e) Settlement of Disputes.
(i) Disputes Not Involving Third Parties. If a
Dispute involves claims not involving any third party, Buyer and Seller
or the applicable Shareholder shall settle the Dispute by submitting
the same to binding arbitration.
-18-
<PAGE>
(ii) Disputes Involving Claims Made by Third Parties.
If a Dispute involves claims made by one or more third parties (a
"THIRD PARTY CLAIM"), the party asserting its right to indemnification
for such Third Party Claim shall give written notice to the other party
as soon as practical after such asserting party receives notice of such
Third Party Claim; provided, however the failure to timely give such
notice shall not affect such party's right to indemnification except to
the extent the party to receive the notice is damaged by such delay.
Upon such notice to Seller or Shareholder, Buyer and Seller and/or
Shareholder shall submit the Dispute to arbitration, and the following
procedures shall apply:
(A) Solely for purposes of
determining the party responsible for defending the
Third Party Claim, the arbitrators shall deem such
Third Party Claim to be valid (although such
consideration shall not be an admission by any party
as to any liability to any party). The arbitrators
then shall decide which party shall be liable for the
Third Party Claim if it is successfully prosecuted by
such third party or parties, and the decision of such
arbitrators with respect to such liability shall be
final and binding as among the parties. (Such party
determined to be liable for such claim sometimes
shall be referred to herein as the "RESPONSIBLE
PARTY".)
(B) If the Responsible Party refuses
to settle (and pay the settlement amount of) the
Third Party Claim immediately, then the Responsible
Party immediately shall select one of the following
two options:
Option One: The Responsible Party,
at the Responsible Party's sole expense and
risk, can assume the defense of the Third
Party Claim, provided the Responsible Party
first places in escrow, in favor of the
other party, adequate collateral (as
determined by the arbitrators on
consideration of all relevant facts) to
protect the other party from all Damages
with respect to such Third Party Claim (in
which case the other party immediately shall
be reimbursed by the Responsible Party for
any amount the other party is required to
pay with respect to such Third Party Claim;
or
Option Two: The Responsible Party,
at the Responsible Party's expense and risk,
can co-defend the Third Party Claim with the
other party, with the Responsible Party also
responsible for paying all costs incurred by
the other Party in connection with such
defense, including, without limitation, the
legal fees and expenses of the other party's
counsel for its reasonable involvement in
such defense. If the other party is found to
be liable for any portion of such Third
Party Claim, the Responsible Party
immediately shall reimburse the other party
for any amount required to be paid by the
other party with respect thereto; provided,
however, if the Responsible Party selects
this option, the Responsible Party shall
attempt diligently to have the other party
removed as a party to any legal action
involving the Third Party Claim (and, upon
such removal, the involvement of the other
party's counsel shall cease unless requested
by the Responsible Party or the Responsible
Party's counsel); and
-19-
<PAGE>
(C) No party may settle any Third
Party Claim without the prior consent of the other
parties hereto unless the settlement will not have a
material adverse effect on the other party hereto.
The parties will resolve any Dispute with respect to
any such proposed settlement in accordance with this
paragraph 16.
(D) Any party responsible for
defending a Third Party Claim shall proceed with
diligence and in good faith with respect thereto.
18. Use of Corporate and Fictitious Names. Seller and the
Shareholders, jointly and severally, agree to take all actions necessary to
assist Buyer in obtaining the rights to use the corporate name and any
fictitious names used in its conduct of any of the Business, including but not
limited to the execution of any assignments and consents to use such name. If
Buyer attempts to use such name, Seller shall consent to Buyer's use of such
name if such consent is required by any state, county or local governmental
authority.
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, on consummation of the transactions contemplated by this Agreement,
shall be the property of Buyer.
20. Post-Closing Requirements of Seller.
(a) Payment Escrow. At Closing, Buyer shall pay over and
deliver to or on behalf of Seller (and shall be credited, dollar-for-dollar, as
partial payment of the Purchase Price) to the Paying Agent, in escrow (the
"PAYMENT ESCROW"), an amount equal to the Closing Date Liabilities as specified
in paragraph 2(b)(i), to be held by the Paying Agent subject to the terms,
conditions, and provisions of the Payment Escrow Agreement. The Paying Agent
shall be an attorney at law authorized to practice law in the state of New
Mexico or a trust company or bank having trust powers in such State, which
Paying Agent has been selected by Seller and approved by Buyer.
(i) Seller shall pay all costs and expenses of the Payment
Escrow, including without limitation, any fees or costs of the Paying
Agent.
(ii) Seller shall be obligated to see that the Paying
Agent timely and properly pays all Closing Date Liabilities, and that
the Paying Agent obtains and delivers to Buyer the "Final Release"
referred to in the Payment Escrow Agreement, or other reasonable
evidence of payment acceptable to Buyer.
(iii) The existence of the Payment Escrow shall not affect
the obligations of the Seller and the Shareholder to hold Buyer
harmless against any Closing Date Liabilities as provided in paragraph
17(a).
(b) Final Financial Information. Not later than thirty (30)
days following Closing, Seller, at Seller's sole cost and expense, shall deliver
to Buyer "FINAL FINANCIAL INFORMATION", which shall include:
(i) a balance sheet of Seller as of the Closing Date
prepared in accordance with GAAP;
-20-
<PAGE>
(ii) an income statement of Seller for the period
commencing on the date succeeding the last day of the most recent
Financial Statement Date and ending on the Closing Date;
(iii) an inventory of fixed assets of Seller as of the
Closing Date;
(iv) an inventory of supplies of Seller as of the Closing
Date; and
(v) a cash settlement statement of Seller as of the
Closing Date.
(c) Liabilities Deficiency. If all such Final Financial
Information is not delivered to Buyer within such thirty (30) day period
following Closing, Seller and the Shareholders shall be liable to Buyer in an
amount equal to $500.00 for each day after such thirty (30) day period until all
such Final Financial Information is delivered to Buyer, and such liability shall
constitute a Liabilities Deficiency under the provisions of paragraph 5, above.
20. Third Party Beneficiaries. Nothing in this Agreement, expressed
or implied, is intended to confer on any person, other than the parties hereto,
and their successors, any rights or remedies under or by reason of this
Agreement other the affiliates entitled to indemnification pursuant to paragraph
16.
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. Notices. All notices, consents, waivers and other
communications required or permitted hereunder shall be in writing and shall be
deemed to be properly given when personally delivered to the party or parties
entitled to receive the notice or three (3) business days after sent by
certified or registered mail, postage prepaid, or on the business day after sent
by nationally recognized overnight courier, in each case, properly addressed to
the party or parties entitled to receive such notice at the address stated
below:
to Seller: Regional Medical Supply, Inc.
1482 Indian Wells Road
Alamogordo, N.M. 88310
Attention: Keith Thomas, President
to the Shareholders: Keith Thomas
2504 Aspen Drive
Alamogordo, NM 88310
with a copy to: David A. Thomsen, Esq.
2810 Sudderth Drive, Suite 206
Ruidoso, N.M. 88345
to Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Elizabeth B. Kelly
Marshall Elkins
-21-
<PAGE>
with copies to:
c/o RoTech Medical Corporation
4506 L.B. McLeod Road, Suite F
Orlando, FL 32811
Attention: Stephen P. Griggs
and
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attn: Andrew S. Bogen
23. Choice of Law. The laws of the State of New Mexico applicable
to contracts executed, delivered and to be fully performed in such State govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
24. Sections and Other Headings. Section, paragraph, and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
25. 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 instrument.
26. Gender. All gender employed in this Agreement shall include
all genders, and the singular shall include the plural and the plural shall
include the singular whenever and as often as may be appropriate.
27. Parties in Interest. This Agreement shall be binding on and
shall inure to the benefit of, and be enforceable by, Seller, the Shareholders
and Buyer and their respective successors and assigns. Buyer shall be entitled
to assign its rights under this Agreement and the Transaction Documents after
the Closing. Seller and the Shareholders may not assign this Agreement or any of
their rights hereunder without the prior consent of Buyer.
28. Entire Agreement. This Agreement including all Schedules and
Exhibits hereto, and all Transaction Documents constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no agreements, understandings, restrictions, warranties, or representations
between the parties with respect to the subject matter hereof other than as set
forth herein or as herein provided.
29. Performance. In the event of a breach by Seller or any
Shareholder of any of their respective obligations hereunder, the Buyer shall
have the right, in addition to any other remedies which may be available, to
obtain specific performance of the terms of this Agreement, and Seller and each
Shareholder hereby waives the defense that there may be an adequate remedy at
law.
30. Waiver, Discharge, Etc. This Agreement and the Transaction
Documents and the obligations hereunder and thereunder shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement or any Transaction Document shall be held to be a waiver of any
other or subsequent breach.
-22-
<PAGE>
31. Cooperation Further Assistance. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed or delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably requested or
necessary to carry out the intent and purpose of this Agreement, and to vest in
Buyer good title to, possession of and control of all the Assets.
32. Joint and Several. Seller and the Shareholders shall be
jointly and severally liable for all representations, warranties and
obligations, including, without limitation, indemnification obligations, and
covenants made by any of them pursuant to this Agreement, including, without
limitation, any made pursuant to any Transaction Document. For all purposes of
this Agreement, any representation or warranty that is qualified to be "to the
knowledge of Seller" or by a requirement that Seller shall have received
"notice" of any matter, or any similar qualification shall be deemed to include
the knowledge of any Shareholder or notices to any Shareholder, as the case may
be.
33. Independent Legal Counsel. Seller and each Shareholder
represent and warrant that each party has had the opportunity to seek the advice
of independent legal counsel prior to signing this Agreement, and that the Buyer
has recommended to Seller and each Shareholder that such party obtain legal
counsel.
[SIGNATURES ON THE FOLLOWING PAGE]
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
BUYER:
INTEGRATED HEALTH SERVICES
AT JEFFERSON HOSPITAL, INC.
By: /s/ Mark Kovinsky
---------------------------
Name: Mark Kovinsky
Title:SVP Corporate Development
INTEGRATED HEALTH
SERVICES, INC.
By:/s/ Mark Kovinsky
---------------------------
Name: Mark Kovinsky
Title:SVP Corporate Development
SELLER:
REGIONAL MEDICAL SUPPLY, INC.
By:/s/ Keith Thomas
---------------------------
Name: Keith Thomas
Title: President
SHAREHOLDERS:
/s/ Keith Thomas
------------------------------
Keith Thomas
/s/ Laurie Nuckols
------------------------------
Laurie Nuckols
STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by, Keith Thomas,
as President of Regional Medical Supply, Inc., a New Mexico corporation, on
behalf of the corporation, and who is personally known to me; or has produced
N/A as identification.
3/23/98 /s/ David Thomsen
- ------------------------- -----------------------------
Date Notary Signature
David Thomsen
------------------------------
Notary Name Printed
My Commission Expires: 3/23/02
-24-
<PAGE>
STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by Keith Thomas,
and who is personally known to me; or has produced N/A as identification.
3/23/98 /s/ DAVID THOMSEN
- ----------------------------- -----------------------------
Date Notary Signature
David Thomsen
Notary Name Printed
My Commission Expires: 3/23/02
STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by Laurie Nuckols,
and who is personally known to me; or has produced N/A as identification.
3/23/98 /s/ DAVID THOMSEN
- ----------------------------- -----------------------------
Date Notary Signature
David Thomsen
Notary Name Printed
My Commission Expires: 3/23/02
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(B) - Patients' List of the Business
Schedule 1(a)(v)(C) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(iii) - Wire Instructions
Schedule 4(a) - Closing Date Liabilities
Schedule 4(b) - Unassumed Contracts
Schedule 10(c) - Seller's Opinion
Schedule 13(c) - Litigation
Schedule 13(g) - Contracts
Schedule 13(i) - Employment Contracts; Employees
Schedule 13(k) - Insurance
Schedule 13(o) - Tax Returns and Financial Statements
Schedule 13(p) - Supplemental Tax Information
Schedule 13(q) - Adverse Business Developments
Schedule 13(r) - Relationships
Schedule 13(u) - Reimbursement Matters
Schedule 13(v) - Environmental Compliance
Schedule 16(a) - Locations
Exhibit 2(b)(i)-A - Stock Pledge Agreement
Exhibit 2(b)(i) - Escrow Agreement
-26-
-----------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 10, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.
AND
ROTECH OXYGEN & MEDICAL EQUIPMENT, INC.
AND
MEDICARE CONVALESCENT AIDS OF PINELLAS, INC. D/B/A MEDAIDS
AND THE SHAREHOLDERS OF THE CONSTITUENT CORPORATIONS
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: MERGER...............................................................2
1.1 Merger...............................................................2
1.2 Merger Time..........................................................2
1.3 Payment of Merger Consideration......................................2
1.4 Surviving Corporation................................................3
ARTICLE II: CONVERSION...........................................................3
2.1 Consideration........................................................3
2.2 Conversion of Common Stock...........................................4
2.3 Manner of Exchange...................................................5
2.4 No Fractional Shares.................................................6
2.5 Assets...............................................................6
2.6 Closing Date Liabilities.............................................7
2.7 Right of Offset Against the Escrow Fund..............................8
ARTICLE III: IHS STOCK...........................................................9
3.1 IHS Stock............................................................9
ARTICLE IV: EMPLOYEES...........................................................14
ARTICLE V: CLOSING.............................................................14
5.1 Closing Date........................................................14
5.2 Deliveries..........................................................14
ARTICLE VI: ASSET CONDITION.....................................................15
ARTICLE VII: SALES AND TRANSFER TAXES; FEES.....................................15
ARTICLE VIII: RESTRICTIONS ON OPERATIONS OF THE COMPANIES.......................15
8.1 Negative Covenants..................................................15
8.2 Conduct of Business Pending Closing.................................17
ARTICLE IX: REPRESENTATIONS AND WARRANTIES BY SHAREHOLDERS......................17
9.1 Organization of Companies; Enforceability...........................17
9.2 Consents............................................................17
9.3 LITIGATION..........................................................18
9.4 Compliance with Laws and Contracts..................................18
9.5 Corporate Acts and Proceedings......................................18
9.6 TITLE TO ASSETS.....................................................18
9.7 Contracts...........................................................18
9.8 Brokers.............................................................20
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
9.9 Employment Contracts; Employees.....................................20
9.10 Employee Benefit Plans..............................................21
9.11 Insurance...........................................................21
9.12 Disclosure..........................................................21
9.13 Officers and Directors of Companies.................................21
9.14 Inventory and Fixed Assets..........................................22
9.15 Financial Statements................................................22
9.16 Tax Information.....................................................22
9.17 Adverse Business Developments.......................................23
9.18 Relationships.......................................................23
9.19 Assets Comprising the Business......................................23
9.20 Questionable Payments...............................................24
9.21 Reimbursement Matters...............................................24
9.22 Environmental Compliance............................................24
9.23 Capital Stock.......................................................24
9.24 Accounts Receivable.................................................25
ARTICLE X: REPRESENTATIONS AND WARRANTIES OF IHS AND NEWCO......................25
10.1 Due Organization....................................................25
10.2 Due Authority.......................................................25
10.3 Binding Authority...................................................25
10.4 Cash Payment Authority..............................................25
10.5 Brokers.............................................................25
ARTICLE XI: SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................26
ARTICLE XII: RESTRICTIVE COVENANTS..............................................26
12.1 Non-Compete.........................................................26
12.2 Confidential Information............................................26
12.3 Non-Solicitation and Non-Pirating...................................27
12.4 Necessary Restrictions..............................................27
12.5 Remedies for Breach.................................................27
ARTICLE XIII: INDEMNIFICATION; REMEDIES.........................................27
13.1 Indemnification by Guarantors and Shareholders......................27
13.2 Indemnification by IHS..............................................28
13.3 Definition of Damages...............................................28
13.4 Remedies............................................................28
13.5 Settlement of Disputes..............................................29
ARTICLE XIV: POST-CLOSING REQUIREMENTS OF SHAREHOLDERS..........................30
14.1 Final Financial and Tax Information.................................30
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XV: MISCELLANEOUS.......................................................31
15.1 Group's Representative..............................................31
15.2 Third Party Beneficiaries...........................................32
15.3 Expenses............................................................32
15.4 Notices.............................................................32
15.5 Choice of Law.......................................................33
15.6 Sections and Other Headings.........................................33
15.7 Counterpart Execution...............................................33
15.8 Gender..............................................................33
15.9 Parties in Interest.................................................33
15.10 Entire Agreement....................................................33
15.11 Performance.........................................................33
15.12 Waiver, Discharge, Etc..............................................33
15.13 Cooperation Further Assistance......................................34
15.14 Joint and Several...................................................34
15.15 Independent Legal Counsel...........................................34
</TABLE>
(iii)
<PAGE>
--------------------------
AGREEMENT AND PLAN OF MERGER
--------------------------
This Agreement and Plan of Merger (this "AGREEMENT") is made as of the
day of , 1998, among INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("IHS"), ROTECH OXYGEN & MEDICAL EQUIPMENT, INC., a Florida corporation
("NEWCO"), MEDICARE CONVALESCENT AIDS OF PINELLAS, INC. D/B/A MEDAIDS
("MEDAIDS", or the "COMPANY"), ARTHUR TEPPER ("TEPPER"), JOSEPH VALENTI
("VALENTI"), LEANN JARCZYNSKI ("JARCZYNSKI", together with Tepper and, the
"GUARANTORS" and each a "GUARANTOR"), Arthur Tepper and Elizabeth Tepper, as
Trustees F/B/O Arthur Tepper UTD 7/14/78 (the "TEPPER TRUST"), Thomas A. Valenti
as Trustee of the Thomas A. Valenti Trust U/A/D 5/22/96 (the "T. VALENTI
TRUST"), Joseph D. Valenti, as trustee F/B/O Joseph D. Valenti Revocable Trust,
Dated 6/10/88 (the "J. VALENTI TRUST"), Samuel J. and Helen Leann Jarczynski,
JTWROS ("JARCZYNSKI JTWROS"), and Steven Tepper ("S. TEPPER", and together with
the Tepper Trust, the T. Valenti Trust, the J. Valenti Trust, and Jarczynki
JTWROS, the "SHAREHOLDERS" and each a "SHAREHOLDER").
WHEREAS, RXSTAT, Inc. (the "SUBSIDIARY") is a wholly owned subsidiary
of the Company; and
WHEREAS, the Company and the Subsidiary operate a home respiratory and
durable medical equipment business in the State of Florida (the "BUSINESS"); and
WHEREAS, the Shareholders own all of the issued and outstanding shares
of common stock of Medaids, par value $1 per share ("MEDAIDS STOCK" or "COMPANY
SHARES"); and
WHEREAS, concurrently herewith, IHS and Newco are entering into an
Agreement and Plan of Merger (the "PRIME MERGER AGREEMENT") with Prime Medical
Services, Inc. ("PRIME") and its stockholders, pursuant to which, among other
things, Prime is being merged with and into Newco upon the terms and subject to
the conditions set forth therein; and
WHEREAS, Newco is an indirectly wholly owned subsidiary of IHS;
WHEREAS, the Boards of Directors of IHS, Newco, and the Company deem it
advisable to merge the Company and Prime with and into Newco pursuant to this
Agreement and the Prime Merger Agreement (the "MERGER");
WHEREAS, pursuant to the Merger each outstanding share of capital stock
of Medaids (each a "MEDAIDS SHARE", and collectively, the "MEDAIDS SHARES")
shall be converted into the right to receive the Merger Consideration (as
hereinafter defined); and
WHEREAS, to effectuate the foregoing, the parties desire to adopt a
plan of merger and reorganization; and
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WHEREAS, all of the holders of capital stock in the Company have
approved this Agreement and the plan of merger described herein and the
transactions contemplated hereby in accordance with all applicable laws, and the
Company's Certificate of Incorporation and By-laws; and
WHEREAS, the Guarantors and Shareholders have obtained all consents of
Governmental Authorities (as such term is hereinafter defined) and all third
parties necessary to the consummation of the transactions contemplated hereby;
and
WHEREAS, each of the Guarantors acknowledges that he or she will
directly or indirectly receive good and valuable consideration by reason of the
completion of the Merger;
NOW, THEREFORE, each of the Guarantors, Shareholders, Newco, IHS, and
the Company, intending to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Upon the terms and subject to the conditions set forth in
this Plan of Merger and in accordance with the General Corporation Law of the
State of Florida (the "FBCA"), at the Merger Time (as defined herein), the
Company and Prime shall be merged with and into Newco in accordance with the
provisions of Section 607.1101, et al of the FBCA. In furtherance thereof, on
the Closing Date the Company and Newco (together with Prime), shall execute,
deliver, and cause to be filed with the Secretary of State of the State of
Florida, the Articles and Plan of Merger in the form of Exhibit 1.1 hereto (the
"PLAN OF MERGER" or "ARTICLES OF MERGER"). Following the Merger Time, the
separate existence of the Company and Prime shall cease, and Newco shall
continue as the surviving corporation in the Merger (hereinafter sometimes
referred to as the "SURVIVING CORPORATION") as a business corporation
incorporated under the laws of the State of Florida under the name "ROTECH
OXYGEN & MEDICAL EQUIPMENT, INC. D/B/A MEDAIDS", and shall succeed to and assume
all the rights and obligations of the Company, Prime and Newco in accordance
with the FBCA.
1.2 MERGER TIME. The Merger shall become effective at such time (the
"MERGER TIME") as the duly executed Articles of Merger is filed with the
Secretary of State of the State of Florida.
1.3 PAYMENT OF MERGER CONSIDERATION. IHS agrees that following the
Closing (as defined in Section 5.1, below), it will make payment of the Merger
Consideration (as defined in Section 2.1(d)) to the extent set forth in, and in
accordance with the terms of, this Agreement.
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1.4 SURVIVING CORPORATION.
(A) CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Newco as in effect immediately prior to the Merger Time (as such term is
defined in Section 2.2) shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the terms thereof
and of the FBCA.
(B) BY-LAWS. The By-laws of Newco as in effect immediately prior
to the Merger Time shall be the By-laws of the Surviving Corporation until duly
amended in accordance with their terms and as provided by the Certificate of
Incorporation of the Surviving Corporation and the FBCA.
(C) DIRECTORS. The directors of Newco at the Merger Time shall,
from and after the Merger Time, be the directors of the Surviving Corporation
until their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation, or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
(D) OFFICERS. The officers of Newco at the Merger Time shall, from
and after the Merger Time, be the officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation, or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws.
(E) FURTHER ACTION. If at any time after the Merger Time, IHS
shall consider that any further deeds, assignments, conveyances, agreements,
documents, instruments, or assurances in law or any other things are necessary
or desirable to vest, perfect, confirm, or record in the Surviving Corporation
the title to any property, rights, privileges, powers, and franchises of Newco
by reason of, or as a result of, the merger, or otherwise to carry out the
provisions of this Agreement and the Plan of Merger, the officers of Newco shall
execute and deliver, upon IHS's request, any instruments or assurances, and do
all other things necessary or proper to vest, perfect, confirm, or record title
to such property, rights, privileges, powers, and franchises in the Surviving
Corporation, and otherwise to carry out the provisions of this Agreement and the
Plan of Merger.
(F) The Plan of Merger includes the merger of Prime with and into
Newco, and the payment of merger consideration to the shareholders of Prime.
Each Shareholder and Guarantor represents, warrants and agrees that it, he or
she has reviewed the Plan of Merger, and it, he or she hereby approves such Plan
of Merger.
ARTICLE II: CONVERSION
2.1 CONSIDERATION. For purposes of this Agreement the terms:
(A) (I) "MERGER CONSIDERATION" shall mean THREE MILLION ONE
HUNDRED THOUSAND DOLLARS ($3,100,000) plus the Additional Amount (as
defined below).
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(II) "MEDAIDS CASH MERGER CONSIDERATION" shall mean $620,000
of the Merger Consideration, and shall be paid in cash.
(III) "MEDAIDS IHS STOCK MERGER CONSIDERATION" shall mean the
balance of the Merger Consideration ($2,480,000 plus the "Additional
Amount" remaining from cash and equivalents after payment of Closing Date
Liabilities), and shall be paid by the delivery of shares of common stock,
par value $.001, of IHS ("IHS SHARES") having a value as determined in
accordance with Section 3.1(a) below for the shares to be issued at Closing
and as of the "Subsequent Delivery Date" as set forth in Section 2.3(d) for
shares to be issued with respect to the "Additional Amount".
(IV) "ADDITIONAL AMOUNT" shall mean the amount of cash plus
cash equivalents included in the Assets less the amount of the Closing Date
Liabilities (as herein after defined in Section 2.6(b)). The Shareholders
and Guarantors represent, warrant and covenant that the amount of cash and
cash equivalents included in the Assets is $425,532.77 (the "CLOSING CASH
AMOUNT"). The Additional Amount shall not include any tax refunds for
Federal, State or local income taxes paid by the Company prior to the
Closing in respect of income prior to the Closing ("TAX REFUNDS");
provided, however, that the Surviving Corporation shall pay to the Group's
Representative (for distribution to the Shareholders in accordance with
their respective Proportionate Amounts) an amount equal to any Tax Refunds
actually collected by the Surviving Corporation after the Closing.
2.2 CONVERSION OF COMMON STOCK. At the Merger Time:
(A) each Medaids Share which is issued and outstanding at the
Merger Time shall by reason of the Merger, without any action by the holder
thereof, be converted into the right to receive, in accordance with the
procedures hereinafter described, a Proportionate Amount (as hereinafter
defined) of the Medaids Cash Merger Consideration and of the Medaids IHS Stock
Merger Consideration;
(B) each share of capital stock of Prime which is issued and
outstanding at the Merger Time shall by reason of the Merger, without any action
by the holder thereof, be converted into the right to receive cash and shares of
IHS Stock in the amounts, and in accordance with the procedures described in the
Plan of Merger, payable in cash plus shares of IHS Stock; and
(C) each share of Newco common stock outstanding immediately prior
to the Merger Time shall be unaffected by the Merger and shall continue to be
held by a direct or indirect wholly owned subsidiary of IHS.
For purposes of this Agreement: the "PROPORTIONATE AMOUNT" to which any
Medaids Share shall be entitled shall be a fraction, the numerator of which
shall be one, and the denominator of which shall be the total number of Medaid
Shares issued and outstanding at the Merger Time, other than shares, if any,
held in treasury.
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2.3 MANNER OF EXCHANGE. The Merger Consideration shall be paid as
follows:
(A) At Closing, IHS Shares (the "ESCROWED SHARES" or the "ESCROW
FUND") having an aggregate value (determined in accordance with Section 3.1(a)
hereof) equal to Three Hundred Ten Thousand Dollars ($310,000) shall be
delivered to CoreStates Bank, N.A., as escrow agent ("ESCROW AGENT"), to be held
by Escrow Agent during the Escrow Period (as defined in Section 2.7(d), below),
pursuant to the terms of an Escrow Agreement, in the form attached hereto as
Exhibit 2.3(a) (the "ESCROW AGREEMENT"). The Escrowed Shares shall be subject to
the provisions of Section 2.7 hereof. A Proportionate Amount of the Escrowed
Shares shall be delivered by each Shareholder.
(B) The balance of the Medaids Cash Merger Consideration and
$2,170,000 of the Medaids IHS Stock Merger Consideration shall be payable to the
Shareholders and shall be paid in accordance with the procedure set forth below
in Section 2.3(e). Attached hereto as Schedule 2.3(c) are the wire instructions
for delivery of such cash and shares of IHS Stock to the Shareholders. Each
Shareholder shall be entitled to a Proportionate Amount of such cash and shares
of IHS Stock.
(C) Two Hundred and Seventy (270) days after the Closing Date (the
"SUBSEQUENT DELIVERY DATE"), IHS shall cause the balance of the Medaids IHS
Stock Merger Consideration to be delivered to the Shareholders in accordance
with their Proportionate Amounts. Such shares of IHS Stock shall be valued as of
the Subsequent Delivery Date using a price per share of such stock equal to the
average closing New York Stock Exchange ("NYSE") price of such stock for the
twenty (20) trading day period immediately preceding the date which is two (2)
trading days before the Subsequent Delivery Date. The parties understand that
the amount of such balance of the Medaids IHS Stock Merger Consideration shall
be determined by IHS in good faith by subtracting the amount of the Closing Date
Liabilities (as determined by IHS in good faith) from the Closing Cash Amount.
(D) The Shareholders represent and warrant that in accordance with
the provisions of subsection (a) above, the Merger Consideration is required to
be distributed as set forth on Schedule 2.3(e). Upon delivery to IHS of stock
certificates representing any Company Shares, together with a fully completed
and executed letter of transmittal in the form of Exhibit 2.3(e) (a "LETTER OF
TRANSMITTAL"), IHS shall promptly pay to, or on behalf of, each person entitled
thereto the amount of cash and shall deliver certificates representing the
number of shares to which such person is entitled, as provided on Schedule
2.3(e). No interest will be paid or accrued on any Merger Consideration payable
upon the surrender of any certificate or certificates or other instruments. If
payment is to be made to a person other than the one in whose name the
certificate or other instrument surrendered is registered, it shall be a
condition of payment to such other person that the certificate or instrument so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer, stamp or
other taxes required by reason of the payment to a person other than the
registered holder of the certificate or other instrument surrendered or
establish to the satisfaction of IHS that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.3(e), the certificate or certificates or instruments which immediately prior
to the Merger Time represented issued and outstanding Company Shares shall
represent for all purposes the right only to receive the Merger Consideration
set forth in this Agreement. After the Merger Time, there shall be no further
registration of transfers on the records of the Company of any Company Shares.
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(E) Subject to the terms and conditions of this Agreement, each
party hereto approves and agrees to the Plan of Merger and shall execute,
deliver and file, or shall cause to be executed, delivered and filed, all such
consents, instruments, covenants, agreements, certificates and documents as
shall be necessary to effectuate the Merger on the Closing Date, including
without limitation, one or more Articles of Merger.
2.4 NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of IHS Stock shall be issued upon the surrender for exchange
of certificates representing any Company Shares, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of IHS. Notwithstanding any other provision of this Agreement, each
holder of Company Shares exchanged pursuant to the Merger, (after taking into
account all certificates representing Company Shares delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of IHS Stock multiplied by the value of such
share determined in accordance with Section 3.1(a) below.
2.5 ASSETS. As of January 30, 1998 (the "ECONOMIC CHANGE DATE"), the
assets (collectively, the "ASSETS") of each of the Company and the Subsidiary
will include the following:
(A) INVENTORY; FIXED ASSETS. All inventory and fixed assets of its
Business, including, without limitation, all of the same set forth on the
Schedule of Inventory and Fixed Assets attached hereto as Schedule 2.5(a); and
(B) ACCOUNTS RECEIVABLE. All of the accounts receivable of its
Business including, without limitation those described on Schedule 2.5(b); and
(C) MOTOR VEHICLES. All motor vehicles of its Business, including
without limitation, all of the same set forth on the Schedule of Motor Vehicles
attached hereto as Schedule 2.5(c); and
(D) PROPERTY RIGHTS. All Leases (as hereinafter defined in
paragraph 9.7(g)), easements and rights of way permitting access to its
Business; and
(E) CASH AND CASH EQUIVALENTS. The amount of cash and the cash
equivalents identified on Schedule 2.5(e) hereto, together with the bank
accounts related thereto.
(F) OTHER ASSETS. All other assets of any kind, tangible or
intangible, real, personal or mixed, owned and used or held for use by the
Company or the Subsidiary in connection with its Business, including, without
limitation, all of the following: (i) the Patients' List of the Business, as
described in Schedule 2.5(f)(i); (ii) the telephone numbers listed on the
Schedule of Telephone Numbers and Licenses attached hereto as Schedule
2.5(f)(ii); (iii) all personal property, machinery and equipment; (iv) all of
the Company's or the Subsidiary's prepaid assets; (v) all of the Company's or
the Subsidiary's rights under contracts, agreements, and instruments; (vi) any
assets of the Company or the Subsidiary used in the operation of the Business,
but not owned by the Company or the Subsidiary; (viii) all intangible rights of
the Company or the Subsidiary of every kind and description used in, or held for
use in connection with, the operation of its Business, including, without
limitation, all intangible assets, and to the extent permitted by applicable
law, all licenses, permits and authorizations; (ix) the security deposits listed
on Schedule 2.5(f)(ix), and (x)
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each of the Company's and the Subsidiary's Certificate of Incorporation,
qualification to do business in any jurisdiction, taxpayer identification
number, minute books, stock transfer records and other documents related
specifically to the Company or the Subsidiary corporate organization and
maintenance.
2.6 CLOSING DATE LIABILITIES.
(A) The Shareholders and Guarantors jointly and severally
represent and warrant that, to the best of their knowledge and belief after
diligent inquiry, all liabilities of the Company or the Subsidiary as of the
Economic Change Date are listed on the Schedule of Liabilities attached hereto
as Schedule 2.6 (a). For purposes of this Agreement "LIABILITIES" shall mean and
include all claims, lawsuits, liabilities, obligations or debts of any kind or
nature whatsoever, whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition, and whether or not of a type which
would be reflected as a liability on a balance sheet (including, without
limitation, federal, state and local taxes of any nature) in accordance with
generally accepted accounting principles, consistently applied ("GAAP"),
including without limitation, malpractice or other tort claims asserted against
the Company or the Subsidiary, claims for breach of contract, any claims of any
kind asserted by patients, former patients, employees or former employees of the
Company or the Subsidiary or any other party that are based on acts or omissions
occurring on or before the Closing Date, amounts due or that may become due in
connection with the participation of the Company or the Subsidiary in the
Medicare or Medicaid programs or due to any other health care reimbursement or
payment intermediary, or that may be due by the Company or the Subsidiary to any
other third party payor, accounts payable, notes payable, trade payables, lease
obligations, indebtedness for borrowed money, accrued interest, and contractual
obligations. The Shareholders and Guarantors acknowledge that the amount of the
Merger Consideration for the Company Shares is based on the accuracy of the
representations and warranties of the Shareholders and the Guarantors contained
in this Agreement, including, but not limited to, the representations and
warranties contained in this Section 2.6(a).
(B) At the Closing, pursuant to an assumption agreement in the
form of Schedule 2.6(b) hereto (the "ASSUMPTION AGREEMENT"), the Shareholders
and the Guarantors will assume, jointly and severally, each liability of the
Company and the Subsidiaries arising out of facts or circumstances existing as
of the Economic Change Date, whether or not disclosed or known on the Closing
Date (the "CLOSING DATE LIABILITIES"), and will agree to satisfy all of the
Closing Date Liabilities that are not satisfied pursuant to Section 14.1, below,
as the same become due. Notwithstanding the foregoing, Buyer shall pay all
Closing Date Liabilities that are payable in cash, to the extent, but only to
the extent, the aggregate amount thereof does not exceed the Closing Cash
Amount.
(C) Without limiting the generality of the provisions of
subsection (b) above, the Closing Date Liabilities shall include all liabilities
under any Contracts (as hereinafter defined) to the extent such liabilities
arise out of facts or circumstances or obligations to be satisfied on or prior
to the Economic Change Date, all Taxes (as such term is defined in Section 9.16)
that arise out of the transactions contemplated hereby or out of any income
earned by the Company or the Subsidiary on or prior to the Merger Time, and the
Broker's Fee.
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(D) Newco and IHS agree that the obligations (the "CONTINUING
OBLIGATIONS") arising out of services or products or other benefits to be
provided to the Surviving Corporation or the Subsidiary after Closing under
Contracts that are not terminated on or prior to Closing shall be the
responsibility of the Surviving Corporation or the Subsidiary, as the case may
be, after the Closing, and shall not constitute Closing Date Liabilities, and
Newco and IHS shall indemnify and hold each Guarantor and Shareholder harmless
from and against any Damages (as hereinafter defined in Section 13.3) arising
out of any of such Continuing Obligations.
(E) Additional Assets and Liabilities. (i) The parties agree that
the Assets also shall include all of the assets arising out of the operation of
the Business during the period commencing on the Economic Change Date and
terminating on the Closing Date (the "INTERIM PERIOD"), including without
limitation, any accounts receivable generated (whether or not billed) during the
Interim Period (the "INTERIM PERIOD RECEIVABLES"), any cash collected in respect
of any accounts receivable, and any inventory or equipment acquired by the
Company and the Subsidiary during such Interim Period in connection with the
operation of the Business. Notwithstanding the foregoing, the Assets shall not
include any non-material tangible assets (such as inventory or supplies) used or
disposed of, or any cash expended for liabilities incurred (as set forth in
clause (ii) below) after the Economic Change Date, in each case for the benefit
of the Business in the ordinary course of business consistent with past practice
during the Interim Period. Any cash collected in respect of accounts receivable
of the Company and the Subsidiary that were in existence as of the Economic
Change Date shall be applied to reduce the Shareholders obligations under
Section 2.7(a)(ii) below.
(II) The parties further agree that the Closing Date Liabilities
shall not include any accounts payable, payroll expenses or other expenses
incurred by the Company and the Subsidiary during the Interim Period for the
benefit of the Business in the ordinary course of business consistent with past
practice.
2.7 RIGHT OF OFFSET AGAINST THE ESCROW FUND.
(A) EVENT OF DEFICIENCY. If:
(I) the Surviving Corporation, the Subsidiary or IHS pays for
any Closing Date Liabilities (a "LIABILITIES DEFICIENCY"); or
(II) the aggregate value of all of the collectible accounts
receivable of the Company and the Subsidiary as of the Economic Change Date
is determined to be less than $ , as determined by actual net cash
collections of such receivables during the twelve (12) month period
immediately following the Closing Date (an "ASSET VALUE DEFICIENCY") (it
being understood that until the earlier to occur of (x) the first
anniversary of the Closing Date; and (y) the date on which their is no
longer an Asset Value Deficiency, the Surviving Corporation will use the
accounts receivable computer system currently used by the Company and the
Subsidiary for purposes of recording, resubmitting and collecting the
accounts receivable included in the Assets, and upon reasonable request of
the Group's Representative, the Surviving Corporation shall provide him
with reasonable information regarding the status of the collection of such
accounts receivable, and will permit the Group's
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Representative to pursue the collection of such receivables on behalf of
the Surviving Corporation or, in lieu thereof (in the discretion of the
Surviving Corporation), the Surviving Corporation shall assign, without
recourse, such receivables to the Group's Representative in consideration
for payment to the Surviving Corporation of the face amount thereof in
cash, in each case, unless the Surviving Corporation shall reasonably
determine that the Group's Representative's pursuit of such collection may
have a material adverse effect on the Surviving Corporation); or
(III) any IHS Claimant (as defined in Section 13.1) shall be
entitled to be indemnified for any Damages (as such term is defined in
Section 13.3) pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and
together with any Liabilities Deficiencies, and any Asset Value
Deficiencies, collectively "CLAIMS" and each, a "CLAIM");
then, and in any of such events, the applicable IHS Claimant may provide written
notice to the Group's Representative of the Claim, in which case such IHS
Claimant shall be entitled to recover the amount of such Claim in accordance
with the following procedure.
(B) PROCEDURE IF SHAREHOLDERS OR GUARANTORS FAIL TO PAY. If any
Shareholder or Guarantor fails to pay any Claim in full to any applicable IHS
Claimant within twenty (20) days from the date of such written notice (said
twenty (20) day period hereinafter referred to as the "NOTICE PERIOD"), such IHS
Claimant shall have the right to offset against the Escrow Fund, in accordance
with the terms and conditions of the Escrow Agreement, in amounts from time to
time equal to the amount of such Claim (subject, however, in the case of a
"DISPUTE", to the provisions of Section 13.4 hereof applicable thereto), and
each Guarantor and Shareholder agrees to any such offset. The right of the IHS
Claimants to proceed against the Escrow Fund shall not be exclusive of any other
rights or remedies that they may have under this Agreement, law, equity or
otherwise.
(C) ESCROW COSTS. The fees of the Escrow Agent shall be borne by
the IHS.
(D) ESCROW PERIOD.
(I) The "ESCROW PERIOD" shall terminate on the first
anniversary of the Closing Date.
(II) The balance, if any, of the Escrow Fund remaining (the
"REMAINING ESCROW FUNDS") at the close of business on the last day of the
Escrow Period, shall be delivered to Group's Representative for further
distribution to the Shareholders within fifteen (15) days after the last
day of the Escrow Period.
(III) Notwithstanding anything to the contrary contained in
this subsection (d), if any Claim made by any IHS Claimant is in dispute at
the time that any amounts are otherwise to be delivered to the
Shareholders' Representative, then there shall
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be withheld from such amount to be delivered and there shall be retained in
the Escrow Fund, a number of IHS Shares such that there will be remaining
in the Escrow Fund a number of IHS Shares having a value (determined in
accordance with Section 3.1(a) hereto) equal to at least twice the amount
of the Claim asserted by the IHS Claimant until the final settlement of
such Claim or Claims.
(E) VALUE OF ESCROWED SHARES. For purposes of determining the
number of IHS Shares to be delivered to any IHS Claimant in respect of any
Claim, the IHS Shares shall be valued in accordance with Section 3.1(a) hereof.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. A portion of the Merger Consideration equal to Two
Million Four Hundred Eighty Thousand Dollars ($2,480,000) shall be payable by
means of the delivery of IHS Shares in accordance with the following:
(A) SHARE VALUE. The number of IHS Shares issuable at Closing (the
"CLOSING DATE SHARE COUNT") or deliverable to any IHS Claimant from the Escrow
Fund shall be calculated based upon a price per share of such stock equal to
$29.859.
(B) REGISTRATION RIGHTS. IHS will prepare and use its reasonable
commercial efforts to cause to be filed within one-hundred and twenty (120) days
following the Closing Date, and will use its reasonable commercial efforts to
have declared effective by the Securities and Exchange Commission (the
"COMMISSION"), a registration statement for the registration of the IHS Shares
issued to the Shareholders in connection with this transaction, including the
shares, if any, issuable under Section 3.1(c) in respect of any re-calculation
of the Closing Date Share Count, under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and IHS shall maintain the effectiveness of each such
registration statement for a period of one (1) year following the date it became
effective (the "REGISTRATION DATE"), except to the extent that an exemption from
registration may be available.
(C) SHARE ADJUSTMENT. Promptly following the Share Adjustment Date
(as hereinafter defined), the number of shares deliverable as part of the Merger
Consideration (and that have not previously been transferred by any Shareholder)
shall be re-calculated based upon the average closing NYSE price for IHS Shares
for the 20-trading day period immediately preceding the first anniversary of the
Closing Date (the "RECALCULATED VALUE"), provided that such adjustment shall be
made only if the result shall be an increase in the number of shares issuable to
the Shareholders. If the number of shares as re-calculated under this subsection
(c) (the "ADJUSTED SHARE COUNT") exceeds the Closing Date Share Count, IHS
promptly shall deliver over to the Group's Representative an additional number
of IHS Shares as shall have a value equal to the amount of such excess (using
the Recalculated Value for determining the number of such IHS Shares to be
delivered), and such additional shares shall be included in the aforementioned
registration
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statement by means of a post-effective amendment thereto. In lieu of delivering
additional shares as aforesaid, IHS may, in its sole discretion, elect to
deliver cash to the Group's Representative (for distribution to the
Shareholders) in the amount of such excess. If the Closing Date Share Count
exceeds the Adjusted Share Count, no adjustment shall be made. For purposes
hereof, "SHARE ADJUSTMENT DATE" shall mean the earlier to occur of: (x) the
first anniversary of the Closing Date; or (y) the day preceding the date, if
any, on which all issued and outstanding shares of IHS Stock are to be split,
reverse split, exchanged, converted or otherwise recharacterized pursuant to any
plan of merger, consolidation, reorganization or other corporate restructuring.
(D) REGISTRATION EXPENSES. Shareholders shall not be responsible
for, and IHS shall bear, all of the reasonable expenses of IHS related to such
registration including, without limitation, the fees and expenses of its counsel
and accountants, all of its other costs, fees and expenses incident to the
preparation, printing, registration and filing under the Securities Act of the
registration statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and each
amendment or supplement thereto to underwriters, dealers and other purchasers of
IHS Shares and the costs and expenses (including fees and disbursements of its
counsel) incurred in connection with the qualification of IHS Shares under the
Blue Sky laws of various jurisdictions. IHS, however, shall not be required to
pay underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs or expenses arising out of Shareholders' or any transferee's failure to
comply with its obligations under this Article III.
(E) RESALE LIMITATIONS. The Shareholders hereby covenant with
Buyer that, until the second anniversary of the Closing Date, sales by them and
the Shareholders of Prime of IHS Shares after the Closing Date shall not, in the
aggregate, exceed 30,000 shares during any 30- day period. All sales by
Shareholders during said period shall be effected solely through Smith Barney,
Inc.
(F) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholders with respect to the IHS Shares
as provided in this Section 3.1, IHS covenants and agrees as follows:
(I) At IHS's expense, IHS will keep the registration and
qualification under this Section 3.1 effective (and in compliance with
the Securities Act) by such action as may be necessary or appropriate
until the first anniversary of the Closing Date except to the extent
that an exemption from registration may be available. IHS will promptly
notify the Shareholders, at any time when a prospectus relating to a
registration statement under this Section 3.1 is required to be
delivered under the Securities Act, of the happening of any event known
to IHS as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(II) IHS shall furnish the Shareholders with such number of
prospectuses as shall reasonably be requested.
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(III) IHS shall take all necessary action which may be
required in qualifying or registering IHS Shares included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the
Shareholders, provided that IHS shall not be obligated to qualify as a
foreign corporation or dealer to do business under the laws of any such
jurisdiction.
(IV) The information included or incorporated by reference in
the registration statement filed pursuant to this Section 3.1 will not,
at the time any such registration statement becomes effective, contain
any untrue statement of a material fact, or omit to state any material
fact required to be stated therein as necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in any
earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. IHS shall indemnify the Shareholders, their
successors and assigns, and each person, if any, who controls such
Shareholders within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become
subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in such registration statement executed by IHS or based upon
written information furnished by IHS filed in any jurisdiction in order
to qualify IHS Shares under the securities laws thereof or filed with
the Commission, any state securities commission or agency, NYSE or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to IHS by any of the Shareholders expressly for
use in such registration statement, any amendment or supplement thereto
or any application, as the case may be. If any action is brought
against the Shareholders or any controlling person of the Shareholders
in respect of which indemnity may be sought against IHS pursuant to
this subsection 3.1(f)(iv), the Shareholders or such controlling person
shall within thirty (30) days after the receipt thereby of a summons or
complaint, notify IHS in writing of the institution of such action and
IHS shall assume the defense of such actions, including the employment
and payment of reasonable fees and expenses of counsel (reasonably
satisfactory to the Shareholder's Representative or such controlling
person). The Shareholders or such controlling person shall have the
right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the
Shareholders or such controlling person unless (A) the employment of
such counsel shall have been authorized in writing by IHS in connection
with the defense of such action, or (B) IHS shall not have employed
counsel to have charge of the defense of such action, or (C) such
indemnified party or parties shall have reasonably concluded (after
notice to IHS) that there may be defenses available to it or them which
are different from or additional to those available to IHS (in which
case, IHS shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any
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of which events the fees and expenses of not more than one additional
firm of attorneys for the Shareholders and such controlling persons
shall be borne by IHS. Except as expressly provided in the previous
sentence, in the event that IHS shall not previously have assumed the
defenses of any such action or claim, IHS shall not thereafter be
liable to the Shareholders or such controlling person in investigating,
preparing or defending any such action or claim.
(V) The Shareholders, and their successors and assigns, shall
severally, and not jointly, indemnify IHS, its officers and directors
and each person, if any, who controls IHS within the meaning of ss.15
of the Securities Act or ss.20(a) of the Exchange Act against all loss,
claim, damage, or expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the
Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising from information furnished by or on behalf of such
Shareholders, or their successors or assigns for specific inclusion in
such registration statement.
(G) NOTICE OF SALE. If the Shareholders desire to transfer all or
any IHS Shares, they will deliver prior written notice to IHS, describing in
reasonable detail their intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Shareholders will sell the IHS
Shares in compliance with the disclosure therein and discontinue any offers and
sales thereunder upon notice from IHS that the registration statement relating
to the IHS Stock being transferred is not "current" until IHS gives further
notice that offers and sales may be recommenced. In the event of any such notice
from IHS, IHS agrees to file expeditiously such amendments to the registration
statement as may be necessary to bring it current during the period specified in
Section 3.1(b) and to give prompt notice to the Shareholders when the
registration statement has again become current. If the Shareholders deliver to
IHS an opinion of counsel reasonably acceptable to IHS and its counsel and to
the effect that the proposed transfer of IHS Shares may be made without
registration under the Securities Act, the Shareholders will be entitled to
transfer IHS Shares in accordance with the terms of the notice and opinion of
their counsel.
(H) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of IHS to take any action pursuant to this Article III that the
Shareholders shall furnish to IHS such information regarding themselves, the IHS
Shares held by them, and the intended method of disposition of such securities
as shall be required to effect the registration of their IHS Shares. In that
connection, each transferee of any Shareholder shall be required to represent to
IHS that all such information which is given is both complete and accurate in
all material respects. Such Shareholders shall deliver to IHS a statement in
writing from the beneficial owners of such securities that they bona fide intend
to sell, transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify IHS at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Section 3.1
is required to be delivered under the Securities Act, of the happening of any
event known to such transferee as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the statements as then existing.
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(I) INVESTMENT REPRESENTATIONS. All IHS Shares to be issued
hereunder will be newly issued shares of IHS. The Shareholders represent and
warrant to IHS that the IHS Shares being issued hereunder are being acquired,
and will be acquired, by the Shareholders for investment for their own accounts
and not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act or the applicable state securities law;
the Shareholders acknowledge that the IHS Shares constitute restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and may have to be held indefinitely, and the Shareholders agree
that no IHS Shares may be sold, transferred, assigned, pledged or otherwise
disposed of except pursuant to an effective registration statement or an
exemption from registration under the Securities Act, the rules and regulations
thereunder, and under all applicable state securities laws. The Shareholders
have the knowledge and experience in financial and business matters, are capable
of evaluating the merits and risks of the investment, and are able to bear the
economic risk of such investment. The Shareholders have had the opportunity to
make inquiries of and obtain from representatives and employees of IHS such
other information about IHS as they deem necessary in connection with such
investment.
(J) LEGEND. It is understood that the certificates evidencing the
IHS Shares shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
(K) CERTAIN TRANSFEREES. Prior to the effective date of
registration of the IHS Shares, no Shareholder shall transfer any shares of IHS
Shares to any person or entity except as expressly permitted by this Agreement
and unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Shareholders under this Article III.
ARTICLE IV: EMPLOYEES
It is expressly understood and agreed that although the Surviving
Corporation intends to retain substantially all of the employees of the Company
and the Subsidiary after the Closing, it may notify the Group's Representative
prior to the Closing that the employment of a limited number of such employees
is to be terminated, in which case, the Company or the Subsidiary, as the case
may be, shall cause such termination, and all liabilities resulting therefrom
that may be due to such terminated employee shall constitute Closing Date
Liabilities. In any event, any benefits, costs or liabilities incurred or
accrued on or prior to Closing with respect to any employee of the Company or
the Subsidiary shall constitute Closing Date Liabilities.
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<PAGE>
ARTICLE V: CLOSING
5.1 CLOSING DATE. The consummation of the transactions
contemplated by this Agreement is occurring on the date hereof and is sometimes
referred to as the "CLOSING", and the date on which such consummation occurs,
including, without limitation, the execution and delivery of this Agreement by
each of the parties hereto, is sometimes referred to as the "CLOSING DATE".
5.2 DELIVERIES. At the Closing:
(A) The Company and Newco (together with Prime) shall
execute, deliver and cause to be filed with the Secretary of State of Florida
and any other appropriate Governmental Authorities (as such term is defined in
Section 9.4), the Certificate of Merger and such other instruments or documents,
if any, as shall be necessary to cause the Company (together with Prime) to be
merged with and into Newco as provided in Section 1.1 above.
(B) The Shareholders and Guarantors will deliver to IHS an
opinion, dated the Closing Date, of their counsel, in substantially the form
attached hereto as Exhibit 5.2(b).
(C) The Company will deliver a certificate of its Secretary
or other officer certifying as of the Closing Date a copy of resolutions of its
board of directors and its stockholders, authorizing the execution, delivery and
full performance of this Agreement and the Transaction Documents (as defined in
Section 9.1(a) below), and the incumbency of its officers.
(D) Newco, as the Surviving Corporation of the Merger, will
enter into an employment agreement with Jarczynski in the form and substance of
Exhibit 5.2(d).
(E) The Shareholders and Guarantors shall execute and deliver
the Assumption Agreement and Transmittal Letters, and deliver to IHS the
certificates representing all of the Company Shares.
(F) Each officer and director of the Company or of the
Subsidiary shall resign from such position as of the Closing Date.
ARTICLE VI: ASSET CONDITION
The Shareholders and Guarantors, jointly and severally, represent,
warrant and covenant that, as of the Closing Date, all physical Assets of the
Company and the Subsidiary are free of defects except to the extent that such
failure will not likely have a material adverse effect on the assets,
liabilities, financial condition or prospects of the Company or the Subsidiary,
and in good working order, condition and repair, except for ordinary wear and
tear, and conform in all material respects with all applicable Governmental
Requirements (as defined in Section 9.4).
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ARTICLE VII: SALES AND TRANSFER TAXES; FEES
All transfer and other taxes and fees, if any, that may be due or
payable as a result of the transactions contemplated by this Agreement, whether
levied on the Shareholders, IHS, Newco or the Company, shall be borne by the
Shareholders and Guarantors.
ARTICLE VIII: RESTRICTIONS ON OPERATIONS OF THE COMPANIES
8.1 NEGATIVE COVENANTS. The Shareholders and Guarantors represent,
warrant and covenant that, except as expressly disclosed on Schedules hereto,
since the most recent Financial Statement Date referred to in Section 9.15
below, there has been no material adverse change in the assets, liabilities,
financial condition, or prospects of the Company or the Subsidiary, and neither
the Company nor the Subsidiary has:
(A) sold, assigned or transferred any Assets, except in the
ordinary course of business, consistent with past practice;
(B) subjected any Assets to any liens, claims, security
interests, pledges, mortgages, restrictions on transfer or use and other
encumbrances of any kind or nature whatsoever ("LIENS");
(C) entered into any contract or transaction binding the
Company or the Subsidiary or Business other than immaterial contracts or
transactions entered into in the ordinary course of business, consistent with
past practice;
(D) incurred any liabilities or indebtedness other than in
the ordinary course of business, consistent with past practice;
(E) except in the ordinary course of business, consistent
with past practice, or otherwise to comply with any applicable minimum wage law,
paid any bonuses, increased the salaries or other compensation of any of its
employees, consultants, agents or representatives, or made any increase in, or
any additions to, other benefits to which any of such employees, consultants,
agents or representatives may be entitled;
(F) discharged or satisfied any Lien, or satisfied, paid or
prepaid any material liabilities, other than in the ordinary course of business
consistent with past practice, or failed to pay or discharge when due any
liabilities, the failure to pay or discharge of which has caused or may cause
any actual damage or risk of loss to the Company or the Subsidiaries or Business
or Assets;
(G) failed to collect any accounts receivable in the ordinary
course of business, consistent with past practice;
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(H) changed any of the accounting principles followed by it
or the methods of applying such principles;
(I) canceled, modified or waived any debts or claims held by
it, other than in the ordinary course of business, consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business;
(J) instituted, settled or agreed to settle any litigation,
action or proceeding before any Governmental Authority relating to them or their
property or received any threat thereof; or
(K) entered into any material transaction other than in the
ordinary course of business, consistent with past practice.
8.2 CONDUCT OF BUSINESS PENDING CLOSING. The Shareholders and
Guarantors represent, warrant and covenant that since the most recent Financial
Statement Date referred to in Section 9.15 below, each of the Company and the
Subsidiary shall maintain its existence and conduct its business in good faith
and in the customary and ordinary course of business consistent with past
practice.
ARTICLE IX: REPRESENTATIONS AND WARRANTIES BY SHAREHOLDERS
As a material inducement to IHS and Newco to execute and perform their
obligations under this Agreement, the Shareholders and Guarantors hereby,
jointly and severally, represent and warrant to IHS and Newco as follows as of
the Closing Date:
9.1 ORGANIZATION OF COMPANIES; ENFORCEABILITY.
(A) The Company is a corporation, organized, and in good
standing in the State of Florida, and is qualified to do business and is in good
standing in each other State where the nature of its business or the assets held
by it requires such qualification, and has requisite corporate power and
authority to carry on its Business as presently being conducted, to enter into
this Agreement, and to carry out and perform the terms and provisions of this
Agreement. Each of this Agreement and each agreement, instrument, certificate
and document ("TRANSACTION DOCUMENTS") executed by the Company in connection
with this Agreement or the transactions contemplated hereby constitutes the
legal, valid and binding obligations of the Company, enforceable against it in
accordance with its respective terms.
(B) The Company has no subsidiaries other than the
Subsidiary. The Company owns, legally and beneficially and free and clear of all
Liens, all of the issued and outstanding capital stock of the Subsidiary. The
Subsidiary is a corporation, organized, and in good standing in the State of
Florida, and is qualified to do business and is in good standing in each other
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State where the nature of its business or the assets held by it requires such
qualification, and has requisite corporate power and authority to carry on its
Business as presently being conducted.
(C) Each Shareholder that is a trust was duly created and
exists in accordance with the law of the State of Florida, and has the requisite
trust power and authority to carry on its activities as presently being
conducted, to enter into this Agreement, and to carry out and perform the terms
and provisions of this Agreement. This Agreement and each of the Transaction
Documents executed by any Shareholder (whether or not such Shareholder is a
trust) constitutes the legal, valid and binding obligations of such Shareholder,
enforceable against it, him or her in accordance with its respective terms.
9.2 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any Governmental Authority or of any
party to any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which the Company or the Subsidiary
or any of the Assets is bound ("CONTRACTS") or by which any Shareholder or
Guarantor or any Shareholder's or Guarantor's assets is bound
("SHAREHOLDER/GUARANTOR CONTRACTS") is necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by any Company or Shareholder or Guarantor. Without limiting the
generality of the foregoing, all necessary consents to the execution, delivery
and performance of this Agreement and the Transaction Documents and the
transactions contemplated hereby and thereby of any beneficiary or settlor of
any Shareholder that is a trust have been obtained.
9.3 LITIGATION. Except as set forth on Schedule 9.3, there are no
actions, suits or proceedings affecting the Company or the Subsidiary or any of
the Assets which are pending or threatened against the Company or the Subsidiary
or affecting any of the Company's or the Subsidiary's properties or rights, at
law or in equity, or before any Governmental Authority, nor is the Company or
the Subsidiary or any of their respective officers or directors or any
Shareholder aware of any facts which to their knowledge might reasonably be
expected to result in any such action, suit or proceeding.
9.4 COMPLIANCE WITH LAWS AND CONTRACTS. Neither the Company nor
the Subsidiary is in violation of, or in default under: any term or provision of
its Articles of Incorporation or By-Laws; or any judgment, order, writ,
injunction, decree, statute, law, rule, regulation, directive, mandate,
ordinance or guideline ("GOVERNMENTAL REQUIREMENTS") of any Federal, state,
local or other governmental or quasi-governmental agency, bureau, board,
council, administrator, court, arbitrator, commission, department,
instrumentality, body or other authority ("GOVERNMENTAL AUTHORITIES"); or of any
Contract. The execution and delivery by the Company and each Shareholder and
each Guarantor of, and the performance and compliance by each of them with this
Agreement, and the Transaction Documents and the transactions contemplated
hereby and thereby, does not and will not result in the violation of or conflict
with or constitute a default under any such term or provision or result in the
creation of any Lien on any of the properties or assets of the Company or the
Subsidiary or any Shareholder or Guarantor pursuant to any such term or
provision or any term or provision of any Governmental Requirement by which any
Shareholder or Guarantor is bound or of any Shareholder/Guarantor Contract.
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9.5 CORPORATE ACTS AND PROCEEDINGS. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the consummation of the
Merger as provided for in this Agreement, have been approved and consented to by
the Board of Directors of the Company and, all holders of outstanding capital
stock of the Company, and all action required by any applicable Governmental
Requirement by the stockholders of the Company with regard thereto have been
appropriately authorized and accomplished. Any rights of appraisal or to dissent
to the Merger have been waived.
9.6 TITLE TO ASSETS. Except for the Assets that are held subject
to Leases (as hereinafter defined) the Company and the Subsidiary have good and
indefeasible title to all of the Assets, free and clear of all Liens. The
Company and the Subsidiary have good and valid leasehold interests, subject to
no Liens, in each of the Leases.
9.7 CONTRACTS. Set forth on Schedule 9.7 hereto is a list of all
material Contracts of the Company and the Subsidiary, including, without
limitation, each:
(A) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or termination of or with, any
director, officer, employee, consultant, sales representative, or agent or group
of employees, or any non-competition, non- solicitation, confidentiality or
similar agreement with any such person or persons;
(B) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights outside the ordinary course of
business or requiring the consent of any party to the transfer and assignment of
any such assets, property or rights (by purchase or sale of assets, purchase or
sale of stock, merger or otherwise), that is executory or that was entered into
during the three (3) year period ending on the date hereof;
(C) contract, agreement or commitment which contains any
provisions requiring the Company or the Subsidiary or Business to indemnify or
act for any other person or entity or to guaranty or act as surety for any other
person or entity;
(D) contract, agreement or commitment restricting any Company
or Business from, or in favor of the Company or the Subsidiary or Business and
restricting any other person or entity from, conducting business anywhere in the
world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(E) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to any Business or any portion thereof or the
business of any other person or entity;
(F) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
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(G) contract, agreement or arrangement granting a leasehold
or other interest in real property or personal property, including without
limitation, subleases, licenses and sublicenses (the "LEASES");
(H) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Company or the Subsidiary
or Business not covered by subsection (a) above;
(I) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(J) agreement with respect to the settlement of any
litigation or other proceeding with any third person or entity;
(K) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Company or the
Subsidiary, or any other entity, including without limitation, registration
rights agreements, voting trust agreements and shareholder and proxy agreements;
(L) contract, agreement or commitment to provide services or
products, or
(M) agreement not made in the ordinary and normal course of
business and consistent with past practice, or involving consideration in excess
of $25,000 in each case, that is not set forth in subsections (a) through (l)
above.
To the best knowledge of the Company, the Subsidiary, and each Guarantor
and Shareholder, no party to any Contract is in default under any Contract. The
Shareholders and Guarantors have delivered to IHS true and complete copies of
each written Contract (or a description of each oral Contract) requested by IHS.
9.8 BROKERS. The Shareholders and the Company have been
represented solely by the Broker, and as a result the Broker's Fee in the amount
of $123,300 is payable by the Shareholders to the Broker at the Closing in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any additional broker's or finder's fee or other
commission in respect thereof based in any way on agreements, understandings or
arrangements with any Company or Shareholder.
9.9 EMPLOYMENT CONTRACTS; EMPLOYEES. There are no Contracts of
employment between the Company or the Subsidiary and any of its employees,
except as set forth on Schedule 9.7(a) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Company or
the
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Subsidiary, contained on the Schedule of Personnel Payrates and Advances
attached hereto as Schedule 9.9 is accurate and complete. No employee,
consultant or agent of the Company or the Subsidiary has any vested or unvested
retirement benefits or other termination benefits, except as described on
Schedule 9.9. Since the date that is two (2) years prior to the Closing Date,
there has been no material adverse change in the relationship between the
Company or the Subsidiary and its employees, nor any strike or labor disturbance
by any of such employees affecting the Business and there is no indication that
such a change, strike or labor disturbance is likely. No employees of the
Company or the Subsidiary are represented by any labor union or similar
organization in connection with their employment by or relationship with, the
Company or the Subsidiary, and to the knowledge of the Company, the Subsidiary,
the Guarantors and Shareholders, there are no pending or threatened activities
the purpose of which is to achieve such representation of all or some of such
employees, and there are no threats of strikes, work stoppages or pending
grievances by any such employees. Neither the Company nor the Subsidiary is
party to any collective bargaining or other labor contracts.
9.10 EMPLOYEE BENEFIT PLANS. Neither the Company nor the
Subsidiary has any pension, bonus, profit-sharing, or retirement plans for
directors, officers or employees of the Business, the Company or the Subsidiary,
nor is the Company or the Subsidiary required to contribute to any such plan.
Without limiting the generality of the foregoing, neither the Company nor the
Subsidiary maintains or makes contributions to, and neither the Company nor the
Subsidiary has at any time in the past maintained or made contributions to, any
employee benefit plan which is subject to the minimum funding standards of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or to any
multi-employer plan subject to the terms of the Multi-employer Pension Plan
Amendment Act of 1980 (the "MULTI-EMPLOYER ACT"). Prior to the date hereof, the
only pension, bonus, profit-sharing, or retirement plans that have been in
effect for directors, officers or employees of the Business or the Company or
the Subsidiary are set forth on Schedule 9.10 hereto (the "TERMINATED PLANS").
Each of such Terminated Plans has been terminated in accordance with the terms
of such Terminated Plans and in accordance with all Governmental Requirements,
including without limitation, ERISA. At the time of termination, each of such
Terminated Plans was fully funded and in compliance with all applicable
Governmental Requirements. Neither the Company nor the Subsidiary has any
liability with respect to any Terminated Plan.
9.11 INSURANCE. All inventories, buildings and fixed assets owned
or leased by the Company or the Subsidiary 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 Schedule
9.11, is accurate and complete. Schedule 9.11 also sets forth any claims made
under any of the insurance policies referred to above or increases in premiums
therefore during the past two years. True and complete copies of all policies of
fire, liability and other forms of insurance held or owned by the Company or the
Subsidiary or otherwise in force and providing coverage for any Business or any
of the Assets (including but not limited to medical malpractice insurance, and
any state sponsored plan or program for worker's compensation) have been
delivered to IHS. Such policies are owned by and payable solely to the Company
or the Subsidiary, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date, and all premiums due on or
before the Closing Date in respect thereof have been paid. The Company and the
Subsidiary have purchased title insurance as set forth on Schedule 9.11.
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9.12 DISCLOSURE. No representation or warranty by any Guarantor or
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
the Company, the Subsidiary, any Guarantor or Shareholder or any of their
respective officers, directors, trustees or stockholders has knowledge or
notice, required to make the statements herein or therein contained not
misleading.
9.13 OFFICERS AND DIRECTORS OF COMPANIES. As of the Closing Date,
the following individuals are all of the officers and directors of the Company
and the Subsidiary:
<TABLE>
<CAPTION>
Name Office/Position
---- ---------------
<S> <C>
Arthur Tepper Director, President, Secretary
Joseph Valenti Director, Vice President, Treasurer
</TABLE>
9.14 INVENTORY AND FIXED ASSETS. The information contained on the
Schedule of Inventory and Fixed Assets, attached hereto as Schedule 2.5(a) is
accurate and complete in all material respects.
9.15 FINANCIAL STATEMENTS. The Shareholders and Guarantors have
furnished IHS with the financial statements of the Company and the Subsidiary on
a consolidated basis (the "FINANCIAL STATEMENTS") for the periods ended
[_____________________ ], [_____________________________] and December 31, 1997
(the "FINANCIAL STATEMENT DATES"), copies of which are attached hereto as
Schedule 9.15. The Financial Statements: (a) are in accordance with the books
and records of the Company and the Subsidiary; (b) fairly present the financial
condition of the Company and the Subsidiary on a consolidated basis at such date
and the results of its operations for the periods specified; (c) were prepared
in accordance with all rules, guidelines, regulations and laws applicable to
reporting financial condition for Federal income tax purposes applied on a basis
consistent with prior periods (the "TAX PRINCIPLES"); (d) with respect to all
Contracts of the Company or Subsidiary, reflect adequate reserves for all
reasonably anticipated losses and costs in excess of anticipated income; and (e)
with respect to any balance sheets, disclose all of the liabilities of the
Company and the Subsidiary 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 expressly
disclosed on Schedule 9.15 to this Agreement. The income statements included in
the Financial Statements do not contain any items of special or nonrecurring
income or expense or any other income not earned or expense not incurred in the
ordinary course of business, consistent with past practice, except as expressly
specified therein, and such Financial Statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
9.16 TAX INFORMATION. Each of the Company and the Subsidiary has
furnished IHS with its (a) most recent tax registration certificates, and (b)
tax returns for the periods ________________________ ,_______________ and
__________________ required of it by each state or other locality in which it
conducts business, which tax returns in all instances where applicable include,
but shall not be limited to, income, franchise taxes, state and local tangible
personal property tax returns, and state and local sales tax returns, which
registration certificates and tax returns are set forth, collectively,
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on the Schedule of Tax Information, attached hereto as Schedule 9.16. The
Balance Sheet included in the most recent Financial Statements for the Company
and the Subsidiary on a consolidated basis sufficiently provides for all
accrued, deferred and unpaid federal, state, local and foreign net or gross
income, profits, property, sales, use, excise, license, franchise, severance,
stamp, occupation, premium, windfall profits tax, alternative and add-on minimum
taxes, customs duty, added value, payroll, employer's income, withholding and
social security taxes, excise or other taxes ("TAXES") and any penalties,
interest, governmental charges, assessments and deficiencies related thereto,
payable by the Company or the Subsidiary. All Taxes payable by the Company or
the Subsidiary, and all interest and penalties thereon, whether disputed or not,
have been paid in full when due, all tax returns, declarations of estimated tax
and other reports required to be filed in connection therewith ("TAX RETURNS")
have been accurately prepared and completed on an appropriate basis and duly and
timely filed in accordance with all Governmental Requirements, all computations
and taxable income correctly and accurately made and reported in accordance with
all Government Requirements, and all withholdings and deposits required by
Governmental Requirements to be made by the Company or the Subsidiary with
respect to employee's withholding taxes have been duly made. None of the Company
or the Subsidiary has been delinquent in the payment of any Tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such deficiency
or claim. The federal income tax returns of the Company and the Subsidiary have
been filed with the Internal Revenue Service for all of the fiscal years though
the year ended , and no objections with respect thereto have been received by
the Company, the Subsidiary, any Guarantor or Shareholder. There is not now in
force any extension of time with respect to the date on which any Tax Return was
or is due to be filed by or with respect to the Company or the Subsidiary or any
waiver or agreement by the Company or the Subsidiary for the extension of time
for assessment of any Tax. Neither the Company nor the Subsidiary is a party to
any pending action or proceeding, and, to the knowledge of the Company, the
Subsidiary, the Guarantors and the Shareholders, no action or proceeding has
been threatened by any Governmental Authority for assessment or collection of
any Taxes, nor has any claim for assessment or collection of Taxes been asserted
against the Company or the Subsidiary. Neither the Company nor the Subsidiary is
a party to any tax sharing agreement or arrangement. Neither the Company nor the
Subsidiary has elected to be taxed in accordance with Subchapter S of the
Internal Revenue Code of 1986, as amended.
9.17 ADVERSE BUSINESS DEVELOPMENTS. No notice has been received by
the Company, the Subsidiary, any Guarantor or Shareholder of any new or
substantially expanded firm or individual engaged in a business directly
competitive to the Company or the Subsidiary in its primary service area within
six (6) months before the date hereof that the Company, the Subsidiary, any
Guarantor or Subsidiary reasonably believes will have a material adverse effect
on the Business. None of the Company, the Subsidiary, the Guarantors and
Shareholders has received, either orally or in writing, any notice specific to
it 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 in by the Company or the
Subsidiary, nor has the Company, the Subsidiary, any Guarantor or any
Shareholder received, or been threatened with, any claim for refund specific to
it in excess of $750 by a Medicare or Medicaid carrier, except as disclosed in
the Schedule of Proceedings attached hereto as Schedule 9.17.
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9.18 RELATIONSHIPS. Except as disclosed on Schedule 9.18, none of
the Company, the Subsidiary, the Shareholders and the Guarantors, and none of
their respective officers, trustees, directors, employees, immediate family
members, and no person or entity which is controlled by, under common control
with, or controlling any of them (each, an "AFFILIATE") has, or at any time
within the last two (2) years has had, a material ownership interest in any
business, corporate or otherwise, that is a party to, or in any property that is
the subject of, business relationships or arrangements of any kind relating to
the operation of the Business of the Company and the Subsidiary. Except as set
forth on Schedule 9.18, no Affiliate is guaranteeing the obligations of the
Company or the Subsidiary.
9.19 ASSETS COMPRISING THE BUSINESS. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Businesses as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Businesses of the Company and the Subsidiary in the ordinary
course of the business of the Company and the Subsidiary, consistent with past
practice, as determined by the Shareholders and Guarantors in good faith and
consistent with past practice.
9.20 QUESTIONABLE PAYMENTS. Neither the Company nor the Subsidiary
has, and to the knowledge of the Company, the Subsidiary, the Guarantors and
Shareholders, none of their Affiliates or employees have, offered, made or
received any illegal or unlawful payment, bribe, kickback, political
contribution or other similar questionable payment for any referrals or
otherwise in connection with the ownership or operation of any of the Business,
including, without limitation, any of the same that would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended.
9.21 REIMBURSEMENT MATTERS. Each of the Company and the Subsidiary
to the extent necessary to conduct its business in a manner consistent with past
practice, is qualified for participation in the Medicare and Medicaid programs.
Except as disclosed on Schedule 9.21, (i) none of the Company, the Subsidiary,
the Guarantors and the Shareholders has received any notice of denial or
recoupment from the Medicare or Medicaid programs, or any other third party
reimbursement source (inclusive of managed care organizations) with respect to
products or services provided by the Company or the Subsidiary, (ii) to the
knowledge of the Company, the Subsidiary, the Guarantors and each Shareholder,
there is no basis for the assertion after the Closing Date of any such denial or
recoupment claim, and (iii) none of the Company, the Subsidiary, the Guarantors
and the Shareholders has received notice from any Medicare or Medicaid program
or any other third party reimbursement source (inclusive of managed care
organizations) of any pending or threatened investigations or surveys with
respect to, or arising out of, products or services provided by the Company or
the Subsidiary or otherwise, and to the knowledge of the Company, the
Subsidiary, the Guarantors and the Shareholders, no such investigation or survey
is pending, threatened or imminent.
9.22 ENVIRONMENTAL COMPLIANCE. Except as disclosed on Schedule
9.22, at all times during the ownership by the Company and the Subsidiary of the
Business, such Business has not been, and the Business currently is not, in
violation of any Governmental Requirement relating
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to environmental matters and no notice has ever been served upon any Guarantor
or Shareholder or the Subsidiary or the Company, or any of their agents or
representatives or any prior owner of any Business, claiming any violation of
any Governmental Requirement concerning the environmental state, condition or
quality of any real or personal property in any related to the Business, or
requiring or calling attention to the need for any work, repairs or demolition
on or in connection with any of the real property in order to comply with any
governmental requirement concerning the environmental or healthful state,
condition or quality of the real property.
9.23 CAPITAL STOCK. Schedule 9.23 sets forth a complete list and
description of all of the authorized capital stock of the Company and the
Subsidiary, the number of shares issued and outstanding of such capital stock
and the identity of each holder thereof, in each case indicating the number of
shares held. No shares of capital stock of the Company or the Subsidiary are
held in the treasury or such corporation. Each of the Company and the Subsidiary
has only one class of capital stock. The Shareholders are the lawful record and
beneficial owners of all of the Company Shares as indicated on Schedule 9.23,
free and clear of all Liens, and the Company is the lawful record and beneficial
owner of all of the issued and outstanding shares of capital stock of the
Subsidiary, free and clear of all Liens, and all of such stock is duly
authorized, validly issued, and fully paid and non-assessable. Each Shareholder
has the full legal power to transfer and deliver the Company Shares listed as
owned by him, her or it on Schedule 9.23. There are not now any and, on the
Closing Date there will be no, subscription, participation, preemptive or first
refusal rights to purchase or otherwise acquire shares of capital stock of the
Company or the Subsidiary from the Company, the Subsidiary or from any
Shareholder or from any other person, pursuant to any provision of law or the
Articles of Incorporation or By-Laws of the Company or the Subsidiary or by
agreement or otherwise. There are not now any and, on the Closing Date there
shall not be, outstanding any warrants, options, or other rights to subscribe
for or purchase from the Company or the Subsidiary any shares of capital stock
of the Company or the Subsidiary, nor are there and there shall not be
outstanding on the Closing Date, any securities convertible into or exchangeable
for any such shares. There are no voting agreements, arrangements, trusts or
restrictions relating to any of the Company Shares or any shares of capital
stock of the Subsidiary.
9.24 ACCOUNTS RECEIVABLE. The information contained on the
Schedule of Accounts Receivable Data, attached hereto as Schedule 9.24, is
accurate and complete. $ of the amount set forth thereon is fully collectible
(without further reserve) within twelve (12) months from the Closing Date.
ARTICLE X: REPRESENTATIONS AND WARRANTIES OF IHS AND NEWCO
IHS and Newco represent and warrant to the Shareholders that:
10.1 DUE ORGANIZATION. Each of IHS and Newco is a duly organized,
valid corporation under the laws of the State of Delaware and Florida,
respectively.
10.2 DUE AUTHORITY. Each of IHS and Newco is duly authorized by
law and corporate policy and approval to: (a) enter into this Agreement and each
Transaction Document; (b)
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make all warranties and representations made by them herein; and (c) deliver all
consideration provided for under the terms hereof.
10.3 BINDING AUTHORITY. All signatories and agents designated as
agents/officers for IHS or Newco for signing purposes have the authority to bind
IHS or Newco, as the case may be, to the terms of this Agreement.
10.4 CASH PAYMENT AUTHORITY. IHS has the authority to cause the
Merger Consideration to be delivered in accordance with the terms of this
Agreement.
10.5 BROKERS. No broker or finder has acted for the IHS or Newco
in connection with the transactions contemplated by this Agreement, and no
broker or finder is entitled to any broker's or finder's fee or other commission
in respect thereof based in any way on agreements, understandings or
arrangements with IHS or Newco.
ARTICLE XI: SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of IHS, Newco and each Guarantor and
each Shareholder contained or made pursuant to this Agreement shall survive the
execution of this Agreement.
ARTICLE XII: RESTRICTIVE COVENANTS
12.1 NON-COMPETE. Each Shareholder and each Guarantor hereby
agrees that until the fifth (5th) anniversary of the Closing Date (the
"RESTRICTED PERIOD"), it, he or she will not, directly or indirectly, own,
manage, operate, join, control or participate, or have a proprietary interest
in, the ownership, management, operation or control, of or be connected with, in
any manner, any home health care business within fifty (50) miles of any
location set forth on the Schedule of Locations attached hereto as Schedule
12.1.
12.2 CONFIDENTIAL INFORMATION. Certain confidential and
proprietary information is included within the Assets ("TRADE SECRETS"),
including, without limitation, with respect to some or all of the following
categories of information: (a) financial information, including but not limited
to information relating to earnings, assets, debts, prices, pricing structure,
reimbursement matters, volume of purchases or sales or other financial data
whether related to the Company or the Subsidiary or generally, or to particular
products, services, geographic areas, or time periods; (b) supply and service
information, including but not limited to information relating to goods and
services, suppliers' names or addresses, terms of supply or service contracts or
of particular transactions, or related information about potential suppliers to
the extent that such information is not generally known to the public, and to
the extent that the combination of suppliers or use of a particular supplier,
though generally known or available, may yield advantages to IHS or the
Surviving Corporation, details of which are not generally known; (c) marketing
information, including but not limited to information relating to details about
ongoing or proposed marketing programs or agreements by or on behalf of the
Company or the Subsidiary, sales forecasts, advertising formats and methods or
results of marketing efforts or information about impending transactions; (d)
personnel information, including but not limited to information relating to
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employees' personal or medical histories, compensation or other terms of
employment, actual or proposed promotions, hirings, resignations, disciplinary
actions, terminations or reasons therefor, training methods, performance, or
other employee information; (e) customer and patient information, including but
not limited to information relating to names, addresses or backgrounds of past,
existing or prospective clients, customers, payors, referral sources, and
patients, records of agreements and prices, proposals or agreements between any
of them and the Company or the Subsidiary, status of accounts or credit,
patients' medical histories or related information as well as customer lists;
and (f) inventions and technological information, including but not limited to
information related to proprietary technology, trade secrets, research and
development data, processes, formulae, data and know-how, improvements,
inventions, techniques, and information that has been created, discovered or
developed, or has otherwise become known to the applicable Guarantor or
Shareholder, and/or in which property rights have been assigned or otherwise
conveyed to the Company or the Subsidiary, which information has commercial
value in the business in which the Company or the Subsidiary is engaged. Each
Shareholder and Guarantor shall hold all Trade Secrets in confidence and will
not discuss, communicate or transmit to others, or make any unauthorized copy of
or use any of the Trade Secrets; and will take all reasonable actions that IHS
deems reasonably necessary or appropriate, to prevent unauthorized use or
disclosure of or to protect the Surviving Corporation's interest in the Trade
Secrets. The foregoing does not apply to information that by means other than
deliberate or inadvertent disclosure by any Guarantor or Shareholder or any of
their respective Affiliates, becomes well known to the public; or disclosure
compelled by judicial or administrative proceedings after the Guarantors and
Shareholders diligently try to avoid each disclosure and afford IHS the
opportunity to obtain assurance that compelled disclosures will receive
confidential treatment.
12.3 NON-SOLICITATION AND NON-PIRATING. Each Guarantor and
Shareholder hereby agrees that, during the Restricted Period it, he or she will
not, directly or indirectly, for itself, himself or herself on behalf of any
other person, firm, entity or other enterprise: (a) solicit or in any way divert
or take away any person or entity that, prior to the Closing Date, was a
patient, client, customer, payor, referral source, facility or patient of the
Company, Prime or the Subsidiary; or (b) hire, entice away or in any other
manner persuade any person who was an employee, consultant, representative or
agent of the Company, Prime or the Subsidiary prior to the Closing Date, to
alter, modify or terminate their relationship with the Surviving Corporation.
12.4 NECESSARY RESTRICTIONS. Each Guarantor and Shareholder
acknowledges that the restrictions contained in this Agreement are reasonable
and necessary to protect the legitimate business interests of IHS and the
Surviving Corporation and that any violation thereof by any of them would result
in irreparable harm to IHS and the Surviving Corporation, and that damages in
the event of any such breach of this Agreement will be difficult, if not
impossible, to ascertain. Accordingly, each of the Guarantors and Shareholders
agrees that upon the violation of any of the restrictions contained in this
Agreement, IHS or the Surviving Corporation shall be entitled to obtain from any
court of competent jurisdiction a preliminary and permanent injunction as well
as any other relief provided at law, equity, under this Agreement or otherwise.
In the event any of the foregoing restrictions are adjudged unreasonable in any
proceeding, then the parties agree that the period of time or the scope of such
restrictions (or both) shall be adjusted to such a manner or for such a time (or
both) as is adjudged to be reasonable.
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12.5 REMEDIES FOR BREACH. Each Guarantor and Shareholder
acknowledge that the covenants contained in this Article XII of this Agreement
are independent covenants of IHS and the Surviving Corporation and that any
failure by IHS or the Surviving Corporation to perform its obligations under
this Agreement or any other agreement shall not be a defense to enforcement of
the covenants contained in this Agreement, including but not limited to a
temporary or permanent injunction.
ARTICLE XIII: INDEMNIFICATION; REMEDIES
13.1 INDEMNIFICATION BY GUARANTORS AND SHAREHOLDERS. The
Guarantors and Shareholders shall, jointly and severally, indemnify and hold
harmless at all times IHS and the Surviving Corporation and their respective
stockholders, directors, officers, employees, agents and assigns (collectively,
the "IHS CLAIMANTS" and each an "IHS CLAIMANT", from and against any Damages (as
hereinafter defined) resulting from: (a) any inaccurate representation made by
any Shareholder or Guarantor in, pursuant to or under this Agreement or any
Transaction Document; (b) any breach of any warranty made by any Shareholder or
Guarantor in, pursuant to or under this Agreement or any Transaction Document;
(c) any breach or default in the performance by any of the Company, the
Guarantors or Shareholders of any of the covenants to be performed by any of the
Shareholders, the Guarantors or the Company hereunder or in any Transaction
Document; (d) any Closing Date Liabilities; (e) any Liabilities Deficiency; and
(f) any Asset Value Deficiency.
13.2 INDEMNIFICATION BY IHS. IHS shall indemnify and hold harmless
at all times each Shareholder and Guarantors from and against any Damages
resulting from: (a) any inaccurate representation made by IHS or Newco in,
pursuant to or under this Agreement; (b) any breach of any warranty made by IHS
or Newco in, pursuant to or under this Agreement; and (c) any breach or default
in the performance by IHS or Newco of any of the covenants to be performed by
IHS or Newco hereunder.
13.3 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, settlements, penalties, and damages, including, without limitation,
reasonable counsel and arbitration fees incurred in investigating or in
attempting to avoid or oppose the imposition thereof.
13.4 REMEDIES.
(A) REMEDIES OF IHS CLAIMANTS. If any IHS Claimant makes
written request to any Guarantor or Shareholder for the payment of Damages, then
such Guarantor or Shareholder shall pay to such IHS Claimant the amount of
Damages requested within ten (10) days from the date on which such request is
received (the "NOTICE PERIOD").
(B) SHAREHOLDERS' REMEDIES. If any Guarantor or Shareholder
makes written request to IHS or the Surviving Corporation for the payment of
Damages, then IHS or the
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Surviving Corporation shall pay to such Guarantor or Shareholder the amount of
Damages requested within the Notice Period.
(C) NOTICE OF DISPUTE. Notwithstanding the foregoing
provisions of this Section 13.4, if a party (the "DEMANDING PARTY") serves a
request for payment on the other party (the "OBLIGATED PARTY"), the Obligated
Party shall have the option to provide written notice to the Demanding Party
(the "NOTICE OF DISPUTE") within the Notice Period that the Obligated Party
disputes, in good faith, the validity or amount of the Damages set out in the
request for payment of Damages, and if the affected parties cannot agree on the
validity or amount of such Damages within ten (10) days following the Notice
Period, the dispute as to the validity or amount of such claim or liability (the
"DISPUTE") shall be settled as set forth in Section 13.5 below, with the
non-prevailing party bearing the prevailing party's costs of arbitration if such
Dispute is resolved by arbitration.
(D) ARBITRATION. If arbitration is required pursuant to this
Section 13.4, IHS and the Surviving Corporation, on the one hand and the
Shareholders' Representative on behalf of all of the Shareholders and
Guarantors, on the other hand, each shall select an arbitrator within ten (10)
business days after the Notice of Dispute is delivered; those two arbitrators
will then select a third arbitrator; and the three arbitrators so chosen will
determine the validity of the claim for Damages (unless a single arbitrator
shall be agreed to by the applicable parties; in which case such single
arbitrator shall make such determination). If either side delays in appointing
an arbitrator when required, and ten (10) days or more has elapsed, the
arbitrator appointed by the other party shall arbitrate the dispute. If any of
the Shareholders or Guarantors shall be subject to a Dispute with IHS and/or the
Surviving Corporation, they shall, unless IHS or the Surviving Corporation
elects otherwise in its sole and absolute discretion, be required to act as a
group with respect to any and all rights and obligations with respect to the
resolution of the Dispute as provided in this Section 13.4. The parties agree
that any arbitration pursuant hereto shall be held in Tampa, Florida.
13.5 SETTLEMENT OF DISPUTES.
(A) DISPUTES NOT INVOLVING THIRD PARTIES. If a Dispute
involves claims not involving any third party, IHS and the Surviving
Corporation, on the one hand, and all of the Guarantors and Shareholders, on the
other hand, shall settle the Dispute by submitting the same to binding
arbitration.
(B) DISPUTES INVOLVING CLAIMS MADE BY THIRD PARTIES. If a
Dispute involves claims made by one or more third parties (a "THIRD PARTY
CLAIM"), the party asserting its right to indemnification for such Third Party
Claim shall give written notice to the other party as soon as practical after
such asserting party receives notice of such Third Party Claim; provided,
however the failure to timely give such notice shall not affect such party's
right to indemnification except to the extent the party to receive the notice is
damaged by such delay. Upon such notice the parties shall submit the Dispute to
arbitration, and the following procedures shall apply:
(I) Solely for purposes of determining the party
responsible for defending the Third Party Claim, the arbitrators shall
deem such Third Party Claim to be valid (although such consideration
shall not be an admission by any party as to any liability to any
party). The arbitrators then shall decide which party shall be liable
for the Third Party Claim if it is successfully prosecuted by such
third party or parties, and the decision of such
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arbitrators with respect to such liability shall be final and binding
as among the parties. (Such party determined to be liable for such
claim sometimes shall be referred to herein as the "RESPONSIBLE
PARTY".)
(II) If the Responsible Party refuses to settle (and pay
the settlement amount of) the Third Party Claim immediately, then the
Responsible Party immediately shall select one of the following two
options:
Option One: The Responsible Party, at the Responsible
Party's sole expense and risk, can assume the defense of
the Third Party Claim, provided the Responsible Party first
places in escrow, in favor of the other party, adequate
collateral (as determined by the arbitrators on
consideration of all relevant facts) to protect the other
party from all Damages with respect to such Third Party
Claim (in which case the other party immediately shall be
reimbursed by the Responsible Party for any amount the
other party is required to pay with respect to such Third
Party Claim); or
Option Two: The Responsible Party, at the Responsible
Party's expense and risk, can co-defend the Third Party
Claim with the other party, with the Responsible Party also
responsible for advancing all costs incurred by the other
Party in connection with such defense, including, without
limitation, the legal fees and expenses of the other
party's counsel for its reasonable involvement in such
defense. If the other party is found to be liable for any
portion of such Third Party Claim, the Responsible Party
immediately shall advance to the other party any amount
required to be paid by the other party with respect
thereto; provided, however, if the Responsible Party
selects this option, the Responsible Party shall attempt
diligently to have the other party removed as a party to
any legal action involving the Third Party Claim (and, upon
such removal, the involvement of the other party's counsel
shall cease unless requested by the Responsible Party or
the Responsible Party's counsel); and
(III) No party may settle any Third Party Claim without the
prior consent of the other parties hereto unless the settlement will
not have a material adverse effect on the other party hereto. The
parties will resolve any Dispute with respect to any such proposed
settlement in accordance with this Section 13.5.
(IV) Any party responsible for defending a Third Party Claim
shall proceed with diligence and in good faith with respect thereto.
ARTICLE XIV: POST-CLOSING REQUIREMENTS OF SHAREHOLDERS
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14.1 FINAL FINANCIAL AND TAX INFORMATION.
(A) Not later than thirty (30) days following Closing, the
Shareholders and Guarantors, at their sole cost and expense, shall deliver to
IHS "FINAL AND TAX FINANCIAL INFORMATION", which shall include:
(I) a balance sheet of the Company and the Subsidiary on
a consolidated basis as of the Economic Change Date prepared in
accordance with the Tax Principles;
(II) an income statement, prepared in accordance with
the Tax Principles, of the Company and the Subsidiary on a consolidated
basis for the period commencing on the date succeeding the last day of
the most recent Financial Statement Date and ending on the Economic
Change Date;
(III) an aged schedule of accounts receivable of the
Company and the Subsidiary as of the Economic Change Date;
(IV) a Cash Settlement Summary of the Company and the
Subsidiary, in form provided by Buyer;
(V) an inventory of fixed assets of the Company and the
Subsidiary as of the Economic Change Date;
(VI) an inventory of supplies of the Company and the
Subsidiary as of the Economic Change Date; and
(VII) a Federal and State tax return for the Company and
the Subsidiary for the Company's and Subsidiary's respective fiscal
period ending on the Economic Change Date, or if such a return may not
be filed in accordance with applicable Governmental Requirements, a tax
return fiscal year end Federal and State income tax return for the
Company and the Subsidiary prepared as if the Economic Change Date was
the last day of the fiscal year of the Company and the Subsidiary.
(B) LIABILITIES DEFICIENCY. If all such Final Financial and
Tax Information is not delivered to IHS within such thirty (30) day period
following the effective date of the merger, the Guarantors and Shareholders
shall be liable to IHS in an amount equal to $500.00 for each day after such
thirty (30) day period until all such Final Financial and Tax Information is
delivered to IHS, and such liability shall constitute a Liabilities Deficiency
under the provisions of Section 2.7(a), above.
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ARTICLE XV: MISCELLANEOUS
15.1 GROUP'S REPRESENTATIVE. Each Guarantor and Shareholder hereby
designates Arthur Tepper, and Arthur Tepper hereby accepts the designation as
the representative of the Guarantor and Shareholders ( the "GROUP'S
REPRESENTATIVE") to act for and on behalf of the Guarantors and Shareholders as
provided in this Agreement. Each Shareholder and Guarantor shall be bound by all
actions taken or omitted by Group's Representative on behalf of any Guarantor or
Shareholder as provided in this Agreement, and each Guarantor and Shareholder
shall be deemed to have received any notice deemed given or payment made to
Group's Representative in accordance with the notice provisions of this
Agreement on the date deemed given or the date paid to Group's Representative,
and IHS and the Surviving Corporation shall be entitled to rely on all notices
and consents given, and all settlements entered into on behalf of any Guarantor
or Shareholder to the extent authorized pursuant to the terms of this Agreement
notwithstanding any objections made by any Guarantor or Shareholder prior to,
concurrently with or subsequent to the giving of any such notice or consent or
the settlement of any such matter. Group's Representative may be replaced only
if and when all of the Guarantors and Shareholders shall notify IHS that a new
individual person (named in such notice) has been unanimously selected by them
to be the new Group's Representative, in which case such new person shall
thereafter be the Group's Representative.
15.2 THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
expressed or implied, is intended to confer on any person, other than the
parties hereto, and their successors, any rights or remedies under or by reason
of this Agreement other the affiliates entitled to indemnification pursuant to
Sections 13.1 and 13.2.
15.3 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.
15.4 NOTICES. All notices, consents, waivers and other
communications required or permitted hereunder shall be in writing and shall be
deemed to be properly given when personally delivered to the party or parties
entitled to receive the notice or three (3) business days after sent by
certified or registered mail, postage prepaid, or on the business day after sent
by nationally recognized overnight courier, in each case, properly addressed to
the party or parties entitled to receive such notice at the address stated
below:
to any Guarantor
or Shareholder: Arthur Tepper
12219 Brightwater Boulevard
Tampa, Florida 33617
with a copy to: Michael D. LaBarbera, Esq.
LaBarbera, Campbell and Leto
West Kennedy Legal Center
1907 West Kennedy Boulevard
Tampa, Florida 33606
32
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to IHS: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall Elkins, General Counsel, and
Elizabeth B. Kelly, Executive Vice
President
and
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attn: Andrew S. Bogen
with a copy to: RoTech Medical Corporation
4506 L.B. McLeod Road, Suite F
Orlando, FL 32811
Attention: Stephen P. Griggs
15.5 CHOICE OF LAW. The laws of the State of Florida applicable to
contracts executed, delivered and to be fully performed in such State govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
15.6 SECTIONS AND OTHER HEADINGS. Section, paragraph, and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
15.7 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 instrument. Facsimile signatures may
be deemed binding for this Agreement, or any modification or amendment hereto,
or any Transaction Documents contemplated hereby.
15.8 GENDER. All gender employed in this Agreement shall include
all genders, and the singular shall include the plural and the plural shall
include the singular whenever and as often as may be appropriate.
15.9 PARTIES IN INTEREST. This Agreement shall be binding on and
shall inure to the benefit of, and be enforceable by, IHS, the Surviving
Corporation, the Guarantors, Shareholders and their respective successors and
assigns. IHS and the Surviving Corporation shall be entitled to assign their
rights under this Agreement and the Transaction Documents after the Closing. No
Shareholder or Guarantor may assign this Agreement or any of his or her rights
hereunder without the prior consent of IHS.
15.10 ENTIRE AGREEMENT. This Agreement including all Schedules and
Exhibits hereto, and all Transaction Documents constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no agreements, understandings, restrictions, warranties, or representations
between the parties with respect to the subject matter hereof other than as set
forth herein or as herein provided.
33
<PAGE>
15.11 PERFORMANCE. In the event of a breach by any Shareholder or
Guarantor of any of its, his or her respective obligations hereunder, IHS shall
have the right, in addition to any other remedies which may be available, to
obtain specific performance of the terms of this Agreement, and each of the
Guarantors and Shareholders hereby waives the defense that there may be an
adequate remedy at law.
15.12 WAIVER, DISCHARGE, ETC. This Agreement and the Transaction
Documents and the obligations hereunder and thereunder shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement or any Transaction Document shall be held to be a waiver of any
other or subsequent breach.
15.13 COOPERATION FURTHER ASSISTANCE. From time to time, as and
when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed or delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
requested or necessary to carry out the intent and purpose of this Agreement.
15.14 JOINT AND SEVERAL. The Shareholders and Guarantors shall be
jointly and severally liable for all representations, warranties and
obligations, including, without limitation, indemnification obligations, and
covenants made by any of them pursuant to this Agreement, including, without
limitation, any made pursuant to any Transaction Document. For all purposes of
this Agreement, any representation or warranty that is qualified to be "to the
knowledge of any Shareholder or Company or Guarantor or the Subsidiary" or by a
requirement that the Company, the Subsidiary, or any Guarantor or Shareholder
shall have received "notice" of any matter, or any similar qualification shall
be deemed to include the knowledge of the Company, the Subsidiary, or any
Guarantor or Shareholder or notices to the Company, the Subsidiary, or any
Guarantor or Shareholder, as the case may be. No Guarantor or Shareholder shall
have any right of contribution from, or indemnification by, the Surviving
Corporation (as the successor to the Company and Prime) by reason of such
Guarantor's or Shareholder's prior association with the Company or Prime as a
shareholder, employee, officer or director.
15.15 INDEPENDENT LEGAL COUNSEL. Each Guarantor and Shareholder
represents and warrants that it, he or she has had the opportunity to seek the
advice of independent legal counsel prior to signing this Agreement, and that
IHS has recommended to such Guarantor or Shareholder that such party obtain
legal counsel.
34
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
By:/s/ Elizabeth B. Kelly
-------------------------
Name: Elizabeth B. Kelly
Title: EVP, Corporate
Development
ROTECH OXYGEN & MEDICAL
EQUIPMENT, INC.
By: /s/ STEPHEN P. GRIGGS
-------------------------
Name: Stephen P. Griggs
Title: President
STATE OF FLORIDA
-----------------
COUNTY OF ORANGE
-----------------
The foregoing instrument was acknowledged before me by, Stephen P.
Griggs,_______________________ as President of Rotech Oxygen & Medical
Equipment, Inc., a Florida corporation, on behalf of the corporation, and who is
personally known to me; or has produced ______________________________________as
identification.
/s/ ELIZABETH S. BROWN
- ----------------------------------- -----------------------------
Date Notary Signature
[SEAL] ELIZABETH S. BROWN
MY COMMISSION #CC377695 EXPIRES
JUNE 25, 1998
BONDED THRU TROY FARM INSURANCE, INC.
-----------------------------
Notary Name Printed
My Commission Expires:
STATE OF MARYLAND
-----------------
COUNTY OF BALTIMORE
-----------------
The foregoing instrument was acknowledged before me by, Elizabeth B.
Kelly, Executive Vice President of Integrated Health Services, a
________corporation, on behalf of the corporation, and who is personally known
to me; or has produced a driver's license as identification.
5/10/98 /s/ JOYCE WALKER DULEY
- ----------------------------------- -----------------------------
Date Notary Signature
[SEAL] JOYCE WALKER DULEY
NOTARY PUBLIC STATE OF MARYLAND
MY COMMISSION EXPIRES DECEMBER 24, 2000
/s/ JOYCE WALKER DULEY
-----------------------------
Notary Name Printed
My Commission Expires:
35
<PAGE>
ARTHUR TEPPER AND ELIZABETH TEPPER,
AS TRUSTEES F/B/O
ARTHUR TEPPER UTD 7/14/78
By: /s/ ARTHUR TEPPER
--------------------------------
Its: Trustee
STATE OF FLORIDA
-----------------
COUNTY OF HILLSBOROUGH
----------------
The foregoing agreement was acknowledged before me
by,_____________________ , who is personally known to me; or has produced
__________________________________ as identification.
2/8/98 /s/ MICHAEL D. LABARBERA
- ------------------------- -------------------------------------
Date Notary Signature
MICHAEL D. LABARBERA
-------------------------------------
Notary Name Printed
My Commission Expires:
[SEAL] MICHAEL D. LABARBERA
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC539722
MY COMMISSION EXPIRES MARCH 22, 2000
THOMAS A. VALENTI, AS TRUSTEE OF THE
THOMAS A. VALENTI TRUST U/A/D
5/22/96
By: /s/ THOMAS A. VALENTI
----------------------------------
Its: TRUSTEE
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing agreement was acknowledged before me by,
Thomas A. Valenti, Trustee, who is personally known to me; or has produced
______________________________ as identification.
2/6/98 /s/ MICHAEL D. LABARBERA
- ------------------------- ------------------------------
Date Notary Signature
MICHAEL D. LABARBERA
[SEAL] MICHAEL D. LABARBERA ------------------------------
NOTARY PUBLIC STATE OF FLORIDA Notary Name Printed
COMMISSION NO. CC539722 My Commission Expires:
MY COMMISSION EXPIRES MARCH 22, 2000
37
<PAGE>
JOSEPH D. VALENTI, AS TRUSTEE FBO
JOSEPH D. VALENTI REVOCABLE TRUST
DATED 6/10/88
By: /s/ JOSEPH D. VALENTI
------------------------------
Its: TRUSTEE
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing agreement was acknowledged before me by Joseph D.
Valenti, Trustee , who is personally known to me; or has produced
______________________________ as identification.
2/6/98 /s/ MICHAEL D. LABARBERA
- ------------------------- ------------------------------
Date Notary Signature
MICHAEL D. LABARBERA
------------------------------
[SEAL] MICHAEL D. LABARBERA Notary Name Printed
NOTARY PUBLIC STATE OF FLORIDA My Commission Expires:
COMMISSION NO. CC539722
MY COMMISSION EXPIRES MARCH 22, 2000 Arthur Tepper
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing agreement was acknowledged before me
by, Arthur Tepper , who is personally known to me; or has produced
___________________________________ as identification.
2/6/98 /s/ MICHAEL D. LABARBERA
- ------------------------- ------------------------------
Date Notary Signature
[SEAL] MICHAEL D. LABARBERA MICHAEL D. LABARBERA
NOTARY PUBLIC STATE OF FLORIDA ------------------------------
COMMISSION NO. CC539722 Notary Name Printed
MY COMMISSION EXPIRES MARCH 22, 2000 My Commission Expires:
38
<PAGE>
/s/ Joseph Valenti
-------------------------
Joseph Valenti
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing agreement was acknowledged before me by, Joseph Valenti ,
who is personally known to me; or has produced ____________________________ as
identification.
2/6/98 /s/ Michael D. Labarbera
- ------------------------- ------------------------------
Date [OFFICIAL NOTARY SEAL] Notary Signature
------------------------------
Notary Name Printed
My Commission Expires:
/S/ Leann Jarczynski
------------------------------
Leann Jarczynski
STATE OF FLORIDA
----------------------
COUNTY OF HILLSBOROUGH
---------------------
The foregoing agreement was acknowledged before me
by,______________________ , who is personally known to me; or has produced
_____________________________ as identification.
2/6/98 /s/ Michael D. Labarbera
- ------------------------- ------------------------------
Date Notary Signature
[OFFICIAL NOTARY SEAL]
------------------------------
Notary Name Printed
My Commission Expires:
39
<PAGE>
/s/ Steven G. Tepper
-------------------------
Steven Tepper
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
The foregoing agreement was acknowledged before me by, Steven Tepper,
[who is personally known to me]; or has produced CA Drivers' License as
identification.
February 5, 1998 /s/ Carolyn Joncas
- ------------------------- -----------------------------
Date Notary Signature
Carolyn Joncas
------------------------------
Notary Name Printed
My Commission Expires:
Dec. 7, 2000
40
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(B) - Other Assets
Schedule 1(a)(v)(C) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(iv) - Wire Instructions
Schedule 4(a) - Closing Date Liabilities
Schedule 4(b) - Unassumed Contracts
Schedule 9(c) - Seller's Opinion
Schedule 12(c) - Liabilities
Schedule 12(g) - Contracts
Schedule 12(i) - Personnel Payrates; Employee Benefits
Schedule 12(k) - Insurance
Schedule 12(o) - Tax Returns and Financial Statements
Schedule 12(p) - Supplemental Tax Information
Schedule 12(q) - Adverse Business Developments
Schedule 12(r) - Relationships
Schedule 12(u) - Reimbursement Matters
Schedule 12(v) - Environmental Compliance
Schedule 15(a) - Locations
Exhibit 2(b)(i) - Escrow Agreement
Exhibit 2(b)(ii) - Payment Escrow Agreement
41
-----------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 10, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.
AND
ROTECH OXYGEN & MEDICAL EQUIPMENT, INC.
AND
PRIME MEDICAL SERVICES, INC.
AND THE SHAREHOLDERS OF THE CONSTITUENT CORPORATIONS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: MERGER...............................................................2
1.1 Merger..............................................................2
1.2 Merger Time.........................................................2
1.3 Payment of Merger Consideration.....................................2
1.4 Surviving Corporation...............................................2
ARTICLE II: CONVERSION..........................................................3
2.1 Consideration.......................................................3
2.2 Conversion of Common Stock..........................................4
2.3 Manner of Exchange..................................................4
2.4 No Fractional Shares................................................6
2.5 Assets..............................................................6
2.6 Closing Date Liabilities............................................7
2.7 Right of Offset Against the Escrow Fund.............................8
ARTICLE III: IHS STOCK..........................................................9
3.1 IHS Stock...........................................................9
ARTICLE IV: EMPLOYEES...........................................................14
ARTICLE V: CLOSING.............................................................14
5.1 Closing Date.......................................................14
5.2 Deliveries.........................................................14
ARTICLE VI: ASSET CONDITION.....................................................15
ARTICLE VII: SALES AND TRANSFER TAXES; FEES.....................................15
ARTICLE VIII: RESTRICTIONS ON OPERATIONS OF THE COMPANIES.......................15
8.1 Negative Covenants.................................................15
8.2 Conduct of Business Pending Closing................................16
ARTICLE IX: REPRESENTATIONS AND WARRANTIES BY SHAREHOLDERS......................16
9.1 Organization of Companies; Enforceability..........................16
9.2 Consents...........................................................17
9.3 Litigation.........................................................17
9.4 Compliance with Laws and Contracts.................................17
9.5 Corporate Acts and Proceedings.....................................17
9.6 Title to Assets....................................................18
9.7 Contracts..........................................................18
9.8 Brokers............................................................19
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
9.9 Employment Contracts; Employees....................................19
9.10 Employee Benefit Plans.............................................20
9.11 Insurance..........................................................20
9.12 Disclosure.........................................................20
9.13 Officers and Directors of Companies................................20
9.14 Inventory and Fixed Assets.........................................21
9.15 Financial Statements...............................................21
9.16 Tax Information....................................................21
9.17 Adverse Business Developments......................................22
9.18 Relationships......................................................22
9.19 Assets Comprising the Business.....................................22
9.20 Questionable Payments..............................................22
9.21 Reimbursement Matters..............................................23
9.22 Environmental Compliance...........................................23
9.23 Capital Stock......................................................23
9.24 Accounts Receivable................................................24
ARTICLE X: REPRESENTATIONS AND WARRANTIES OF IHS AND NEWCO......................24
10.1 Due Organization...................................................24
10.2 Due Authority......................................................24
10.3 Binding Authority..................................................24
10.4 Cash Payment Authority.............................................24
10.5 Brokers............................................................24
ARTICLE XI: SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................24
ARTICLE XII: RESTRICTIVE COVENANTS..............................................24
12.1 Non-Compete........................................................24
12.2 Confidential Information...........................................25
12.3 Non-Solicitation and Non-Pirating..................................25
12.4 Necessary Restrictions.............................................26
12.5 Remedies for Breach................................................26
ARTICLE XIII: INDEMNIFICATION; REMEDIES.........................................26
13.1 Indemnification by Shareholders....................................26
13.2 Indemnification by IHS.............................................26
13.3 Definition of Damages..............................................26
13.4 Remedies...........................................................27
13.5 Settlement of Disputes.............................................27
ARTICLE XIV: POST-CLOSING REQUIREMENTS OF SHAREHOLDERS..........................29
14.1 Payment Escrow.....................................................29
14.2 Final Financial and Tax Information................................29
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XV: MISCELLANEOUS.......................................................30
15.1 Group's Representative..............................................30
15.2 Third Party Beneficiaries...........................................31
15.3 Expenses............................................................31
15.4 Notices.............................................................31
15.5 Choice of Law.......................................................31
15.6 Sections and Other Headings.........................................32
15.7 Counterpart Execution...............................................32
15.8 Gender..............................................................32
15.9 Parties in Interest.................................................32
15.10 Entire Agreement....................................................32
15.11 Performance.........................................................32
15.12 Waiver, Discharge, Etc..............................................32
15.13 Cooperation Further Assistance......................................32
15.14 Joint and Several...................................................33
15.15 Independent Legal Counsel...........................................33
</TABLE>
(iii)
<PAGE>
--------------------------
AGREEMENT AND PLAN OF MERGER
--------------------------
This Agreement and Plan of Merger (this "AGREEMENT") is made as of the
10th day of February, 1998, among INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation ("IHS"), ROTECH OXYGEN & MEDICAL EQUIPMENT, INC., a Florida
corporation ("NEWCO"), PRIME MEDICAL SERVICES, INC. (the "COMPANY"), ELIZABETH
TEPPER ("TEPPER"), LEE T. MCCARGER ("MCCARGER"), BERNICE BRIERLEY ("BRIERLEY"),
LEANN JARCZYNSKI ("JARCZYNSKI", together with Tepper, McCarger, and Brierley,
the "SHAREHOLDERS" and each a "SHAREHOLDER").
WHEREAS, the Company operates a home respiratory and durable medical
equipment business in the State of Florida (the "BUSINESS"); and
WHEREAS, the Shareholders own all of the issued and outstanding shares
of common stock of the Company, par value $1 per share ("PRIME STOCK" or
"COMPANY SHARES"); and
WHEREAS, concurrently herewith, IHS and Newco are entering into an
Agreement and Plan of Merger (the "MEDAIDS MERGER AGREEMENT") with Medicare
Convalescent Aids of Pinellas, Inc., d/b/a Medaids ("MEDAIDS") and its
stockholders, pursuant to which, among other things, Medaids is being merged
with and into Newco upon the terms and subject to the conditions set forth
therein; and
WHEREAS, Newco is an indirectly wholly owned subsidiary of IHS;
WHEREAS, the Boards of Directors of IHS, Newco, and the Company deem it
advisable to merge the Company and Medaids with and into Newco pursuant to this
Agreement and the Medaids Merger Agreement (the "MERGER");
WHEREAS, pursuant to the Merger each outstanding share of capital stock
of Prime (each a "PRIME SHARE", and collectively, the "PRIME SHARES") shall be
converted into the right to receive the Merger Consideration (as hereinafter
defined); and
WHEREAS, to effectuate the foregoing, the parties desire to adopt a
plan of merger and reorganization; and
WHEREAS, all of the holders of capital stock in the Company have
approved this Agreement and the plan of merger described herein and the
transactions contemplated hereby in accordance with all applicable laws, and the
Company's Certificate of Incorporation and By-laws; and
WHEREAS, the Shareholders have obtained all consents of Governmental
Authorities (as such term is hereinafter defined) and all third parties
necessary to the consummation of the transactions contemplated hereby; and
<PAGE>
NOW, THEREFORE, each of the Shareholders, Newco, IHS, and the Company,
intending to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Upon the terms and subject to the conditions set forth in
this Plan of Merger and in accordance with the General Corporation Law of the
State of Florida (the "FBCA"), at the Merger Time (as defined herein), the
Company and Medaids shall be merged with and into Newco in accordance with the
provisions of Section 607.1101, et al of the FBCA. In furtherance thereof, on
the Closing Date the Company and Newco (together with Medaids), shall execute,
deliver, and cause to be filed with the Secretary of State of the State of
Florida, the Articles and Plan of Merger in the form of Exhibit 1.1 hereto (the
"PLAN OF MERGER" or "ARTICLES OF MERGER"). Following the Merger Time, the
separate existence of the Company and Medaids shall cease, and Newco shall
continue as the surviving corporation in the Merger (hereinafter sometimes
referred to as the "SURVIVING CORPORATION") as a business corporation
incorporated under the laws of the State of Florida under the name "ROTECH
OXYGEN & MEDICAL EQUIPMENT, INC. D/B/A MEDAIDS", and shall succeed to and assume
all the rights and obligations of the Company, Medaids and Newco in accordance
with the FBCA.
1.2 MERGER TIME. The Merger shall become effective at such time (the
"MERGER TIME") as the duly executed Articles of Merger is filed with the
Secretary of State of the State of Florida.
1.3 PAYMENT OF MERGER CONSIDERATION. IHS agrees that following the
Closing (as defined in Section 5.1, below), it will make payment of the Merger
Consideration (as defined in Section 2.1(d)) to the extent set forth in, and in
accordance with the terms of, this Agreement.
1.4 SURVIVING CORPORATION.
(A) CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Newco as in effect immediately prior to the Merger Time (as such term is
defined in Section 2.2) shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the terms thereof
and of the FBCA.
(B) BY-LAWS. The By-laws of Newco as in effect immediately prior
to the Merger Time shall be the By-laws of the Surviving Corporation until duly
amended in accordance with their terms and as provided by the Certificate of
Incorporation of the Surviving Corporation and the FBCA.
(C) DIRECTORS. The directors of Newco at the Merger Time shall,
from and after the Merger Time, be the directors of the Surviving Corporation
until their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation, or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
2
<PAGE>
(D) OFFICERS. The officers of Newco at the Merger Time shall, from
and after the Merger Time, be the officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation, or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws.
(E) FURTHER ACTION. If at any time after the Merger Time, IHS
shall consider that any further deeds, assignments, conveyances, agreements,
documents, instruments, or assurances in law or any other things are necessary
or desirable to vest, perfect, confirm, or record in the Surviving Corporation
the title to any property, rights, privileges, powers, and franchises of Newco
by reason of, or as a result of, the merger, or otherwise to carry out the
provisions of this Agreement and the Plan of Merger, the officers of Newco shall
execute and deliver, upon IHS's request, any instruments or assurances, and do
all other things necessary or proper to vest, perfect, confirm, or record title
to such property, rights, privileges, powers, and franchises in the Surviving
Corporation, and otherwise to carry out the provisions of this Agreement and the
Plan of Merger.
(F) The Plan of Merger includes the merger of Medaids with and
into Newco, and the payment of merger consideration to the shareholders of
Medaids. Each Shareholder represents, warrants and agrees that it, he or she has
reviewed the Plan of Merger, and it, he or she hereby approves such Plan of
Merger.
ARTICLE II: CONVERSION
2.1 CONSIDERATION. For purposes of this Agreement the terms:
(A) (I) "MERGER CONSIDERATION" shall mean ONE MILLION FOUR HUNDRED
THOUSAND DOLLARS ($1,400,000) plus the Additional Amount(as defined below).
(II) "PRIME CASH MERGER CONSIDERATION" shall mean $280,000 of
the Merger Consideration, and shall be paid in cash.
(III) "PRIME IHS STOCK MERGER CONSIDERATION" shall mean the
balance of the Merger Consideration, and shall be paid by the delivery of
shares of common stock, par value $.001, of IHS ("IHS SHARES") having a
value equal to such amount as determined in accordance with Section 3.1(a)
below.
(IV) "ADDITIONAL AMOUNT" shall mean the amount of cash plus
cash equivalents included in the Assets as of the Economic Date Date. The
Shareholders represent, warrant and covenant that the Additional Amount is
$54,000 (the "REPRESENTED AMOUNT"). If the actual Additional Amount shall
be less than the Represented Amount, the Shareholders shall cause the
Paying Agent to immediatley pay such deficiency to the Surviving
Corporation. The Additional Amount shall not include any tax refunds for
Federal, State or local income taxes paid by the Company prior to the
Closing in respect of income prior to the Closing ("TAX REFUNDS");
provided, however, that the Surviving Corporation shall pay to the Group's
Representative (for distribution to the Shareholders in accordance with
their respective Proportionate Amounts) an amount equal to any Tax Refunds
actually collected by the Surviving Corporation after the Closing.
3
<PAGE>
2.2 CONVERSION OF COMMON STOCK. At the Merger Time:
(A) each Prime Share which is issued and outstanding at the
Merger Time shall by reason of the Merger, without any action by the holder
thereof, be converted into the right to receive, in accordance with the
procedures hereinafter described, a Proportionate Amount (as hereinafter
defined) of the Prime Cash Merger Consideration and of the Prime IHS Stock
Merger Consideration;
(B) each share of capital stock of Medaids which is issued and
outstanding at the Merger Time shall by reason of the Merger, without any action
by the holder thereof, be converted into the right to receive cash and shares of
IHS Stock in the amounts, and in accordance with the procedures, described in
the Plan of Merger; and
(C) each share of Newco common stock outstanding immediately
prior to the Merger Time shall be unaffected by the Merger and shall continue to
be held by a direct or indirect wholly owned subsidiary of IHS.
For purposes of this Agreement: the "PROPORTIONATE AMOUNT" to which any
Prime Share shall be entitled shall be a fraction, the numerator of which shall
be one, and the denominator of which shall be the total number of Prime Shares
issued and outstanding at the Merger Time, other than shares, if any, held in
treasury.
2.3 MANNER OF EXCHANGE. The Merger Consideration shall be paid as
follows:
(A) At Closing, IHS Shares (the "ESCROWED SHARES" or the
"ESCROW FUND") having an aggregate value (determined in accordance with Section
3.1(a) hereof) equal to One Hundred Forty Thousand Dollars ($140,000) shall be
delivered to CoreStates Bank, N.A., as escrow agent ("ESCROW AGENT"), to be held
by Escrow Agent during the Escrow Period (as defined in Section 2.7(d), below),
pursuant to the terms of an Escrow Agreement, in the form attached hereto as
Exhibit 2.3(a) (the "ESCROW AGREEMENT"). The Escrowed Shares shall be subject to
the provisions of Section 2.7 hereof. A Proportionate Amount of the Escrowed
Shares shall be delivered by each Shareholder.
(B) At Closing, one hundred thirty seven thousand eight
hundred fourteen & no/00 ($137,814.00) of the Prime Cash Merger Consideration
shall be paid and delivered to the "PAYING AGENT" designated by the Group's
Representative (as hereinafter defined in Section 15.1) and reasonably
satisfactory to IHS, to be held and administered pursuant to the "PAYMENT ESCROW
AGREEMENT" attached hereto as Exhibit 2.3(b). Attached hereto as Schedule 2.3(b)
are the wire instructions for delivery of such cash to the Paying Agent. Such
cash shall be subject to the provisions of Section 14.1 hereof. A Proportionate
Amount of the amount payable to the Paying Agent shall be delivered on behalf of
each Shareholder.
4
<PAGE>
(C) At Closing, Sixty Nine Thousand Seven Hundred ($69,700)
Dollars of the Cash Merger Consideration shall be paid, on behalf of the
Shareholders, to Steven Richards & Associates Inc. (the "BROKER"), in cash in
full satisfaction of all fees and compensation due to the Broker in connection
with the transactions contemplated by this Agreement (the "BROKER'S FEE").
Attached hereto as Schedule 2.3(c) are the wire instructions for delivery of
such cash to the Broker. The Shareholders represent and warrant to IHS that the
Broker has acted as the Shareholders' representative and broker in connection
with the transactions contemplated by this Agreement, and authorizes and directs
IHS to withhold such sum from the Prime Cash Merger Consideration and disburse
such sum directly to the Broker. A Proportionate Amount of the cash payable to
the Broker shall be made on behalf of each Shareholder.
(D) The balance of the Prime Cash Merger Consideration and the
balance of the Prime IHS Stock Merger Consideration shall be payable to the
Shareholders and shall be paid in accordance with the procedure set forth below
in Section 2.3(e). Attached hereto as Schedule 2.3(d) are the wire instructions
for delivery of such cash to the Shareholders. Each Shareholder shall be
entitled to a Proportionate Amount of such cash.
(E) The Shareholders represent and warrant that in accordance
with the provisions of subsection (a) above, the Merger Consideration is
required to be distributed as set forth on Schedule 2.3(e). Upon delivery to IHS
of stock certificates representing any Company Shares, together with a fully
completed and executed letter of transmittal in the form of Exhibit 2.3(e) (a
"LETTER OF TRANSMITTAL"), IHS shall promptly pay to, or on behalf of, each
person entitled thereto the amount of cash and shall deliver certificates
representing the number of shares to which such person is entitled, as provided
on Schedule 2.3(e). No interest will be paid or accrued on any Merger
Consideration payable upon the surrender of any certificate or certificates or
other instruments. If payment is to be made to a person other than the one in
whose name the certificate or other instrument surrendered is registered, it
shall be a condition of payment to such other person that the certificate or
instrument so surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment shall pay any transfer,
stamp or other taxes required by reason of the payment to a person other than
the registered holder of the certificate or other instrument surrendered or
establish to the satisfaction of IHS that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.3(e), the certificate or certificates or instruments which immediately prior
to the Merger Time represented issued and outstanding Company Shares shall
represent for all purposes the right only to receive the Merger Consideration
set forth in this Agreement. After the Merger Time, there shall be no further
registration of transfers on the records of the Company of any Company Shares.
(F) Subject to the terms and conditions of this Agreement,
each party hereto approves and agrees to the Plan of Merger and shall execute,
deliver and file, or shall cause to be executed, delivered and filed, all such
consents, instruments, covenants, agreements, certificates and documents as
shall be necessary to effectuate the Merger on the Closing Date, including
without limitation, one or more Articles of Merger.
2.4 NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of IHS Stock shall be issued upon the surrender
for exchange of certificates representing any Company Shares, and such
fractional share interests will not entitle the owner thereof to vote or to
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any rights of a stockholder of IHS. Notwithstanding any other provision of this
Agreement, each holder of Company Shares exchanged pursuant to the Merger,
(after taking into account all certificates representing Company Shares
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of IHS Stock
multiplied by the value of such share determined in accordance with Section
3.1(a) below.
2.5 ASSETS. As of January 30, 1998 (the "ECONOMIC CHANGE
DATE"), the assets (collectively, the "ASSETS") of each of the Company will
include the following:
(A) INVENTORY; FIXED ASSETS. All inventory and fixed assets
of its Business, including, without limitation, all of the same set forth on the
Schedule of Inventory and Fixed Assets attached hereto as Schedule 2.5(a); and
(B) ACCOUNTS RECEIVABLE. All of the accounts receivable of
its Business including, without limitation those described on Schedule 2.5(b);
and
(C) MOTOR VEHICLES. All motor vehicles of its Business,
including without limitation, all of the same set forth on the Schedule of Motor
Vehicles attached hereto as Schedule 2.5(c); and
(D) PROPERTY RIGHTS. All Leases (as hereinafter defined in
paragraph 9.7(g)), easements and rights of way permitting access to its
Business; and
(E) CASH AND CASH EQUIVALENTS. The amount of cash and the
cash equivalents identified on Schedule 2.5(e) hereto, together with the bank
accounts related thereto.
(F) OTHER ASSETS. All other assets of any kind, tangible or
intangible, real, personal or mixed, owned and used or held for use by the
Company in connection with its Business, including, without limitation, all of
the following: (i) the Patients' List of the Business, as described in Schedule
2.5(f)(i); (ii) the telephone numbers listed on the Schedule of Telephone
Numbers and Licenses attached hereto as Schedule 2.5(f)(ii); (iii) all personal
property, machinery and equipment; (iv) all of the Company's prepaid assets; (v)
all of the Company's rights under contracts, agreements, and instruments; (vi)
any assets of the Company used in the operation of the Business, but not owned
by the Company; (viii) all intangible rights of the Company of every kind and
description used in, or held for use in connection with, the operation of its
Business, including, without limitation, all intangible assets, and to the
extent permitted by applicable law, all licenses, permits and authorizations;
(ix) the security deposits listed on Schedule 2.5(f)(ix), and (x) each of the
Company's Certificate of Incorporation, qualification to do business in any
jurisdiction, taxpayer identification number, minute books, stock transfer
records and other documents related specifically to the Company's corporate
organization and maintenance.
2.6 CLOSING DATE LIABILITIES.
(A) The Shareholders jointly and severally represent and
warrant that, to the best of their knowledge and belief after diligent inquiry,
all liabilities of the Company as of the
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Economic Change Date are listed on the Schedule of Liabilities attached hereto
as Schedule 2.6 (a). For purposes of this Agreement "LIABILITIES" shall mean and
include all claims, lawsuits, liabilities, obligations or debts of any kind or
nature whatsoever, whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition, and whether or not of a type which
would be reflected as a liability on a balance sheet (including, without
limitation, federal, state and local taxes of any nature) in accordance with
generally accepted accounting principles, consistently applied ("GAAP"),
including without limitation, the Company, claims for breach of contract, any
claims of any kind asserted by patients, former patients, employees or former
employees of the Company or any other party that are based on acts or omissions
occurring on or before the Closing Date, amounts due or that may become due in
connection with the participation of the Company in the Medicare or Medicaid
programs or due to any other health care reimbursement or payment intermediary,
or that may be due by the Company to any other third party payor, accounts
payable, notes payable, trade payables, lease obligations, indebtedness for
borrowed money, accrued interest, and contractual obligations. The Shareholders
acknowledge that the amount of the Merger Consideration for the Company Shares
is based on the accuracy of the representations and warranties of the
Shareholders contained in this Agreement, including, but not limited to, the
representations and warranties contained in this Section 2.6(a).
(B) At the Closing, pursuant to an assumption agreement in the
form of Schedule 2.6(b) hereto (the "ASSUMPTION AGREEMENT"), the Shareholders
will assume, jointly and severally, each liability of the Company arising out of
facts or circumstances existing as of the Economic Change Date, whether or not
disclosed or known on the Closing Date (the "CLOSING DATE LIABILITIES"), and
will agree to satisfy all of the Closing Date Liabilities that are not satisfied
pursuant to Section 14.1, below, as the same become due.
(C) Without limiting the generality of the provisions of
subsection (b) above, the Closing Date Liabilities shall include all liabilities
under any Contracts (as hereinafter defined) to the extent such liabilities
arise out of facts or circumstances or obligations to be satisfied on or prior
to the Economic Change Date, all Taxes (as such term is defined in Section 9.16)
that arise out of the transactions contemplated hereby or out of any income
earned by the Company on or prior to the Merger Time, and the Broker's Fee.
(D) Newco and IHS agree that the obligations (the "CONTINUING
OBLIGATIONS") arising out of services or products or other benefits to be
provided to the Surviving Corporation after Closing under Contracts that are not
terminated on or prior to Closing shall be the responsibility of the Surviving
Corporation after the Closing, and shall not constitute Closing Date
Liabilities, and Newco and IHS shall indemnify and hold each Shareholder
harmless from and against any Damages (as hereinafter defined in Section 13.3)
arising out of any of such Continuing Obligations.
(E) Additional Assets and Liabilities. (i) The parties agree
that the Assets also shall include all of the assets arising out of the
operation of the Business during the period commencing on the Economic Change
Date and terminating on the Closing Date (the "INTERIM PERIOD"), including
without limitation, any accounts receivable generated (whether or not billed)
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during the Interim Period (the "INTERIM PERIOD RECEIVABLES"), any cash collected
in respect of any accounts receivable, and any inventory or equipment acquired
by the Company during such Interim Period in connection with the operation of
the Business. Notwithstanding the foregoing, the Assets shall not include any
non-material tangible assets (such as inventory or supplies) used or disposed
of, or any cash expended, in each case for the benefit of the Business in the
ordinary course of business consistent with past practice during the Interim
Period. Any cash collected in respect of accounts receivable of the Company that
were in existence as of the Economic Change Date shall be applied to reduce the
Shareholders obligations under Section 2.7(a)(ii) below.
(ii) The parties further agree that the Closing Date
Liabilities shall not include any accounts payable, payroll expenses or other
expenses incurred by the Company during the Interim Period for the benefit of
the Business in the ordinary course of business consistent with past paractice.
2.7 RIGHT OF OFFSET AGAINST THE ESCROW FUND.
(A) EVENT OF DEFICIENCY. If:
(I) the Surviving Corporation or IHS pays for any Closing
Date Liabilities (a "LIABILITIES DEFICIENCY"); or
(II) the aggregate value of all of the collectible
accounts receivable of the Company as of the Closing Date is determined
to be less than $1, as determined by actual net cash collections of
such receivables during the twelve (12) month period immediately
following the Closing Date (an "ASSET VALUE DEFICIENCY") (it being
understood that until the earlier to occur of (x) the first anniversary
of the Closing Date; and (y) the date on which their is no longer an
Asset Value Deficiency, the Surviving Corporation will use the accounts
receivable computer system currently used by the Company for purposes
of recording, resubmitting and collecting the accounts receivable
included in the Assets, and upon reasonable request of the Group's
Representative, the Surviving Corporation shall provide him with
reasonable information regarding the status of the collection of such
accounts receivable, and will permit the Group's Representative to
pursue the collection of such receivables on behalf of the Surviving
Corporation or, in lieu thereof (in the discretion of the Surviving
Corporation), the Surviving Corporation shall assign, without recourse,
such receivables to the Group's Representative in consideration for
payment to the Surviving Corporation of the face amount thereof in
cash, in each case, unless the Surviving Corporation shall reasonably
determine that the Group's Representative's pursuit of such collection
may have a material adverse effect on the Surviving Corporation); or
(III) any IHS Claimant (as defined in Section 13.1) shall
be entitled to be indemnified for any Damages (as such term is defined
in Section 13.3) pursuant to this Agreement ("INDEMNIFICATION CLAIMS",
and together with any Liabilities Deficiencies, and any Asset Value
Deficiencies, collectively "CLAIMS" and each, a "CLAIM");
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then, and in any of such events, the applicable IHS Claimant may
provide written notice to the Group's Representative of the Claim, in
which case such IHS Claimant shall be entitled to recover the amount of
such Claim in accordance with the following procedure.
(B) PROCEDURE IF SHAREHOLDERS FAIL TO PAY. If any
Shareholder fails to pay any Claim in full to any applicable IHS
Claimant within twenty (20) days from the date of such written notice
(said twenty (20) day period hereinafter referred to as the "NOTICE
PERIOD"), such IHS Claimant shall have the right to offset against the
Escrow Fund, in accordance with the terms and conditions of the Escrow
Agreement, in amounts from time to time equal to the amount of such
Claim (subject, however, in the case of a "DISPUTE", to the provisions
of Section 13.4 hereof applicable thereto), and each Shareholder agrees
to any such offset. The right of the IHS Claimants to proceed against
the Escrow Fund shall not be exclusive of any other rights or remedies
that they may have under this Agreement, law, equity or otherwise.
(C) ESCROW COSTS. The fees of the Escrow Agent shall be
borne by the IHS.
(D) ESCROW PERIOD.
(I) The "ESCROW PERIOD" shall terminate on the first
anniversary of the Closing Date.
(II) The balance, if any, of the Escrow Fund remaining
(the "REMAINING ESCROW FUNDS") at the close of business on the
last day of the Escrow Period, shall be delivered to Group's
Representative for further distribution to the Shareholders within
fifteen (15) days after the last day of the Escrow Period.
(III) Notwithstanding anything to the contrary
contained in this subsection (d), if any Claim made by any IHS
Claimant is in dispute at the time that any amounts are otherwise
to be delivered to the Shareholders' Representative, then there
shall be withheld from such amount to be delivered and there shall
be retained in the Escrow Fund, a number of IHS Shares such that
there will be remaining in the Escrow Fund a number of IHS Shares
having a value (determined in accordance with Section 3.1(a)
hereto) equal to at least twice the amount of the Claim asserted
by the IHS Claimant until the final settlement of such Claim or
Claims.
(E) VALUE OF ESCROWED SHARES. For purposes of determining
the number of IHS Shares to be delivered to any IHS Claimant in respect of any
Claim, the IHS Shares shall be valued in accordance with Section 3.1(a) hereof.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. A portion of the Merger Consideration equal to ONE
MILLION ONE HUNDRED SEVENTY FOUR THOUSAND DOLLARS ($1,174,000) shall be payable
by means of the delivery of IHS Shares in accordance with the following:
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(A) SHARE VALUE. The number of IHS Shares issuable at
Closing (the "CLOSING DATE SHARE COUNT") or deliverable to any IHS Claimant from
the Escrow Fund shall be calculated based upon a price per share of such stock
equal to $29.859.
(B) REGISTRATION RIGHTS. IHS will prepare and use its
reasonable commercial efforts to cause to be filed within one-hundred and twenty
(120) days following the Closing Date, and will use its reasonable commercial
efforts to have declared effective by the Securities and Exchange Commission
(the "COMMISSION"), a registration statement for the registration of the IHS
Shares issued to the Shareholders in connection with this transaction, including
the shares, if any, issuable under Section 3.1(c) in respect of any
re-calculation of the Closing Date Share Count, under the Securities Act of
1933, as amended (the "SECURITIES ACT"), and IHS shall maintain the
effectiveness of each such registration statement for a period of one (1) year
following the date it became effective (the "REGISTRATION DATE"), except to the
extent that an exemption from registration may be available.
(C) SHARE ADJUSTMENT. Promptly following the Share
Adjustment Date (as hereinafter defined), the number of shares deliverable as
part of the Merger Consideration (and that have not previously been transferred
by any Shareholder) shall be re-calculated based upon the average closing NYSE
price for IHS Shares for the 20-trading day period immediately preceding the
first anniversary of the Closing Date (the "RECALCULATED VALUE"), provided that
such adjustment shall be made only if the result shall be an increase in the
number of shares issuable to the Shareholders. If the number of shares as
re-calculated under this subsection (c) (the "ADJUSTED SHARE COUNT") exceeds the
Closing Date Share Count, IHS promptly shall deliver over to the Group's
Representative an additional number of IHS Shares as shall have a value equal to
the amount of such excess (using the Recalculated Value for determining the
number of such IHS Shares to be delivered), and such additional shares shall be
included in the aforementioned registration statement by means of a
post-effective amendment thereto. In lieu of delivering additional shares as
aforesaid, IHS may, in its sole discretion, elect to deliver cash to the Group's
Representative (for distribution to the Shareholders) in the amount of such
excess. If the Closing Date Share Count exceeds the Adjusted Share Count, no
adjustment shall be made. For purposes hereof, "SHARE ADJUSTMENT DATE" shall
mean the earlier to occur of: (x) the first anniversary of the Closing Date; or
(y) the day preceding the date, if any, on which all issued and outstanding
shares of IHS Stock are to be split, reverse split, exchanged, converted or
otherwise recharacterized pursuant to any plan of merger, consolidation,
reorganization or other corporate restructuring.
(D) REGISTRATION EXPENSES. Shareholders shall not be
responsible for, and IHS shall bear, all of the reasonable expenses of IHS
related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Shares and the costs and
expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Shares under
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the Blue Sky laws of various jurisdictions. IHS, however, shall not be required
to pay underwriter's or brokerage discounts, commissions or expenses, or to pay
any costs or expenses arising out of Shareholders' or any transferee's failure
to comply with its obligations under this Article III.
(E) RESALE LIMITATIONS. The Shareholders hereby covenant
with Buyer that, until the second anniversary of the Closing Date, sales by them
and the Shareholders of Medaids of IHS Shares after the Closing Date shall not,
in the aggregate, exceed 30,000 shares during any 30-day period. All sales by
Shareholders during said period shall be effected solely through Smith Barney,
Inc.
(F) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholders with respect to the IHS Shares
as provided in this Section 3.1, IHS covenants and agrees as follows:
(I) At IHS's expense, IHS will keep the registration
and qualification under this Section 3.1 effective (and in compliance
with the Securities Act) by such action as may be necessary or
appropriate until the first anniversary of the Closing Date except to
the extent that an exemption from registration may be available. IHS
will promptly notify the Shareholders, at any time when a prospectus
relating to a registration statement under this Section 3.1 is required
to be delivered under the Securities Act, of the happening of any event
known to IHS as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(II) IHS shall furnish the Shareholders with such
number of prospectuses as shall reasonably be requested.
(III) IHS shall take all necessary action which may be
required in qualifying or registering IHS Shares included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the
Shareholders, provided that IHS shall not be obligated to qualify as a
foreign corporation or dealer to do business under the laws of any such
jurisdiction.
(IV) The information included or incorporated by
reference in the registration statement filed pursuant to this Section
3.1 will not, at the time any such registration statement becomes
effective, contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein as necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading or necessary to correct any
statement in any earlier filing of such registration statement or any
amendments thereto. The registration statement will comply in all
material respects with the provisions of the Securities Act and the
rules and regulations thereunder. IHS shall indemnify the Shareholders,
their successors and assigns, and each person, if any, who controls
such Shareholders within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), against all loss, claim,
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damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement executed by IHS or based upon written information furnished
by IHS filed in any jurisdiction in order to qualify IHS Shares under
the securities laws thereof or filed with the Commission, any state
securities commission or agency, NYSE or any securities exchange; or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements contained
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to
IHS by any of the Shareholders expressly for use in such registration
statement, any amendment or supplement thereto or any application, as
the case may be. If any action is brought against the Shareholders or
any controlling person of the Shareholders in respect of which
indemnity may be sought against IHS pursuant to this subsection
3.1(f)(iv), the Shareholders or such controlling person shall within
thirty (30) days after the receipt thereby of a summons or complaint,
notify IHS in writing of the institution of such action and IHS shall
assume the defense of such actions, including the employment and
payment of reasonable fees and expenses of counsel (reasonably
satisfactory to the Shareholder's Representative or such controlling
person). The Shareholders or such controlling person shall have the
right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the
Shareholders or such controlling person unless (A) the employment of
such counsel shall have been authorized in writing by IHS in connection
with the defense of such action, or (B) IHS shall not have employed
counsel to have charge of the defense of such action, or (C) such
indemnified party or parties shall have reasonably concluded (after
notice to IHS) that there may be defenses available to it or them which
are different from or additional to those available to IHS (in which
case, IHS shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
the fees and expenses of not more than one additional firm of attorneys
for the Shareholders and such controlling persons shall be borne by
IHS. Except as expressly provided in the previous sentence, in the
event that IHS shall not previously have assumed the defenses of any
such action or claim, IHS shall not thereafter be liable to the
Shareholders or such controlling person in investigating, preparing or
defending any such action or claim.
(V) The Shareholders, and their successors and
assigns, shall severally, and not jointly, indemnify IHS, its officers
and directors and each person, if any, who controls IHS within the
meaning of ss.15 of the Securities Act or ss.20(a) of the Exchange Act
against all loss, claim, damage, or expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under
the Securities Act, the Exchange Act or any other statute, common law
or otherwise, arising from information furnished by or on behalf of
such Shareholders, or their successors or assigns for specific
inclusion in such registration statement.
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(G) NOTICE OF SALE. If the Shareholders desire to transfer all
or any IHS Shares, they will deliver prior written notice to IHS, describing in
reasonable detail their intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Shareholders will sell the IHS
Shares in compliance with the disclosure therein and discontinue any offers and
sales thereunder upon notice from IHS that the registration statement relating
to the IHS Stock being transferred is not "current" until IHS gives further
notice that offers and sales may be recommenced. In the event of any such notice
from IHS, IHS agrees to file expeditiously such amendments to the registration
statement as may be necessary to bring it current during the period specified in
Section 3.1(b) and to give prompt notice to the Shareholders when the
registration statement has again become current. If the Shareholders deliver to
IHS an opinion of counsel reasonably acceptable to IHS and its counsel and to
the effect that the proposed transfer of IHS Shares may be made without
registration under the Securities Act, the Shareholders will be entitled to
transfer IHS Shares in accordance with the terms of the notice and opinion of
their counsel.
(H) FURNISH INFORMATION. It shall be a condition precedent to
the obligations of IHS to take any action pursuant to this Article III that the
Shareholders shall furnish to IHS such information regarding themselves, the IHS
Shares held by them, and the intended method of disposition of such securities
as shall be required to effect the registration of their IHS Shares. In that
connection, each transferee of any Shareholder shall be required to represent to
IHS that all such information which is given is both complete and accurate in
all material respects. Such Shareholders shall deliver to IHS a statement in
writing from the beneficial owners of such securities that they bona fide intend
to sell, transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify IHS at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Section 3.1
is required to be delivered under the Securities Act, of the happening of any
event known to such transferee as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the statements as then existing.
(I) INVESTMENT REPRESENTATIONS. All IHS Shares to be issued
hereunder will be newly issued shares of IHS. The Shareholders represent and
warrant to IHS that the IHS Shares being issued hereunder are being acquired,
and will be acquired, by the Shareholders for investment for their own accounts
and not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act or the applicable state securities law;
the Shareholders acknowledge that the IHS Shares constitute restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and may have to be held indefinitely, and the Shareholders agree
that no IHS Shares may be sold, transferred, assigned, pledged or otherwise
disposed of except pursuant to an effective registration statement or an
exemption from registration under the Securities Act, the rules and regulations
thereunder, and under all applicable state securities laws. The Shareholders
have the knowledge and experience in financial and business matters, are capable
of evaluating the merits and risks of the investment, and are able to bear the
economic risk of such investment. The Shareholders have had the opportunity to
make inquiries of and obtain from representatives and employees of IHS such
other information about IHS as they deem necessary in connection with such
investment.
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(J) LEGEND. It is understood that the certificates evidencing
the IHS Shares shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(K) CERTAIN TRANSFEREES. Prior to the effective date of
registration of the IHS Shares, no Shareholder shall transfer any shares of IHS
Shares to any person or entity except as expressly permitted by this Agreement
and unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Shareholders under this Article III.
ARTICLE IV: EMPLOYEES
It is expressly understood and agreed that although the Surviving
Corporation intends to retain substantially all of the employees of the Company
after the Closing, it may notify the Group's Representative prior to the Closing
that the employment of a limited number of such employees is to be terminated,
in which case, the Company, as the case may be, shall cause such termination,
and all liabilities resulting therefrom that may be due to such terminated
employee shall constitute Closing Date Liabilities. In any event, any benefits,
costs or liabilities incurred or accrued on or prior to Closing with respect to
any employee of the Company shall constitute Closing Date Liabilities.
ARTICLE V: CLOSING
5.1 CLOSING DATE. The consummation of the transactions
contemplated by this Agreement is occurring on the date hereof and is sometimes
referred to as the "CLOSING", and the date on which such consummation occurs,
including, without limitation, the execution and delivery of this Agreement by
each of the parties hereto, is sometimes referred to as the "CLOSING DATE".
5.2 DELIVERIES. At the Closing:
(A) The Company and Newco (together with Medaids) shall
execute, deliver and cause to be filed with the Secretary of State of Florida
and any other appropriate Governmental Authorities (as such term is defined in
Section 9.4), the Certificate of Merger and such other instruments or documents,
if any, as shall be necessary to cause the Company (together with Prime) to be
merged with and into Newco as provided in Section 1.1 above.
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(B) The Shareholders will deliver to IHS an opinion, dated the
Closing Date, of their counsel, in substantially the form attached hereto as
Exhibit 5.2(b).
(C) The Company will deliver a certificate of its Secretary or
other officer certifying as of the Closing Date a copy of resolutions of its
board of directors and its stockholders, authorizing the execution, delivery and
full performance of this Agreement and the Transaction Documents (as defined in
Section 9.1(a) below), and the incumbency of its officers.
(D) Newco, as the Surviving Corporation of the Merger, will
enter into an employment agreement with McCarger in the form and substance of
Exhibit 5.2(d).
(E) The Shareholders shall execute and deliver the Assumption
Agreement and Transmittal Letters, and deliver to IHS the certificates
representing all of the Company Shares.
(F) Each officer and director of the Company shall resign from
such position as of the Closing Date.
ARTICLE VI: ASSET CONDITION
The Shareholders, jointly and severally, represent, warrant and
covenant that, as of the Closing Date, all physical Assets of the Company are
free of defects except to the extent that such failure will not likely have a
material adverse effect on the assets, liabilities, financial condition or
prospects of the Company, and in good working order, condition and repair,
except for ordinary wear and tear, and conform in all material respects with all
applicable Governmental Requirements (as defined in Section 9.4).
ARTICLE VII: SALES AND TRANSFER TAXES; FEES
All transfer and other taxes and fees, if any, that may be due or
payable as a result of the transactions contemplated by this Agreement, whether
levied on the Shareholders, IHS, Newco or the Company, shall be borne by the
Shareholders and Guarantors.
ARTICLE VIII: RESTRICTIONS ON OPERATIONS OF THE COMPANIES
8.1 NEGATIVE COVENANTS. The Shareholders represent, warrant and
covenant that, except as expressly disclosed on Schedules hereto, since the most
recent Financial Statement Date referred to in Section 9.15 below, there has
been no material adverse change in the assets, liabilities, financial condition,
or prospects of the Company, and the Company has not:
(A) sold, assigned or transferred any Assets, except in the
ordinary course of business, consistent with past practice;
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(B) subjected any Assets to any liens, claims, security
interests, pledges, mortgages, restrictions on transfer or use and other
encumbrances of any kind or nature whatsoever ("LIENS");
(C) entered into any contract or transaction binding the
Company or Business other than immaterial contracts or transactions entered into
in the ordinary course of business, consistent with past practice;
(D) incurred any liabilities or indebtedness other than in the
ordinary course of business, consistent with past practice;
(E) except in the ordinary course of business, consistent with
past practice, or otherwise to comply with any applicable minimum wage law, paid
any bonuses, increased the salaries or other compensation of any of its
employees, consultants, agents or representatives, or made any increase in, or
any additions to, other benefits to which any of such employees, consultants,
agents or representatives may be entitled;
(F) discharged or satisfied any Lien, or satisfied, paid or
prepaid any material liabilities, other than in the ordinary course of business
consistent with past practice, or failed to pay or discharge when due any
liabilities, the failure to pay or discharge of which has caused or may cause
any actual damage or risk of loss to the Company or Business or Assets;
(G) failed to collect any accounts receivable in the ordinary
course of business, consistent with past practice;
(H) changed any of the accounting principles followed by it or
the methods of applying such principles;
(I) canceled, modified or waived any debts or claims held by
it, other than in the ordinary course of business, consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business;
(J) instituted, settled or agreed to settle any litigation,
action or proceeding before any Governmental Authority relating to them or their
property or received any threat thereof; or
(K) entered into any material transaction other than in the
ordinary course of business, consistent with past practice.
8.2 CONDUCT OF BUSINESS PENDING CLOSING. The Shareholders
represent, warrant and covenant that since the most recent Financial Statement
Date referred to in Section 9.15 below, the Company shall maintain its existence
and conduct its business in good faith and in the customary and ordinary course
of business consistent with past practice.
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ARTICLE IX: REPRESENTATIONS AND WARRANTIES BY SHAREHOLDERS
As a material inducement to IHS and Newco to execute and perform their
obligations under this Agreement, the Shareholders hereby, jointly and
severally, represent and warrant to IHS and Newco as follows as of the Closing
Date:
9.1 ORGANIZATION OF COMPANIES; ENFORCEABILITY.
(A) The Company is a corporation, organized, and in good
standing in the State of Florida, and is qualified to do business and is in good
standing in each other State where the nature of its business or the assets held
by it requires such qualification, and has requisite corporate power and
authority to carry on its Business as presently being conducted, to enter into
this Agreement, and to carry out and perform the terms and provisions of this
Agreement. Each of this Agreement and each agreement, instrument, certificate
and document ("TRANSACTION DOCUMENTS") executed by the Company in connection
with this Agreement or the transactions contemplated hereby constitutes the
legal, valid and binding obligations of the Company, enforceable against it in
accordance with its respective terms.
(B) The Company has no subsidiaries.
(C) This Agreement and each of the Transaction Documents
executed by any Shareholder constitutes the legal, valid and binding obligations
of such Shareholder, enforceable against it, him or her in accordance with its
respective terms.
9.2 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any Governmental Authority or of any
party to any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which the Company or any of the
Assets is bound ("CONTRACTS") or by which any Shareholder or any Shareholder's
assets is bound ("SHAREHOLDER CONTRACTS") is necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by Company or any Shareholder.
9.3 LITIGATION. Except as set forth on Schedule 9.3, there are no
actions, suits or proceedings affecting the Company or any of the Assets which
are pending or threatened against the Company or affecting any of the Company's
properties or rights, at law or in equity, or before any Governmental Authority,
nor is the Company or any of its officers or directors or any Shareholder aware
of any facts which to their knowledge might reasonably be expected to result in
any such action, suit or proceeding.
9.4 COMPLIANCE WITH LAWS AND CONTRACTS. The Company is not in
violation of, or in default under: any term or provision of its Articles of
Incorporation or By-Laws; or any judgment, order, writ, injunction, decree,
statute, law, rule, regulation, directive, mandate, ordinance or guideline
("GOVERNMENTAL REQUIREMENTS") of any Federal, state, local or other governmental
or quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
the Company and each Shareholder of, and the
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performance and compliance by each of them with this Agreement, and the
Transaction Documents and the transactions contemplated hereby and thereby, does
not and will not result in the violation of or conflict with or constitute a
default under any such term or provision or result in the creation of any Lien
on any of the properties or assets of the Company or any Shareholder pursuant to
any such term or provision or any term or provision of any Governmental
Requirement by which any Shareholder is bound or of any Shareholder Contract.
9.5 CORPORATE ACTS AND PROCEEDINGS. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the consummation of the
Merger as provided for in this Agreement, have been approved and consented to by
the Board of Directors of the Company and, all holders of outstanding capital
stock of the Company, and all action required by any applicable Governmental
Requirement by the stockholders of the Company with regard thereto have been
appropriately authorized and accomplished. Any rights of appraisal or to dissent
to the Merger have been waived.
9.6 TITLE TO ASSETS. Except for the Assets that are held subject
to Leases (as hereinafter defined) the Company has good and indefeasible title
to all of the Assets, free and clear of all Liens. The Company has good and
valid leasehold interests, subject to no Liens, in each of the Leases.
9.7 CONTRACTS. Set forth on Schedule 9.7 hereto is a list of all
material Contracts of the Company, including, without limitation, each:
(A) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or termination of or with, any
director, officer, employee, consultant, sales representative, or agent or group
of employees, or any non-competition, non- solicitation, confidentiality or
similar agreement with any such person or persons;
(B) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights outside the ordinary course of
business or requiring the consent of any party to the transfer and assignment of
any such assets, property or rights (by purchase or sale of assets, purchase or
sale of stock, merger or otherwise), that is executory or that was entered into
during the three (3) year period ending on the date hereof;
(C) contract, agreement or commitment which contains any
provisions requiring the Company or Business to indemnify or act for any other
person or entity or to guaranty or act as surety for any other person or entity;
(D) contract, agreement or commitment restricting any Company
or Business from, or in favor of the Company or Business and restricting any
other person or entity from, conducting business anywhere in the world for any
period of time or restricting the use or disclosure of any confidential or
proprietary information or prohibiting the solicitation of business or of
employees, agents or others;
(E) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to any Business or any portion thereof or the
business of any other person or entity;
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(F) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(G) contract, agreement or arrangement granting a leasehold or
other interest in real property or personal property, including without
limitation, subleases, licenses and sublicenses (the "LEASES");
(H) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Company or Business not
covered by subsection (a) above;
(I) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(J) agreement with respect to the settlement of any litigation
or other proceeding with any third person or entity;
(K) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Company, or any other
entity, including without limitation, registration rights agreements, voting
trust agreements and shareholder and proxy agreements;
(L) contract, agreement or commitment to provide services or
products, or
(M) agreement not made in the ordinary and normal course of
business and consistent with past practice, or involving consideration in excess
of $25,000 in each case, that is not set forth in subsections (a) through (l)
above.
To the best knowledge of the Company and each Shareholder, no party to
any Contract is in default under any Contract. The Shareholders have delivered
to IHS true and complete copies of each written Contract (or a description of
each oral Contract) requested by IHS.
9.8 BROKERS. The Shareholders and the Company have been
represented solely by the Broker, and as a result the Broker's Fee in the amount
of $69,700 is payable by the Shareholders to the Broker at the Closing in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any additional broker's or finder's fee or other
commission in respect thereof based in any way on agreements, understandings or
arrangements with any Company or Shareholder.
9.9 EMPLOYMENT CONTRACTS; EMPLOYEES. There are no Contracts of
employment between the Company and any of its employees, except as set forth on
Schedule 9.7(a) above. The name, position, current rate of compensation and any
vacation or holiday pay, sick pay, personal leave, severance and any other
compensation arrangements or fringe benefits, of each
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current employee, sales representative, consultant and agent of the Company,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 9.9 is accurate and complete. No employee, consultant or agent of the
Company has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 9.9. Since the date that is two (2)
years prior to the Closing Date, there has been no material adverse change in
the relationship between the Company and its employees, nor any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of the Company are represented by any labor union or similar
organization in connection with their employment by or relationship with, the
Company, and to the knowledge of the Company, and Shareholders, there are no
pending or threatened activities the purpose of which is to achieve such
representation of all or some of such employees, and there are no threats of
strikes, work stoppages or pending grievances by any such employees. The Company
is not party to any collective bargaining or other labor contracts.
9.10 EMPLOYEE BENEFIT PLANS. The Company does not have any
pension, bonus, profit-sharing, or retirement plans for directors, officers or
employees of the Business or the Company, nor is the Company required to
contribute to any such plan. Without limiting the generality of the foregoing,
the Company does not maintain or make contributions to, and the Company has not
at any time in the past maintained or made contributions to, any employee
benefit plan which is subject to the minimum funding standards of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or to any
multi-employer plan subject to the terms of the Multi-employer Pension Plan
Amendment Act of 1980 (the "MULTI-EMPLOYER ACT"). Prior to the date hereof, the
only pension, bonus, profit-sharing, or retirement plans that have been in
effect for directors, officers or employees of the Business or the Company are
set forth on Schedule 9.10 hereto (the "TERMINATED PLANS"). Each of such
Terminated Plans has been terminated in accordance with the terms of such
Terminated Plans and in accordance with all Governmental Requirements, including
without limitation, ERISA. At the time of termination, each of such Terminated
Plans was fully funded and in compliance with all applicable Governmental
Requirements. The Company has no liability with respect to any Terminated Plan.
9.11 INSURANCE. All inventories, buildings and fixed assets owned
or leased by the Company 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 Schedule 9.11, is accurate
and complete. Schedule 9.11 also sets forth any claims made under any of the
insurance policies referred to above or increases in premiums therefore during
the past two years. True and complete copies of all policies of fire, liability
and other forms of insurance held or owned by the Company or otherwise in force
and providing coverage for any Business or any of the Assets (including but not
limited to medical malpractice insurance, and any state sponsored plan or
program for worker's compensation) have been delivered to IHS. Such policies are
owned by and payable solely to the Company, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date,
and all premiums due on or before the Closing Date in respect thereof have been
paid. The Company has purchased title insurance as set forth on Schedule 9.11.
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9.12 DISCLOSURE. No representation or warranty by any Shareholder
in this Agreement or in any Transaction Document, contains any untrue statement
of material fact or omits to state any material fact, of which the Company, or
any Shareholder or any of their respective officers, directors, trustees or
stockholders has knowledge or notice, required to make the statements herein or
therein contained not misleading.
9.13 OFFICERS AND DIRECTORS OF COMPANIES. As of the Closing Date,
the following individuals are all of the officers and directors of the Company:
<TABLE>
Name Office/Position
---- ---------------
<S> <C>
Lee T. McCarger Director, President
Leann Jarczynski Director, Vice President
Samuel Jarczynski Director, Treasurer
</TABLE>
9.14 INVENTORY AND FIXED ASSETS. The information contained on the
Schedule of Inventory and Fixed Assets, attached hereto as Schedule 2.5(a) is
accurate and complete in all material respects.
9.15 FINANCIAL STATEMENTS. The Shareholders have furnished IHS
with the financial statements of the Company (the "FINANCIAL STATEMENTS") for
the periods ended [9/30/96], [9/30/97] and December 31, 1997 (the "FINANCIAL
STATEMENT DATES"), copies of which are attached hereto as Schedule 9.15. The
Financial Statements: (a) are in accordance with the books and records of the
Company; (b) fairly present the financial condition of the Company on a
consolidated basis at such date and the results of its operations for the
periods specified; (c) were prepared in accordance with all rules, guidelines,
regulations and laws applicable to reporting financial condition for Federal
income tax purposes applied on a basis consistent with prior periods (the "TAX
PRINCIPLES"); (d) with respect to all Contracts of the Company, reflect adequate
reserves for all reasonably anticipated losses and costs in excess of
anticipated income; and (e) with respect to any balance sheets, disclose all of
the liabilities of the Company 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 expressly
disclosed on Schedule 9.15 to this Agreement. The income statements included in
the Financial Statements do not contain any items of special or nonrecurring
income or expense or any other income not earned or expense not incurred in the
ordinary course of business, consistent with past practice, except as expressly
specified therein, and such Financial Statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
9.16 TAX INFORMATION. The Company has furnished IHS with its (a)
most recent tax registration certificates, and (b) tax returns for the periods
9/30/96, 9/30/97 and required of it by each state or other locality in which it
conducts business, which tax returns in all instances where applicable include,
but shall not be limited to, income, franchise taxes, state and local tangible
personal property tax returns, and state and local sales tax returns, which
registration certificates and tax returns are set forth, collectively, on the
Schedule of Tax Information, attached hereto as Schedule 9.16. The Balance Sheet
included in the most recent Financial Statements for the Company sufficiently
provides for all accrued, deferred and unpaid
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federal, state, local and foreign net or gross income, profits, property, sales,
use, excise, license, franchise, severance, stamp, occupation, premium, windfall
profits tax, alternative and add-on minimum taxes, customs duty, added value,
payroll, employer's income, withholding and social security taxes, excise or
other taxes ("TAXES") and any penalties, interest, governmental charges,
assessments and deficiencies related thereto, payable by the Company. All Taxes
payable by the Company, and all interest and penalties thereon, whether disputed
or not, have been paid in full when due, all tax returns, declarations of
estimated tax and other reports required to be filed in connection therewith
("TAX RETURNS") have been accurately prepared and completed on an appropriate
basis and duly and timely filed in accordance with all Governmental
Requirements, all computations and taxable income correctly and accurately made
and reported in accordance with all Government Requirements, and all
withholdings and deposits required by Governmental Requirements to be made by
the Company with respect to employee's withholding taxes have been duly made.
The Company has not been delinquent in the payment of any Tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such deficiency
or claim. The federal income tax returns of the Company have been filed with the
Internal Revenue Service for all of the fiscal years though the year ended
9/30/97, and no objections with respect thereto have been received by the
Company or any Shareholder. There is not now in force any extension of time with
respect to the date on which any Tax Return was or is due to be filed by or with
respect to the Company any waiver or agreement by the Company for the extension
of time for assessment of any Tax. The Company is not a party to any pending
action or proceeding, and, to the knowledge of the Company and the Shareholders,
no action or proceeding has been threatened by any Governmental Authority for
assessment or collection of any Taxes, nor has any claim for assessment or
collection of Taxes been asserted against the Company. The Company is not a
party to any tax sharing agreement or arrangement. The Company has not elected
to be taxed in accordance with Subchapter S of the Internal Revenue Code of
1986, as amended.
9.17 ADVERSE BUSINESS DEVELOPMENTS. No notice has been received by
the Company or any Shareholder of any new or substantially expanded firm or
individual engaged in a business directly competitive to the Company in its
primary service area within six (6) months before the date hereof that the
Company, the Subsidiary, any Guarantor or Subsidiary reasonably believes will
have a material adverse effect on the Business. None of the Company and
Shareholders has received, either orally or in writing, any notice specific to
it 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 in by the Company, nor has the
Company or any Shareholder received, or been threatened with, any claim for
refund specific to it in excess of $750 by a Medicare or Medicaid carrier,
except as disclosed in the Schedule of Proceedings attached hereto as Schedule
9.17.
9.18 RELATIONSHIPS. Except as disclosed on Schedule 9.18, none of
the Company and the Shareholders, and none of their respective officers,
trustees, directors, employees, immediate family members, and no person or
entity which is controlled by, under common control with, or controlling any of
them (each, an "AFFILIATE") has, or at any time within the last two (2) years
has had, a material ownership interest in any business, corporate or otherwise,
that is a party to, or in any property that is the subject of, business
relationships or arrangements of any kind relating to the operation of the
Business of the Company. Except as set forth on Schedule 9.18, no Affiliate is
guaranteeing the obligations of the Company.
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9.19 ASSETS COMPRISING THE BUSINESS. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Businesses as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Businesses of the Company in the ordinary course of the business
of the Company, consistent with past practice, as determined by the Shareholders
in good faith and consistent with past practice.
9.20 QUESTIONABLE PAYMENTS. The Company has not, and to the
knowledge of the Company and Shareholders, none of their Affiliates or employees
have, offered, made or received any illegal or unlawful payment, bribe,
kickback, political contribution or other similar questionable payment for any
referrals or otherwise in connection with the ownership or operation of any of
the Business, including, without limitation, any of the same that would
constitute a violation of the Foreign Corrupt Practices Act of 1977, as amended.
9.21 REIMBURSEMENT MATTERS. The Company to the extent necessary to
conduct its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 9.21, (i) none of the Company, and the Shareholders has received any
notice of denial or recoupment from the Medicare or Medicaid programs, or any
other third party reimbursement source (inclusive of managed care organizations)
with respect to products or services provided by the Company, (ii) to the
knowledge of the Company, and each Shareholder, there is no basis for the
assertion after the Closing Date of any such denial or recoupment claim, and
(iii) none of the Company, and the Shareholders has received notice from any
Medicare or Medicaid program or any other third party reimbursement source
(inclusive of managed care organizations) of any pending or threatened
investigations or surveys with respect to, or arising out of, products or
services provided by the Company or otherwise, and to the knowledge of the
Company, and the Shareholders, no such investigation or survey is pending,
threatened or imminent.
9.22 ENVIRONMENTAL COMPLIANCE. Except as disclosed on Schedule
9.22, at all times during the ownership by the Company of the Business, such
Business has not been, and the Business currently is not, in violation of any
Governmental Requirement relating to environmental matters and no notice has
ever been served upon any Shareholder or the Company, or any of their agents or
representatives or any prior owner of any Business, claiming any violation of
any Governmental Requirement concerning the environmental state, condition or
quality of any real or personal property in any related to the Business, or
requiring or calling attention to the need for any work, repairs or demolition
on or in connection with any of the real property in order to comply with any
governmental requirement concerning the environmental or healthful state,
condition or quality of the real property.
9.23 CAPITAL STOCK. Schedule 9.23 sets forth a complete list and
description of all of the authorized capital stock of the Company, the number of
shares issued and outstanding of such capital stock and the identity of each
holder thereof, in each case indicating the number of shares held. No shares of
capital stock of the Company are held in the treasury or such corporation. The
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Company has only one class of capital stock. The Shareholders are the lawful
record and beneficial owners of all of the Company Shares as indicated on
Schedule 9.23, free and clear of all Liens, and all of such stock is duly
authorized, validly issued, and fully paid and non-assessable. Each Shareholder
has the full legal power to transfer and deliver the Company Shares listed as
owned by him, her or it on Schedule 9.23. There are not now any and, on the
Closing Date there will be no, subscription, participation, preemptive or first
refusal rights to purchase or otherwise acquire shares of capital stock of the
Company from the Company, or from any Shareholder or from any other person,
pursuant to any provision of law or the Articles of Incorporation or By-Laws of
the Company or by agreement or otherwise. There are not now any and, on the
Closing Date there shall not be, outstanding any warrants, options, or other
rights to subscribe for or purchase from the Company any shares of capital stock
of the Company, nor are there and there shall not be outstanding on the Closing
Date, any securities convertible into or exchangeable for any such shares. There
are no voting agreements, arrangements, trusts or restrictions relating to any
of the Company Shares.
9.24 ACCOUNTS RECEIVABLE. The information contained on the
Schedule of Accounts Receivable Data, attached hereto as Schedule 9.24, is
accurate and complete. $ of the amount set forth thereon is fully collectible
(without further reserve) within twelve (12) months from the Closing Date.
ARTICLE X: REPRESENTATIONS AND WARRANTIES OF IHS AND NEWCO
IHS and Newco represent and warrant to the Shareholders that:
10.1 DUE ORGANIZATION. Each of IHS and Newco is a duly organized,
valid corporation under the laws of the State of Delaware and Florida,
respectively.
10.2 DUE AUTHORITY. Each of IHS and Newco is duly authorized by
law and corporate policy and approval to: (a) enter into this Agreement and each
Transaction Document; (b) make all warranties and representations made by them
herein; and (c) deliver all consideration provided for under the terms hereof.
10.3 BINDING AUTHORITY. All signatories and agents designated as
agents/officers for IHS or Newco for signing purposes have the authority to bind
IHS or Newco, as the case may be, to the terms of this Agreement.
10.4 CASH PAYMENT AUTHORITY. IHS has the authority to cause the
Merger Consideration to be delivered in accordance with the terms of this
Agreement.
10.5 BROKERS. No broker or finder has acted for the IHS or Newco
in connection with the transactions contemplated by this Agreement, and no
broker or finder is entitled to any broker's or finder's fee or other commission
in respect thereof based in any way on agreements, understandings or
arrangements with IHS or Newco.
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ARTICLE XI: SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of IHS, Newco and each Shareholder
contained or made pursuant to this Agreement shall survive the execution of this
Agreement.
ARTICLE XII: RESTRICTIVE COVENANTS
12.1 NON-COMPETE. Each Shareholder hereby agrees that until the
fifth (5th) anniversary of the Closing Date (the "RESTRICTED PERIOD"), it, he or
she will not, directly or indirectly, own, manage, operate, join, control or
participate, or have a proprietary interest in, the ownership, management,
operation or control, of or be connected with, in any manner, any home health
care business within fifty (50) miles of any location set forth on the Schedule
of Locations attached hereto as Schedule 12.1.
12.2 CONFIDENTIAL INFORMATION. Certain confidential and
proprietary information is included within the Assets ("TRADE SECRETS"),
including, without limitation, with respect to some or all of the following
categories of information: (a) financial information, including but not limited
to information relating to earnings, assets, debts, prices, pricing structure,
reimbursement matters, volume of purchases or sales or other financial data
whether related to the Company or generally, or to particular products,
services, geographic areas, or time periods; (b) supply and service information,
including but not limited to information relating to goods and services,
suppliers' names or addresses, terms of supply or service contracts or of
particular transactions, or related information about potential suppliers to the
extent that such information is not generally known to the public, and to the
extent that the combination of suppliers or use of a particular supplier, though
generally known or available, may yield advantages to IHS or the Surviving
Corporation, details of which are not generally known; (c) marketing
information, including but not limited to information relating to details about
ongoing or proposed marketing programs or agreements by or on behalf of the
Company, sales forecasts, advertising formats and methods or results of
marketing efforts or information about impending transactions; (d) personnel
information, including but not limited to information relating to employees'
personal or medical histories, compensation or other terms of employment, actual
or proposed promotions, hirings, resignations, disciplinary actions,
terminations or reasons therefor, training methods, performance, or other
employee information; (e) customer and patient information, including but not
limited to information relating to names, addresses or backgrounds of past,
existing or prospective clients, customers, payors, referral sources, and
patients, records of agreements and prices, proposals or agreements between any
of them and the Company, status of accounts or credit, patients' medical
histories or related information as well as customer lists; and (f) inventions
and technological information, including but not limited to information related
to proprietary technology, trade secrets, research and development data,
processes, formulae, data and know-how, improvements, inventions, techniques,
and information that has been created, discovered or developed, or has otherwise
become known to the applicable Shareholder, and/or in which property rights have
been assigned or otherwise conveyed to the Company, which information has
commercial value in the business in which the Company is engaged. Each
Shareholder shall hold all Trade Secrets in confidence and will not discuss,
communicate or transmit to others, or make any unauthorized copy of or use any
of the Trade Secrets; and will take all reasonable actions that IHS deems
reasonably necessary or appropriate, to prevent unauthorized use or disclosure
of or to protect
25
<PAGE>
the Surviving Corporation's interest in the Trade Secrets. The foregoing does
not apply to information that by means other than deliberate or inadvertent
disclosure by any Shareholder or any of their respective Affiliates, becomes
well known to the public; or disclosure compelled by judicial or administrative
proceedings after the Shareholders diligently try to avoid each disclosure and
afford IHS the opportunity to obtain assurance that compelled disclosures will
receive confidential treatment.
12.3 NON-SOLICITATION AND NON-PIRATING. Each Shareholder hereby
agrees that, during the Restricted Period it, he or she will not, directly or
indirectly, for itself, himself or herself on behalf of any other person, firm,
entity or other enterprise: (a) solicit or in any way divert or take away any
person or entity that, prior to the Closing Date, was a patient, client,
customer, payor, referral source, facility or patient of the Company or Medaids;
or (b) hire, entice away or in any other manner persuade any person who was an
employee, consultant, representative or agent of the Company or Medaids prior to
the Closing Date, to alter, modify or terminate their relationship with the
Surviving Corporation.
12.4 NECESSARY RESTRICTIONS. Each Shareholder acknowledges that
the restrictions contained in this Agreement are reasonable and necessary to
protect the legitimate business interests of IHS and the Surviving Corporation
and that any violation thereof by any of them would result in irreparable harm
to IHS and the Surviving Corporation, and that damages in the event of any such
breach of this Agreement will be difficult, if not impossible, to ascertain.
Accordingly, each of the Shareholders agrees that upon the violation of any of
the restrictions contained in this Agreement, IHS or the Surviving Corporation
shall be entitled to obtain from any court of competent jurisdiction a
preliminary and permanent injunction as well as any other relief provided at
law, equity, under this Agreement or otherwise. In the event any of the
foregoing restrictions are adjudged unreasonable in any proceeding, then the
parties agree that the period of time or the scope of such restrictions (or
both) shall be adjusted to such a manner or for such a time (or both) as is
adjudged to be reasonable.
12.5 REMEDIES FOR BREACH. Each Shareholder acknowledges that the
covenants contained in this Article XII of this Agreement are independent
covenants of IHS and the Surviving Corporation and that any failure by IHS or
the Surviving Corporation to perform its obligations under this Agreement or any
other agreement shall not be a defense to enforcement of the covenants contained
in this Agreement, including but not limited to a temporary or permanent
injunction.
ARTICLE XIII: INDEMNIFICATION; REMEDIES
13.1 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders shall,
jointly and severally, indemnify and hold harmless at all times IHS and the
Surviving Corporation and their respective stockholders, directors, officers,
employees, agents and assigns (collectively, the "IHS CLAIMANTS" and each an
"IHS CLAIMANT", from and against any Damages (as hereinafter defined) resulting
from: (a) any inaccurate representation made by any Shareholder in, pursuant to
or under this Agreement or any Transaction Document; (b) any breach of any
warranty made by any Shareholder in, pursuant to or under this Agreement or any
Transaction Document; (c) any breach or default in the performance by any of the
Company or Shareholders of any of the covenants to be performed by any of the
Shareholders, or the Company hereunder or in any Transaction Document; (d) any
Closing Date Liabilities; (e) any Liabilities Deficiency; and (f) any Asset
Value Deficiency.
26
<PAGE>
13.2 INDEMNIFICATION BY IHS. IHS shall indemnify and hold harmless
at all times each Shareholder from and against any Damages resulting from: (a)
any inaccurate representation made by IHS or Newco in, pursuant to or under this
Agreement; (b) any breach of any warranty made by IHS or Newco in, pursuant to
or under this Agreement; and (c) any breach or default in the performance by IHS
or Newco of any of the covenants to be performed by IHS or Newco hereunder.
13.3 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, settlements, penalties, and damages, including, without limitation,
reasonable counsel and arbitration fees incurred in investigating or in
attempting to avoid or oppose the imposition thereof.
13.4 REMEDIES.
(A) REMEDIES OF IHS CLAIMANTS. If any IHS Claimant makes
written request to any Shareholder for the payment of Damages, then such
Shareholder shall pay to such IHS Claimant the amount of Damages requested
within ten (10) days from the date on which such request is received (the
"NOTICE PERIOD").
(B) SHAREHOLDERS' REMEDIES. If any Shareholder makes written
request to IHS or the Surviving Corporation for the payment of Damages, then IHS
or the Surviving Corporation shall pay to such Shareholder the amount of Damages
requested within the Notice Period.
(C) NOTICE OF DISPUTE. Notwithstanding the foregoing
provisions of this Section 13.4, if a party (the "DEMANDING PARTY") serves a
request for payment on the other party (the "OBLIGATED PARTY"), the Obligated
Party shall have the option to provide written notice to the Demanding Party
(the "NOTICE OF DISPUTE") within the Notice Period that the Obligated Party
disputes, in good faith, the validity or amount of the Damages set out in the
request for payment of Damages, and if the affected parties cannot agree on the
validity or amount of such Damages within ten (10) days following the Notice
Period, the dispute as to the validity or amount of such claim or liability (the
"DISPUTE") shall be settled as set forth in Section 13.5 below, with the
non-prevailing party bearing the prevailing party's costs of arbitration if such
Dispute is resolved by arbitration.
(D) ARBITRATION. If arbitration is required pursuant to this
Section 13.4, IHS and the Surviving Corporation, on the one hand and the Group's
Representative on behalf of all of the Shareholders, on the other hand, each
shall select an arbitrator within ten (10) business days after the Notice of
Dispute is delivered; those two arbitrators will then select a third arbitrator;
and the three arbitrators so chosen will determine the validity of the claim for
Damages (unless a single arbitrator shall be agreed to by the applicable
parties; in which case such single arbitrator shall make such determination). If
either side delays in appointing an arbitrator when required, and ten (10) days
or more has elapsed, the arbitrator appointed by the other party shall arbitrate
the dispute. If any of the Shareholders shall be subject to a Dispute with IHS
and/or the Surviving Corporation, they shall, unless IHS or the Surviving
Corporation elects otherwise in its sole and absolute discretion, be required to
act as a group with respect to any and all rights and obligations with respect
to the resolution of the Dispute as provided in this Section 13.4. The parties
agree that any arbitration pursuant hereto shall be held in Tampa, Florida.
27
<PAGE>
13.5 SETTLEMENT OF DISPUTES.
(A) DISPUTES NOT INVOLVING THIRD PARTIES. If a Dispute
involves claims not involving any third party, IHS and the Surviving
Corporation, on the one hand, and all of the Shareholders, on the other hand,
shall settle the Dispute by submitting the same to binding arbitration.
(B) DISPUTES INVOLVING CLAIMS MADE BY THIRD PARTIES. If a
Dispute involves claims made by one or more third parties (a "THIRD PARTY
CLAIM"), the party asserting its right to indemnification for such Third Party
Claim shall give written notice to the other party as soon as practical after
such asserting party receives notice of such Third Party Claim; provided,
however the failure to timely give such notice shall not affect such party's
right to indemnification except to the extent the party to receive the notice is
damaged by such delay. Upon such notice the parties shall submit the Dispute to
arbitration, and the following procedures shall apply:
(I) Solely for purposes of determining the party
responsible for defending the Third Party Claim, the arbitrators shall
deem such Third Party Claim to be valid (although such consideration
shall not be an admission by any party as to any liability to any
party). The arbitrators then shall decide which party shall be liable
for the Third Party Claim if it is successfully prosecuted by such
third party or parties, and the decision of such arbitrators with
respect to such liability shall be final and binding as among the
parties. (Such party determined to be liable for such claim sometimes
shall be referred to herein as the "RESPONSIBLE PARTY".)
(II) If the Responsible Party refuses to settle (and pay
the settlement amount of) the Third Party Claim immediately, then the
Responsible Party immediately shall select one of the following two
options:
Option One: The Responsible Party, at the
Responsible Party's sole expense and risk, can assume the
defense of the Third Party Claim, provided the
Responsible Party first places in escrow, in favor of the
other party, adequate collateral (as determined by the
arbitrators on consideration of all relevant facts) to
protect the other party from all Damages with respect to
such Third Party Claim (in which case the other party
immediately shall be reimbursed by the Responsible Party
for any amount the other party is required to pay with
respect to such Third Party Claim); or
Option Two: The Responsible Party, at the
Responsible Party's expense and risk, can co-defend the
Third Party Claim with the other party, with the
Responsible Party also responsible for advancing all
costs incurred by the other Party in connection with such
defense, including, without limitation, the legal fees
and expenses of the other party's counsel for its
reasonable involvement in such defense. If the other
party is found to be liable for any portion of such Third
Party Claim, the Responsible Party immediately shall
advance to the other party any amount required to be paid
by the
28
<PAGE>
other party with respect thereto; provided, however, if
the Responsible Party selects this option, the
Responsible Party shall attempt diligently to have the
other party removed as a party to any legal action
involving the Third Party Claim (and, upon such removal,
the involvement of the other party's counsel shall cease
unless requested by the Responsible Party or the
Responsible Party's counsel); and
(III) No party may settle any Third Party Claim without
the prior consent of the other parties hereto unless the settlement
will not have a material adverse effect on the other party hereto. The
parties will resolve any Dispute with respect to any such proposed
settlement in accordance with this Section 13.5.
(IV) Any party responsible for defending a Third Party
Claim shall proceed with diligence and in good faith with respect
thereto.
ARTICLE XIV: POST-CLOSING REQUIREMENTS OF SHAREHOLDERS
14.1 PAYMENT ESCROW. At Closing, IHS shall pay over and
deliver to or on behalf of Shareholders (and shall be credited,
dollar-for-dollar, as partial payment of the Merger Consideration) to the Paying
Agent, in escrow (the "PAYMENT ESCROW"), an amount equal to the Closing Date
Liabilities as specified in Section 2.3(b), to be held by the Paying Agent
subject to the terms, conditions, and provisions of the Payment Escrow
Agreement. The Paying Agent shall be an attorney at law authorized to practice
law in the State of Florida, a trust company or a bank having trust powers in
such State, which Paying Agent has been selected by the Group's Representative
and approved by IHS.
(A) The Shareholders shall pay all costs and expenses of the
Payment Escrow, including without limitation, any fees or costs of the Paying
Agent.
(B) The Shareholders shall be obligated to ensure that the
Paying Agent timely and properly pays all Closing Date Liabilities, and that the
Paying Agent obtains and delivers to IHS the "Final Release" referred to in the
Payment Escrow Agreement, or other reasonable evidence of payment acceptable to
IHS.
(C) The existence of the Payment Escrow shall not affect the
obligations of the Shareholders to hold the IHS Claimants harmless against any
Closing Date Liabilities as provided in Section 13.1.
14.2 FINAL FINANCIAL AND TAX INFORMATION.
(A) Not later than thirty (30) days following Closing, the
Shareholders, at their sole cost and expense, shall deliver to IHS "FINAL AND
TAX FINANCIAL INFORMATION", which shall include:
29
<PAGE>
(I) a balance sheet of the Company and the Subsidiary on
a consolidated basis as of the Economic Change Date prepared in
accordance with the Tax Principles;
(II) an income statement, prepared in accordance with the
Tax Principles, of the Company and the Subsidiary on a consolidated
basis for the period commencing on the date succeeding the last day of
the most recent Financial Statement Date and ending on the Economic
Change Date;
(III) an aged schedule of accounts receivable of the
Company and the Subsidiary as of the Economic Change Date;
(IV) a Cash Settlement Summary of the Company and the
Subsidiary, in form provided by Buyer;
(V) an inventory of fixed assets of the Company and the
Subsidiary as of the Economic Change Date;
(VI) an inventory of supplies of the Company and the
Subsidiary as of the Economic Change Date; and
(VII) a Federal and State tax return for the Company and
the Subsidiary for the Company's fiscal period ending on the Economic
Change Date, or if such a return may not be filed in accordance with
applicable Governmental Requirements, a fiscal year end Federal and
State income tax return for the Company and the Subsidiary prepared as
if the Economic Change Date was the last day of the fiscal year of the
Company and the Subsidiary.
(B) LIABILITIES DEFICIENCY. If all such Final Financial and
Tax Information is not delivered to IHS within such thirty (30) day period
following the effective date of the merger, the Guarantors and Shareholders
shall be liable to IHS in an amount equal to $500.00 for each day after such
thirty (30) day period until all such Final Financial and Tax Information is
delivered to IHS, and such liability shall constitute a Liabilities Deficiency
under the provisions of Section 2.7(a), above.
ARTICLE XV: MISCELLANEOUS
15.1 GROUP'S REPRESENTATIVE. Each Shareholder hereby designates
Lee T. McCarger, and Lee T. McCarger hereby accepts the designation as the
representative of the Shareholders ( the "GROUP'S REPRESENTATIVE") to act for
and on behalf of the Guarantors and Shareholders as provided in this Agreement.
Each Shareholder shall be bound by all actions taken or omitted by Group's
Representative on behalf of any Shareholder as provided in this Agreement, and
each Shareholder shall be deemed to have received any notice deemed given or
payment made to Group's Representative in accordance with the notice provisions
of this Agreement on the date deemed given or the date paid to Group's
Representative, and IHS and the Surviving Corporation shall be entitled to rely
on all notices and consents given, and all settlements entered into on behalf of
any Shareholder to the extent authorized pursuant to the terms of this Agreement
notwithstanding
30
<PAGE>
any objections made by any Shareholder prior to, concurrently with or subsequent
to the giving of any such notice or consent or the settlement of any such
matter. Group's Representative may be replaced only if and when all of the
Shareholders shall notify IHS that a new individual person (named in such
notice) has been unanimously selected by them to be the new Group's
Representative, in which case such new person shall thereafter be the Group's
Representative.
15.2 THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
expressed or implied, is intended to confer on any person, other than the
parties hereto, and their successors, any rights or remedies under or by reason
of this Agreement other the affiliates entitled to indemnification pursuant to
Sections 13.1 and 13.2.
15.3 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.
15.4 NOTICES. All notices, consents, waivers and other
communications required or permitted hereunder shall be in writing and shall be
deemed to be properly given when personally delivered to the party or parties
entitled to receive the notice or three (3) business days after sent by
certified or registered mail, postage prepaid, or on the business day after sent
by nationally recognized overnight courier, in each case, properly addressed to
the party or parties entitled to receive such notice at the address stated
below:
to any Shareholder: Lee T. McCargar
17726 Grey Eagle Rd
Tampa, Fl 33647
with a copy to: Michael D. LaBarbera, Esq.
LaBarbera, Campbell and Leto
West Kennedy Legal Center
1907 West Kennedy Boulevard
Tampa, Florida 33606
to IHS: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall Elkins, General Counsel, and
Elizabeth B. Kelly, Executive Vice
President
and
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attn: Andrew S. Bogen
31
<PAGE>
with a copy to: RoTech Medical Corporation
4506 L.B. McLeod Road, Suite F
Orlando, FL 32811
Attention: Stephen P. Griggs
15.5 CHOICE OF LAW. The laws of the State of Florida
applicable to contracts executed, delivered and to be fully performed in such
State govern the validity of this Agreement, the construction of its terms, and
the interpretation of the rights and duties of the parties.
15.6 SECTIONS AND OTHER HEADINGS. Section, paragraph, and
other headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
15.7 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 instrument. Facsimile signatures may
be deemed binding for this Agreement, or any modification or amendment hereto,
or any Transaction Documents contemplated hereby.
15.8 GENDER. All gender employed in this Agreement shall
include all genders, and the singular shall include the plural and the plural
shall include the singular whenever and as often as may be appropriate.
15.9 PARTIES IN INTEREST. This Agreement shall be binding on
and shall inure to the benefit of, and be enforceable by, IHS, the Surviving
Corporation, Shareholders and their respective successors and assigns. IHS and
the Surviving Corporation shall be entitled to assign their rights under this
Agreement and the Transaction Documents after the Closing. No Shareholder may
assign this Agreement or any of his or her rights hereunder without the prior
consent of IHS.
15.10 ENTIRE AGREEMENT. This Agreement including all Schedules
and Exhibits hereto, and all Transaction Documents constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no agreements, understandings, restrictions, warranties, or
representations between the parties with respect to the subject matter hereof
other than as set forth herein or as herein provided.
15.11 PERFORMANCE. In the event of a breach by any Shareholder
of any of its, his or her respective obligations hereunder, IHS shall have the
right, in addition to any other remedies which may be available, to obtain
specific performance of the terms of this Agreement, and each of the
Shareholders hereby waives the defense that there may be an adequate remedy at
law.
15.12 WAIVER, DISCHARGE, ETC. This Agreement and the
Transaction Documents and the obligations hereunder and thereunder shall not be
released, discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right
32
<PAGE>
of any party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement or any Transaction Document shall be held to be a
waiver of any other or subsequent breach.
15.13 COOPERATION FURTHER ASSISTANCE. From time to time, as
and when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed or delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
requested or necessary to carry out the intent and purpose of this Agreement.
15.14 JOINT AND SEVERAL. The Shareholders shall be jointly and
severally liable for all representations, warranties and obligations, including,
without limitation, indemnification obligations, and covenants made by any of
them pursuant to this Agreement, including, without limitation, any made
pursuant to any Transaction Document. For all purposes of this Agreement, any
representation or warranty that is qualified to be "to the knowledge of any
Shareholder or Company" or by a requirement that the Company or any Shareholder
shall have received "notice" of any matter, or any similar qualification shall
be deemed to include the knowledge of the Company, or any Shareholder or notices
to the Company or any Shareholder, as the case may be. No Shareholder shall have
any right of contribution from, or indemnification by, the Surviving Corporation
(as the successor to the Company and Medaids) by reason of such Shareholder's
prior association with the Company or Medaids as a shareholder, employee,
officer or director.
15.15 INDEPENDENT LEGAL COUNSEL. Each Shareholder represents
and warrants that it, he or she has had the opportunity to seek the advice of
independent legal counsel prior to signing this Agreement, and that IHS has
recommended to such Shareholder that such party obtain legal counsel.
[SIGNATURES ON THE FOLLOWING PAGE]
33
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
INTEGRATED HEALTH
SERVICES, INC.
By:
------------------------------
Name:
Title:
ROTECH OXYGEN & MEDICAL
EQUIPMENT, INC.
By: /s/ STEPHEN P. GRIGGS
------------------------------
Name: Stephen P. Griggs
Title: President
STATE OF FLORIDA
--------------
COUNTY OF ORANGE
--------------
The foregoing instrument was acknowledged before me by, Stephen P.
Griggs, as __________________________ President of Rotech Oxygen & Medical
Equipment, Inc., a corporation, on behalf of the corporation, and who is
personally known to me; or has produced __________________________ as
identification.
April 21, 1998 /s/ Elizabeth S. Brown
- ------------------------- ---------------------------------
Date Notary Signature
---------------------------------
Notary Name Printed
My Commission Expires:
[SEAL] ELIZABETH S. BROWN
MY COMMISSION # CC377695 EXPIRES
JUNE 25, 1998
BONDED THRU TROY FARM INSURANCE, INC.
34
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
INTEGRATED HEALTH
SERVICES, INC.
By: /s/ ELIZABETH B. KELLY
------------------------------
Name: Elizabeth B. Kelly
Title: EVP, Corporate Development
ROTECH OXYGEN & MEDICAL
EQUIPMENT, INC.
By:
------------------------------
Name:
Title:
STATE OF MARYLAND
--------------
COUNTY OF BALTIMORE
--------------
The foregoing instrument was acknowledged before me by, Elizabeth B.
Kelly, as Executive Vice President of Integrated Health Services,
a_________________ corporation, on behalf of the corporation, and who is
personally known to me; or has produced a drivers' license as identification.
2/10/98 /s/ Joyce Walker Duley
- ------------------------- ---------------------------------
Date Notary Signature
/s/ Joyce Walker Duley
---------------------------------
Notary Name Printed
My Commission Expires:
JOYCE WALKER DULEY
NOTARY PUBLIC STATE OF MARYLAND
MY COMMISSION EXPIRES DECEMBER 24, 2001
35
<PAGE>
PRIME MEDICAL SERVICES, INC.
By: /s/ LEE T. MCCARGER
-----------------------------
Name: LEE T. MCCARGER
Title: President
STATE OF FLORIDA
----------------
COUNTY OF HILLSBOROUGH
---------------
The foregoing instrument was acknowledged before me by, Lee T
McCarger, as ___________________ President of Prime Medical Services, a
corporation, on behalf of the corporation, and who is personally known to me; or
has produced________________________ as identification.
2/6/98 /s/ MICHAEL D. LABARBERA
- ------------------------------ ----------------------------------
Date Notary Signature
OFFICIAL NOTARY SEAL MICHAEL D. LABARBERA
MICHAEL D LABARBERA ----------------------------------
NOTARY PUBLIC STATE OF FLORIDA Notary Name Printed
COMMISSION NO. CC539722 My Commission Expires:
MY COMMISSION EXP. MAR. 22, 2000
/s/ LEANN JARCYNSKI /s/ SAMUEL JARCZYNSKI
- -------------------------------- ----------------------------------
LEANN JARCZYNSKI Samuel Jarczynski
STATE OF FLORIDA
------------------
COUNTY OF HILLSBOROUGH
-----------------
The foregoing agreement was acknowledged before me by, Leann Jarcynski,
Samuel Jarcynski who is personally known to me; or has produced
_______________________ as identification.
2/6/98 /s/ MICHAEL D. LABARBERA
- --------------------------- ----------------------------------
Date Notary Signature
MICHAEL D. LABARBERA
OFFICIAL NOTARY SEAL ----------------------------------
MICHAEL D LABARBERA Notary Name Printed
NOTARY PUBLIC STATE OF FLORIDA My Commission Expires:
COMMISSION NO. CC539722
MY COMMISSION EXP. MAR. 22, 2000
36
<PAGE>
/s/ ELIZABETH TEPPER
----------------------------------
Elizabeth Tepper
STATE OF FLORIDA
----------------
COUNTY OF HILLSBOROUGH
---------------
The foregoing agreement was acknowledged before me by, Elizabeth Tepper
who is personally known to me; or has produced ____________________________ as
identification.
2/6/98 /s/ MICAHEL D. LABARBERA
- ------------------------------- ---------------------------------
Date Notary Signature
OFFICIAL NOTARY SEAL MICHAEL D. LABARBERA
MICHAEL D LABARBERA ---------------------------------
NOTARY PUBLIC STATE OF FLORIDA Notary Name Printed
COMMISSION NO. CC539722 My Commission Expires:
MY COMMISSION EXP. MAR. 22, 2000
/s/ BERNICE BRIERLEY by
ARTHUR TEPPER POA
---------------------------------
Bernice Brierley
STATE OF FLORIDA
-------------------
COUNTY OF HILLSBOROUGH
------------------
The foregoing agreement was acknowledged before me by, Arthur Tepper as
attorney in fact for Bernice Brierley, who is personally known to me; or has
produced ______________________________ as identification.
2/6/98 /s/ MICAHEL D. LABARBERA
- ------------------------------- ---------------------------------
Date Notary Signature
OFFICIAL NOTARY SEAL MICHAEL D. LABARBERA
MICHAEL D LABARBERA ---------------------------------
NOTARY PUBLIC STATE OF FLORIDA Notary Name Printed
COMMISSION NO. CC539722 My Commission Expires:
MY COMMISSION EXP. MAR. 22, 2000
37
<PAGE>
/s/ LEE T. MCCARGER
---------------------------------
Lee T. McCarger
STATE OF FLORIDA
----------------------
COUNTY OF HILLSBOROUGH
---------------------
The foregoing agreement was acknowledged before me by, Lee T. McCarger,
who is personally known to me; or has produced____________________________ as
identification.
2/6/98 /s/ MICAHEL D. LABARBERA
- ------------------------------- ---------------------------------
Date Notary Signature
OFFICIAL NOTARY SEAL MICHAEL D. LABARBERA
MICHAEL D LABARBERA ---------------------------------
NOTARY PUBLIC STATE OF FLORIDA Notary Name Printed
COMMISSION NO. CC539722 My Commission Expires:
MY COMMISSION EXP. MAR. 22, 2000
38
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(B) - Other Assets
Schedule 1(a)(v)(C) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(iv) - Wire Instructions
Schedule 4(a) - Closing Date Liabilities
Schedule 4(b) - Unassumed Contracts
Schedule 9(c) - Seller's Opinion
Schedule 12(c) - Liabilities
Schedule 12(g) - Contracts
Schedule 12(i) - Personnel Payrates; Employee Benefits
Schedule 12(k) - Insurance
Schedule 12(o) - Tax Returns and Financial Statements
Schedule 12(p) - Supplemental Tax Information
Schedule 12(q) - Adverse Business Developments
Schedule 12(r) - Relationships
Schedule 12(u) - Reimbursement Matters
Schedule 12(v) - Environmental Compliance
Schedule 15(a) - Locations
Exhibit 2(b)(i) - Escrow Agreement
Exhibit 2(b)(ii) - Payment Escrow Agreement
39
-----------------------------
MEMBERSHIP INTEREST PURCHASE AGREEMENT
DATED AS OF APRIL 7, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
DOWNSTATE LITHOTRIPTER LLC,
METRO/LITHO L.P.,
LONG ISLAND LITHOTRIPTER, LLC,
LITHOTRIPTER CORPORATION
AND
ALLIED UROLOGICAL SERVICES, LLC
-----------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
ARTICLE I: SALE AND PURCHASE OF COMPANY ASSETS; ALLOCATION......................2
<S> <C> <C>
1.1 Downstate..........................................................2
1.2 Metro/Litho........................................................2
1.3 Long Island........................................................3
1.4 Litho Corp.........................................................3
1.5 Assignment of Rights and Obligations...............................4
1.6 Allocation of Purchase Price.......................................4
ARTICLE II: COMPANY ASSETS AND LIABILITIES.....................................4
2.1 Downstate..........................................................4
2.2 Metro/Litho........................................................5
2.3 Long Island........................................................6
2.4 Litho Corp.........................................................8
2.5 Lithotripsy Practice...............................................9
ARTICLE III: ADJUSTMENTS TO STOCK PORTION OF PURCHASE PRICE.....................10
3.1 Adjustments to the Aggregate Stock Portion of Purchase Price.......10
3.2 Definition of Working Capital......................................12
3.3 Allocation among the Companies.....................................13
ARTICLE IV: ASSUMED CONTRACTS...................................................13
4.1 Assumed Contracts..................................................13
ARTICLE V: IHS STOCK...........................................................14
5.1 IHS Stock..........................................................14
5.2 Transfers of IHS Stock and Membership Interests....................18
ARTICLE VI: THE CLOSING........................................................19
6.1 Time and Place of Closing..........................................19
ARTICLE VII: REPRESENTATIONS AND WARRANTIES.....................................19
7.1 Representations and Warranties of IHS..............................19
7.2 Representations and Warranties of Downstate........................19
7.3 Representations and Warranties of Metro/Litho......................19
7.4 Representations and Warranties of Long Island......................19
7.5 Representations and Warranties of Litho Corp.......................19
7.6 Representations and Warranties Regarding Lithotripsy Practice......19
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANIES.................20
8.1 Access to Information and Records before Closing...................20
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING...........................20
9.1 Conduct of Business Pending Closing................................20
9.2 Negative Covenants of the Companies................................20
9.3 Affirmative Covenants..............................................22
9.4 Pursuit of Consents and Approvals..................................23
</TABLE>
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9.5 Supplementary Financial Information...............................23
9.6 Exclusivity.......................................................23
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.........................23
10.1 Representations and Warranties....................................23
10.2 Performance of Covenants..........................................24
10.3 Delivery of Closing Certificate...................................24
10.4 Opinions of Counsel...............................................24
10.5 Legal Matters.....................................................24
10.6 Authorization Documents...........................................24
10.7 Material Change...................................................24
10.8 Approvals.........................................................24
10.9 [Intentionally Omitted]...........................................25
10.10 Engineering Report................................................25
10.11 Surveys...........................................................25
10.12 Zoning Report.....................................................25
10.13 Title Insurance...................................................25
10.14 Operating Agreement...............................................25
10.15 Management Agreement and Leases...................................25
10.16 Liens on Lithotripsy Practice Assets..............................25
10.17 Westchester Facility..............................................25
10.18 Employment and Consulting Agreements..............................25
10.19 Non-Compete Agreements............................................26
10.20 Agreements with Certain Urologists, Radiology
Technologists and Anesthesiologists..............................26
10.21 Investor Representation and Indemnification Agreements............26
10.22 Working Capital...................................................26
10.23 Long-term Liabilities.............................................26
10.24 Estimated Lithotripsy Practice Balance Sheet......................26
10.25 Other Documents...................................................26
ARTICLE XI: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANIES...............26
11.1 Representations and Warranties....................................27
11.2 Performance of Covenants..........................................27
11.3 Delivery of Closing Certificate...................................27
11.4 Opinion of Counsel................................................27
11.5 Legal Matters.....................................................27
11.6 Authorization Documents...........................................27
11.7 Employment Agreements.............................................27
11.8 Release of Guaranties.............................................27
11.9 Operating Agreement...............................................27
11.10 Management Agreement and Leases...................................28
11.11 IHS Non-compete/First Offer Agreement.............................28
11.12 Consent of Existing Equity Holders................................28
11.13 Other Documents...................................................28
11.14 No Decline in Stock Price.........................................28
ARTICLE XII: SURVIVAL AND INDEMNIFICATION; POST-CLOSING OBLIGATIONS............28
12.1 Survival of Representations and Warranties........................28
12.2 Indemnification by the Companies..................................28
12.3 Indemnification by IHS............................................30
12.4 Indemnification by Allied.........................................30
</TABLE>
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12.5 Limitations on Indemnification Obligations.......................30
12.6 Control of Defense of Indemnifiable Claims.......................32
12.7 Agreement Regarding Certain Urologists...........................33
ARTICLE XIII: TERMINATION.......................................................33
13.1 Termination......................................................33
13.2 Effect of Termination............................................34
ARTICLE XIV: CASUALTY, RISK OF LOSS.............................................34
14.1 Casualty, Risk of Loss...........................................34
ARTICLE XV: MISCELLANEOUS......................................................34
15.1 Representatives..................................................34
15.2 Performance......................................................36
15.3 Benefit and Assignment...........................................36
15.4 Effect and Construction of this Agreement........................37
15.5 Cooperation - Further Assistance.................................37
15.6 Notices..........................................................37
15.7 Waiver, Discharge, Etc...........................................38
15.8 Rights of Persons Not Parties....................................38
15.9 Governing Law....................................................38
15.10 Amendments, Supplements, Etc.....................................38
15.11 Severability.....................................................39
15.12 Costs and Expenses...............................................39
15.13 Public Announcements.............................................39
15.14 Arbitration......................................................39
ARTICLE XVI: CERTAIN DEFINITIONS................................................39
</TABLE>
(iii)
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SCHEDULES & EXHIBITS
Schedule 1.6 - Allocation
Schedule 3.3 - Allocation Among Companies
Schedule 4.1-A - Designated Contracts
Schedule 4.1-B - Termination Contracts
Schedule 10.19 - Urologists Entering into Non-Competes
Exhibit A - Operating Agreement
Exhibit 7.1 - IHS Representations and Warranties
Exhibit 7.2 - Downstate Representations and Warranties
Exhibit 7.3 - Metro/Litho Representations and Warranties
Exhibit 7.4 - Long Island Representations and Warranties
Exhibit 7.5 - Litho Corp. Representations and Warranties
Exhibit 7.6 - Lithotripsy Practice Representations and Warranties
Exhibit 10.15 - Form of Management Agreement
Exhibit 10.18-1 - McGowen Employment Agreement
Exhibit 10.18-2 - Fruchtman Employment Agreement
Exhibit 10.19 - Form of Non-Compete Agreement
Exhibit 10.21 - Form of Representation and Indemnification Instrument
Exhibit 11.11 - Form of Non-Compete/First Offer Agreement
(iv)
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
---------------------------------------
This Membership Interest Purchase Agreement (this "AGREEMENT")
is made as of the 7th day of April, 1998, among Allied Urological Services, LLC,
a limited liability company formed under the laws of Delaware ("ALLIED"),
Integrated Health Services, Inc., a Delaware corporation ("IHS"), Downstate
Lithotripter LLC, a limited liability company formed under the laws of New York
("DOWNSTATE"), Metro/Litho L.P., a limited partnership formed under the laws of
New York ("METRO/LITHO"), Long Island Lithotripter, LLC, a limited liability
company formed under the laws of New York ("LONG ISLAND") and Lithotripter
Corporation, a New York corporation ("LITHO CORP", and together with Downstate,
Metro/Litho and Long Island, the "COMPANIES", and each a "COMPANY").
RECITALS
WHEREAS, the Companies currently provide equipment and management
services to Metropolitan Lithotripter Associates, PC (the "LITHOTRIPSY
PRACTICE"), a professional corporation composed of approximately 200 urologists
that provides renal lithotripsy and other services ("SERVICES") in the Greater
New York metropolitan area, including Manhattan and Long Island; and
WHEREAS, the equipment and services provided by the Companies to the
Lithotripsy Practice (the "EQUIPMENT AND MANAGEMENT SERVICES") include the
following:
(A) Manhattan: Sublease to the Lithotripsy Practice by Metro/Litho of a
fixed site lithotripter facility (the "MANHATTAN FACILITY") and provision of
management services to the Lithotripsy Practice relating to such Manhattan
Facility (the "MANHATTAN MANAGEMENT SERVICES");
(B) Long Island: Lease to the Lithotripsy Practice by Downstate of a
mobile lithotripter (expected to be converted to a fixed site lithotripter) (the
"LONG ISLAND MOBILE LITHOTRIPTER"), lease to the Lithotripsy Practice of a
urology-specific procedure facility in East Meadow, Long Island owned by
Downstate (the "LONG ISLAND FACILITY"), and provision of management services to
the Lithotripsy Practice relating to the Long Island Mobile Lithotripter and the
Long Island Facility by Long Island (the "LONG ISLAND MANAGEMENT SERVICES"); and
(C) Westchester: Sublease to the Lithotripsy Practice by Downstate of a
fixed site lithotripter facility (the "NEW WESTCHESTER FACILITY", and together
with the Manhattan Facility and the Long Island Facility, the "FACILITIES", and
each a FACILITY") that is under construction and, upon completion of the New
Westchester Facility, the provision to the Lithotripsy Practice by Downstate of
management services relating to such New Westchester Facility (the "WESTCHESTER
MANAGEMENT SERVICES"); and
WHEREAS, the Companies are owned by approximately 90 urologists (the
"UROLOGIST INVESTORS") (of which approximately all are also investors in the
Lithotripsy Practice), Cabrini Medical Center ("CABRINI"), and five other
non-urologist investors (together with Cabrini, the "NON-UROLOGIST INVESTORS",
and the Urologist Investors and the Non-Urologist Investors are collectively
referred to as the "EXISTING EQUITY HOLDERS"); and
<PAGE>
WHEREAS, the Companies desire to combine their assets and businesses,
and IHS desires to invest in such combined business ("BUSINESS"); and
WHEREAS, Allied has been formed as a limited liability company under
the laws of the State of Delaware on behalf of the parties hereto to be the
owner of the Business and, as of the date hereof, IHS owns the entire membership
interest in Allied (the "AGGREGATE MEMBERSHIP INTEREST"); and
WHEREAS, the parties hereto desire and intend that at the Closing (as
such term is defined in Section 5.1), the Companies shall transfer the Aggregate
Assets to Allied, as assignee of IHS pursuant to Section 1.5 hereof, and, in
consideration therefor, IHS shall deliver to the Companies shares of IHS Stock
(as hereinafter defined) and Allied shall deliver to the Companies membership
interests in Allied, in each case in such amounts as are determined pursuant to
the terms hereof; and
WHEREAS, the parties hereto desire and intend that immediately after
the Closing, the Aggregate Membership Interest shall be owned sixty percent
(60%) by IHS, and forty percent (40%) by the Companies in the aggregate; and
WHEREAS, the Operating Agreement of Allied is as set forth on Exhibit A
hereto (the "OPERATING AGREEMENT").
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, each of the parties hereto intending to be
legally bound, agree as follows:
ARTICLE I: SALE AND PURCHASE OF COMPANY ASSETS; ALLOCATION
1.1 DOWNSTATE.
(A) ACQUISITION OF DOWNSTATE ASSETS. Subject to the terms
and conditions of this Agreement, at the Closing, IHS will acquire from
Downstate, and Downstate will sell, assign, transfer and convey to IHS, all of
the Downstate Assets (as such term is hereinafter defined in Section 2.1(a)),
free and clear of all Liens (as such term is hereinafter defined in Article XV),
other than Permitted Liens (as such term is hereinafter defined in Article XV).
(B) PURCHASE PRICE FOR DOWNSTATE ASSETS. Subject to
adjustment as provided below, the aggregate purchase price (the "DOWNSTATE
PURCHASE PRICE") for all of the Downstate Assets shall consist of: (i) the
issuance by IHS to Downstate of that number of shares of the common stock of
IHS, par value $.001 per share ("IHS STOCK"), determined as of the Closing Date
in accordance with Section 5.1(a) hereof, as shall have an aggregate value,
subject to adjustment pursuant to Section 3.1 below, of $3,381,951 (the
"DOWNSTATE STOCK PORTION"); and (ii) the issuance by Allied to Downstate of
12.8836% (the "DOWNSTATE PERCENTAGE") of the Aggregate Membership Interest (the
"DOWNSTATE MEMBERSHIP INTEREST"), free and clear of all Liens other than the
restrictions set forth in the Operating Agreement.
1.2 METRO/LITHO.
(A) ACQUISITION OF METRO/LITHO ASSETS. Subject to the
terms and conditions of this Agreement, at the Closing, IHS will acquire from
Metro/Litho, and Metro/Litho will sell, assign, transfer and convey to IHS, all
of the Metro/Litho Assets (as such term is hereinafter defined in Section
2.2(a)), free and clear of all Liens, other than Permitted Liens.
2
<PAGE>
(B) PURCHASE PRICE FOR METRO/LITHO ASSETS. Subject to
adjustment as provided below, the aggregate purchase price (the "METRO/LITHO
PURCHASE PRICE") for all of the Metro/Litho Assets shall consist of: (i) the
issuance by IHS to Metro/Litho of that number of shares of IHS Stock determined
as of the Closing Date in accordance with Section 5.1(a) hereof, as shall have
an aggregate value, subject to adjustment pursuant to Section 3.1 below, of
$5,891,198 (the "METRO/LITHO STOCK PORTION"), and (ii) the issuance by Allied to
Metro/Litho of 22.4427% (the "METRO/LITHO PERCENTAGE") of the Aggregate
Membership Interest (the "METRO/LITHO MEMBERSHIP INTEREST"), free and clear of
all Liens other than the restrictions set forth in the Operating Agreement.
1.3 LONG ISLAND.
(A) ACQUISITION OF LONG ISLAND ASSETS. Subject to the
terms and conditions of this Agreement, at the Closing, IHS will acquire from
Long Island, and Long Island will sell, assign, transfer and convey to IHS, all
of the Long Island Assets (as such term is hereinafter defined in Section
2.3(a)), free and clear of all Liens, other than Permitted Liens.
(B) PURCHASE PRICE FOR LONG ISLAND ASSETS. Subject to
adjustment as provided below, the aggregate purchase price (the "LONG ISLAND
PURCHASE PRICE") for all of the Long Island Assets shall consist of: (i) the
issuance by IHS to Long Island of that number of shares of IHS Stock determined
as of the Closing Date in accordance with Section 5.1(a) hereof, as shall have
an aggregate value, subject to adjustment pursuant to Section 3.1 below, of
$376,668 (the "LONG ISLAND STOCK PORTION"); and (ii) the issuance by Allied to
Long Island of 1.1036% (the "LONG ISLAND PERCENTAGE") of the Aggregate
Membership Interest (the "LONG ISLAND MEMBERSHIP INTEREST"), free and clear of
all Liens other than the restrictions set forth in the Operating Agreement.
1.4 LITHO CORP.
(A) ACQUISITION OF LITHO CORP ASSETS. Subject to the terms
and conditions of this Agreement, at the Closing, IHS will acquire from Litho
Corp, and Litho Corp will sell, assign, transfer and convey to IHS, all of the
Assets (as such term is hereinafter defined in Section 2.4(a)), free and clear
of all Liens, other than Permitted Liens.
(B) PURCHASE PRICE FOR LITHO CORP ASSETS. Subject to
adjustment as provided below, the aggregate purchase price (the "LITHO CORP
PURCHASE PRICE", and together with the Downstate Purchase Price, the Metro/Litho
Purchase Price, and the Long Island Purchase Price, the "AGGREGATE PURCHASE
PRICE", and each a "PURCHASE PRICE") for all of the Litho Corp Assets shall
consist of: (i) the issuance by IHS to Litho Corp of that number of shares of
IHS Stock determined as of the Closing Date in accordance with Section 5.1(a)
hereof, as shall have an aggregate value, subject to adjustment pursuant to
Section 3.1 below, of $1,250,183 (the "LITHO CORP STOCK PORTION", and together
with the Downstate Stock Portion, the Metro/Litho Stock Portion, and the Long
Island Stock Portion, the "AGGREGATE STOCK PORTION", and each a "STOCK
PORTION"); and (ii) the issuance by Allied to Litho Corp, of 3.5701% (the "LITHO
CORP PERCENTAGE", and together with the Downstate Percentage, the Metro/Litho
Percentage, and the Long Island Percentage, the "AGGREGATE PERCENTAGE", and each
a "PERCENTAGE") of the Aggregate Membership Interest (the "LITHO CORP MEMBERSHIP
INTEREST", and together with the Downstate Membership Interest, the Metro/Litho
Membership Interest and the Long Island Membership Interest, the "AGGREGATE
COMPANY MEMBERSHIP INTEREST", and each a "COMPANY MEMBERSHIP INTEREST"), free
and clear of all Liens other than the restrictions set forth in the Operating
Agreement.
3
<PAGE>
1.5 ASSIGNMENT OF RIGHTS AND OBLIGATIONS. Notwithstanding any
contrary provisions contained herein, the parties hereto agree that prior to the
Closing IHS shall assign its rights and obligations under this Article I to take
title to the Aggregate Assets to Allied, and upon such assignment IHS shall be
relieved of said obligations; except that no such assignment shall relieve IHS
of its obligation to pay the Aggregate Purchase Price.
1.6 ALLOCATION OF PURCHASE PRICE. The Aggregate Purchase Price
shall be allocated among the Aggregate Assets as set forth in Schedule 1.6
hereof, and the parties shall adhere to such allocations in filing all returns
to the appropriate taxing authorities. If the Aggregate Purchase Price is
increased or reduced on account of any adjustment provided for herein, or if
payments on account of indemnification obligations are made by IHS or the
Companies hereunder, then the parties shall in good faith agree upon a
reallocation of the Aggregate Purchase Price to the extent necessary to correct
any material discrepancy or inconsistency with respect to the original
allocation.
ARTICLE II: COMPANY ASSETS AND LIABILITIES
2.1 DOWNSTATE.
(A) DOWNSTATE ASSETS. For purposes of this Agreement, the
"DOWNSTATE ASSETS" shall mean, except as set forth in the following sentence,
all of the tangible and intangible assets, real, personal or mixed, that are
owned by Downstate or in which it has an ownership interest and that are
utilized or are held for use in connection with or are necessary to the business
of Downstate, including, without limitation, all lithotripters and other
property, plant, and equipment, real property leasehold rights, contract rights
(including, without limitation, rights under leases of lithotripters and
management agreements with the Lithotripsy Practice and non-competition
agreements), telephone numbers, books and records, inventory and supplies, trade
names, trademarks, cash, cash equivalents, bank accounts and accounts
receivable, and, to the extent permitted by law, all licenses, permits, and
authorizations. Notwithstanding the foregoing, the Downstate Assets shall not
include assets disposed of from the date hereof until Closing in the ordinary
course of business consistent with past practice and otherwise in conformity
with the obligations of Downstate under this Agreement, Downstate's Certificate
of Formation and Operating Agreement, its qualification to do business in any
jurisdiction, taxpayer identification number, minute books, membership interest
transfer records and other documents related specifically to such Downstate's
limited liability company organization and maintenance (collectively, the
"DOWNSTATE EXCLUDED ASSETS").
(B) DOWNSTATE LIABILITIES.
(I) Subject to the terms and conditions hereof, at the
Closing, Allied shall assume and thereafter in due course fully satisfy the
following liabilities of Downstate (the "DOWNSTATE ASSUMED LIABILITIES"):
(A) all trade payables, operating expenses and other
current liabilities of Downstate that are taken into account as current
liabilities ("DOWNSTATE CURRENT LIABILITIES") in determining the
Proposed Working Capital (as such term is hereinafter defined in
Section 3.1(b)(i)(A));
(B) long-term liabilities of Downstate that are taken into
account as long-term liabilities ("DOWNSTATE LONG-TERM LIABILITIES") in
determining the Proposed Long-term Liabilities (as such term is
hereinafter defined Section 3.1(b)(i)(C)); and
4
<PAGE>
(C) those obligations that arise under the Downstate
Assumed Contracts (as such term is hereinafter defined in Section 4.1)
assigned by Downstate to Allied, with respect to services to be
rendered or goods to be supplied or benefits to be conferred to Allied
solely after the Closing Date. Liabilities under such Downstate Assumed
Contracts that have accrued, or the performance of which is due, on or
prior to the Closing Date, or which are in payment or consideration for
Downstate Excluded Assets, shall remain the sole responsibility of
Downstate except to the extent same constitute Downstate Current
Liabilities or Downstate Long-term Liabilities.
(II) Except for the Downstate Assumed Liabilities, Allied
will not assume, and Downstate shall continue to be liable for and shall satisfy
as the same become due all Liabilities (as such term is hereinafter defined in
Article XV) that arise out of acts or omissions by it or circumstances for which
it is responsible attributable to any period on or prior to the Closing Date
("DOWNSTATE EXCLUDED LIABILITIES"), including, without limitation, (A)
liabilities arising out of arrangements between it or the Lithotripsy Practice
with any third party payor, or arrangements with any person or entity that
participates in any third party payor program, including without limitation,
with respect to any excess reimbursement, recapture, adjustment or overpayment
whatsoever ("DOWNSTATE REIMBURSEMENT LIABILITIES"), (B) malpractice claims
asserted by patients or any other tort claims asserted, claims for breach of
contract, or any claims of any kind asserted by patients, former patients,
employees or any other party, (C) any accounts payable or employment or other
taxes (except to the extent of the amount thereof, if any, that constitute
Downstate Current Liabilities or Downstate Long-term Liabilities), and (D)
accrued but unpaid compensation or other benefits to any of the employees,
agents, consultants or advisers of Downstate, including accrued vacation (except
to the extent the amount thereof, if any, constitutes Downstate Current
Liabilities).
(III) It is expressly understood that all Liabilities of
Downstate for amounts owing or payable to any organizing adviser of, or finder
for, Downstate, incurred with respect to the transactions contemplated by this
Agreement or with respect to any prior transactions, shall be deemed Downstate
Excluded Liabilities (regardless of whether the same would constitute a
liability to be set forth on a balance sheet of Downstate), and Allied will not
assume, and Downstate shall continue to be liable for and shall satisfy same.
2.2 METRO/LITHO.
(A) METRO/LITHO ASSETS. For purposes of this Agreement,
the "METRO/LITHO ASSETS" shall mean, except as set forth in the following
sentence, all of the tangible and intangible assets, real, personal or mixed,
that are owned by Metro/Litho or in which it has an ownership interest and that
are utilized or are held for use in connection with or are necessary to the
business of Metro/Litho, including, without limitation, the TUNA machine, all
lithotripters and other property, plant, and equipment, real property leasehold
rights, contract rights (including, without limitation, rights under leases of
lithotripters and management agreements with the Lithotripsy Practice and
non-competition agreements), telephone numbers, books and records, inventory and
supplies, trade names, trademarks, cash, cash equivalents, bank accounts and
accounts receivable, and, to the extent permitted by law, all licenses, permits,
and authorizations. Notwithstanding the foregoing, the Metro/Litho Assets shall
not include assets disposed of from the date hereof until Closing in the
ordinary course of business consistent with past practice and otherwise in
conformity with the obligations of Metro/Litho under this Agreement,
Metro/Litho's Limited Partnership Certificate and Limited Partnership Agreement,
its qualification to do business in any jurisdiction, taxpayer identification
number, minute books, partnership transfer records and other documents related
specifically to such Metro/Litho's limited partnership organization and
maintenance, and its membership interest in Downstate (collectively, the
"METRO/LITHO EXCLUDED ASSETS").
5
<PAGE>
(B) METRO/LITHO LIABILITIES.
(I) Subject to the terms and conditions hereof, at the
Closing, Allied shall assume and thereafter in due course fully satisfy the
following liabilities of Metro/Litho (the "METRO/LITHO ASSUMED LIABILITIES"):
(A) all trade payables, operating expenses and other
current liabilities of Metro/Litho that are taken into account as
current liabilities ("METRO/LITHO CURRENT LIABILITIES") in determining
the Proposed Working Capital; and
(B) long-term liabilities of Metro/Litho that are taken
into account as long-term liabilities ("METRO/LITHO LONG-TERM
LIABILITIES") in determining the Proposed Long-term Liabilities; and
(C) those obligations that arise under the Metro/Litho
Assumed Contracts (as such term is hereinafter defined in Section 4.1)
and assigned by Metro/Litho to Allied, with respect to services to be
rendered or goods to be supplied or benefits to be conferred to Allied
solely after the Closing Date. Liabilities under such Metro/Litho
Assumed Contracts that have accrued, or the performance of which is
due, on or prior to the Closing Date, or which are in payment or
consideration for Metro/Litho Excluded Assets, shall remain the sole
responsibility of Metro/Litho except to the extent same constitute
Metro/Litho Current Liabilities or Metro/Litho Long-term Liabilities.
(II) Except for the Metro/Litho Assumed Liabilities,
Allied will not assume, and Metro/Litho shall continue to be liable for and
shall satisfy as the same become due all Liabilities that arise out of acts or
omissions by it or circumstances for which it is responsible attributable to any
period on or prior to the Closing Date ("METRO/LITHO EXCLUDED LIABILITIES"),
including, without limitation, (A) liabilities arising out of arrangements
between it or the Lithotripsy Practice with any third party payor, or
arrangements with any person or entity that participates in any third party
payor program, including without limitation, with respect to any excess
reimbursement, recapture, adjustment or overpayment whatsoever ("METRO/LITHO
REIMBURSEMENT LIABILITIES"), (B) malpractice claims asserted by patients or any
other tort claims asserted, claims for breach of contract, or any claims of any
kind asserted by patients, former patients, employees or any other party, (C)
any accounts payable or employment or other taxes (except to the extent of the
amount thereof, if any, that constitute Metro/Litho Current Liabilities or
Metro/Litho Long-term Liabilities), and (D) accrued but unpaid compensation or
other benefits to any of the employees, agents, consultants or advisers of
Metro/Litho, including accrued vacation (except to the extent the amount
thereof, if any, constitutes Metro/Litho Current Liabilities).
(III) It is expressly understood that all Liabilities of
Metro/Litho for amounts owing or payable to any organizing adviser of, or finder
for, Metro/Litho, incurred with respect to the transactions contemplated by this
Agreement or with respect to any prior transactions, shall be deemed Metro/Litho
Excluded Liabilities (regardless of whether the same would constitute a
liability to be set forth on a balance sheet of Metro/Litho), and Allied will
not assume, and Metro/Litho shall continue to be liable for and shall satisfy
same.
2.3 LONG ISLAND.
(A) LONG ISLAND ASSETS. For purposes of this Agreement,
the "LONG ISLAND ASSETS" shall mean, except as set forth in the following
sentence, all of the tangible and intangible assets,
6
<PAGE>
real, personal or mixed, that are owned by Long Island or in which it has an
ownership interest and that are utilized or are held for use in connection with
or are necessary to the business of Long Island, including, without limitation,
all lithotripters and other property, plant, and equipment, real property
leasehold rights, contract rights (including, without limitation, rights under
leases of lithotripters and management agreements with the Lithotripsy Practice
and non-competition agreements), telephone numbers, books and records, inventory
and supplies, trade names, trademarks, cash, cash equivalents, bank accounts and
accounts receivable, and, to the extent permitted by law, all licenses, permits,
and authorizations. Notwithstanding the foregoing, the Long Island Assets shall
not include assets disposed of from the date hereof until Closing in the
ordinary course of business consistent with past practice and otherwise in
conformity with the obligations of Long Island under this Agreement, Long
Island's Certificate of Formation and Operating Agreement, its qualification to
do business in any jurisdiction, taxpayer identification number, minute books,
membership interest transfer records and other documents related specifically to
such Long Island's limited liability company organization and maintenance, and
its membership interest in Downstate (collectively, the "LONG ISLAND EXCLUDED
ASSETS").
(B) LONG ISLAND LIABILITIES.
(I) Subject to the terms and conditions hereof, at the
Closing, Allied shall assume and thereafter in due course fully satisfy the
following liabilities of Long Island (the "LONG ISLAND ASSUMED LIABILITIES"):
(A) all trade payables, operating expenses and other
current liabilities of Long Island that are taken into account as
current liabilities ("LONG ISLAND CURRENT LIABILITIES") in determining
the Proposed Working Capital; and
(B) long-term liabilities of Long Island that are taken
into account as long-term liabilities ("LONG ISLAND LONG-TERM
LIABILITIES") in determining the Proposed Long-term Liabilities; and
(C) those obligations that arise under the Long Island
Assumed Contracts (as such term is hereinafter defined in Section 4.1)
and assigned by Long Island to Allied, with respect to services to be
rendered or goods to be supplied or benefits to be conferred to Allied
solely after the Closing Date. Liabilities under such Long Island
Assumed Contracts that have accrued, or the performance of which is
due, on or prior to the Closing Date, or which are in payment or
consideration for Long Island Excluded Assets, shall remain the sole
responsibility of Long Island except to the extent same constitute Long
Island Current Liabilities or Long Island Long-term Liabilities.
(II) Except for the Long Island Assumed Liabilities,
Allied will not assume, and Long Island shall continue to be liable for and
shall satisfy as the same become due all Liabilities that arise out of acts or
omissions by it or circumstances for which it is responsible attributable to any
period on or prior to the Closing Date ("LONG ISLAND EXCLUDED LIABILITIES"),
including, without limitation, (A) liabilities arising out of arrangements
between it or the Lithotripsy Practice with any third party payor, or
arrangements with any person or entity that participates in any third party
payor program, including without limitation, with respect to any excess
reimbursement, recapture, adjustment or overpayment whatsoever ("LONG ISLAND
REIMBURSEMENT LIABILITIES"), (B) malpractice claims asserted by patients or any
other tort claims asserted, claims for breach of contract, or any claims of any
kind asserted by patients, former patients, employees or any other party, (C)
any accounts payable or employment or other taxes (except to the extent of the
amount thereof, if any, that constitute Long Island Current Liabilities or Long
Island Long-term Liabilities), and (D) accrued but unpaid compensation or other
benefits to any of the employees, agents, consultants or advisers of Long
Island, including accrued vacation (except to the extent of the amount thereof,
if any, that constitute Long Island Current Liabilities).
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(III) It is expressly understood that all Liabilities of
Long Island for amounts owing or payable to any organizing adviser of, or finder
for, Long Island, incurred with respect to the transactions contemplated by this
Agreement or with respect to any prior transactions, shall be deemed Long Island
Excluded Liabilities (regardless of whether the same would constitute a
liability to be set forth on a balance sheet of Long Island), and Allied will
not assume, and Long Island shall continue to be liable for and shall satisfy
same.
2.4 LITHO CORP.
(A) LITHO CORP ASSETS. For purposes of this Agreement, the
"LITHO CORP ASSETS" shall mean, except as set forth in the following sentence,
all of the tangible and intangible assets, real, personal or mixed, that are
owned by Litho Corp or in which it has an ownership interest and that are
utilized or are held for use in connection with or are necessary to the business
of Litho Corp, including, without limitation, all lithotripters and other
property, plant, and equipment, real property leasehold rights, contract rights
(including, without limitation, rights under leases of lithotripters and
management agreements with the Lithotripsy Practice and non-competition
agreements), telephone numbers, books and records, inventory and supplies, trade
names, trademarks, cash, cash equivalents, bank accounts, and accounts
receivable, and, to the extent permitted by law, all licenses, permits, and
authorizations. Notwithstanding the foregoing, the Litho Corp Assets shall not
include assets disposed of from the date hereof until Closing in the ordinary
course of business consistent with past practice and otherwise in conformity
with the obligations of Litho Corp under this Agreement, Litho Corp's
Certificate of Incorporation and By-Laws, its qualification to do business in
any jurisdiction, taxpayer identification number, minute books, stock transfer
records and other documents related specifically to such Litho Corp's corporate
organization and maintenance, and its partnership interest in Metro/Litho and
its membership interest in Downstate (collectively, the "LITHO CORP EXCLUDED
ASSETS").
(B) LITHO CORP LIABILITIES.
(I) Subject to the terms and conditions hereof, at the
Closing, Allied shall assume and thereafter in due course fully satisfy the
following liabilities of Litho Corp (the "LITHO CORP ASSUMED LIABILITIES"):
(A) all trade payables, operating expenses and other
current liabilities of Litho Corp that are taken into account as
current liabilities ("LITHO CORP CURRENT LIABILITIES") in determining
the Proposed Working Capital;
(B) long-term liabilities of Litho Corp that are taken
into account as long-term liabilities ("LITHO CORP LONG-TERM
LIABILITIES") in determining the Proposed Long-term Liabilities; and
(C) those obligations that arise under the Litho Corp
Assumed Contracts (as such term is hereinafter defined in Section 4.1)
and assigned by Litho Corp to Allied with respect to services to be
rendered or goods to be supplied or benefits to be conferred to Allied
solely after the Closing Date. Liabilities under such Litho Corp
Assumed Contracts that have accrued, or the performance of which is
due, on or prior to the Closing Date, or which are in payment or
consideration for Litho Corp Excluded Assets, shall remain the sole
responsibility of Litho Corp except to the extent same constitute Litho
Corp Current Liabilities or Litho Corp Long- term Liabilities.
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(II) Except for the Litho Corp Assumed Liabilities, Allied
will not assume, and Litho Corp shall continue to be liable for and shall
satisfy as the same become due all Liabilities that arise out of acts or
omissions by it or circumstances for which it is responsible attributable to any
period on or prior to the Closing Date ("LITHO CORP EXCLUDED LIABILITIES"),
including, without limitation, (A) liabilities arising out of arrangements
between it or the Lithotripsy Practice with any third party payor, or
arrangements with any person or entity that participates in any third party
payor program, including without limitation, with respect to any excess
reimbursement, recapture, adjustment or overpayment whatsoever ("LITHO CORP
REIMBURSEMENT LIABILITIES"), (B) malpractice claims asserted by patients or any
other tort claims asserted, claims for breach of contract, or any claims of any
kind asserted by patients, former patients, employees or any other party, (C)
any accounts payable or employment or other taxes (except to the extent of the
amount thereof, if any, that constitute Litho Corp Current Liabilities or Litho
Corp Long-term Liabilities), and (D) accrued but unpaid compensation or other
benefits to any of the employees, agents, consultants or advisers of Litho Corp,
including accrued vacation (except to the extent of the amount thereof, if any,
constitute Litho Corp Current Liabilities).
(III) It is expressly understood that all Liabilities of
Litho Corp for amounts owing or payable to any organizing adviser of, or finder
for, Litho Corp, incurred with respect to the transactions contemplated by this
Agreement or with respect to any prior transactions, shall be deemed Litho Corp
Excluded Liabilities (regardless of whether the same would constitute a
liability to be set forth on a balance sheet of Litho Corp), and Allied will not
assume, and Litho Corp shall continue to be liable for and shall satisfy same.
2.5 LITHOTRIPSY PRACTICE.
(A) LITHOTRIPSY PRACTICE ASSETS. It shall be a condition
of IHS to Closing that, as of the Closing Date, the assets of the Lithotripsy
Practice will include all of the Lithotripsy Practice Assets, and for purposes
of this Agreement, the "LITHOTRIPSY PRACTICE ASSETS" shall mean all of the
tangible and intangible assets, real, personal or mixed, that are owned by
Lithotripsy Practice or in which it has an ownership interest and that are
utilized or are held for use in connection with or are necessary to the business
of Lithotripsy Practice, including, without limitation, all lithotripters and
other property, plant, and equipment, real property leasehold rights, contract
rights (including, without limitation, restrictive covenants and rights under
contracts with third party payors), telephone numbers, books and records,
inventory and supplies, trade names, cash, cash equivalents and accounts
receivable, and, to the extent permitted by law, all licenses, permits, and
authorizations. Notwithstanding the foregoing, the Lithotripsy Practice Assets
shall not include assets disposed of from the date hereof until Closing in the
ordinary course of business consistent with past practice and otherwise in
conformity with the obligations of the Companies under this Agreement
(collectively, the "LITHOTRIPSY PRACTICE EXCLUDED ASSETS"). At the Closing, all
of the Lithotripsy Practice Assets shall be free and clear of Liens, other than
Permitted Liens.
(B) LITHOTRIPSY PRACTICE LIABILITIES.
(I) As of the Closing, except for Lithotripsy Practice
Permitted Liabilities (as hereinafter defined in clause (ii)), there will not be
any Liabilities against Lithotripsy Practice that arise out of acts or omissions
by it or circumstances for which it is responsible attributable to any period on
or prior to the Closing Date ("LITHOTRIPSY PRACTICE PROHIBITED LIABILITIES"),
including, without limitation, (A) liabilities arising out of arrangements
between it with any third party payor, or arrangements with any person or entity
that participates in any third party payor program, including without
limitation, with respect to any excess reimbursement, recapture, adjustment or
overpayment whatsoever ("LITHOTRIPSY PRACTICE REIMBURSEMENT LIABILITIES"), (B)
malpractice claims asserted by patients or any other tort claims
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asserted, claims for breach of contract, or any claims of any kind asserted by
patients, former patients, employees or any other party, (C) any accounts
payable or employment or other taxes (except to the extent of the amount
thereof, if any, constitute Lithotripsy Practice Current Liabilities (as
hereinafter defined in clause (ii)), and (D) accrued but unpaid compensation or
other benefits to any of the employees, agents, consultants or advisers of
Lithotripsy Practice, including accrued vacation (except to the extent of the
amount thereof, if any, constitute Lithotripsy Practice Current Liabilities).
(II) For purposes of this Agreement, the following
liabilities of Lithotripsy Practice shall constitute "LITHOTRIPSY PRACTICE
PERMITTED LIABILITIES":
(A) all trade payables, operating expenses and other
current liabilities of Lithotripsy Practice that are taken into account
as current liabilities ("LITHOTRIPSY PRACTICE CURRENT LIABILITIES") in
preparing the Estimated Lithotripsy Practice Closing Date Balance Sheet
(as such term is hereinafter defined in Section 10.24);
(B) those obligations that arise under agreements,
contracts, instruments and commitments of the Lithotripsy Practice with
respect to services to be rendered or goods to be supplied or benefits
to be conferred to the Lithotripsy Practice solely after the Closing
Date. Liabilities under such agreements, contracts, instruments and
commitments that have accrued, or the performance of which is due, on
or prior to the Closing Date shall constitute Lithotripsy Practice
Prohibited Liabilities (except to the extent of the amount thereof, if
any, that constitute Lithotripsy Practice Current Liabilities); and
(C) such other liabilities of the Lithotripsy Practice as
are disclosed on Schedule 2.5 hereto.
ARTICLE III: ADJUSTMENTS TO STOCK PORTION OF PURCHASE PRICE
3.1 ADJUSTMENTS TO THE AGGREGATE STOCK PORTION OF PURCHASE PRICE.
(A) (I) At the Closing, the Representatives (as defined in
Article XIV hereof) shall deliver to Allied and IHS a certificate certifying to
be their best good faith estimate of the aggregate amount of working capital (as
defined in Section 3.2 below) of the Companies on a combined basis immediately
prior to the Closing (the "ESTIMATED CLOSING DATE WORKING CAPITAL").
(A) If the Estimated Closing Date Working Capital is less
than $625,000 (the "MINIMUM WORKING CAPITAL"), the Aggregate Stock
Portion, and the amount thereof payable to the Companies at Closing,
will be reduced by an amount equal to the amount of such deficiency,
with such reduction to be made by reducing the number of shares of IHS
Stock, in the proportions set forth on Schedule 3.3 hereto (valued
using the Closing Date as the date of determination in accordance with
Section 5.1(a) below), otherwise deliverable to the Companies.
(B) If the Estimated Closing Date Working Capital is
greater than the Minimum Working Capital, then the Aggregate Stock
Portion and the amount thereof payable to the Companies at Closing,
will be increased by an amount equal to the amount of such excess, and
IHS shall deliver to the Companies, in the proportions set forth on
Schedule 3.3 hereto, shares of IHS Stock equal in value to such excess
(with such IHS Stock being valued using the Closing Date as the date of
determination in accordance with Section 5.1(a) below).
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(II) Additionally, at the Closing, the Representatives
shall deliver to Allied and IHS the combined balance sheet of the Companies as
of the point in time immediately prior to the Closing, certified by the
Representatives to be their best good faith estimate of the items thereon (the
"ESTIMATED CLOSING DATE BALANCE SHEET").
(A) If the Estimated Closing Date Balance Sheet discloses
that the aggregate amount of the long-term liabilities of the Companies
on a combined basis (the "ESTIMATED LONG-TERM LIABILITIES") as
determined in accordance with GAAP exceeds $1,151,000 (the "MAXIMUM
LONG-TERM LIABILITIES"), the Aggregate Stock Portion, and the amount
thereof payable to the Companies at Closing, will be reduced by an
amount equal to the amount of such excess, with such reduction to be
made by reducing the number of shares of IHS Stock, in the proportions
set forth on Schedule 3.3 hereto (valued using the Closing Date as the
date of determination in accordance with Section 5.1(a) below),
otherwise deliverable to the Companies.
(B) If the Estimated Long-term Liabilities is less than
the Maximum Long-term Liabilities, then the Aggregate Stock Portion and
the amount thereof payable to the Companies at Closing, will be
increased by an amount equal to the amount of such deficiency, and IHS
shall deliver to the Companies, in the proportions set forth on
Schedule 3.3 hereto, shares of IHS Stock equal in value to such
deficiency (with such IHS Stock being valued using the Closing Date as
the date of determination in accordance with Section 5.1(a) below).
(B) (I) Within ninety (90) days following the Closing
Date, IHS shall complete a review (the "IHS REVIEW") of the combined balance
sheet of the Companies as of the point in time immediately prior to the Closing
and shall deliver a proposed closing date balance sheet (the "PROPOSED CLOSING
DATE BALANCE SHEET") to the Representatives. If IHS shall fail to timely deliver
its Proposed Closing Date Balance Sheet, the Estimated Closing Date Working
Capital and the Estimated Long-term Liabilities delivered by the Representatives
on the Closing Date shall be deemed accepted by IHS and shall be conclusive and
binding on all parties hereto, absent fraud.
(A) If the aggregate amount of working capital of the
Companies on a combined basis as of the Closing Date as shown on the
Proposed Closing Date Balance Sheet (the "PROPOSED WORKING CAPITAL")
was less than the Estimated Closing Date Working Capital, then, subject
to Section 3.1(c), the Aggregate Stock Portion shall be deemed to have
been reduced by the amount of such deficiency, and within ten (10)
business days after request from IHS, the Companies shall refund to
IHS, in the proportions set forth on Schedule 3.3 hereto, the amount of
such deficiency with such payment to be made in shares of IHS Stock
(valued using the Closing Date as the date of determination in
accordance with Section 5.1(a)).
(B) If the IHS Review reveals that the Proposed Working
Capital was greater than the Estimated Closing Date Working Capital,
then the Aggregate Stock Portion shall be deemed to have been increased
by the amount of such excess, and within ten (10) business days after
delivery of the Proposed Closing Date Balance Sheet to the
Representatives, IHS will deliver to the Companies, in the proportions
set forth on Schedule 3.3 hereto, shares of IHS Stock equal in value to
such excess (with such IHS Stock being valued using the Closing Date as
the date of determination in accordance with Section 5.1(a) below).
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(C) Furthermore, if the aggregate amount of the long-term
liabilities of the Companies on a combined basis as of the Closing Date
as shown on the Proposed Closing Date Balance Sheet (the "PROPOSED
LONG-TERM LIABILITIES") exceeded the Estimated Long- term Liabilities,
then, subject to Section 3.1(c) below, the Aggregate Stock Portion
shall be deemed to have been reduced by the amount of such excess, and
within ten (10) business days after request from IHS, the Companies
shall refund to IHS, in the proportions set forth on Schedule 3.3
hereto, the amount of such reduction, with such payment to be made in
shares of IHS Stock (valued using the Closing Date as the date of
determination in accordance with Section 5.1(a)).
(D) If the IHS Review reveals that the Proposed Long-term
Liabilities was less than the Estimated Long-term Liabilities, then the
Aggregate Stock Portion shall be deemed to have been increased by the
amount of such deficiency, and within ten (10) business days after
delivery of the Proposed Closing Date Balance Sheet to the
Representatives, IHS will deliver to the Companies, in the proportions
set forth on Schedule 3.3 hereto, shares of IHS Stock equal in value to
the amount of such deficiency (with such IHS Stock being valued using
the Closing Date as the date of determination in accordance with
Section 5.1(a) below).
(C) If at least seventy-five percent (75%) of the
Representatives shall in good faith dispute the Proposed Working Capital or
Proposed Long-term Liabilities of the Companies on a combined basis as of the
Closing Date as set forth on the Proposed Closing Date Balance Sheet, they shall
give notice to IHS (a "DELAY PAYMENT NOTICE") within thirty (30) days after
delivery to them of the Proposed Closing Date Balance Sheet setting forth in
reasonable detail their objections and the basis therefor, in which case, the
disputed portion of any payment otherwise required to be made pursuant to
subsection (a) or (b) above shall be delayed, and IHS and the Representatives
shall meet and in good faith attempt to resolve any disagreements within thirty
(30) days after delivery to IHS of the Delay Payment Notice. If the
Representatives shall fail to timely deliver a Delay Payment Notice, the working
capital and long-term liabilities amounts set forth in the Proposed Closing Date
Balance Sheet shall be deemed accepted by the Companies and shall be conclusive
and binding on all parties hereto, absent fraud. If a Delay Payment Notice is
timely delivered and the parties are unable to resolve such disagreements within
such time period, the disagreements shall be referred to Ernst & Young LLP (the
"ARBITRATING ACCOUNTANTS"), and the determination of the Arbitrating Accountants
shall be final, conclusive and binding on the parties hereto. The Arbitrating
Accountants shall be directed to use their best efforts to reach a determination
not more than thirty (30) days after such referral. The costs and expenses of
the services of the Arbitrating Accountants shall be borne by the party against
whom the Arbitrating Accountants shall rule; provided that if the Arbitrating
Accountants shall not rule against any party, then such costs and expenses shall
be borne equally by the Companies, on the one hand, and IHS, on the other hand.
On the third business day following the final resolution of any matter covered
by a Delay Payment Notice, the Companies shall, if applicable, pay to IHS any
delayed payment to the extent determined to be due to IHS in accordance with
such resolution, with such payment to be made in shares of IHS Stock, in the
proportions set forth on Schedule 3.3 hereto (valued using the Closing Date as
the date of determination in accordance with Section 5.1(a)).
3.2 DEFINITION OF WORKING CAPITAL. For the purposes of this
Article III, "WORKING CAPITAL" means the excess of current assets over current
liabilities, as determined in accordance with GAAP; provided, however, that all
inter-company receivables and payables among the Companies and the Lithotripsy
Practice, all investments by any of the Companies in any of the other Companies,
and all other inter-company assets and liabilities among the Companies and the
Lithotripsy Practice shall be excluded, and "LONG-TERM LIABILITY" means any
liability that would be set forth as a long-term liability on a balance sheet in
accordance with GAAP. Notwithstanding anything to the contrary contained in this
Agreement, any Taxes (as such term is hereinafter defined in Article XV) arising
out of the transactions contemplated by this Agreement, including without
limitation, any "built-in" gains Taxes, shall be paid by the Companies, shall be
Excluded Liabilities, and shall not be included as Current Liabilities in the
computation of Proposed Working Capital.
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3.3 ALLOCATION AMONG THE COMPANIES.
(A) The Companies may agree among themselves in a separate
agreement as to the allocation of any cash amounts that may be receivable by
them or any shares of IHS Stock that may be deliverable to them or by them
pursuant to Article V hereof, and IHS agrees to make any deliveries, pursuant to
this Article III or Article V, in accordance with the written instructions
executed by not less than seventy-five percent (75%) of the Representatives. In
the absence of any such written instructions, IHS shall be permitted to rely for
all purposes on the allocations set forth in Schedule 3.3 hereto, and any
written instructions delivered under this Section 3.3(a) shall expressly state
that such instructions supersede any prior written instructions as to
allocations, including Schedule 3.3.
(B) With respect to any refund of shares of IHS Stock due
to IHS pursuant to this Article III or Article V hereof, IHS shall use its
reasonable efforts to collect said shares from the Companies in the proportions
set forth in Schedule 3.3, or otherwise in accordance with written instructions
(expressly stating that they supersede all prior written instructions as to
allocations, including Schedule 3.3) executed by not less than seventy-five
percent (75%) of the Representatives; provided however, that if at least
seventy-five percent (75%) of the Representatives do not notify IHS in writing
prior to the date such refund is due to IHS, or if after receiving such notice
IHS is unable to so collect such IHS Stock when same is due in accordance with
the instructions of at least seventy-five percent (75%) of the Representatives,
or, if in the absence of any such notice, IHS is unable to collect such IHS
Stock when same is due in accordance with the allocations set forth on Schedule
3.3, then IHS shall be entitled to collect the cash value of such IHS Stock
(valued in accordance with the provision under which such IHS Stock was to be
returned) from the Companies (and the Companies' Existing Equity Holders
pursuant to their Representation and Indemnification Agreements) jointly and
severally; provided further that any amount due to IHS pursuant to this Article
III or pursuant to Article V that is not paid when due shall accrue interest at
the rate per anum equal to ten percent (10%) and IHS shall be indemnified and
held harmless by the Companies (and the Companies' Existing Equity Holders
pursuant to their Representation and Indemnification Agreements) jointly and
severally from all costs and expenses of the collection of all amounts due to it
without regard to any limitations set forth in Section 12.5(c) below or
otherwise.
ARTICLE IV: ASSUMED CONTRACTS
4.1 ASSUMED CONTRACTS. Set forth on Schedule 4.1A, is a list of the
agreements, contracts, instruments and commitments, if any, of each of the
Companies, that Allied shall not assume as of the Closing ("DESIGNATED
CONTRACTS"). Each agreement, contract, instrument and commitment of each Company
that is disclosed by it pursuant to Section 7.x.7 of its respective
Representation and Warranty Exhibit and that is not a Designated Contract shall
be deemed to be a "DOWNSTATE ASSUMED CONTRACT", a "METRO/LITHO ASSUMED
CONTRACT", a "LONG ISLAND ASSUMED CONTRACT", or a "LITHO CORP ASSUMED CONTRACT",
as the case may be. Collectively, the Downstate Assumed Contracts, the
Metro/Litho Assumed Contracts, the Long Island Assumed Contracts, and the Litho
Corp Assumed Contracts are referred to as the "ASSUMED CONTRACTS". If any
Company shall enter into any agreement, contract, instrument or commitment after
the date hereof and prior to Closing, or if there shall be disclosed any
agreement, contract, instrument or commitment that should have been disclosed on
any Schedule 7.x.7 to any Representation and Warranty Exhibit, but that was not
so disclosed, then IHS shall have five (5) business days to notify the
applicable Representative as to whether such agreement, contract, instrument or
commitment shall be an Assumed Contract. If IHS fails to so notify such
Representative, then such agreement, contract, instrument or commitment shall be
deemed to be a Designated Contract. It shall be a condition of IHS and Allied to
consummate the transactions contemplated by this Agreement (the "TRANSACTION")
that all consents required
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to transfer the material Assumed Contracts shall have been obtained. It also
shall be a condition to the obligation of IHS to close the Transaction that IHS
shall be reasonably satisfied that no material agreements, contracts,
instruments and commitments of the Lithotripsy Practice (including, without
limitation, contracts to provide Services) will be terminated by reason of the
Transaction. It also shall be a condition of IHS to Closing that the agreements,
contracts, instruments and commitments, if any, of the Lithotripsy Practice set
forth on Schedule 4.1-B shall have been terminated.
ARTICLE V: IHS STOCK
5.1 IHS STOCK. The Aggregate Stock Portion shall be payable by means of
the delivery of IHS Stock in accordance with the following:
(A) SHARE VALUE. The number of shares of IHS Stock issuable at Closing
shall be calculated based upon a price per share of such stock equal to the
average closing NYSE price of such stock for the thirty (30) trading day period
immediately preceding the date which is two (2) trading days before the Closing
Date (the "CLOSING DATE PRICE PER SHARE").
(B) REGISTRATION RIGHTS. IHS will use its best efforts to cause to be
prepared, filed and declared effective by the Securities and Exchange Commission
(the "COMMISSION") within ninety (90) days following the Closing Date, a
registration statement (the "REGISTRATION STATEMENT") for the registration under
the Securities Act of 1933, as amended (the "SECURITIES ACT") of the IHS Stock
issued pursuant to this Agreement, and IHS shall maintain the effectiveness of
the Registration Statement for a period of one (1) year following the date on
which such Registration Statement becomes effective (the "REGISTRATION DATE"),
or until the Companies (and their respective partners, members or shareholders,
as distributees of such IHS Stock), shall not own any of the IHS Stock issued
pursuant to this Agreement, whichever shall occur first.
(C) REGISTRATION DATE SHARE ADJUSTMENT. If the average closing NYSE
price per share of IHS Stock for the 30-day trading period immediately preceding
the Registration Date (the "REGISTRATION DATE PRICE PER SHARE") is above or
below the Closing Date Price Per Share, then the number of shares of IHS Stock
issued by IHS as the Aggregate Stock Portion (as adjusted under Section 3.1)
shall be recalculated based upon the Registration Date Price Per Share, and the
following shall apply:
(I) If the number of shares of IHS Stock as recalculated under this
Section 5.1 (c) exceeds the number of shares of IHS Stock issued by IHS as the
Aggregate Stock Portion (as adjusted under Section 3.1), then IHS promptly shall
deliver to the Companies (in the proportions set forth in Schedule 3.3 hereto)
an additional number of shares of IHS Stock as shall be equal to the amount of
such excess, and such additional shares shall be included in the Registration
Statement by means of a post-effective amendment thereto.
(II) If the number of shares of IHS Stock issued by IHS as the
Aggregate Stock Portion (as adjusted under Section 3.1) exceeds the number of
shares of IHS Stock as recalculated under this Section 5.1(c), then the
Companies shall promptly return to IHS that number of shares of IHS Stock as
shall be equal to one-half (1/2) of such excess.
(D) POST-REGISTRATION DATE SHARE ADJUSTMENT. If as of the close of
trading on the NYSE on the date which is the fifteenth (15th) consecutive
trading day from (and including) the Registration Date (the "FINAL ADJUSTMENT
DATE"), the difference between (i) the average sale price per share of all IHS
Stock theretofore issued pursuant to this Agreement and sold during the period
from the
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Registration Date to the Final Adjustment Date under the Registration Statement
in bona fide sales to third parties that are not affiliates and otherwise in
accordance with the provisions of this Article V (such shares are the "DISPOSED
SHARES"), and (ii) the average per share cost of the brokerage commissions and
expenses paid by them to the Broker (defined below) in connection with such
sales of the Disposed Shares (the difference between (i) and (ii) is the "FINAL
ADJUSTMENT DATE PRICE PER SHARE") is below the lower of (x) the Closing Date
Price Per Share, and (y) the Registration Date Price Per Share, then IHS
promptly shall issue to the Companies (in the proportions set forth in writing
by at least seventy-five (75%) percent of the Representatives pursuant to
Section 3.3 (b) hereof) an additional number of shares of IHS Stock as shall be
equal in value to the product of (A) the difference between (1) the lower of (p)
the Closing Date Price Per Share, and (q) the Registration Date Price Per Share,
and (2) the Final Adjustment Date Price Per Share, multiplied by (B) the number
of Disposed Shares, and such additional shares of IHS Stock shall be included in
the Registration Statement by means of a post-effective amendment thereto.
Shares of IHS Stock issuable pursuant to this Section 5.1 (d) shall be
calculated based upon a price per share of such stock equal to the average
closing NYSE price of such stock for the thirty (30) trading day period
immediately preceding the Final Adjustment Date.
(E) DELAYED REGISTRATION ADJUSTMENT. If the Registration Statement is
not filed and declared effective by the Commission within one-hundred twenty
(120) days following the Closing Date (the "REGISTRATION DEADLINE DATE"), then
interest shall be deemed to accrue on the value of the Aggregate Stock Portion
(as adjusted under Section 3.1) from the period beginning with the Registration
Deadline Date and ending on the Registration Date (the "INTEREST PERIOD") at the
rate of ten (10%) percent per annum for the first thirty (30) days of the
Interest Period, eleven (11%) percent per annum for the second thirty (30) days
of the Interest Period and twelve (12%) percent per annum for the remainder of
the Interest Period, and IHS shall pay to the Companies in cash (in the
proportions set forth in Schedule 3.3 hereto), not later than the fifth day of
each month during the Interest Period, the aggregate amount of accrued and
unpaid interest under this Section 5.1(e) through the last day of the
immediately preceding month of the Interest Period.
(F) REGISTRATION EXPENSES. The Companies, and their respective
partners, members and shareholders ("PARTICIPANTS") shall not be responsible
for, and IHS shall bear, all of IHS's expenses related to the registration
referred to herein, including, without limitation, the fees and expenses of its
counsel and accountants, all of its other costs, fees and expenses incident to
the preparation, printing, registration and filing under the Securities Act of
the Registration Statement and all amendments and supplements thereto, the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of IHS Stock and the costs and expenses (including fees and
disbursements of its counsel) incurred in connection with the qualification of
the Companies' IHS Stock under the Blue Sky laws of various jurisdictions.
Except to the extent accounted for in the post-registration date share
adjustment under Section 5.1(d) above, IHS shall not pay any brokerage
discounts, commissions or expenses, or pay any costs and expenses arising out of
the Companies' or any transferee's failure to comply with its obligations under
this Article V.
(G) RESALE LIMITATIONS. All resales of IHS Stock issued pursuant to
this Agreement shall be effected solely through Smith Barney Inc. ("BROKER"),
and resales by the Companies and the Participants shall not at any time, in the
aggregate, exceed (i) Thirty-Five Thousand (35,000) shares per day for each of
the fifteen (15) consecutive trading days commencing with the Registration Date,
and (ii) Seventy-Five Thousand (75,000) shares during any thirty (30) day period
thereafter.
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(H) REGISTRATION PROCEDURES, ETC. In connection with the registration
rights granted to the Companies with respect to the IHS Stock as provided in
this Section 5.1, IHS covenants and agrees as follows:
(I) At IHS's expense, IHS will keep the registration and
qualification under this Section 5.1 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate for a period
of one (1) year following the Registration Date, or until the Companies and the
Participants shall not own any of the IHS Stock issued pursuant to this
Agreement, whichever shall occur first. IHS will promptly notify the Companies
and the Representatives, at any time when a prospectus relating to a
registration statement under this Section 5.1 is required to be delivered under
the Securities Act, of the happening of any event known to IHS as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(II) IHS shall furnish the Companies with such number of
prospectuses as shall reasonably be requested.
(III) IHS shall take all necessary action which may be
required in qualifying or registering IHS Stock included in a registration
statement for offering and sale under the securities or Blue Sky laws of such
states as reasonably are requested by the Companies, provided that IHS shall not
be obligated to qualify as a foreign corporation or dealer to do business under
the laws of any such jurisdiction.
(IV) The information included or incorporated by reference
in the registration statement filed pursuant to this Section 5.1 will not, at
the time any such registration statement becomes effective, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein as necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or necessary to
correct any statement in any earlier filing of such registration statement or
any amendments thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. IHS shall indemnify the holders of IHS Stock to be sold pursuant to
the registration statement, their successors and assigns, and each person, if
any, who controls such holders within the meaning of ss.15 of the Securities Act
or ss.20(a) of the Securities Exchange Act of 1934 ("EXCHANGE ACT"), against all
loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Securities Act, the Exchange
Act or any other statute, common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement executed by IHS or based upon written information
furnished by IHS filed in any jurisdiction in order to qualify IHS Stock under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, NYSE or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to IHS by the Companies for use in such registration
statement (it being understood that IHS may rely on the representations and
warranties of the Companies made pursuant to this Agreement in preparing such
Registration Statement), any amendment or supplement thereto or any application,
as the case may be. If any action is brought against the Companies or any
controlling person of the Companies in respect of which indemnity may be sought
against IHS pursuant to this subsection 5.1(h)(iv), the Companies or such
controlling person shall within thirty (30) days after the receipt thereby of a
summons or complaint, notify
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IHS in writing of the institution of such action and IHS shall assume the
defense of such actions, including the employment and payment of reasonable fees
and expenses of counsel (reasonably satisfactory to the Companies or such
controlling person). The Companies or such controlling person shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Companies or such
controlling person unless (A) the employment of such counsel shall have been
authorized in writing by IHS in connection with the defense of such action, or
(B) IHS shall not have employed counsel to have charge of the defense of such
action, or (C) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different from or
additional to those available to IHS (in which case, IHS shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for the Companies and/or such controlling person
shall be borne by IHS. Except as expressly provided in the previous sentence, in
the event that IHS shall not previously have assumed the defenses of any such
action or claim, IHS shall not thereafter be liable to the Companies or such
controlling person in investigating, preparing or defending any such action or
claim.
(V) The holders of IHS Stock to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify IHS, its officers and directors and each person, if any,
who controls IHS within the meaning of ss.15 of the Securities Act or ss.20(a)
of the Exchange Act against all loss, claim, damage, or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising from information furnished in writing by or on behalf of such
holders, or their successors or assigns, for specific inclusion in such
registration statement.
(I) NOTICE OF SALE. If any Company desires to transfer all or any
portion of the IHS Stock, such party shall deliver written notice to IHS
describing in reasonable detail its intention to effect the transfer and the
manner of the proposed transfer. If the transfer is to be pursuant to an
effective registration statement as provided herein, such party shall sell the
IHS Stock in compliance with the disclosure therein and discontinue any offers
and sales thereunder upon notice from IHS that the registration statement
relating to the IHS Stock being transferred is not "current" until IHS gives
further notice that offers and sales may be recommenced. In the event of any
such notice from IHS, IHS agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in Section 5.1(b) and to give prompt notice to the Companies and to
the Representatives when the registration statement has again become current. If
any Company desires to transfer any IHS Stock without use of the registration
statement, it shall deliver to IHS an opinion of counsel reasonably acceptable
to IHS and its counsel to the effect that the proposed transfer of IHS Stock may
be made without registration under the Securities Act, and, in such event, such
party will be entitled to transfer IHS Stock in accordance with the terms of the
notice and opinion of his counsel.
(J) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of IHS to take any action pursuant to this Article V that the
Companies shall furnish to IHS in writing such information regarding themselves
and the IHS Stock held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of the IHS Stock. In
that connection, the Companies shall be required to represent to IHS that all
such information which is given is both complete and accurate in all material
respects. The Companies shall deliver to IHS a statement in writing from the
beneficial owner of such securities that they bona fide intend to sell, transfer
or otherwise dispose of such securities. The Companies will promptly notify IHS
at any time when a prospectus relating to a registration statement covering
their respective shares under this Section 5.1 is required to be delivered under
the Securities Act, or the happening of any event known to them as a result of
which the prospectus included
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in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the statements as then existing.
(K) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to
be issued hereunder will be newly issued shares of IHS. The Companies represent
and warrant to IHS that the IHS Stock being issued hereunder is being acquired,
and will be acquired, by the Companies for investment for their own account and
not with a view to or for sale in connection with any unlawful distribution
thereof within the meaning of the Securities Act or the applicable state
securities law; the Companies acknowledge that the IHS Stock constitutes
restricted securities under Rule 144 promulgated by the Commission pursuant to
the Securities Act, and may have to be held indefinitely, and the Companies
agree that no shares of IHS Stock may be sold, transferred, assigned, pledged or
otherwise disposed of except pursuant to an effective registration statement or
an exemption from registration under the Securities Act, the rules and
regulations thereunder, and under all applicable state securities laws. The
Companies represent and warrant that they have the knowledge and experience in
financial and business matters, are capable of evaluating the merits and risks
of the investment, and are able to bear the economic risk of such investment.
The Companies have had the opportunity to make inquiries of and obtain from
representatives and employees of IHS such other information about IHS as they
deem necessary in connection with such investment.
(L) LEGEND. It is understood that, prior to sale of any
shares of IHS Stock pursuant to an effective registration pursuant to subsection
(b) above, the certificates evidencing such shares of IHS Stock shall bear the
following (or a similar) legend (in addition to any legends which may be
required in the opinion of IHS's counsel by the applicable securities laws of
any state), and upon sale of such shares pursuant to such an effective
registration, new certificates shall be issued for the shares sold without such
legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF THE
COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
(M) CERTAIN TRANSFEREES. Prior to the effective date of
registration of the IHS Stock, the Companies and shall not transfer any shares
of IHS Stock to any person or entity unless such transferee shall have agreed in
writing to be bound by the provisions applicable to the Companies under this
Article V.
5.2 TRANSFERS OF IHS STOCK AND MEMBERSHIP INTERESTS. Each
Company agrees that no portion of the IHS Stock or Company Membership Interest
issued to it pursuant to this Agreement may be sold, transferred, assigned,
pledged or otherwise disposed of except pursuant to an effective registration
statement or an exemption from registration under the Securities Act, the rules
and regulations thereunder, and under all applicable state securities laws.
Without limiting the generality of the foregoing, no Company may transfer any
portion of its IHS Stock or Membership Interest to any of its members or
partners unless IHS and its legal counsel shall be satisfied that such transfer
shall comply with all applicable Federal and state securities laws, including,
without limitation, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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ARTICLE VI: THE CLOSING
6.1 TIME AND PLACE OF CLOSING.
(A) The closing (the "CLOSING") of the Transaction shall
take place at the office of IHS's counsel at 10:00 A.M. on the day that is one
(1) business day after all of the conditions to closing set forth in this
Agreement shall have been tendered, satisfied or expressly waived, but in no
event later than May 31, 1998, or at such other time and place upon which the
parties may agree. The date on which the Closing is held is referred to in this
Agreement as the "CLOSING DATE".
(B) If prior to or on the date scheduled for the Closing
any of any party's conditions precedent to Closing shall not have been satisfied
(and the other party shall not be prepared to tender satisfaction of all
unsatisfied conditions at such time), then such party whose conditions have not
been satisfied shall be entitled, but shall not be obligated, to extend the date
scheduled for the Closing, from time to time, until such time as all of such
party's conditions precedent are satisfied; provided that no party shall be
entitled to extend the Closing to a date that is later than June 30, 1998, or if
the failure of such condition to occur is the result of any bad faith action or
failure to act of such party seeking to extend the Closing.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES OF IHS. IHS hereby
represents and warrants to each of the Companies as set forth on Exhibit 7.1
(the "IHS REPRESENTATION AND WARRANTY EXHIBIT"), which exhibit is hereby
incorporated herein by reference and made an integral part of this Agreement.
7.2 REPRESENTATIONS AND WARRANTIES OF DOWNSTATE. Downstate
hereby represents and warrants to IHS and Allied as set forth on Exhibit 7.2
(the "DOWNSTATE REPRESENTATION AND WARRANTY EXHIBIT"), which exhibit is hereby
incorporated herein by reference and made an integral part of this Agreement.
7.3 REPRESENTATIONS AND WARRANTIES OF METRO/LITHO.
Metro/Litho hereby represents and warrants to IHS and Allied as set forth on
Exhibit 7.3 (the "METRO/LITHO REPRESENTATION AND WARRANTY EXHIBIT"), which
exhibit is hereby incorporated herein by reference and made an integral part of
this Agreement.
7.4 REPRESENTATIONS AND WARRANTIES OF LONG ISLAND. Long
Island hereby represents and warrants to IHS and Allied as set forth on Exhibit
7.4 (the "LONG ISLAND REPRESENTATION AND WARRANTY EXHIBIT"), which exhibit is
hereby incorporated herein by reference and made an integral part of this
Agreement.
7.5 REPRESENTATIONS AND WARRANTIES OF LITHO CORP. Litho
Corp, hereby represents and warrants to IHS and Allied as set forth on Exhibit
7.5 (the "LITHO CORP REPRESENTATION AND WARRANTY EXHIBIT").
7.6 REPRESENTATIONS AND WARRANTIES REGARDING LITHOTRIPSY
PRACTICE. Each of the Companies hereby jointly and severally represent and
warrant to IHS and Allied with respect to the Lithotripsy Practice as set forth
on Exhibit 7.6 (the "LITHOTRIPSY PRACTICE REPRESENTATION AND WARRANTY EXHIBIT",
and together with the Downstate Representation and Warranty Exhibit, the
Metro/Litho Representation and Warranty Exhibit, the Long Island Representation
and Warranty Exhibit, and the Litho Corp Representation and Warranty Exhibit,
the "REPRESENTATION AND WARRANTY EXHIBITS", and each a "REPRESENTATION AND
WARRANTY EXHIBIT"), which exhibit is hereby incorporated herein by reference and
made an integral part of this Agreement.
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ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANIES
8.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING.
Prior to the Closing Date, IHS may make, or cause to be
made, such investigation of the financial and legal condition of the Companies
and the Lithotripsy Practice as it deems necessary or advisable to familiarize
itself with the Companies and the Lithotripsy Practice and/or matters relating
to their history or operation. The Companies shall permit, and shall cause the
Lithotripsy Practice to permit IHS and its authorized representatives (including
legal counsel and accountants), to have full access to the books and records of
the Companies and the Lithotripsy Practice upon reasonable notice and during
normal business hours, and the Companies will furnish, or cause to be furnished,
to IHS such financial and operating data and other information and copies of
documents with respect to the products, services, operations and assets of the
Companies and the Lithotripsy Practice as IHS shall from time to time reasonably
request. The documents to which IHS shall have access shall include, but not be
limited to, the tax returns and related work papers since inception of the
Companies and the Lithotripsy Practice; and the Companies shall make, or cause
to be made, extracts thereof as IHS and its representatives may request from
time to time to enable IHS and its representatives to investigate the affairs of
the Companies and the accuracy of the representations and warranties made in
this Agreement. The Companies shall cause their accountants to cooperate with
IHS and to disclose the results of audits relating to the Companies and the
Lithotripsy Practice to produce the working papers relating thereto. Without
limiting any of the foregoing, it is agreed that IHS will have full access to
any and all agreements between and among the previous and current equity holders
regarding their ownership of equity or the management or operation of the
Companies and the Lithotripsy Practice. The Companies will, subject to mutually
acceptable conditions and schedules, permit IHS (or its representatives) to meet
with and interview the employees and representatives of the Companies and the
Lithotripsy Practice that are responsible for the responses to, or have
information with respect to, the questions set forth on the Questionnaires
referred to in the Representation and Warranty Exhibits.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date
of this Agreement and the Closing, each Company shall, and each of the Companies
shall use its respective best efforts to cause the Lithotripsy Practice to,
maintain its respective existence and conduct its business in good faith and in
the customary and ordinary course of business consistent with past practice.
9.2 NEGATIVE COVENANTS OF THE COMPANIES. Without the prior
written approval of IHS, no Company shall (and each Company shall use its
respective best efforts to cause the Lithotripsy Practice not to) between the
date hereof and the Closing (or the earlier termination of this Agreement):
(A) (I) sell, assign, transfer or dispose of any of its
assets, except in the ordinary course of business consistent with past practice
and which does not result in a material depletion of assets;
(II) mortgage, pledge or subject to any Lien of any nature
whatsoever any of its assets, other than Permitted Liens;
(III) enter into any contract, agreement, instrument or
commitment or make or suffer any termination of any contract, agreement,
instrument or commitment, or make or suffer any modification or amendment of any
contract, agreement, instrument or commitment except, in each case, in the
ordinary course of business consistent with past practice and which will not
materially adversely affect its earnings or otherwise be material;
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(IV) except in the ordinary course of business, consistent
with past practice, fail to comply with any applicable minimum wage law,
increase the salaries or other compensation of any of its employees, consultants
or representatives, or make any increase in, or any additions to, other benefits
to which any of such employees, consultants or representatives may be entitled;
(V) discharge or satisfy any Lien or encumbrance, or
satisfy, pay or prepay any material liabilities, other than in the ordinary
course of business consistent with past practice, or fail to pay or discharge
when due any liabilities, the failure to pay or discharge of which would likely
cause any actual damage or risk of loss to it or its business or its assets;
(VI) incur any liabilities, other than trade payables and
other operating liabilities that would be reflected on the date incurred as
current liabilities on its balance sheet in accordance with GAAP, and in the
ordinary course of business consistent with past practice;
(VII) fail to use its commercially reasonable efforts
collect any accounts receivable in the ordinary course of business consistent
with past practice;
(VIII) change any of the accounting principles followed by
it or the methods of applying such principles;
(IX) cancel, modify or waive any debts or claims held by
it, other than in the ordinary course of business consistent with past practice,
or waive any rights of substantial value, whether or not in the ordinary course
of business; or
(X) issue any capital stock, or declare or pay or set
aside or reserve any amounts for payment of any dividend or other distribution
in respect of any equity interest or other securities, or redeem or repurchase
any of its capital stock or other securities, or make any payment to any
Affiliate (as such term is defined in the Representation and Warranty Exhibits)
except for payments of ordinary dividends and tax distributions to Existing
Equity Holders and fees and compensation to Affiliates in the ordinary course of
business consistent with past practice and disclosed to IHS as such; provided,
however, that IHS will not withhold its consent to any payment otherwise
prohibited hereby so long as it reasonably believes that such payment will not
result in a Stock Portion reduction at Closing in accordance with Article III
above;
(XI) fail to collect, withhold and/or pay to any proper
Governmental Authority (as such term is defined in the Representation and
Warranty Exhibits), any Taxes (as such term is defined in the Representation and
Warranty Exhibits) required by applicable law to be so collected, withheld
and/or paid, except to the extent such Taxes are being contested in good faith
by appropriate proceedings and a proper reserve therefor has been made and is
disclosed on the relevant Balance Sheet;
(XII) institute, settle or agree to settle any litigation,
action or proceeding before any Governmental Authority (as such term is defined
in the Representation and Warranty Exhibits) relating to it or its property;
(XIII) enter into any material transaction other than in
the ordinary course of business consistent with past practice; or
(XIV) agree or otherwise become committed to do any thing
described in any of clauses (i) through and including (xiii) above;
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(B) dissolve, reorganize, merge, consolidate or enter into
a share exchange with or into any other entity;
(C) make any change to its Governing Documents (as such
term is defined in the Representation and Warranty Exhibits);
(D) perform, take or fail to take any action or incur or
permit to exist any of the acts, transactions, events or occurrences of a type
which would be inconsistent with the representations, warranties and covenants
made by it pursuant to this Agreement had the same occurred prior to the date
hereof; provided however, that the foregoing shall not prohibit it from
acquiring or disposing of assets, or incurring trade payables, or entering into
contracts, in each case, to the extent not otherwise prohibited by this
Agreement;
(E) take any action that would prevent it from
consummating the transactions contemplated by this Agreement.
9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the
Closing, each Company shall (and each Company shall use its respective
reasonable best efforts to cause the Lithotripsy Practice to):
(A) maintain its assets in substantially the state of
repair, order and condition as on the date hereof, reasonable wear and tear or
loss by casualty excepted;
(B) maintain in full force and effect all Licenses (as
such term is defined in the Representation and Warranty Exhibits) currently in
effect with respect to its business;
(C) maintain in full force and effect the insurance
policies and binders currently in effect, or the replacements thereof;
(D) preserve intact its present business organization;
keep available the services of its present employees and agents; and maintain
the relations and goodwill with suppliers, employees, affiliated medical
personnel and any others having business relating to it;
(E) maintain all of its books and records in accordance
with its past practices;
(F) comply in all material respects with all provisions of
contracts, agreements, instruments and commitments to which it is a party, and
comply in all material respects with the provisions of all Governmental
Requirements applicable to its business;
(G) cause to be paid when due, all Taxes, imposed upon it
or on any of its properties or which it is required to withhold and pay over,
except to the extent such Taxes are being contested in good faith by appropriate
proceedings and a proper reserve therefore has been made and is disclosed on the
relevant Balance Sheet;
(H) promptly notify IHS in writing of the threat or
commencement against it of any claim, action, suit or proceeding, arbitration or
investigation;
(I) promptly notify IHS in writing of any act, event or
occurrence that constitutes, or that will constitute on the Closing Date, a
breach by it of any representation, warranty or covenant made pursuant to this
Agreement; and
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(J) promptly notify IHS in writing of any event involving
it which has had or may be reasonably expected to have a material adverse effect
on its business or financial condition or may involve the material loss of
relationships with any of its customers.
9.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing,
the parties shall cooperate and use their respective reasonable efforts to
obtain all consents and approvals of Governmental Authorities and all other
parties necessary for the lawful consummation of the transactions contemplated
hereby and the lawful use, occupancy and enjoyment of the business of the
Companies by Allied in accordance herewith ("REQUIRED APPROVALS").
9.5 SUPPLEMENTARY FINANCIAL INFORMATION. Within fifteen (15)
days after the end of each calendar month between the date of this Agreement and
the Closing Date, each Company shall provide to IHS unaudited financial
statements (including at a minimum, income statements, a balance sheet and a
statement of cash flows, and an accounts receivable aging list) for such month
then ended that shall present fairly the results of the operations of the
Companies, on a combined basis, at such date and for the period covered thereby,
all in accordance with GAAP (except as otherwise specifically disclosed in
schedules annexed thereto), in each case, certified as true and correct in all
material respects by each of the Representatives.
9.6 EXCLUSIVITY. Until the earlier of the Closing Date or the
termination of this Agreement pursuant to Section 13.1, neither the Company, nor
any of their respective Affiliates, shall, directly or indirectly (through any
brokers, finders or otherwise), solicit or entertain any offers or engage in any
discussions or negotiations or enter into any agreement or letter of intent
directly or indirectly with any other party in respect of the sale of any equity
in any Company or of substantially all of the assets of any Company, or in
respect of any merger, consolidation or other sale of any Company or, except as
contemplated by this Agreement, with respect to the management of the
Lithotripsy Practice or any lease to the Lithotripsy Practice (any of said
transactions being referred to herein as a "PROHIBITED TRANSACTION"). Any
Company shall promptly advise IHS of any offer or solicitation that he, she or
it receives for a Prohibited Transaction, including, without limitation, the
name of the person making such offer or solicitation and the terms of such offer
or solicitation.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of IHS to consummate the Transaction is subject
to the satisfaction, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by IHS, with any such waiver
to be effective only if in writing. Upon failure of any of the following
conditions, IHS may terminate this Agreement pursuant to and in accordance with
Article XII herein.
10.1 REPRESENTATIONS AND WARRANTIES.
(A) The representations and warranties of each Company
made pursuant to this Agreement shall be true and correct in all material
respects (except those representations and warranties that are qualified by
materiality, which shall be true and correct in all respects) at and as of the
Closing, as though such representations and warranties were made at and as of
such time.
(B) The representations and warranties of each Existing
Equity Holder made pursuant to its, his or her Representation and
Indemnification Agreement shall be true and correct in all material respects
(except those representations and warranties that are qualified by materiality,
which shall be true and correct in all respects) at and as of the Closing, as
though such representations and warranties were made at and as of such time.
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10.2 PERFORMANCE OF COVENANTS.
(A) Each of the Companies shall have performed or complied
in all material respects with their respective agreements and covenants required
by this Agreement to be performed or complied with by them prior to or at the
Closing.
(B) Each Existing Equity Holder shall have performed or
complied in all material respects with such party's respective agreements and
covenants required by this Agreement to be performed or complied with by such
party prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. An authorized officer,
manager or general partner of each Company shall have executed and delivered to
IHS a certificate dated the Closing Date, upon which IHS may rely, certifying
that the conditions contemplated by Sections 10.1 and 10.2 applicable to them
have been satisfied.
10.4 OPINIONS OF COUNSEL.
(A) The Companies shall have delivered to IHS an opinion,
dated the Closing Date, of their counsel, in form and substance to be mutually
agreed.
(B) In addition, IHS shall have received an opinion
acceptable to it from legal counsel in New York on the present ownership,
referral and reimbursement structure of the lithotripsy business conducted by
each of the Companies, and on such other matters, as IHS shall reasonably
request. The cost of such regulatory opinion shall be borne by IHS.
10.5 LEGAL MATTERS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any Governmental
Authority which prohibits or prevents the consummation of the transactions
contemplated by this Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. IHS shall have received a
certificate of an authorized officer, manager or general partner of each Company
certifying as of the Closing Date a copy of resolutions of its shareholders,
members or partners authorizing the execution and full performance of this
Agreement and the Transaction Documents and the incumbency of its authorized
representatives.
10.7 MATERIAL CHANGE. Since the date of the Balance Sheet
there shall not have been any material adverse change in the condition
(financial or otherwise) of the assets, properties or operations of any Company
or the Lithotripsy Practice, taken as a whole.
10.8 APPROVALS.
(A) The Required Approvals shall have been granted;
(B) None of the Required Approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the business of any Company or Allied or IHS (or
any of its subsidiaries or affiliates), or (ii) shall impose upon any of them
any material condition or provision or requirement with respect to its business
or the respective operation thereof that is more restrictive than the conditions
imposed upon such operation prior to Closing.
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10.9 [INTENTIONALLY OMITTED].
10.10 ENGINEERING REPORT. IHS shall have received a copy of an
engineering survey and report in form and substance reasonably satisfactory to
it from a qualified engineering or other firm of its choice concerning a full
and complete inspection of the Long Island Facility. If such report states that
a material problem exists, IHS may terminate this Agreement.
10.11 SURVEYS. IHS shall have received a standard real estate
boundary and as built survey of the Long Island Facility, prepared by a land
surveyor licensed in New York and approved by IHS that confirms the condition of
the property without Liens or exceptions other than Permitted Liens. If such
report states that a material problem exists, IHS may terminate this Agreement.
10.12 ZONING REPORT. IHS shall have received reports from
qualified zoning inspectors approved by it with respect to the compliance of the
Long Island Facility with all applicable zoning requirements. If such report
states that a material problem exists, IHS may terminate this Agreement.
10.13 TITLE INSURANCE. IHS shall have obtained, at its
expense, at normal rates, a title commitment from a reputable title insurance
company selected by IHS (the "TITLE COMPANY") for a title policy (owner's ALTA
Policy Form B, as amended 10/17/70), insuring that title to the Long Island
Facility shall be good and marketable and free and clear of all Liens and other
title objections (including any lien or future claim from materials or labor
supplied for improvement of such property), except for Permitted Liens and the
standard exceptions normally contained in the ALTA Form B Title Policy and
schedules thereto; provided, however, that at the request of IHS the applicable
Company, shall provide such affidavits to the Title Company or take such other
reasonable actions (at no expense to IHS or Allied) that would enable the Title
Company to remove any of such standard exceptions. If such title commitment
shall indicate that any Liens or other exceptions exist that are not permitted
as aforesaid, IHS may terminate this Agreement.
10.14 OPERATING AGREEMENT. The Operating Agreement shall
be in the form and substance of Exhibit A.
10.15 MANAGEMENT AGREEMENT AND LEASES. The Lithotripsy
Practice shall have entered into a Management Agreement (the "MANAGEMENT
AGREEMENT") with Allied in the form and substance of Exhibit 10.15, and shall
have entered into equipment and facility leases with Allied on terms and
conditions no less favorable to Allied than those presently governing with
respect to the leases of equipment and facilities by the Companies to the
Lithotripsy Practice, and otherwise on terms and conditions reasonably
satisfactory to the parties hereto, provided, however, that the aggregate amount
of rent payable by the Lithotripsy Practice for equipment and facility space
attributable to the Manhattan Facility, the Long Island Facility and the
Westchester Facility shall in no event be less than $3,750,000.
10.16 LIENS ON LITHOTRIPSY PRACTICE ASSETS. All security
interests held by any of the Comapnies with respect to any of the assets and
property, including receivables, of the Lithotripsy Practice, shall be
terminated.
10.17 WESTCHESTER FACILITY. The Westchester Facility shall
be operational.
10.18 EMPLOYMENT AND CONSULTING AGREEMENTS. Allied shall
have entered into Employment Agreements with Dr. McGowan in the form and
substance of Exhibit 10.18-1 (the "MCGOWAN EMPLOYMENT AGREEMENT") and with Dr.
Fruchtman in the form and substance of Exhibit 10.18-2 (the "FRUCHTMAN
EMPLOYMENT AGREEMENT", and collectively, the "EMPLOYMENT AGREEMENTS").
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10.19 NON-COMPETE AGREEMENTS. At least eighty-five (85%)
percent of the urologists that hold equity interests in any of the Companies on
the date hereof, and the Lithotripsy Practice and each Company, shall have
entered into non-competition agreements with Allied in the form and substance of
Exhibit 10.19 (the "NON-COMPETE AGREEMENTS"). Without limiting the foregoing,
each of the urologists set forth on Schedule 10.19 shall have entered into
Non-Compete Agreements.
10.20 AGREEMENTS WITH CERTAIN UROLOGISTS, RADIOLOGY
TECHNOLOGISTS AND ANESTHESIOLOGISTS. The Companies shall use their respective
reasonable best efforts to cause each radiology technologist and
anaesthesiologist that performs services for the Lithotripsy Practice, to have
entered into an agreement with respect to their provision of services to the
Lithotripsy Practice on terms and conditions reasonably satisfactory to IHS.
10.21 INVESTOR REPRESENTATION AND INDEMNIFICATION
AGREEMENTS. Each Existing Equity Holder shall have executed and delivered a
Representation and Indemnification Agreement in the form of Exhibit 10.21 (the
"REPRESENTATION AND INDEMNIFICATION AGREEMENTS"), pursuant to which it, he or
she shall make certain representations, warranties and covenants with respect to
its, his or her equity interest in the applicable Company, its, his or her
proposed investment in Allied, and with respect to certain other matters, and
pursuant to which it, he or she shall agree to indemnify Allied and IHS, subject
to the terms and conditions set forth in such Representation and Indemnification
Agreements, with respect to breaches of representations, warranties and
covenants of the Companies in which it, he or she is an equity holder.
10.22 WORKING CAPITAL. The aggregate Estimated Closing
Date Working Capital of the Companies shall be at least $525,000.
10.23 LONG-TERM LIABILITIES. The aggregate Estimated
Long-term Liabilities of the Companies shall not be greater than $1,300,000.
10.24 ESTIMATED LITHOTRIPSY PRACTICE BALANCE SHEET. The
Companies shall have delivered to IHS a certificate signed by each
Representative certifying his or her best good faith estimate of the balance
sheet of the Lithotripsy Practice as of the Closing Date (the "ESTIMATED
LITHOTRIPSY PRACTICE CLOSING DATE BALANCE SHEET"). If the working capital of the
Lithotripsy Practice as set forth on the Estimated Lithotripsy Practice Balance
Sheet shall be less than $3,000,000 (the "MINIMUM LITHOTRIPSY PRACTICE WORKING
CAPITAL"), or if there shall be any long-term liabilities set forth thereon, IHS
shall not be required to close the transactions contemplated hereby. Any working
capital in excess of the Minimum Lithotripsy Practice Working Capital may be
distributed to the Companies prior to Closing.
10.25 OTHER DOCUMENTS. The Companies shall have furnished
IHS or Allied with all other documents, certificates and other instruments
required to be furnished by them pursuant to the terms hereof.
ARTICLE XI: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANIES
The obligation of the Companies to consummate the
transactions contemplated by this Agreement is subject to the satisfaction,
prior to or at the Closing, of each of the following conditions, any one or more
of which may be waived by the applicable Representative, with any such waiver to
be effective only if in writing. Upon failure of any of the following
conditions, the applicable Representative may terminate this Agreement pursuant
to and in accordance with Article XIII herein.
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11.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of IHS made pursuant to this Agreement shall be true and correct
in all material respects (except those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) at
and as of the Closing as though such representations and warranties were made at
and as of such time.
11.2 PERFORMANCE OF COVENANTS. IHS shall have performed or
complied in all material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
11.3 DELIVERY OF CLOSING CERTIFICATE. IHS shall have delivered to
the Representatives a certificate of an officer of IHS dated the Closing Date
upon which the Companies may rely, certifying that the statements made in
Sections 11.1 and 11.2 are true, correct and complete as of the Closing Date.
11.4 OPINION OF COUNSEL.
(A) IHS shall have delivered to the Representatives an
opinion, dated the Closing Date, of its counsel, in form and substance to be
mutually agreed.
(B) In addition, the Representatives shall have received
an opinion acceptable to them from legal counsel in New York on the present
ownership, referral and reimbursement structure of the lithotripsy business
conducted by each of the Companies, and on such other matters, as the
Representatives shall reasonably request.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any Governmental
Authority which prevents the consummation of the transactions contemplated by
this Agreement shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. The Representatives shall have
received a certificate of the Secretary or other officer of IHS certifying a
copy of resolutions of the Board of Directors of IHS authorizing IHS's execution
and full performance of this Agreement and the Transaction Documents and the
incumbency of the officers of IHS.
11.7 EMPLOYMENT AGREEMENTS. Each of the Employment Agreements
shall have been executed and delivered.
11.8 RELEASE OF GUARANTIES. Each Existing Equity Holder shall have
been released from any guaranties of the Assumed Liabilities. The parties shall
use their respective commercially reasonable efforts to obtain such releases.
Notwithstanding the foregoing, if any of such releases are not obtained, IHS, in
its sole and absolute discretion, may cause the condition set forth herein to be
satisfied by electing that Allied indemnify and hold any Existing Equity Holder
harmless from and against one-hundred (100%) percent of any Losses (as such term
is hereinafter defined in Section 12.2) arising out of any guaranty by such
Existing Equity Holder of any Assumed Liability.
11.9 OPERATING AGREEMENT. The Operating Agreement shall be in the
form and substance of Exhibit A.
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11.10 MANAGEMENT AGREEMENT AND LEASES. The Lithotripsy Practice
shall have entered into the Management Agreement with Allied in the form and
substance of Exhibit 10.15, and shall have entered into equipment and facility
leases with Allied on terms and conditions no less favorable to Allied than
those presently governing with respect to the leases of equipment and facilities
by the Companies to the Lithotripsy Practice, and otherwise on terms and
conditions reasonably satisfactory to the parties hereto, provided, however,
that the aggregate amount of rent payable by the Lithotripsy Practice for
equipment and facility space attributable to the Manhattan Facility, the Long
Island Facility and the Westchester Facility shall in no event be less than
$3,750,000.
11.11 IHS NON-COMPETE/FIRST OFFER AGREEMENT. IHS shall have
entered into a Non- compete/First Offer Agreement with Allied in the form and
substance of Exhibit 11.11.
11.12 CONSENT OF EXISTING EQUITY HOLDERS. To the extent required
by each of their respective organizational agreements and charters, or otherwise
pursuant to applicable law, each Company shall have obtained the approval from
its shareholders, partners or members, as applicable, of the transactions
contemplated hereby.
11.13 OTHER DOCUMENTS. IHS shall have furnished the Companies with
all documents, certificates and other instruments required to be furnished to
them by IHS pursuant to the terms hereof.
11.14 NO DECLINE IN STOCK PRICE. The closing NYSE price per share
of IHS Stock as of the close of trading on the most recent trading day prior to
the Closing shall not be more than thirty-three (33%) percent below the NYSE
price per share of IHS Stock as of the close of trading on the date of this
Agreement (or, if the date hereof is not a trading date, then the most recent
trading day prior to the date of this Agreement).
ARTICLE XII: SURVIVAL AND INDEMNIFICATION; POST-CLOSING OBLIGATIONS
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive the Closing Date notwithstanding
any investigation at any time made by or on behalf of the other party.
12.2 INDEMNIFICATION BY THE COMPANIES.
(A) DOWNSTATE. Subject to the limitations set forth in Section
12.5 below, Downstate shall indemnify and defend IHS and Allied and each of
their respective shareholders, members, managers, officers, directors, agents
and employees, and their respective successors and assigns ("IHS/ALLIED
INDEMNITEES") and hold each of them harmless against and with respect to any and
all damage, loss, liability, deficiency, cost and expense (including, without
limitation, reasonable attorney's fees and expenses) (all of the foregoing
hereinafter collectively referred to as "LOSS") resulting from or arising out
of:
(I) any inaccuracy in, or any breach of, any representation or
warranty made or certification delivered by Downstate pursuant to this
Agreement;
(II) the breach of any covenant or agreement by Downstate made
pursuant to this Agreement;
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(III) any Downstate Excluded Liability;
(IV) any Lithotripsy Practice Prohibited Liability; or
(V) any action, suit, proceeding, demand, assessment, judgment,
settlement, cost or legal or other expense incident to any of the foregoing.
(B) METRO/LITHO. Subject to the limitations set forth in Section
12.5 below, Metro/Litho shall indemnify and defend the IHS/Allied Indemnitees
and hold each of them harmless against and with respect to any and all Loss
resulting from or arising out of:
(I) any inaccuracy in, or any breach of, any representation or
warranty made or certification delivered by Metro/Litho pursuant to this
Agreement;
(II) the breach of any covenant or agreement by Metro/Litho made
pursuant to this Agreement;
(III) any Metro/Litho Excluded Liability;
(IV) any Lithotripsy Practice Prohibited Liability; or
(V) any action, suit, proceeding, demand, assessment, judgment,
settlement, cost or legal or other expense incident to any of the foregoing.
(C) LONG ISLAND. Subject to the limitations set forth in Section
12.5 below, Long Island shall indemnify and defend the IHS/Allied Indemnitees
and hold each of them harmless against and with respect to any and all Loss
resulting from or arising out of:
(I) any inaccuracy in, or any breach of, any representation or
warranty made or certification delivered by Long Island pursuant to this
Agreement;
(II) the breach of any covenant or agreement by Long Island made
pursuant to this Agreement;
(III) any Long Island Excluded Liability;
(IV) any Lithotripsy Practice Prohibited Liability; or
(V) any action, suit, proceeding, demand, assessment, judgment,
settlement, cost or legal or other expense incident to any of the foregoing.
(D) LITHO CORP. Subject to the limitations set forth in Section
12.5 below, Litho Corp shall indemnify and defend the IHS/Allied Indemnitees and
hold each of them harmless against and with respect to any and all Loss
resulting from or arising out of:
(I) any inaccuracy in, or any breach of, any representation or
warranty made or certification delivered by Litho Corp pursuant to this
Agreement;
(II) the breach of any covenant or agreement by Litho Corp made
pursuant to this Agreement;
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(III) any Litho Corp Excluded Liability;
(IV) any Lithotripsy Practice Prohibited Liability; or
(V) any action, suit, proceeding, demand, assessment, judgment,
settlement, cost or legal or other expense incident to any of the foregoing.
12.3 INDEMNIFICATION BY IHS. IHS shall indemnify and defend each
Company and hold them and their respective members, partners, shareholders,
directors, officers and managers and their respective successors and assigns
harmless against and with respect to any and all Loss resulting from or arising
out of:
(A) any inaccuracy in, or breach of, any representation or
warranty made or certification delivered by IHS pursuant to this Agreement;
(B) the breach of any covenant or agreement by IHS made pursuant
to this Agreement; or
(C) any action, suit, proceeding, demand, assessment, judgment,
settlement, cost or legal or other expenses incident to any of the foregoing.
12.4 INDEMNIFICATION BY ALLIED. Allied shall indemnify and defend
each Company and hold them and their respective members, partners, shareholders,
directors, officers and managers and their respective successors and assigns
harmless against and with respect to any and all Loss resulting from or arising
out of the ownership and operation of the Aggregate Assets, and the assumption
and satisfaction of Aggregate Assumed Liabilities, after the Closing Date.
12.5 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(A) EXCEPTIONS TO SEVERAL LIABILITY. Except as hereinafter
provided or as otherwise expressly provided in this Agreement, each of the
parties (and each of the Existing Equity Holders, pursuant to their respective
Representation and Indemnification Agreements) shall be severally and not
jointly liable for any indemnification obligations arising out of this Article
XII.
(I) Downstate shall be jointly and severally liable with the
Downstate Existing Equity Holders (pursuant to their respective Representation
and Indemnification Agreements) for all of its indemnification obligations
hereunder and their indemnification obligations under their respective
Representation and Indemnification Agreements.
(II) Metro/Litho shall be jointly and severally liable with the
Metro/Litho Existing Equity Holders (pursuant to their respective Representation
and Indemnification Agreements) for all of its indemnification obligations
hereunder and their indemnification obligations under their respective
Representation and Indemnification Agreements.
(III) Long Island shall be jointly and severally liable with the
Long Island Existing Equity Holders (pursuant to their respective Representation
and Indemnification Agreements) for all of its indemnification obligations
hereunder and their indemnification obligations under their respective
Representation and Indemnification Agreements.
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(IV) Litho Corp shall be jointly and severally liable with the
Litho Existing Equity Holders (pursuant to their respective Representation and
Indemnification Agreements) for all of its indemnification obligations hereunder
and their indemnification obligations under their respective Representation and
Indemnification Agreements.
(V) Downstate, Metro/Litho, Long Island, Litho Corp and their
respective Existing Equity Holders (pursuant to their respective Representation
and Indemnification Agreements), shall be jointly and severally liable for all
indemnification obligations relating to representations and warranties made
pursuant to the Lithotripsy Practice Representation and Warranty Exhibit.
(B) ASSERTION OF INDEMNIFICATION CLAIMS FOR BREACHES OF
REPRESENTATIONS AND WARRANTIES. Any claim for indemnification for any Loss
arising out of any breach of any representation or warranty made or
certification delivered pursuant to this Agreement must be asserted by written
notice by no later than the fifteen (15) month anniversary of the Closing Date,
except that any claim by any IHS/Allied Indemnitee for indemnification arising
out of a breach of any representation or warranty with respect to any Tax matter
may be asserted any time prior to expiration of the applicable statute of
limitations for the assertion of the related tax claim by the applicable
Governmental Authority, including extensions for any necessary appeals.
(C) MAXIMUM LIABILITY. Subject to subsection (d) below, the
maximum aggregate liability of each of: (i) the Companies and the Existing
Equity Holders (pursuant to their Representation and Indemnification Agreements)
(considered together), or (ii) Allied, or (iii) IHS, for indemnification
pursuant to this Agreement, shall not exceed $5,000,000. Each Representation and
Indemnification Agreement provides that, subject to subsection (d) below, each
Existing Equity Holder shall not be liable for more than forty-seven and
six-tenths percent (47.6%) of his or her allocable share (based on the portion
of such Company that is owned by him or her) of any indemnification obligation
to any IHS/Allied Indemnitee for any Losses for which said Company is jointly
and severally liable in accordance with subsection (a) above.
(D) EXCEPTIONS TO MAXIMUM LIABILITY. Notwithstanding anything to
the contrary contained in subsection (c) above or elsewhere in this Agreement,
there shall be no limit on the liability for indemnification obligations of any
of the parties hereto or any of the Existing Equity Holders pursuant to this
Agreement or pursuant to their respective Representation and Indemnification
Agreements with respect to any obligation to make any payment or refund pursuant
to Article III or Article V hereof. Furthermore, notwithstanding anything to the
contrary contained in subsection (c) above or elsewhere in this Agreement, the
Companies, and the Existing Equity Holders (pursuant to their respective
Representation and Indemnification Agreements) shall, without limitation on
amount, indemnify and hold the IHS/Allied Indemnitees harmless from and against
any Loss incurred by any of them by reason of any claim of any Company, or any
Existing Equity Holder against any IHS/Allied Indemnitee, or against any other
Company or Existing Equity Holder arising out of any breach of any
representation, warranty, or covenant made, or certification delivered, by any
Company, or any Existing Equity Holder to any IHS/Allied Indemnitee, or to each
other in connection with the transactions contemplated by this Agreement, except
to the extent that any such Loss shall have been caused by IHS (whether by
action or by omission to act when a duty to act existed and including as a
result of a breach of any representation, warranty or covenant made by IHS).
Furthermore, the limitations contained in subsection (c) above shall not apply
to any cost or expense, including without limitation, reasonable legal fees and
expenses, incurred in connection with the enforcement of the indemnification
obligations.
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(E) BASKET. None of (i) the Companies, and the Existing Equity
Holders (considered together), (ii) IHS, or (iii) Allied shall be liable for
indemnification obligations pursuant to this Agreement or the Representation and
Indemnification Agreements unless and until the aggregate amount of the
indemnification liabilities against them, Allied or IHS, as the case may be,
shall exceed $10,000, in which case they, Allied or IHS, as the case may be,
shall be liable for the entire amount of such indemnification liabilities.
(F) RIGHT AND OBLIGATION TO PROCEED AGAINST AMOUNTS DUE TO THE
COMPANIES, AND THE EXISTING EQUITY HOLDERS. Each of the Companies hereby
irrevocably grants, and each of the Existing Equity Holders shall, pursuant to
their respective Representation and Indemnity Agreements, irrevocably grant to
each IHS/Allied Indemnitee the right to collect any amounts that it, he or she
may owe to such IHS/Allied Indemnitee by reason of indemnification rights under
this Agreement or any Representation and Indemnity Agreement by taking an
assignment of any amount that shall then or thereafter become due to it, him or
her by Allied. In furtherance of the foregoing, each of the Companies hereby
irrevocably authorizes and instructs Allied, and each of the Existing Equity
Holders shall, pursuant to their respective Representation and Indemnity
Agreements, irrevocably authorize and instruct Allied, to pay (out of any
amounts that shall then be due by Allied to such indemnifying party) to any
IHS/Allied Indemnitee, upon receipt of a written demand from such IHS/Allied
Indemnitee (with copies thereof delivered to the Representatives) any amount
that such IHS/Allied Indemnitee claims pursuant to the indemnification
provisions of this Agreement or any Representation and Indemnity Agreement.
Allied shall be required to make such payment to such IHS/Allied Indemnitee (to
the extent of any amounts that shall then be due to such indemnifying party by
Allied), provided, however, that if the indemnifying party so requests, Allied
shall deposit (out of any amounts that shall then be due by Allied to such
indemnifying party) in an escrow account with Crestar Bank (to be held in escrow
pending joint written delivery instructions from the indemnifying party and the
applicable IHS/Allied Indemnitee, or an order of a court of competent
jurisdiction) any amount that such IHS/Allied Indemnitee claims pursuant to the
indemnification provisions of this Agreement or any Representation and
Indemnification Agreement. If there shall be a Closing, each IHS/Allied
Indemnitee shall be required to proceed to collect any amounts that it claims
pursuant to its, his or her indemnification rights under this Agreement or any
Representation and Indemnity Agreement to the extent of any amounts that shall
then be due by Allied to the applicable indemnifying party prior to proceeding
directly against such indemnifying party.
12.6 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS.
(A) IHS/ALLIED INDEMNITEE CLAIMS. IHS shall be entitled to control
any indemnification claims and rights of Allied. IHS shall give the applicable
Representative (or, in case of a claim involving the Lithotripsy Practice, to
all of the Representatives) prompt written notice of each claim for which any
IHS/Allied Indemnitee seeks indemnification. Failure to give such prompt written
notice shall not relieve any party of its, his or her respective indemnification
obligation (each, an "INDEMNIFYING PARTY"), provided that such indemnification
obligations shall be reduced by any damages that the applicable Indemnifying
Party demonstrates that it, he or she has suffered resulting from a failure to
give prompt notice hereunder. Any Indemnifying Party shall be entitled to
participate in the defense of such claim; however, unless an applicable
Indemnifying Party acknowledges in writing that the claim is fully indemnifiable
by it, him, or her under this Agreement (without any limitations imposed
pursuant to Section 12.5 (c) above), and, if requested by IHS, posts adequate
bond or security, IHS shall be entitled to control the defense of such claim at
the cost and expense of the Indemnifying Parties. If any Indemnifying Party does
acknowledge in writing that the claim is fully indemnifiable by it, him, or her
under this Agreement (without any limitations imposed pursuant to Section
12.5(c) above), and, if requested by IHS, posts adequate bond or security, then
such Indemnifying Party (together with any other Indemnifying Party that is so
qualified) may assume
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control of the defense of any such claim, and IHS shall not settle such claim
without the consent of the Representative for such Indemnifying Party, which
consent shall not be unreasonably withheld, delayed or conditioned. Nothing
contained in this Section 12.6 shall prevent either party from assuming control
of the defense and/or settling any claim against it for which indemnification is
not sought under this Agreement.
(B) COMPANY CLAIMS. Any Company seeking indemnification from IHS
pursuant to this Agreement shall give IHS prompt written notice of each claim
for which such indemnification is sought. Failure to give such prompt written
notice shall not relieve IHS of its indemnification obligation, provided that
such indemnification obligation shall be reduced by any damages that IHS
demonstrates it has suffered resulting from a failure to give prompt notice
hereunder. IHS shall be entitled to participate in the defense of any such
claim; however, unless IHS acknowledges in writing that the claim is fully
indemnifiable by it under this Agreement (without any limitations imposed
pursuant to Section 12.5(c) above), and, if requested by such indemnified party,
posts adequate bond or security, such indemnified party shall be entitled to
control the defense of such claim at the cost and expense of IHS. If IHS does
acknowledge in writing that the claim is fully indemnifiable by it under this
Agreement (without any limitations imposed pursuant to Section 12.5(c) above),
and, if requested by the indemnified party, posts adequate bond or security,
then IHS may assume control of the defense of any such claim, and the
indemnified party shall not settle such claim without the consent of IHS, which
consent shall not be unreasonably withheld, delayed or conditioned. Nothing
contained in this Section 12.6 shall prevent either party from assuming total
control of the defense and/or settling any claim against it for which
indemnification is not sought under this Agreement.
12.7 AGREEMENT REGARDING CERTAIN UROLOGISTS. After the
Closing, the Companies shall in good faith use their reasonable best efforts to
cause Drs. Lui, Peng, Salant, Lowe and Gluck to become members of Allied,
pursuant to the terms of the Operating Agreement.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at
or prior to the time of Closing by:
(A) IHS, if any condition precedent to the obligations of IHS
under this Agreement, including without limitation, those conditions set forth
in Section 2.5(a), Section 4.1 or Article X hereof, have not been satisfied by
the date scheduled for the Closing, as the same may be extended pursuant to
Section 6.1(b), or pursuant to Section 14.1 if any material portion of the
Downstate Assets, the Long Island Assets, the Metro/Litho Assets or the Litho
Corp Assets is damaged or destroyed as a result of fire, other casualty or from
any reason whatsoever, or otherwise as expressly provided in this Agreement;
(B) any Representative, if any condition precedent to the
obligations of any party for whom it is acting as the Representative hereunder,
including without limitation those conditions set forth in Article XI hereof,
have not been satisfied by the date scheduled for the Closing, as the same may
be extended pursuant to Section 6.1(b), or otherwise as expressly provided in
this Agreement;
(C) the mutual consent of IHS and each Representative.
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13.2 EFFECT OF TERMINATION. If a party terminates this Agreement
because one of its conditions precedent has not been fulfilled, or if this
Agreement is terminated by mutual consent, this Agreement shall become null and
void without any liability of any party to the other; provided, however, that if
such termination is by reason of the breach by any party of any of its
representations, warranties or obligations under this Agreement, the other party
shall be entitled to be indemnified for any Losses incurred by it by reason
thereof in accordance with Section 12.2 or 12.3, as the case may be, hereof (and
for such purposes such Section 12.2 or 12.3, as the case may be, shall survive
the termination of this Agreement). Notwithstanding the foregoing, if at any
time on or prior to the Closing, (i) IHS shall determine that the certificate
contemplated in Section 11.3 hereof as it relates to the condition set forth at
Section 11.1 hereof cannot be delivered at Closing, or (ii) any Company shall
determine that the certificate contemplated in Section 10.3 hereof as it relates
to the condition set forth at Section 10.1(a) hereof cannot be delivered at
Closing, in either case as the result of events occurring or circumstances
arising after the date hereof, which events or circumstances have not occurred
or arisen as a result of any act or omission in violation of such party's
obligations hereunder, then the party whose condition has not been fulfilled
shall have the right to waive such condition and proceed with the Closing or
terminate this Agreement, without any liability of any party to the other.
Nothing in this Section 13.2 shall affect the right of any party to seek
specific performance of the obligations of any other parties at Closing
hereunder.
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. The Companies shall bear the risk of
all loss or damage to any of the Aggregate Assets from all causes which occur
prior to the Closing. If at any time prior to the Closing any material portion
of the Aggregate Assets is damaged or destroyed as a result of fire, other
casualty or for any reason whatsoever, the applicable Representative shall
immediately give notice thereof to IHS. IHS shall have the right, in its sole
and absolute discretion, within ten (10) days of receipt of such notice, to (1)
elect not to proceed with the Closing and terminate this Agreement, or (2)
proceed to Closing and consummate the transactions contemplated hereby and
receive any and all insurance proceeds received or receivable by the applicable
Company on account of any such casualty (and such insurance proceeds shall not
be included as current assets for purposes of determining Proposed Closing Date
Working Capital).
ARTICLE XV: MISCELLANEOUS
15.1 REPRESENTATIVES.
(A) DOWNSTATE REPRESENTATIVE. Downstate hereby designates, and
each Downstate Existing Equity Holder shall designate (pursuant to its, his or
her Representation and Indemnification Agreement) Stephen Hirsch, M.D., and
Stephen Hirsch, M.D. hereby accepts the designation as the representative of
Downstate and each Downstate Existing Equity Holder (the "DOWNSTATE
REPRESENTATIVE") to act for and on behalf of Downstate and each Downstate
Existing Equity Holder as provided in this Agreement and each applicable
Representation and Indemnification Agreement. Downstate and each Downstate
Existing Equity Holder shall be bound by all actions taken or omitted by the
Downstate Representative on behalf of any of them as provided in this Agreement
and each applicable Representation and Indemnification Agreement, and Downstate
and each Downstate Existing Equity Holder shall be deemed to have received any
notice given or payment made to the Downstate Representative in accordance with
the notice provisions of this Agreement on the date deemed given or the date
paid to the Downstate Representative, and IHS shall be entitled to rely on all
notices and consents given, and all settlements entered into on behalf of
Downstate or any Downstate Existing Equity Holder to the extent authorized
pursuant to the terms of this Agreement notwithstanding any objections made by
any Downstate Existing Equity Holder prior to, concurrently with or subsequent
to the giving of any such notice or consent or the settlement of any such
matter. The Downstate Representative may be replaced only if and when Downstate
and each
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Downstate Existing Equity Holder shall notify IHS that a new individual person
(named in such notice) has been selected by a majority of Downstate Existing
Equity Holders to be the new Downstate Representative, in which case such new
person shall thereafter be the Downstate Representative. The Downstate
Representative shall not be liable to Downstate or any Downstate Existing Equity
Holder for any costs, losses, liabilities, damages, expenses and claims imposed
upon or asserted against the Downstate Representative (including fees and
disbursements of counsel) on account of any action taken or omitted to be taken
in connection with his acceptance of or performance of his duties and
obligations under this Agreement, other than any act or omission involving gross
negligence or willful misconduct.
(B) METRO/LITHO REPRESENTATIVE. Metro/Litho hereby designates, and
each Metro/Litho Existing Equity Holder shall designate (pursuant to its, his or
her Representation and Indemnification Agreement) Bernard Fruchtman, M.D., and
Bernard Fruchtman, M.D. hereby accepts the designation as the representative of
Metro/Litho and each Metro/Litho Existing Equity Holder (the "METRO/LITHO
REPRESENTATIVE") to act for and on behalf of Metro/Litho and each Metro/Litho
Existing Equity Holder as provided in this Agreement and each applicable
Representation and Indemnification Agreement. Metro/Litho and each Metro/Litho
Existing Equity Holder shall be bound by all actions taken or omitted by the
Metro/Litho Representative on behalf of any of them as provided in this
Agreement and each applicable Representation and Indemnification Agreement, and
Metro/Litho and each Metro/Litho Existing Equity Holder shall be deemed to have
received any notice given or payment made to the Metro/Litho Representative in
accordance with the notice provisions of this Agreement on the date deemed given
or the date paid to the Metro/Litho Representative, and IHS shall be entitled to
rely on all notices and consents given, and all settlements entered into on
behalf of Metro/Litho or any Metro/Litho Existing Equity Holder to the extent
authorized pursuant to the terms of this Agreement notwithstanding any
objections made by any Metro/Litho Existing Equity Holder prior to, concurrently
with or subsequent to the giving of any such notice or consent or the settlement
of any such matter. The Metro/Litho Representative may be replaced only if and
when Metro/Litho and each Metro/Litho Existing Equity Holder shall notify IHS
that a new individual person (named in such notice) has been selected by a
majority of the Metro-Litho Existing Equity Holders be the new Metro/Litho
Representative, in which case such new person shall thereafter be the
Metro/Litho Representative. The Metro/Litho Representative shall not be liable
to Metro/Litho or any Metro/Litho Existing Equity Holder for any costs, losses,
liabilities, damages, expenses and claims imposed upon or asserted against the
Metro/Litho Representative (including fees and disbursements of counsel) on
account of any action taken or omitted to be taken in connection with his
acceptance of or performance of his duties and obligations under this Agreement,
other than any act or omission involving gross negligence or willful misconduct.
(C) LONG ISLAND REPRESENTATIVE. Long Island hereby designates, and
each Long Island Existing Equity Holder shall designate (pursuant to its, his or
her Representation and Indemnification Agreement) Barry Shepard, M.D., and Barry
Shepard, M.D. hereby accepts the designation as the representative of Long
Island and each Long Island Existing Equity Holder (the "LONG ISLAND
REPRESENTATIVE") to act for and on behalf of Long Island and each Long Island
Existing Equity Holder as provided in this Agreement and each applicable
Representation and Indemnification Agreement. Long Island and each Long Island
Existing Equity Holder shall be bound by all actions taken or omitted by the
Long Island Representative on behalf of any of them as provided in this
Agreement and each applicable Representation and Indemnification Agreement, and
Long Island and each Long Island Existing Equity Holder shall be deemed to have
received any notice given or payment made to the Long Island Representative in
accordance with the notice provisions of this Agreement on the date deemed given
or the date paid to the Long Island Representative, and IHS shall be entitled to
rely on all notices and consents given, and all settlements entered into on
behalf of Long Island or any Long Island Existing Equity Holder to the extent
authorized pursuant to the terms of this Agreement notwithstanding any
objections made by any
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Long Island Existing Equity Holder prior to, concurrently with or subsequent to
the giving of any such notice or consent or the settlement of any such matter.
The Long Island Representative may be replaced only if and when Long Island and
each Long Island Existing Equity Holder shall notify IHS that a new individual
person (named in such notice) has been selected by a majority of the Long Island
Existing Equity Holders to be the new Long Island Representative, in which case
such new person shall thereafter be the Long Island Representative. The Long
Island Representative shall not be liable to Long Island or any Long Island
Existing Equity Holder for any costs, losses, liabilities, damages, expenses and
claims imposed upon or asserted against the Long Island Representative
(including fees and disbursements of counsel) on account of any action taken or
omitted to be taken in connection with his acceptance of or performance of his
duties and obligations under this Agreement, other than any act or omission
involving gross negligence or willful misconduct.
(D) LITHO CORP REPRESENTATIVE. Litho Corp hereby designates, and
each Litho Corp Existing Equity Holder shall designate (pursuant to his
Representation and Indemnification Agreement) Andrew McGowan, M.D., and Andrew
McGowan, M.D., hereby accepts the designation as the representative of Litho
Corp and each Litho Corp Existing Equity Holder (the "LITHO CORP
REPRESENTATIVE", and together with the Downstate Representative, the Metro/Litho
Representative, and the Long Island Representative, the "REPRESENTATIVES", and
each a "REPRESENTATIVE") to act for and on behalf of Litho Corp and each Litho
Corp Existing Equity Holder (as provided in this Agreement. Litho Corp and each
Litho Corp Existing Equity Holder shall be bound by all actions taken or omitted
by the Litho Corp Representative on behalf of any of them as provided in this
Agreement, and Litho Corp and each Litho Corp Existing Equity Holder shall be
deemed to have received any notice given or payment made to the Litho Corp
Representative in accordance with the notice provisions of this Agreement on the
date deemed given or the date paid to the Litho Corp Representative, and IHS
shall be entitled to rely on all notices and consents given, and all settlements
entered into on behalf of Litho Corp or any Litho Corp Existing Equity Holder to
the extent authorized pursuant to the terms of this Agreement notwithstanding
any objections made by any Litho Corp Existing Equity Holder prior to,
concurrently with or subsequent to the giving of any such notice or consent or
the settlement of any such matter. The Litho Corp Representative may be replaced
only if and when Litho Corp and each Litho Corp Existing Equity Holder shall
notify IHS that a new individual person (named in such notice) has been selected
by a majority of the Litho Corp Existing Equity Holder to be the new Litho Corp
Representative, in which case such new person shall thereafter be the Litho Corp
Representative. The Litho Corp Representative shall not be liable to Litho Corp
or any Litho Corp Existing Equity Holder for any costs, losses, liabilities,
damages, expenses and claims imposed upon or asserted against the Litho Corp
Representative (including fees and disbursements of counsel) on account of any
action taken or omitted to be taken in connection with his acceptance of or
performance of his duties and obligations under this Agreement, other than any
act or omission involving gross negligence or willful misconduct
15.2 PERFORMANCE. In the event of a breach by any Company, on
the one hand, or IHS, on the other hand, of its respective obligations
hereunder, the non-breaching party shall have the right, in addition to any
other remedies which may be available, to obtain specific performance of the
terms of this Agreement, and the breaching party hereby waives the defense that
there may be an adequate remedy at law.
15.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures
to the benefit of each party hereto and its successors and permitted assigns. No
party may assign its, his or her respective interests under this Agreement to
any other person or entity without the prior written consent of the other
parties hereto; provided, however, that IHS may assign its rights, duties and/or
obligations hereunder to one or more subsidiaries or affiliates of IHS if IHS
shall remain responsible for its obligations hereunder, except as otherwise
provided in this Agreement.
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15.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and
the Exhibits and Schedules hereto embody the entire agreement and understanding
of the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein; provided, however that
any confidentiality agreements among the parties shall survive until the
Closing, at which time they shall terminate except to the extent provided in
this Agreement. The captions used herein are for convenience only and shall not
control or affect the meaning or construction of the provisions of this
Agreement. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same agreement.
15.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and
when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed and delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
necessary to carry out the intent and purposes of this Agreement.
15.6 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given when personally delivered to
the party or parties entitled to receive the notice or three (3) business days
after sent by certified or registered mail, postage prepaid, or on the business
day after sent by nationally recognized overnight courier, or on the same day
when faxed and a confirmation of fax transmission is received, in each case,
properly addressed to the party or parties entitled to receive such notice at
the address stated below:
<TABLE>
<S> <C>
If to Downstate or any Downstate
Existing Equity Holder,
to the Downstate Representative at: Stephen Hirsch, M.D.
176 North Village Avenue
Rockville Centre, NY 11570
with a copy to: Nixon, Hargrave, Devans & Doyle LLP
Clinton Square
Rochester, New York 14603
Attn: Lori B. Green, Esq.
Fax: (716) 263-1600
If to Metro/Litho or any Metro/Litho
Existing Equity Holder,
to the Metro/Litho Representative at: Bernard Fruchtman, M.D.
Metro/Litho L.P.
160 East 32nd Street, Suite 101
New York, NY 10016
with a copy to: Nixon, Hargrave, Devans & Doyle LLP
Clinton Square
Rochester, New York 14603
Attn: Lori B. Green, Esq.
Fax: (716) 263-1600
If to Long Island or any Long Island
Existing Equity Holder, to the Long
Island Representative at: Barry Shepard, M.D.
601 Franklin Avenue
Garden City, NY 11530
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
with a copy to: Nixon, Hargrave, Devans & Doyle LLP
Clinton Square
Rochester, New York 14603
Attn: Lori B. Green, Esq.
Fax: (716) 263-1600
If to Litho Corp or any Litho Corp
Existing Equity Holder,
to the Litho Corp Representative at: Andrew McGowan, M.D.
Metropolitan Lithotripter Associates, P.C.
160 East 32nd Street, Suite 101
New York, NY 10016
with a copy to: Nixon, Hargrave, Devans & Doyle LLP
Clinton Square
Rochester, New York 14603
Attn: Lori B. Green, Esq.
Fax: (716) 263-1600
If to IHS: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Anthony Masso, Executive
Vice-President
Attn: Elizabeth B. Kelly, Executive
Vice-President
cc: Marshall A. Elkins, General Counsel
with a copy to: Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Andrew S. Bogen
</TABLE>
15.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
15.8 RIGHTS OF PERSONS NOT PARTIES. Except as expressly provided
with respect to indemnification rights, nothing contained in this Agreement
shall be deemed to create rights in persons not parties hereto, other than the
successors and permitted assigns of the parties hereto.
15.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, disregarding any
contrary rules relating to the choice or conflict of laws.
15.10 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may not be
amended except by an instrument in writing signed by each of the parties.
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15.11 SEVERABILITY. Any provision, or distinguishable portion of
any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction only, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the parties waive any provision of
law which renders a provision hereof prohibited or unenforceable in any respect.
15.12 COSTS AND EXPENSES. Except as expressly otherwise provided
in this Agreement, each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby. The
Companies shall pay all sales, transfer, recording, stamp and like taxes payable
in connection with any of the transactions contemplated by this Agreement, and
shall timely and truthfully complete and file any filings or returns necessary
in connection therewith. The transaction costs and expenses of Allied, the
Companies and the Existing Equity Holders (including, without limitation, the
costs of preparation and implementation of (but not the costs of review thereof
by, or input from, IHS's counsel) the proxy/information statement relating to
the Transaction) shall not be reflected on the Estimated Closing Date Balance
Sheet, and shall constitute Excluded Liabilities. Notwithstanding the foregoing,
IHS shall reimburse the Existing Equity Holders (other than the Litho Corp
Existing Equity Holders) for up to $50,000 of any legal or accounting
transaction costs and expenses above those otherwise expected to be incurred in
connection with the transaction contemplated hereby that such Existing Equity
Holders reasonably demonstrate they have incurred by reason of structuring the
transaction as an asset purchase rather than as a stock purchase.
15.13 PUBLIC ANNOUNCEMENTS. Any general public announcements or
similar media publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as the parties
shall mutually determine; provided that nothing herein shall prevent either
party, upon as much prior notice as shall be possible under the circumstances to
the other, from making such written announcements as such party's counsel may
consider advisable in order to satisfy the party's legal and contractual
obligations in such regard.
15.14 ARBITRATION. Any dispute or controversy between any of the
parties hereto pertaining to the performance or interpretation of this Agreement
shall be settled by binding arbitration pursuant to the rules of the American
Arbitration Association in New York, New York. The cost of such proceeding shall
be shared equally by all parties thereto, and each such party shall bear its own
costs incurred as a result of its participation in any such arbitration.
ARTICLE XVI: CERTAIN DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
"ARBITRATING ACCOUNTANTS" shall have the meaning as set forth in Section 3.1(c).
"AGGREGATE ASSETS" shall mean the Downstate Assets, the Metro/Litho Assets, the
Long Island Assets, and the Litho Corp Assets.
"AGGREGATE ASSUMED LIABILITIES" shall mean the Downstate Assumed Liabilities,
the Metro/Litho Assumed Liabilities, the Long Island Assumed Liabilities, and
the Litho Corp Assumed Liabilities.
"AGGREGATE PERCENTAGE" shall have the meaning as set forth in Section 1.4(b)
"AGGREGATE PURCHASE PRICE" shall have the meaning as set forth in Section 1.4(b)
"AGGREGATE STOCK PORTION" shall have the meaning as set forth in Section 1.4(b)
"AGGREGATE COMPANY MEMBERSHIP INTEREST" shall have the meaning as set forth in
Section 1.4(b)
"AGREEMENT" shall have the meaning as set forth in the Introduction hereto.
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"ALLIED" shall have the meaning as set forth in the Introduction hereto.
"BALANCE SHEET" shall mean each of the Downstate Balance Sheet, the Metro-Litho
Balance Sheet, the Long Island Balance Sheet, the Litho-Corp Balance Sheet and
the Lithotripsy Practice Balance Sheet, as the context shall require.
"BROKER"shall have the meaning as set forth in Section 5.1(g).
"BUSINESS" shall have the meaning as set forth in the Introduction hereto.
"CABRINI" shall have the meaning as set forth in the Introduction hereto.
"CLOSING" shall have the meaning as set forth in Section 6.1.
"CLOSING DATE" shall have the meaning as set forth in Section 6.1.
"CLOSING DATE PRICE PER SHARE" shall have the meaning as set forth in Section
5.1(a).
"COMMISSION" shall have the meaning as ser forth in Section 5.1(b).
"COMPANY" shall have the meaning as set forth in the Introduction hereto.
"COMPANIES" shall have the meaning as set forth in the Introduction hereto.
"COMPANY MEMBERSHIP INTEREST" shall have the meaning as set forth in Section
1.4(b)
"CONTRACT" shall have the meaning as set forth in Section 7.x.7 of each
Representation and Warranty Exhibit.
"DESIGNATED CONTRACTS" shall have the meaning as set forth in Section 4.1.
"DISPOSED SHARES" shall have the meaning as ser forth in Section 5.1(d).
"DOWNSTATE ASSUMED LIABILITIES" shall have the meaning as set forth in Section
2.1(b)(i)
"DOWNSTATE CURRENT LIABILITIES" shall have the meaning as set forth in Section
2.1(b)(i)(A)
"DOWNSTATE LONG-TERM LIABILITIES" shall have the meaning as set forth in Section
2.1(b)(i)(B)
"DOWNSTATE MEMBERSHIP INTEREST" shall have the meaning as set forth in Section
1.1(b)
"DOWNSTATE PERCENTAGE" shall have the meaning as set forth in Section 1.1(b)
"DOWNSTATE" shall have the meaning as set forth in the Introduction hereto.
"DOWNSTATE ASSETS" shall have the meaning as set forth in Section 2.1.
"DOWNSTATE PURCHASE PRICE" shall have the meaning as set forth in Section
1.2(b).
"DOWNSTATE EXCLUDED ASSETS" shall have the meaning as set forth in Section 2.1.
"DOWNSTATE STOCK PORTION" shall have the meaning as set forth in Section
1.1(b)."
"DOWNSTATE REPRESENTATIVE" shall have the meaning as set forth in Section 15.1.
"DOWNSTATE CLOSING DATE BALANCE SHEET" shall have the meaning as set forth in
Section 2.5(b)(i)
"DOWNSTATE EXCLUDED LIABILITIES" shall have the meaning as set forth in Section
2.1(ii).
"DOWNSTATE REIMBURSEMENT LIABILITIES" shall have the meaning as set forth in
Section 2.1(ii).
"DOWNSTATE REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set
forth in Section 7.2.
"EMPLOYMENT AGREEMENT" shall have the meaning as set forth in Section 10.18.
"EQUIPMENT AND MANAGEMENT SERVICES" shall have the meaning as set forth in the
Introduction hereto.
"ESTIMATED CLOSING DATE BALANCE SHEET" shall have the meaning as set forth in
Section 3.1(ii).
"ESTIMATED CLOSING DATE WORKING CAPITAL" shall have the meaning as set forth in
Section 3.1(a)(i).
"ESTIMATED LONG ISLAND CLOSING DATE WORKING CAPITAL" shall have the meaning as
set forth in Section 3.3(a)(i).
"ESTIMATED LONG-TERM LIABILITIES" shall have the meaning as set forth in Section
3.1(ii)(A).
"ESTIMATED LONG ISLAND CLOSING DATE BALANCE SHEET" shall have the meaning as set
forth in Section 3.3(ii).
"ESTIMATED LITHOTRIPSY PRACTICE CLOSING DATE BALANCE SHEET" shall have the
meaning as set forth in Section 10.24.
"EXCHANGE ACT" shall have the meaning as set forth in Section 5.1(h)(iv).
"EXISTING EQUITY HOLDERS" shall have the meaning as set forth in the
Introduction hereto.
"EXECUTIVE DIRECTOR EMPLOYMENT AGREEMENT" shall have the meaning as set forth in
Section 10.18.
"FACILITY" shall have the meaning as set forth in the Introduction hereto.
"FACILITIES" shall have the meaning as set forth in the Introduction hereto.
"FINAL ADJUSTMENT DATE" shall have the meaning as set forth in Section 5.1(d).
"FINAL ADJUSTMENT DATE PRICE PER SHARE" shall have the meaning as set forth in
Section 5.1(d).
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"FRUCHTMAN EMPLOYMENT AGREEMENT" shall have the meaning as set forth in Section
10.18.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"IHS" shall have the meaning as set forth in the Introduction hereto.
"IHS/ALLIED INDEMNITEES" shall have the meaning as set forth in Section 12.2.
"IHS REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set forth in
Section 7.1.
"IHS REVIEW" shall have the meaning as set forth in Section 3.2(b)(i).
"IHS STOCK" shall have the meaning as set forth in Section 1.1(b).
"INDEMNIFYING PARTY" shall have the meaning as set forth in Section 12.6(a).
"IDENTIFIED UROLOGISTS" shall have the meaning as set forth in Section 9.7.
"INTEREST PERIOD" shall have the meaning as set forth in Section 5.1(e).
"LIABILITY(IES)" shall mean any claims, lawsuits, liabilities, obligations or
debts of any kind or nature whatsoever (regardless of whether the same would
constitute a liability to be set forth on a balance sheet in accordance with
GAAP (as such term is defined in this Section XVI) whether absolute, accrued,
due, direct or indirect, contingent or liquidated, matured or unmatured, joint
or several, whether or not for a sum certain, whether for the payment of money
or for the performance or observance of any obligation or condition.
"LIEN(S)" shall mean any liens, claims, security interests, mortgages, pledges,
charges, easements, rights of set off, restraints on transfer, restrictions on
use, options, or encumbrances of any kind or nature whatsoever.
"LITHO CORP" shall have the meaning as set forth in the Introduction hereto.
"LITHO CORP ASSETS" shall have the meaning as set forth in Section 2.4(a).
"LITHO CORP ASSUMED LIABILITIES" shall have the meaning as set forth in Section
2.4(b)(i).
"LITHO CORP CURRENT LIABILITIES" shall have the meaning as ser forth in Section
2.4(A).
"LITHO CORP EXCLUDED ASSETS" shall have the meaning as set forth in Section
2.4(a).
"LITHO CORP LONG-TERM LIABILITIES" shall have the meaning as set forth in
Section 2.4(B).
"LITHO CORP EXCLUDED LIABILITIES" shall have the meaning as set forth in Section
2.4(b)(ii).
"LITHO CORP PURCHASE PRICE" shall have the meaning as set forth in Section
1.4(b).
"LITHO CORP STOCK PORTION" shall have the meaning as set forth in Section
1.4(b).
"LITHO CORP MEMBERSHIP INTEREST" shall have the meaning as set forth in Section
1.4(b).
"LITHO CORP PERCENTAGE" shall have the meaning as set forth in Section 1.4(b).
"LITHO CORP PERCENTAGE" shall have the meaning as set forth in Section 1.4(b).
"LITHO CORP REIMBURSEMENT LIABILITIES" shall have the meaning as set forth in
Section 2.4(a)(i).
"LITHO CORP REPRESENTATIVE" shall have the meaning as set forth in Section
15.1(d).
"LITHO CORP REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set
forth in Section 7.5
"LITHO CORP ASSETS" shall have the meaning as set forth in Section 2.4(a).
"LITHOTRIPSY PRACTICE ASSETS" shall have the meaning as set forth in Section
2.5(i).
"LITHOTRIPSY PRACTICE EXCLUDED ASSETS" shall have the meaning as set forth in
Section 2.5(a).
"LITHOTRIPSY PRACTICE" shall have the meaning as set forth in the Introduction
hereto.
"LITHOTRIPSY PRACTICE REIMBURSEMENT LIABILITIES" shall have the meaning as set
forth in Section 2.4(i).
"LITHOTRIPSY PRACTICE REPRESENTATION AND WARRANTY EXHIBIT" shall have the
meaning as set forth in Section 7.6.
"LITHOTRIPSY PRACTICE PERMITTED LIABILITIES" shall have the meaning as set forth
in Section 2.5(ii).
"LITHOTRIPSY PRACTICE CURRENT LIABILITIES" shall have the meaning as set forth
in Section 2.5(A).
"LONG ISLAND" shall have the meaning as set forth in the Introduction hereto.
"LONG ISLAND LONG-TERM LIABILITIES" shall have the meaning as set forth in
Section 2.3(B).
"LONG ISLAND REPRESENTATIVE" shall have the meaning as set forth in Section
15.1(c).
"LONG ISLAND REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set
forth in Section 7.4
"LONG ISLAND ASSETS" shall have the meaning as set forth in Section 2.3(a).
"LONG ISLAND ASSUMED LIABILITIES" shall have the meaning as set forth in Section
2.3(i).
"LONG ISLAND CURRENT LIABILITIES" shall have the meaning as set forth in Section
2.3(A).
"LONG ISLAND EXCLUDED ASSETS" shall have the meaning as set forth in Section
2.3(a).
"LONG ISLAND EXCLUDED LIABILITIES" shall have the meaning as set forth in
Section 2.3(ii).
"LONG ISLAND FACILITY" shall have the meaning as set forth in the Introduction
hereto.
"LONG ISLAND MANAGEMENT SERVICES" shall have the meaning as set forth in the
Introduction hereto.
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"LONG ISLAND MEMBERSHIP INTEREST" shall have the meaning as set forth in Section
1.3(b).
"LONG ISLAND MOBILE LITHOTRIPTER" shall have the meaning as set forth in the
Introduction hereto.
"LONG ISLAND PERCENTAGE" shall have the meaning as set forth in Section 1.3(b).
"LONG ISLAND PURCHASE PRICE" shall have the meaning as set forth in Section
1.3(b).
"LONG ISLAND REIMBURSEMENT LIABILITIES" shall have the meaning as set forth in
Section 2.3(ii).
"LONG ISLAND STOCK PORTION" shall have the meaning as set forth in Section
1.3(b).
"LOSS" shall have the meaning as set forth in Section 12.2(a).
"MANHATTAN FACILITY" shall have the meaning as set forth in the Introduction
hereto.
"MANHATTAN MANAGEMENT SERVICES" shall have the meaning as set forth in the
Introduction hereto.
"MANAGEMENT AGREEMENT" shall have the meaning as set forth in Section 10.15.
"MAXIMUM LONG-TERM LIABILITIES" shall have the meaning as set forth in Section
3.1(ii)(A).
"MCGOWAN EMPLOYMENT AGREEMENT" shall have the meaning as set forth in Section
10.18.
"METRO/LITHO" shall have the meaning as set forth in the Introduction hereto.
"METRO/LITHO ASSETS" shall have the meaning as set forth in Section 2.2.
"METRO/LITHO ASSUMED LIABILITIES" shall have the meaning as set forth in Section
2.2(i).
"METRO/LITHO CURRENT LIABILITIES" shall have the meaning as set forth in Section
2.2(b)(i)(A).
"METRO/LITHO EXCLUDED ASSETS" shall have the meaning as set forth in Section
2.2(a).
"METRO/LITHO EXCLUDED LIABILITIES" shall have the meaning as set forth in
Section 2.2(ii).
"METRO/LITHO LONG-TERM LIABILITIES" shall have the meaning as set forth in
Section 2.2(b)(i)(B)
"METRO/LITHO REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set
forth in Section 7.3
"METRO/LITHO REPRESENTATIVE" shall have the meaning as set forth in Section
15.1(b).
"METRO/LITHO REIMBURSEMENT LIABILITIES" shall have the meaning as set forth in
Section 2.2(ii).
"METRO/LITHO STOCK PORTION" shall have the meaning as set forth in Section
1.2(b).
"MINIMUM DOWNSTATE WORKING CAPITAL" shall have the meaning as set forth in
Section 3.1(A).
"MINIMUM LITHOTRIPSY PRACTICE WORKING CAPITAL" shall have the meaning as set
forth in Section 10.24.
"MINIMUM WORKING CAPITAL" shall have the meaning as set forth in Section
3.1(i)(A).
"NEW WESTCHESTER FACILITY" shall have the meaning as set forth in the
Introduction hereto.
"NON-COMPETE AGREEMENTS" shall have the meaning as set forth in Section 10.19.
"NON-UROLOGIST INVESTORS" shall have the meaning as set forth in the
Introduction hereto.
"OPERATING AGREEMENT" shall have the meaning as set forth in the Introduction
hereto.
"PARTICIPANTS" shall have the meaning as set forth in Section 5.1(f).
"PERCENTAGE" shall have the meaning as set forth in Section 1.4(b).
"PERMITTED LIEN(S)" shall mean with respect to any Company or the Lithotripsy
Practice, as the case may be:
(A) each lien, if any, described on Schedule 6.x.6(c) to the
Representation and Warranty Exhibit of such Company or the Lithotripsy Practice,
as the case may be;
(B) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days, that in the aggregate do not
exceed $25,000;
(C) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business, provided that each such deposit
shall be included in the Assets of such Company or the Lithotripsy Practice, as
the case may be, and shall not exceed $15,000 in any one case, or $75,000 in the
aggregate; and
(D) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation.
"PROHIBITED TRANSACTION" shall have the meaning as set forth in Section 9.6.
"PROPOSED WORKING CAPITAL" shall have the meaning as set forth in Section 3.1(b)
(i)(A).
42
<PAGE>
"PROPOSED CLOSING DATE BALANCE SHEET" shall have the meaning as set forth in
Section 3.1(b)(i).
"PROPOSED LONG-TERM LIABILITIES" shall have the meaning as set forth in Section
3.1(c).
"PURCHASE PRICE" shall have the meaning as set forth in Section 1.4(b).
"REGISTRATION DATE PRICE PER SHARE" shall have the meaning as set forth in
Section 5.1(c).
"REGISTRATION DEADLINE DATE" shall have the meaning as set forth in Section
5.1(e).
"REGISTRATION STATEMENT" shall have the meaning as set forth in Section 5.1(b).
"REPRESENTATION AND WARRANTY EXHIBIT" shall have the meaning as set forth in
Section 7.6.
"REPRESENTATION AN WARRANTY EXHIBITS" shall have the meaning as set forth in
Section 7.6.
"REPRESENTATION AND INDEMNIFICATION AGREEMENTS" shall have the meaning as set
forth in Section 10.21.
"REQUIRED APPROVALS" shall have the meaning as set forth in Section 9.4.
"SECURITIES ACT" shall have the meaning as set forth in Section 5.1(b).
"SERVICES" shall have the meaning as set forth in the Introduction hereto.
"TARGET AMOUNT" shall have the meaning as set forth in Section 3.1(a)(iii).
"TAXES" shall mean any and all federal, state, local and foreign net or gross
income, profits, property, sales, use, excise, license, franchise, severance,
stamp, occupation, premium, windfall profits tax, alternative and add-on minimum
taxes, customs duty, added value, payroll, employer's income, withholding and
social security taxes, excise or other taxes, and any penalties, interest,
governmental charges, assessments and deficiencies related thereto.
"TITLE COMPANY" shall have the meaning as set forth in Section 10.13.
"UROLOGIST INVESTORS" shall have the meaning as set forth in the Introduction
hereto.
"WESTCHESTER MANAGEMENT SERVICES" shall have the meaning as set forth in the
Introduction hereto.
[SIGNATURES ON THE FOLLOWING PAGE]
43
<PAGE>
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT made this 4th day of May, 1998, by and among Allied
Urological Services, LLC, a limited liability company formed under the laws of
Delaware ("Allied"), Integrated Health Services, Inc., a Delaware corporation
("IHS"), Downstate Lithotripter LLC, a limited liability company formed under
the laws of New York ("Downstate"), Metro/Litho L.P., a limited partnership
formed under the laws of New York ("Metro/Litho"), Long Island Lithotripter,
LLC, a limited liability company formed under the laws of New York ("Long
Island") and Lithotripter Corporation, a New York corporation ("Litho Corp", and
together with Downstate, Metro/Litho and Long Island, the "Companies").
WHEREAS, Allied, IHS and the Companies have entered into a Membership
Interest Purchase Agreement, dated as of April 7, 1998 (the "Purchase
Agreement") and desire to amend Section 5.1(d) thereof.
WHEREAS, capitalized terms used in this Amendment Agreement and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Purchase Agreement.
NOW, THEREFORE, it is agreed:
1. Section 5.1(d) of the Purchase Agreement is hereby amended in its
entirety to read as follows:
"(D) POST-REGISTRATION DATE SHARE ADJUSTMENT. If as of the close of
trading on the NYSE on the date which is the fifteenth (15th)
consecutive trading day from (and including) the Registration Date (the
"FINAL ADJUSTMENT DATE"), the difference between (i) the average sale
price per share of all IHS Stock theretofore issued pursuant to this
Agreement and sold during the period from the Registration Date to the
Final Adjustment Date under the Registration Statement in bona fide
sales to third parties that are not affiliates and otherwise in
accordance with the provisions of this Article V (such shares are the
"DISPOSED SHARES"), and (ii) the average per share cost of the
brokerage commissions and expenses paid by them to the Broker (defined
below) in connection with such sales of the Disposed Shares (the
difference between (i) and (ii) is the "FINAL ADJUSTMENT DATE PRICE PER
SHARE") is below the lower of (x) the Closing Date Price Per Share, and
(y) the Registration Date Price Per Share, then IHS promptly shall
issue to the Companies (in the proportions set forth in writing by at
least seventy-five (75%) percent of the Representatives pursuant to
Section 3.3 (b) hereof) an additional number of shares of IHS Stock as
shall be equal in value to the product of (A) the difference between
(1) the lower of (p) the Closing Date Price Per Share, and (q) the
Registration Date Price Per Share, and (2) the Final Adjustment Date
Price Per Share, multiplied by (B) the number of Disposed Shares
<PAGE>
(such product of (A) multiplied by (B) is the "FINAL ADJUSTMENT
AMOUNT") . IHS will use its best efforts to cause to be prepared, filed
and declared effective by the Commission within sixty (60) days
following the Final Adjustment Date, a registration statement for the
registration under the Securities Act of the IHS Stock issued pursuant
to this Section 5.1(d), and IHS shall maintain the effectiveness of
such registration statement for a period of one (1) year following the
date on which such registration statement becomes effective (the
"SECOND EFFECTIVE DATE"), or until the Companies (and their respective
partners, members or shareholders, as distributees of such IHS Stock),
shall not own any of the IHS Stock issued pursuant to this Section
5.1(d), whichever shall occur first. The number of shares of IHS Stock
issuable pursuant to this Section 5.1(d) shall be calculated based upon
a price per share of such stock equal to the average closing NYSE price
of such stock for the thirty (30) trading day period immediately
preceding the Final Adjustment Date; provided, however, that (x) if the
number of shares of IHS Stock issued pursuant to this Section 5.1(d) is
less than the number of shares of IHS Stock that would have been
issuable had such IHS stock been valued based upon a price per share of
such stock equal to the average closing NYSE price of such stock for
the thirty (30) trading day period immediately preceding the date which
is two trading days before the Second Effective Date, then IHS promptly
shall deliver to the Companies (in the proportions set forth in writing
by at least seventy-five (75%) percent of the Representatives pursuant
to Section 3.3 (b) hereof) an additional number of shares of IHS Stock
as shall be equal to the amount of such difference, and such additional
shares shall be included in the aforementioned registration statement
by means of a pre-effective amendment thereto, and (y) if the number of
shares of IHS Stock issued pursuant to this Section 5.1(d) exceeds the
number of shares of IHS Stock that would have been issuable had such
IHS stock been valued based upon a price per share of such stock equal
to the average closing NYSE price of such stock for the thirty (30)
trading day period immediately preceding the date which is two trading
days before the Second Effective Date, then the Companies promptly
shall return to IHS that number of shares of IHS Stock as shall be
equal to such excess. Notwithstanding anything to the contrary set
forth in this Section 5.1(d), IHS shall have the right, exercisable in
its sole discretion, to pay to the Companies (in the proportions set
forth in writing by at least seventy-five (75%) percent of the
Representatives pursuant to Section 3.3 (b) hereof), in lieu of IHS
Stock otherwise issuable pursuant to this Section 5.1(d), cash in
amount equal to the Final Adjustment Amount."
2. Except as expressly amended hereby, all of the terms and conditions
of the Purchase Agreement shall remain in full force and effect.
3. This Amendment Agreement may be executed in counterparts, each of
which being deemed an original and both of which, when taken together, being
deemed one and the same instrument.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Amendment Agreement as of the day and
year first above written.
INTEGRATED HEALTH SERVICES, INC.
By:
-----------------------------
Title:
--------------------------
LONG ISLAND LITHOTRIPTER, LLC ALLIED UROLOGICAL SERVICES, LLC
By: By:
-------------------------------- -----------------------------
Title: Title:
------------------------------ --------------------------
LITHOTRIPTER CORPORATION
By: [SIG]
--------------------------------
Title:
-----------------------------
DOWNSTATE LITHOTRIPTER LLC
By: [SIG]
--------------------------------
Title:
-----------------------------
METRO/LITHO L.P.
By: [SIG]
--------------------------------
Title:
-----------------------------
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Amendment Agreement as of the day and
year first above written.
INTEGRATED HEALTH SERVICES, INC.
By:
-----------------------------
Title:
--------------------------
LONG ISLAND LITHOTRIPTER, LLC ALLIED UROLOGICAL SERVICES, LLC
By: By:
-------------------------------- -----------------------------
Title: Title:
------------------------------ --------------------------
LITHOTRIPTER CORPORATION
By: [SIG]
--------------------------------
Title:
-----------------------------
DOWNSTATE LITHOTRIPTER LLC
By: [SIG]
--------------------------------
Title:
-----------------------------
METRO/LITHO L.P.
By: [SIG]
--------------------------------
Title:
-----------------------------
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Agreement as of the day and year
first above written.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ ELIZABETH B. KELLY
---------------------------------
Title: EVP
LONG ISLAND LITHOTRIPTER, LLC
By:
---------------------------------- ALLIED UROLOGICAL SERVICES, LLC
Title:
-------------------------------
By: /s/ ELIZABETH B. KELLY
---------------------------------
Title: EVP
LITHOTRIPTER CORPORATION
By:
----------------------------------
Title:
-------------------------------
DOWNSTATE LITHOTRIPTER LLC
By:
----------------------------------
Title:
-------------------------------
METRO/LITHO L.P.
By:
----------------------------------
Title:
-------------------------------
5
<PAGE>
AMENDMENT TO
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
AGREEMENT, made this 29th day of April, 1998, among Regional Medical
Supply, Inc. ("Seller"), Keith Thomas and Laurie Nuckols (each a "Shareholder"
and collectively, the "Shareholders") and Integrated Health Services at
Jefferson Hospital, Inc. ("Buyer").
WHEREAS, Buyer, Seller and the Shareholders entered into that certain
Agreement for Sale and Purchase of Assets and Restrictive Covenants, dated as of
March 20, 1998 (the "Purchase Agreement"); and
WHEREAS, the parties wish to amend certain terms of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound, the parties agree as
follows:
1. Section 8 of the Purchase Agreement is amended to read that the
Effective Date for the transactions consummated under the Purchase Agreement
shall be April 8, 1998.
2. Except as expressly modified hereby, all of the terms and
conditions of the Purchase Agreement shall remain in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
REGIONAL MEDICAL
SUPPLY, INC.
By: Keith Thomas
---------------------------
Name: Keith Thomas
Its: President
SHAREHOLDERS:
Keith Thomas
------------------------------
Keith Thomas
Laurie Nuckols
------------------------------
Laurie Nuckols
BUYER:
INTEGRATED HEALTH
SERVICES AT JEFFERSON
HOSPITAL, INC.
By: Mark A. Kovinsky
---------------------------
Name: Mark A. Kovinsky
Its: SVP-Corporate Development
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
REGIONAL MEDICAL
SUPPLY, INC.
By:
---------------------------
Name:
Its:
SHAREHOLDERS:
------------------------------
Keith Thomas
------------------------------
Laurie Nuckols
BUYER:
INTEGRATED HEALTH
SERVICES AT JEFFERSON
HOSPITAL, INC.
By: Mark A. Kovinsky
---------------------------
Name: Mark A. Kovinsky
Its: SVP-Corporate Development
EXHIBIT 2.7
-----------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 27, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
INTEGRATED HEALTH SERVICES AT HAWTHORNE NURSING
CENTER, INC.
AND
PREMIERE ASSOCIATES, INC.
AND ITS
SHAREHOLDERS
-----------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: MERGER...............................................................3
1.1 Merger...............................................................3
1.2 Merger Time..........................................................3
1.3 Payment of Merger Consideration......................................4
1.4 Surviving Corporation................................................4
ARTICLE II: CONVERSION...........................................................5
2.1 Consideration........................................................5
2.2 Certain Adjustments to the Base Amount...............................8
2.3 Assets and Liabilities..............................................17
2.4 Designated Contracts................................................18
2.5 Escrow Indemnification..............................................19
ARTICLE III: IHS STOCK..........................................................21
3.1 IHS Stock..........................................................21
ARTICLE IV: THE CLOSING........................................................27
4.1 Time and Place of Closing..........................................27
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SHAREHOLDERS AND COMPANY...................................................27
5.1 Organization and Standing of the Company; Subsidiaries.............27
5.2 Authority..........................................................28
5.3 Binding Effect.....................................................28
5.4 Absence of Conflicting Agreements..................................28
5.5 Consents...........................................................28
5.6 Schedule of Assets and Properties..................................29
5.7 Contracts..........................................................31
5.8 Financial Statements...............................................33
5.9 Material Changes...................................................34
5.10 Licenses; Permits; Certificates of Need............................34
5.11 The Facilities.....................................................35
5.12 Legal Proceedings..................................................37
5.13 Employees..........................................................37
5.14 Collective Bargaining, Labor Contracts, Employment Practices, etc..38
5.15 ERISA..............................................................38
5.16 Questionnaire......................................................38
5.17 Insurance and Surety Agreements....................................38
5.18 Relationships......................................................39
5.19 Assets Comprising the Business.....................................39
5.20 Absence of Certain Events..........................................39
5.21 Compliance with Laws...............................................40
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
5.22 Taxes..............................................................41
5.23 Encumbrances Created by this Agreement.............................42
5.24 Questionable Payments..............................................42
5.25 Reimbursement Matters..............................................42
5.26 Capital Stock......................................................43
5.27 Finders............................................................44
5.28 Shareholder Untrue Statement.......................................44
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF THE MINORITY
SHAREHOLDERS ..........................................................44
6.1 Authority..........................................................44
6.2 Binding Effect.....................................................44
6.3 Absence of Conflicting Agreements..................................45
6.4 Consents...........................................................45
6.5 Capital Stock......................................................45
6.6 Untrue Statements..................................................45
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER...........................45
7.1 Organization and Standing..........................................45
7.2 Power and Authority................................................46
7.3 Binding Agreement..................................................46
7.4 SEC Documents......................................................46
7.5 Absence of Conflicting Agreements..................................46
7.6 Capital Stock......................................................46
7.7 Material Changes...................................................46
7.8 No Untrue Statements...............................................47
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY...................47
8.1 Access to Information and Records before Closing...................47
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING...........................47
9.1 Conduct of Business Pending Closing................................47
9.2 Negative Covenants of the Company..................................48
9.3 Affirmative Covenants..............................................49
9.4 Pursuit of Consents and Approvals..................................50
9.5 Pursuit of Nondisturbance Agreements and Estoppel Certificates.....50
9.6 Supplementary Financial Information................................50
9.7 Exclusivity........................................................51
9.8 Spin-offs..........................................................51
9.9 Certain Bonuses....................................................51
9.10 Special Counsel.....................................................51
9.11 Acquisition of Christopher Manor of St. Petersburg, Inc.............52
9.12 Updating............................................................52
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.........................52
10.1 Representations and Warranties......................................52
10.2 Performance of Covenants............................................52
10.3 Delivery of Closing Certificate.....................................52
10.4 Opinions of Counsel.................................................52
10.5 Legal Matters.......................................................53
10.6 Authorization Documents.............................................53
10.7 Material Change.....................................................53
10.8 Required Approvals..................................................53
10.9 Hart-Scott Rodino Act...............................................53
10.10 Surveys.............................................................53
10.11 Termite Inspections.................................................54
10.12 Zoning Report.......................................................54
10.14 Non-competition Agreements..........................................55
10.15 Cost and Expenses...................................................55
10.16 Consents............................................................55
10.17 Closing Date Balance Sheet..........................................55
10.18 Resignation of Company Boards of Directors and Officers.............55
10.19 Estimated Closing Date Long Term Liabilities;
Negative Working Capital.........................................55
10.20 Termination of Angell Options.......................................56
10.21 Closing of Magnolia/Medi-Serve Merger Agreement.....................56
10.22 Woodruff Facility...................................................56
10.23 Shareholder Settlements.............................................56
10.24 Spin-offs...........................................................56
10.25 Escrow Agreements...................................................56
10.26 IHS Stock Price.....................................................56
10.27 Principal Shareholders' Loans.......................................56
10.28 Opinion of Special Counsel..........................................56
10.29 Termination of Relationship with Manatee............................56
10.30 Christopher of St. Petersburg, Inc..................................57
10.31 Articles of Merger..................................................57
10.32 Other Documents.....................................................57
ARTICLE XI: CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS..................57
11.1 Representations and Warranties......................................58
11.2 Performance of Covenants............................................58
11.3 Delivery of Closing Certificate.....................................58
11.4 Opinion of Counsel..................................................58
11.5 Legal Matters.......................................................58
11.6 Authorization Documents.............................................58
11.7 Hart-Scott Rodino Act...............................................58
11.8 Closing of Magnolia/Medi-Serve Stock Purchase Agreement.............58
11.9 Escrow Agreements...................................................58
11.10 Termination of Guaranties...........................................58
11.11 IHS Stock Price.....................................................59
11.12 Other Documents.....................................................59
(iii)
<PAGE>
ARTICLE XII: SURVIVAL AND INDEMNIFICATION......................................59
12.1 Survival of Representations and Warranties..........................59
12.2 Indemnification by Shareholders.....................................59
12.3 Indemnification by Buyer............................................60
12.4 Assertion of Claims.................................................60
12.5 Control of Defense of Indemnificable Claims.........................61
12.7 WARN ACT LIABILITY..................................................62
12.8 CERTAIN WAIVERS.....................................................63
12.9 CERTAIN ASSISTANCE..................................................63
ARTICLE XIII: TERMINATION.......................................................63
13.1 Termination.........................................................63
13.2 Effect of Termination...............................................64
ARTICLE XIV: CASUALTY, RISK OF LOSS.............................................64
14.1 Casualty, Risk of Loss..............................................64
ARTICLE XV: MISCELLANEOUS......................................................64
15.1 Performance.........................................................64
15.2 Benefit and Assignment..............................................64
15.3 Effect and Construction of this Agreement...........................65
15.4 Cooperation - Further Assistance....................................65
15.5 Notices.............................................................65
15.6 Waiver, Discharge, Etc..............................................66
15.7 Rights of Persons Not Parties.......................................66
15.8 Governing Law.......................................................66
15.9 Amendments, Supplements, Etc........................................66
15.10 Severability........................................................66
15.11 Joint and Several...................................................67
15.12 Records.............................................................67
15.13 Late Delivery of Exhibit 2.2(a)(vi)(E)..............................67
</TABLE>
(iv)
<PAGE>
SCHEDULES & EXHIBITS
--------------------
<TABLE>
<S> <C> <C>
Schedule 2.1(c)(i) - Consideration
Schedule 5.1(a) - Organization and Standing of the Company; Subsidiaries
Schedule 5.1(b) - Organization and Standing of the Company; Subsidiaries
Schedule 5.5 - Consents
Schedule 5.6 - Schedule of Assets and Properties
Schedule 5.7(b) - Contracts
Schedule 5.7(b)(i) - Contracts
Schedule 5.7(c) - Contracts
Schedule 5.8(a)(i) - Financial Statements
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits, Certificates of Need
Schedule 5.11(b) - Title, Condition to Personal Property
Schedule 5.11(c) - Title, Condition to Personal Property
Schedule 5.12 - Legal Proceedings
Schedule 5.14 - Collective Bargaining, Labor, Contracts, Employment Practices, etc.
Schedule 5.15 - ERISA
Schedule 5.17 - Insurance and Surety Agreements
Schedule 5.18 - Relationships
Schedule 5.20 - Absence of Certain Events
Schedule 5.21 - Compliance with Laws
Schedule 5.22 - Taxes
Schedule 5.25 - Reimbursement Matters
Schedule 5.26 - Capital Stock
Schedule 6.4 - Consents
Schedule 7.7 - Material Changes
Exhibit 1.1 - Merger
Exhibit 2.2(e) - Working Capital
Exhibit 2.5(a)(i) - Escrow Agreement
Exhibit 2.5(a)(ii) - Manatee Escrow Agreement
Exhibit 5.16 - Questionnaire
Exhibit 10.4 - Opinions of Counsel
Exhibit 10.14-A - Non-competition Agreements
Exhibit 10.14-B - Non-Solicitation Agreements
Exhibit 10.28 - Opinion of Special Counsel
Exhibit 11.4 - Opinion of Counsel
</TABLE>
(v)
<PAGE>
--------------------------
AGREEMENT AND PLAN OF MERGER
--------------------------
This Agreement and Plan of Merger (this "AGREEMENT") is made as of the 27th day
of February, 1998, among INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation ("BUYER"), INTEGRATED HEALTH SERVICES AT HAWTHORNE NURSING CENTER,
INC., a North Carolina corporation ("NEWCO"), and PREMIERE ASSOCIATES, INC., a
North Carolina corporation ("PREMIERE", or the "COMPANY"), W. STEWART SWAIN, an
individual with an address at 115 Fieldwood Drive, Advance, North Carolina 27006
("SWAIN") and L.P. HERZOG , an individual with an address at 1949 Dupont Court,
Deltona, Florida 32723 ("HERZOG", and together with Swain, the "PRINCIPAL
SHAREHOLDERS"), and Jewell Austin, an individual with an address at 2928 Winding
Way, Lilbum, Georgia 30247 ("AUSTIN"), Troy Curry, an individual with an address
at 1045 Wilderness Run Drive, Yadkinville, NC 27055 ("CURRY"), Bruce W. Covell,
Jr., ("COVELL") an individual with an address at 66 55 S.W. 7th Street, Margate,
FL 33068 ("COVELL"), and M. Rebecca Muenchow, an individual with an address at
656 Lantern Ridge Drive, Winston-Salem, NC 27104 ("MUENCHOW"), and together with
Austin, Curry and Covell the "MINORITY SHAREHOLDERS", and together with the
Principal Shareholders, the "SHAREHOLDERS". The Shareholders and the Company are
sometimes herein referred to collectively as the "GROUP", and each individually
as a "GROUP PARTICIPANT" or "GROUP MEMBER".
PREMISES
WHEREAS, the Principal Shareholders are the owners of all the issued
and outstanding shares of Voting Common Stock (the "SERIES A PREMIERE SHARES")
of Premiere, a corporation that, through its subsidiaries (the "SUBSIDIARIES"),
is the owner in fee simple in the State of Florida of 1 skilled nursing facility
(the "PREMIERE OWNED FACILITY"), the operator in Georgia and Florida of 27
skilled nursing facilities (all of which are leased by it) (the "PREMIERE
OPERATED FACILITIES") and the manager of 18 skilled nursing facilities in the
States of South Carolina, Georgia, and Florida, including all of the Magnolia
Facilities (as hereinafter defined) (the "PREMIERE MANAGED FACILITIES", and
together with the Premiere Owned Facility, and the Premiere Operated Facilities
the "FACILITIES"); and
WHEREAS, the Minority Shareholders are employees of Premiere and the
owners of all the issued and outstanding shares of Non-Voting Common Stock of
Premiere (the "SERIES B PREMIERE SHARES", and together with the Series A
Premiere Shares, the Series C Premiere Shares (as hereinafter defined) and the
Series D Premiere Shares (as hereinafter defined), the "PREMIERE SHARES" or the
"SUBJECT SHARES"); and
<PAGE>
WHEREAS, concurrently herewith, Buyer is entering into an Agreement and Plan of
Merger (the "MAGNOLIA/MEDI-SERVE MERGER AGREEMENT") with The Magnolia Group,
Inc. ("MAGNOLIA"), a South Carolina corporation that, through its subsidiaries,
is the operator in South Carolina of 12 skilled nursing facilities (all of which
are leased by it) (the "MAGNOLIA FACILITIES"), Medi-Serve, Inc., a South
Carolina corporation that provides pharmaceutical and Medicare Part B services
("MEDI-SERVE"), and Terry Cash (the "MAGNOLIA SHAREHOLDER"), an individual with
an address at 620 Henderson Road, Chesnee, SC 29323, and the owner of all of the
issued and outstanding shares of capital stock (the "MAGNOLIA SHARES") of
Magnolia and of Medi-serve, Inc. (the "MEDI-SERVE SHARES"), and the Magnolia
Shareholder is unwilling to sell the Magnolia Shares to Buyer unless Buyer also
purchases the Medi-Serve Shares; and
WHEREAS, the Magnolia Shareholder also owns all of the issued and
outstanding shares of capital stock (the "CATHCART SHARES") of Cathcart &
Associates, Inc. ("CATHCART"), which in turn owns an 88-bed skilled nursing
facility known as the "Woodruff Skilled Nursing Facility" (the "WOODRUFF
FACILITY"); although the Cathcart Shares shall not be purchased by Buyer
pursuant to this Agreement or the Magnolia/Medi-Serve Stock Purchase Agreement,
it shall be a condition to Buyer's obligations hereunder that the Woodruff
Facility shall be leased to Magnolia pursuant to a "triple-net" lease with a
term of at least 25 years, with annual base rent (subject to due diligence) of
$330,000 per year (subject to annual 2% escalations), and otherwise with terms
and conditions satisfactory to Buyer; and
WHEREAS, it is understood that Magnolia is a party to a lease (the "NEW
GREENVILLE LEASE") with respect to a 120- bed skilled nursing facility under
construction in Greenville, South Carolina (the "NEW GREENVILLE FACILITY"); and
WHEREAS, Don G. Angell ("ANGELL") and his affiliates, including without
limitation, Angell Group Incorporated, D. Gray Angell, Jr. and Don R. House,
co-trustees under the Don G. Angell Irrevocable Trust dated July 24, 1992, and
the Bermuda Village Retirement Center Limited Partnership (collectively with
Angell and the Angell Family Limited Partnership, the "ANGELL GROUP" and each an
"ANGELL GROUP MEMBER") holds promissory notes in the original principal amount
of $13,399,161 (the "ANGELL GROUP NOTES") and Angell Family Limited Partnership
holds an option to purchase from Premiere up to approximately nineteen and
one-half percent (19.5%) of the issued and outstanding shares of the capital
stock of Premiere at an aggregate exercise price of $1,000 (the "ANGELL
OPTIONS"); and
WHEREAS, at or prior to Closing, pursuant to a separate agreement (the
"ANGELL AGREEMENT"), the Angell Family Limited Partnership shall exercise the
Angell Options up to an amount such that the Angell Group will hold shares of a
series of Non-Voting Series C Common Stock of Premiere ("SERIES C PREMIERE
SHARES") entitling the Angell Group to receive up to $1,000,000 of the Merger
Consideration (as such term is hereinafter defined); and
WHEREAS, pursuant to the Angell Agreement, at or prior to Closing, all
of the Angell Options shall be exercised as aforesaid, and the Angell Group
shall irrevocably consent to and approve the merger contemplated hereby; and
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WHEREAS, pursuant to the Angell Agreement, at or prior to Closing,
Buyer shall guaranty the repayment of the Angell Group Notes and in
consideration therefore and in consideration for amending such Angell Group
Notes to provide that they shall not be prepaid during the three-year period
following the Closing Date, the Premiere Shares and the shares of capital stock
of the Subsidiaries (as such term is hereinafter defined) (collectively, the
"PLEDGED SHARES") pledged to secure the repayment of the Angell Group Notes
shall be released from such pledge; and
WHEREAS, the Boards of Directors of Buyer, Newco, and the Company deem
it advisable to merge the Company with and into Newco pursuant to this Agreement
(the "MERGER");
WHEREAS, pursuant to the Merger each outstanding share of capital stock
of Premiere shall be converted into the right to receive the Merger
Consideration (as hereinafter defined); and
WHEREAS, to effectuate the foregoing, the parties desire to adopt a
plan of merger and reorganization; and
WHEREAS, all of the holders of capital stock in the Company have
approved this Agreement and the plan of merger described herein and the
transactions contemplated hereby in accordance with all applicable laws, and the
Company's Certificate of Incorporation and By-laws;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, each of the Shareholders, Newco, Buyer, and
the Company, intending to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Upon the terms and subject to the conditions set
forth in this Plan of Merger and in accordance with the General Corporation Law
of the State of North Carolina (the "NCGCL"), at the Merger Time (as defined
herein), the Company shall be merged with and into Newco in accordance with the
provisions of Section 55-11-01, et al of the NCGCL. In furtherance thereof, on
the Closing Date the Company and Newco shall execute, deliver, and cause to be
filed with the Secretary of State of the State of North Carolina, the Articles
and Plan of Merger in the form of Exhibit 1.1 hereto (the "PLAN OF MERGER" or
"ARTICLES OF MERGER"). Following the Merger Time, the separate existence of
Newco and the Company shall cease, and Newco shall continue as the surviving
corporation in the Merger (hereinafter sometimes referred to as the "SURVIVING
CORPORATION") as a business corporation incorporated under the laws of the State
of North Carolina, and shall succeed to and assume all the rights and
obligations of the Company and Newco in accordance with the NCGCL.
1.2 MERGER TIME. The Merger shall become effective at such
time (the "MERGER TIME") as the duly executed Articles of Merger is filed with
the Secretary of State of the State of North Carolina.
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1.3 PAYMENT OF MERGER CONSIDERATION. Buyer agrees that
following the Closing (as hereinafter defined), it will make payment of the
Merger Consideration to the extent set forth in, and in accordance with the
terms of, this Agreement.
1.4 SURVIVING CORPORATION.
(A) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Newco as in effect immediately prior to the Merger Time shall
be the Certificate of Incorporation of the Surviving Corporation until duly
amended in accordance with the terms thereof and of the NCGCL.
(B) BY-LAWS. The By-laws of Newco as in effect
immediately prior to the Merger Time shall be the By-laws of the Surviving
Corporation until duly amended in accordance with their terms and as provided by
the Certificate of Incorporation of the Surviving Corporation and the NCGCL.
(C) DIRECTORS. The directors of Newco at the Merger Time
shall, from and after the Merger Time, be the directors of the Surviving
Corporation until their respective successors have been duly elected or
appointed and qualified or until their earlier death, resignation, or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
(D) OFFICERS. The officers of Newco at the Merger Time
shall, from and after the Merger Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation, or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
(E) FURTHER ACTION. If at any time after the Merger Time,
Buyer shall consider that any further deeds, assignments, conveyances,
agreements, documents, instruments, or assurances in law or any other things are
necessary or desirable to vest, perfect, confirm, or record in the Surviving
Corporation the title to any property, rights, privileges, powers, and
franchises of Newco or the Company by reason of, or as a result of, the Merger,
or otherwise to carry out the provisions of this Agreement and the Plan of
Merger, the officers of Newco and the Company shall execute and deliver, upon
Buyer's request, any instruments or assurances, and do all other things
necessary or proper to vest, perfect, confirm, or record title to such property,
rights, privileges, powers, and franchises in the Surviving Corporation, and
otherwise to carry out the provisions of this Agreement and the Plan of Merger.
(F) APPROVAL. Each Shareholder represents, warrants and
agrees that he or she has reviewed the Plan of Merger, and he or she hereby
approves such Plan of Merger.
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ARTICLE II: CONVERSION
2.1 CONSIDERATION. For purposes of this Agreement the terms:
(A) (I) "MERGER CONSIDERATION" shall mean the aggregate
of the Series A Merger Consideration, the Series B Merger Consideration, the
Series C Merger Consideration and the Series D Merger Consideration, and shall
be equal to $56,000,000 (the "BASE AMOUNT"), as adjusted pursuant to this
Agreement.
(II) "SERIES A MERGER CONSIDERATION" shall mean the
Base Amount, as adjusted pursuant to this Agreement, less the sum of: (x) the
Series B Merger Consideration, (y) the Series C Merger Consideration, and (z)
the Series D Merger Consideration; and the "SERIES A MERGER CONSIDERATION PER
SHARE" shall mean the Series A Merger Consideration divided by the number of
issued and outstanding shares of Series A Premiere Shares at the Merger Time.
(III) "SERIES B MERGER CONSIDERATION" shall mean (A)
$400,000 plus (B) ten percent (10%) of the sum of: (u) $56,000,000 (plus or
minus, as the case may be, any adjustments to the Base Amount made pursuant to
Section 2.2(a)(i), Section 2.2(a)(ii), Section 2.4 or Article X); plus (v)
$1,150,000; plus (w) $1,500,000; plus (x) $1,000,000; and the "SERIES B MERGER
CONSIDERATION PER SHARE" shall mean the Series B Merger Consideration divided by
the number of issued and outstanding shares of Series B Premiere Shares at the
Merger Time.
(IV) "SERIES C MERGER CONSIDERATION" shall mean
$1,000,000; and the "SERIES C MERGER CONSIDERATION PER SHARE" shall mean the
Series C Merger Consideration divided by the number of issued and outstanding
shares of Series C Premiere Shares at the Merger Time.
(V) "SERIES D MERGER CONSIDERATION" shall mean the
amount of the Closing Loans; and the "SERIES D MERGER CONSIDERATION PER SHARE"
shall mean the Series D Merger Consideration divided by the number of issued and
outstanding shares of Series D Premiere Shares at the Merger Time.
(VI) "PROPORTIONATE SHARE" shall mean with respect to
the holder of any series of Premiere Shares the fraction that the number of
shares of such series held by such holder as at the Merger Time bears to the
aggregate number of issued and outstanding shares of such series as at the
Merger Time.
(B) CONVERSION OF COMMON STOCK. At the Merger Time:
(I) each Series A Premiere Share which is issued and
outstanding at the Merger Time shall by reason of the Merger, without any action
by the holder thereof, be converted into the right to receive, in accordance
with the procedures hereinafter described, the Series A Merger Consideration Per
Share;
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(II) each Series B Premiere Share which is issued and
outstanding at the Merger Time shall by reason of the Merger, without any action
by the holder thereof, be converted into the right to receive, in accordance
with the procedures hereinafter described, the Series B Merger Consideration Per
Share;
(III) each Series C Premiere Share which is issued
and outstanding at the Merger Time shall by reason of the Merger, without any
action by the holder thereof, be converted into the right to receive, in
accordance with the procedures hereinafter described, the Series C Merger
Consideration Per Share;
(IV) each Series D Premiere Share which is issued and
outstanding at the Merger Time shall by reason of the Merger, without any action
by the holder thereof, be converted into the right to receive, in accordance
with the procedures hereinafter described, the Series D Merger Consideration Per
Share; and
(V) each share of Newco common stock outstanding
immediately prior to the Merger Time shall be unaffected by the Merger and shall
continue to be held by a direct or indirect wholly owned subsidiary of Buyer.
(C) MANNER OF EXCHANGE. The Merger Consideration shall be
paid as follows:
(I) Buyer shall deliver newly issued shares of the
Common Stock, par value $.001, of Integrated Health Services, Inc. ("IHS STOCK")
having an aggregate value (using the Closing Date as the date of determination
in accordance with Section 3.1(a) below) equal to the Series B Merger
Consideration to the Shareholders' Representative for distribution to, and
registered in the names of, the Minority Shareholders as set forth on Schedule
2.1(c)(i).
(II) Buyer shall deliver newly issued IHS Shares
having an aggregate value (using the Closing Date as the date of determination
in accordance with Section 3.1(a) below) equal to the Series C Merger
Consideration to the Angell Family Limited Partnership for distribution to, and
registered in the name of, the holders of the Series C Merger Consideration.
(III) Buyer shall deliver newly issued IHS Shares
having an aggregate value (using the Closing Date as the date of determination
in accordance with Section 3.1(a) below) equal to the Series D Merger
Consideration to the Principal Shareholders registered in the names of the
Principal Shareholders in accordance with their respective Proportionate Shares
of the Series D Merger Consideration.
(IV) (A) Buyer shall deliver to the Escrowee (as
defined in Section 2.5 below) newly issued IHS Shares having a value (using the
Closing Date as the date of determination in accordance with Section 3.1(a)
below) equal to ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) (the
"PRIMARY ESCROW DEPOSIT") which payment will be credited against a portion of
the Series A Merger Consideration payable to the Principal Shareholders (in
accordance with their respective Proportionate Shares of the Series A Merger
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Consideration), plus, if applicable in accordance with this Agreement,
additional shares of IHS Stock having a value (using the Closing Date as the
date of determination in accordance with Section 3.1(a), below) equal to up to
FIVE MILLION DOLLARS ($5,000,000) (the "SUPPLEMENTAL ESCROW DEPOSIT"), which
payment shall be credited against a portion of the Series A Merger Consideration
payable to the Principal Shareholders (in accordance with their respective
Proportionate Shares of the Series A Merger Consideration), with all of such
shares to be held by the Escrowee pursuant to the Escrow Agreement (as defined
in Section 2.5(a), below) (collectively, the "ESCROW DEPOSIT"), plus additional
shares of IHS Stock having a value (using the Closing Date as the date of
determination in accordance with Section 3.1(a), below) equal to ONE MILLION
DOLLARS ($1,000,000) (the "MANATEE ESCROW DEPOSIT"), which payment will be
credited against a portion of the Series A Merger Consideration payable to the
Principal Shareholders (in accordance with their respective Proportionate Shares
of the Series A Merger Consideration), with all of such shares to be held by the
Escrowee pursuant to the Manatee Escrow Agreement (as described in Section
2.5(a)(ii), below); and
(B) the balance of the Series A Merger Consideration shall be
paid by the delivery by Buyer of shares of IHS Stock having a value equal to the
amount of such balance (using the Closing Date as the date of determination in
accordance with Section 3.1(a) below) to the Principal Shareholders registered
in the names of the Principal Shareholders in accordance with their respective
Proportionate Shares of the Series A Merger Consideration.
(D) TRANSMITTAL. Upon delivery to Buyer of stock certificates
representing any Premiere Shares, Buyer shall promptly pay to, or on behalf of,
each person entitled thereto the amount of cash (in respect of fractional shares
as described below) and shall deliver certificates representing the number of
shares to which such person is entitled, as provided above. No interest will be
paid or accrued on any Merger Consideration payable upon the surrender of any
certificate or certificates or other instruments. Until surrendered in
accordance with the provisions of this subsection (d), the certificate or
certificates or instruments which immediately prior to the Merger Time
represented issued and outstanding Premiere Shares shall represent for all
purposes the right only to receive the Merger Consideration set forth in this
Agreement. After the Merger Time, there shall be no further registration of
transfers on the records of the Company of any Premiere Shares.
(E) NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of IHS Stock shall be issued upon the surrender
for exchange of certificates representing any Company Shares, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of IHS. Notwithstanding any other provision of this
Agreement, each holder of Premiere Shares exchanged pursuant to the Merger
(after taking into account all certificates representing Premiere Shares
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of IHS Stock
multiplied by the value of such share determined in accordance with Section
3.1(a) below.
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(F) (I) Immediately prior to the Closing, Buyer shall make a
loan (the CLOSING SWAIN LOAN") to Swain in an amount equal to the lesser of: (x)
fifty percent (50%) of the amount of the negative working capital and long-term
liabilities included in the Estimated Closing Date Balance Sheet (prior to the
purchase of shares contemplated by this subsection (f)); and (y) $4,000,000, by
depositing (by wire transfer) such amount in an account of the Company, and such
deposit shall be deemed to be full consideration for the purchase by, and
issuance to, Swain of fully paid and nonassessable shares (the "NEW SWAIN
PREMIERE SHARES") of the Company's Non-Voting Series D Common Stock ("SERIES D
PREMIERE SHARES"). The Closing Swain Loan shall bear interest at the rate of
eight and one-half percent (8 1/2) per anum commencing ninety (90) days after
the Effective Date (as hereinafter in Section 3.1(k)) and shall be payable in
four (4) equal installments coming due at the end of each consecutive thirty
(30) successive day period commencing on the Effective Date, and shall be
evidenced by a promissory note issued by Swain to IHS in the form of Exhibit
2.1(f)(i)-1 hereto (the "SWAIN NOTE"), and shall be secured pursuant to a Stock
Pledge Agreement (the "SWAIN STOCK PLEDGE AGREEMENT") in the form of Exhibit
2.1(c)(i)-2 hereto by all of the shares of IHS Stock into which the New Swain
Premiere Shares are converted pursuant to the Merger (the "ADDITIONAL SWAIN IHS
SHARES").
(II) Immediately prior to the Closing, Buyer shall make a
loan (the "CLOSING HERZOG LOAN", and together with the Closing Swain Loan, the
"CLOSING LOANS") to Herzog in an amount equal to the lesser of: (x) fifty
percent (50%) of the amount of the negative working capital and long-term
liabilities included in the Estimated Closing Date Balance Sheet (prior to the
purchase of shares contemplated by this subsection (f)); and (y) $4,000,000, by
depositing (by wire transfer) such amount in an account of the Company, and such
deposit shall be deemed to be full consideration for the purchase by, and
issuance to, Herzog of fully paid and nonassessable Series D Premiere Shares
(the "NEW HERZOG PREMIERE SHARES", and together with the New Swain Premiere
Shares, the "NEW PREMIERE SHARES"). The Closing Herzog Loan shall bear interest
at the rate of eight and one-half percent (8 1/2%) per anum commencing ninety
(90) days after the Effective Date, and shall be payable in four (4) equal
installments coming due at the end of each consecutive thirty (30) successive
day period commencing on the Effective Date, and shall be evidenced by a
promissory note issued by Herzog to IHS in the form of Exhibit 2.1(f)(ii)-1
hereto (the "HERZOG NOTE", and together with the Swain Note, the "PRINCIPAL
SHAREHOLDERS' NOTES"), and shall be secured pursuant to a Stock Pledge Agreement
(the "HERZOG STOCK PLEDGE AGREEMENT", and together with the Swain Stock Pledge
Agreement, the "PRINCIPAL SHAREHOLDERS' STOCK PLEDGE AGREEMENTS") in the form of
Exhibit 2.1(f)(ii)-2 hereto by all of the Additional Herzog IHS Shares.
2.2 CERTAIN ADJUSTMENTS TO THE BASE AMOUNT.
(A) WORKING CAPITAL; LONG-TERM LIABILITIES.
(I) (A) At the Closing, the Principal Shareholders shall
deliver a certificate certifying to be their best good faith estimate of the
amount of the aggregate working capital (as defined in clause (vi) below) of the
Company and its subsidiaries as of the Closing Date on a consolidated basis (the
"ESTIMATED CLOSING DATE WORKING CAPITAL"). If the Estimated Closing Date Working
Capital is a negative amount, the Base Amount (and correspondingly, the Series A
Merger Consideration and the Series B Merger Consideration) will be reduced by
an amount equal to such negative amount.
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(B) If the Estimated Closing Date Working Capital shall
be a positive amount, the Base Amount (and correspondingly, the Series A Merger
Consideration and the Series B Merger Consideration) will be increased by an
amount equal to such positive amount.
(II) Additionally, at the Closing, the Company shall
deliver to Buyer the balance sheet of the Company and its subsidiaries on a
consolidated basis as of the Closing Date, certified by the Principal
Shareholders to be their best good faith estimate thereof (the "ESTIMATED
CLOSING DATE BALANCE SHEET"). The Base Amount (and correspondingly, the Series A
Merger Consideration and the Series B Merger Consideration) will be reduced by
an amount equal to the amount of the long-term liabilities of the Company and
its subsidiaries on a consolidated basis as determined in accordance with
generally accepted accounting principles, consistently applied ("GAAP") (except
as otherwise provided in Section 2.2(a)(vi)) as set forth on the Estimated
Closing Date Balance Sheet.
(III) Within one hundred twenty (120) days following the
Closing Date, Buyer shall use its best efforts to complete a review ("BUYER'S
REVIEW") of the balance sheet of the Companies and its subsidiaries on a
consolidated basis as of the Closing Date (the "CLOSING DATE BALANCE SHEET"). If
the Base Amount, after giving effect to any adjustments made at the Closing
pursuant to Section 2.2(a)(i) and (ii), above, shall be subject to further
adjustment based upon the Buyer's Review indicating that the aggregate working
capital of the Company and the Subsidiaries on a consolidated basis as of the
Closing Date (the "ACTUAL WORKING CAPITAL") was different from the Estimated
Closing Date Working Capital, then the parties shall make such payments to each
other as shall result in the Base Amount (and, correspondingly, the Series A
Merger Consideration) being the amount that it would have been had the Actual
Working Capital been used at Closing in lieu of the Estimated Closing Date
Working Capital. Any increase to the Series A Merger Consideration resulting
therefrom shall be made by delivery by Buyer to the Principal Shareholders of
shares of IHS Stock having an aggregate value equal to such increase valued
based on the Applicable Valuation Date, and if the Series A Merger Consideration
resulting therefrom is reduced, then the Escrowee (as defined below) shall
deliver over to Buyer shares of IHS Stock having a value determined in
accordance with Section 3.1(a), below, equal to such deficiency. In the event
the deficiency exceeds the Escrow Deposit (as defined above) held by Escrowee,
the Principal Shareholders shall be jointly and severally obligated to refund to
Buyer the amount of such deficiency in IHS Stock valued in accordance with
Section 3.1(a), below. Furthermore, if the Buyer's Review reveals the aggregate
amount of the Company's and the Subsidiaries' (on a consolidated basis)
long-term liabilities as of the Closing Date (the "ACTUAL LONG-TERM
LIABILITIES") exceeded the amount of Company's and Subsidiaries' (on a
consolidated basis) long-term liabilities as indicated on the Estimated Closing
Date Balance Sheet, the Base Amount (and, correspondingly, the Series A Merger
Consideration) shall be deemed to have been reduced by the amount of such
excess, and the Escrowee shall deliver over to Buyer IHS Stock having a value
equal to such excess. In the event the amount of such excess is greater than the
Escrow Deposit held by Escrowee, the Principal Shareholders shall be jointly and
severally obligated to refund to Buyer the amount of such excess in IHS Stock.
The value of any IHS Stock to be distributed to the Buyer from the Escrowee will
be as set forth in Section 3.1(a), below. Unless a Delay Payment Notice (as
defined in clause (iv) below) shall have been given, or a Delay Payment Notice
is under good faith
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consideration (prior to the last date on which such a Delay Payment Notice may
be given), any such payment shall be made within two (2) business days after
demand by the party entitled to the adjustment.
(IV) If the Principal Shareholders shall in good faith
dispute the amount of working capital or long-term liabilities of the Companies
and its subsidiaries on a consolidated basis as of the Closing Date as set forth
in Buyer's Review, they shall give notice to Buyer (a "DELAY PAYMENT NOTICE")
within thirty (30) days after delivery to them of Buyer's Review that all or any
portion of the payment specified should not then be made and setting forth in
reasonable detail their objections and the basis therefor, in which case, the
disputed portion of any payment otherwise required to be made pursuant to clause
(iii) above shall be delayed, and Buyer and the Principal Shareholders' shall
meet and in good faith attempt to resolve any disagreements within thirty (30)
days after delivery to Buyer of the Delay Payment Notice. If the Principal
Shareholders shall fail to timely deliver a Delay Payment Notice, the working
capital and long-term liabilities amounts set forth in Buyer's Review shall be
deemed accepted by the Group and shall be conclusive and binding on all parties
hereto, absent fraud. If a Delay Payment Notice is timely delivered and the
parties are unable to resolve such disagreements within such time period, the
disagreements shall be referred to a "Big 4" accounting firm independent of the
Buyer and Sellers selected by agreement between the Buyer and the Shareholders'
Representative, or, if the Buyer and the Shareholders' Representative cannot so
agree within the 30 day period referred to above, by lot (the "ARBITRATING
ACCOUNTANTS"), and the determination of the Arbitrating Accountants shall be
final, conclusive and binding on the parties hereto. The Arbitrating Accountants
shall be directed to use their best efforts to reach a determination not more
than thirty (30) days after such referral. The costs and expenses of the
services of the Arbitrating Accountants shall be borne by the party whose
proposal is further (by dollar amount) from the amount finally determined by the
Arbitrating Accountants. Within two (2) business days after the final resolution
of any matter covered by a Delay Payment Notice, any delayed payment shall be
made to the extent determined to be due in accordance with such resolution.
(V) If there shall be discovered any liability that
should have been included as a current liability or long-term liability on the
Closing Date Balance Sheet but that was not so included, then Buyer, in its sole
discretion, may elect to include such liability as a Permitted Liability, in
which case such liability shall be included as a current liability or long-term
liability, as the case may be, in the determination of the Actual Working
Capital Amount or long-term liabilities, as the case may be, or to exclude such
liability therefrom, in which case such liability shall be a Prohibited
Liability and shall not be included as a current liability in the determination
of the Actual Working Capital Amount, or in the Actual Long-term Liabilities.
(VI) For the purposes hereof, "WORKING CAPITAL" means the
excess of current assets over current liabilities (including, without limitation
all closing costs and expenses to the extent included on the Estimated Closing
Date Balance Sheet), as determined in accordance with GAAP, applied consistently
with the past application of GAAP by the Company; and "LONG- TERM LIABILITY"
means any liability that would be set forth as a long-term liability on a
balance sheet in accordance with GAAP, applied consistently with the past
application of GAAP by the Company, with the following exceptions:
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(A) all inter-company assets and liabilities among the
Company and among its subsidiaries shall be excluded;
(B) all utility deposits in an amount not to exceed
$130,000, and all cash reserves provided by the Company or any Subsidiary to any
landlord, lessor, public utility or mortgagee to the extent the inclusion of
such cash reserves is consistent with the accounting treatment used in the
preparation of the Balance Sheet, and the debt services reserves for the Crystal
Springs Facility (in an amount not to exceed $350,000) shall be included as
current assets of the Company or such Subsidiary, except to the extent of any
reasonable reserve taken for claims against such amounts by the holders thereof;
(C) working capital and long-term liabilities shall be
determined as if the amount, if any, of the purchase price paid by the Company
or its Subsidiaries pursuant to the closings under the SHCM Agreements (as
hereinafter defined in Section 2.2(d)), as finally adjusted and paid pursuant to
such SHCM Agreements (including, without limitation, any earnest money deposits
credited against the purchase price) (the "AGGREGATE SCHM PURCHASE PRICE"), had
not been paid (regardless of whether such purchase price is paid from the
Company's cash or by incurring loans or by some combination thereof);
(D) any loan made by Buyer or its affiliates to Premiere
pursuant to Section 2.2(d)(iii) below shall not be included as liabilities in
the calculation of working capital or long-term liabilities for purposes hereof;
and the assets and the liabilities of SHCM Holdings, Inc. and its subsidiaries
shall not be included in the calculation of working capital or long-term
liabilities for purposes hereof to the extent that such assets and liabilities
are included in the calculation of any purchase price adjustment paid pursuant
to Section 8.3 of the SHCM Stock Purchase Agreement (as hereinafter defined in
Section 2.2(d)); provided that it is understood that any liability arising out
of the termination of any Contract (including, without limitation, any
employment agreement) of SCHM Holdings, Inc. or any of its subsidiaries pursuant
to Section 2.4 below) shall constitute liabilities of the Company for purposes
of the determination of working capital and long-term liabilities; and
(E) based on the representation and warranty of the
Company and the Principal Shareholders that all of the factual matters
incorporated into the calculations attached hereto as Exhibit 2.2(a)(vi)(E) are
true and correct, there shall be only an accrual of $310,000 included in working
capital with respect to accrued sick pay days for employees of the Company or
any Subsidiary who are not members of any union, and there shall be an
additional accrual for accrued sick pay days of employees of the Company or any
Subsidiary who are members of a union in the amount of $90,000; and
(F) the amount of the Series D Merger Consideration shall
be deducted from the working capital.
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(VII) Notwithstanding anything to the contrary contained
in this Agreement, no liabilities of Manatee (as such term is defined in Section
12.2(d) below) or any of its direct or indirect wholly owned subsidiaries,
including without limitation any Manatee Liability (as such term is defined in
Section 12.2(d) below) shall be included as a current liability or long-term
liability of the Company or any Subsidiary for purposes of this Section 2.2(a),
and no current assets of Manatee or any of its direct or indirect wholly owned
subsidiaries shall be included as a current asset for such purpose. All
liabilities of Manatee or any of its direct or indirect wholly owned
subsidiaries, including without limitation, any Manatee Liability, shall
constitute Prohibited Liabilities (as defined in Section 2.3(b)).
(VIII) Notwithstanding anything to the contrary contained
in this Agreement, no liabilities of HCPIII Kansas, Inc. or any of its direct or
indirect wholly owned subsidiaries (the "KANSAS SUBSIDIARIES") or Angell Care of
Cahokia, Inc., Angell Care of Caseyville, Inc., or Caseyville Healthcare
Association, Inc. or any of their respective direct or indirect wholly owned
subsidiaries (the "ILLINOIS SUBSIDIARIES"), shall be included as a current
liability or long-term liability of the Company or any Subsidiary for purposes
of this Section 2.2(a), and none of their respective current assets shall be
included as a current asset for such purpose. All liabilities of the Kansas
Subsidiaries and the Illinois Subsidiaries shall constitute Prohibited
Liabilities.
(B) EXTENSION OF SHORT LEASES. If any lease identified as
a "SHORT LEASE" on Schedule 5.11(a) is not amended on or prior to the Closing
Date to extend the term thereof (or to provide the tenant thereunder with the
irrevocable (assuming no default) (and to the extent such Short Lease is
otherwise assignable, the assignable) right to extend such term for no further
consideration (excluding nominal payments such as reasonable attorney fees or
which restate existing obligations) other than predetermined increases of rent)
until the year 2013 on terms and conditions approved by Buyer, such approval not
to be unreasonably withheld, then shares of IHS Stock having a value (valued
using the Closing Date as the date of determination in accordance with Section
3.1(a) below) equal to the portion of the Series A Merger Consideration
allocable to such Short Lease as set forth on Schedule 2.2(b) (the "SHORT LEASE
EXTENSION ALLOCATION") shall, in lieu of being delivered to the Principal
Shareholders, be deposited with the Escrowee, shall constitute Supplemental
Escrow Deposit, and shall be added to the Primary Escrow Deposit. After the
Closing, the Company, Principal Shareholders and Buyer shall cooperate to cause
such Short Leases to be so amended at no cost or expense to Buyer (other than
its reasonable legal fees and expenses). At such time as any Short Lease shall
be amended as provided above, shares having a value (valued using the Closing
Date as the date of determination in accordance with Section 3.1(a) below) equal
to the Short Lease Extension Allocation amount applicable thereto shall be
delivered to the Principal Shareholders (as payment of Series A Merger
Consideration) by the Escrowee from the Escrow Deposit, or if there are
insufficient shares in the Escrow Deposit, Buyer shall deliver shares valued
using the Closing Date as the date of determination or cash, at Principal
Shareholders' election, to the extent necessary to cover any such deficiency. If
any Short Lease relating to the Facilities known as "Old Capital", "Heritage
Inn" or "Hart Care" (the "CARR FACILITIES") or to the Facilities known as
"Oceanside" or "Savannah Beach" (the "FOSTER FACILITIES") (each a "CARR/FOSTER
LEASE") is not so amended by the fifth anniversary of the Closing Date, or if
any other Short Lease is not so amended by the second anniversary of the Closing
Date, then the Base Amount (and the Series A Merger Consideration) shall be
deemed reduced by the amount of the Short Lease Extension Allocation applicable
to such Short Lease (and the Shareholders shall have no further right to recoup
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such reduction (whether or not the term of such Short Lease is thereafter
extended)), and shares having a value (valued using the Closing Date as the date
of determination in accordance with Section 3.1(a) below) equal to the Short
Lease Extension Allocation amount applicable thereto shall be delivered to Buyer
by the Escrowee from the Escrow Deposit, or if there are insufficient shares in
the Escrow Deposit, the Principal Shareholders shall deliver shares valued using
the Closing Date as the date of determination or cash, at Shareholders'
Representative's election, to the extent necessary to cover any such deficiency.
The Company and Principal Shareholders represent and warrant that they have
delivered to Buyer true and complete copies of certain extension agreements, and
based on the foregoing, Buyer acknowledges that, as of the date hereof, the
Short Leases with respect to the Heart of Georgia Facility and the Macon
Facility have been extended as required pursuant to this subsection (b), and
accordingly, $2,100,000 of the $5,000,000 shall not be deposited in the Escrow
Deposit and shall be included in the Base Amount (and correspondingly, the
Series A Merger Consideration).
(C) AMENDMENTS TO BISHOP LEASES. If all (but not less than
all) of the leases covering the Facilities identified as being leased from Gene
Bishop, as landlord (the "BISHOP LEASES") on Schedule 2.2(c) are amended on or
prior to the Closing Date to extend the term thereof until the year 2022 on
substantially the same terms and conditions as are in existence on the date
hereof (subject to base rent escalations of up to 2% per year), then the Base
Amount (and, correspondingly, the Series A Merger Consideration) shall be
increased by $1,150,000 and shares of IHS Stock having a value (valued using the
Applicable Valuation Date (as defined in Section 3.1(a)) as the date of
determination in accordance with Section 3.1(a) below) equal to such $1,150,000
shall be paid to the Principal Shareholders as additional Series A Merger
Consideration. If any such amount shall become payable after the Closing, then
such payment shall be made by delivery to the Principal Shareholders of shares
of IHS Stock (valued using the Applicable Valuation Date as the date of
determination in accordance with Section 3.1(a) below). The Company and the
Principal Shareholders represent and warrant that they have delivered to Buyer
true and complete copies of certain amendments to the Bishop Leases. Based on
the foregoing, Buyer acknowledges that, as of the date hereof, the Bishop Leases
have been amended (effective as of the Closing Date) in accordance with this
subsection (c) and that upon receipt of the consent to such amendments from
Pacific Life Insurance Company, the amounts payable pursuant to this subsection
(c) shall be included in the Base Amount (and correspondingly, the Series A
Merger Consideration).
(D) LEASE OR ACQUISITION OF SOUTHEASTERN FACILITIES. (I)
Buyer acknowledges that the Company has entered into that certain Stock Purchase
Agreement (the "SHCM STOCK PURCHASE AGREEMENT") dated December 6, 1997 with
Steven D. Johnson, Trustee under the Steven D. Johnson Revocable Trust, John W.
Trost, Trustee under the John W. Trost Revocable Trust, and Brenda J. Trost,
Trustee under the Brenda J. Trost Revocable Trust, with respect to all of the
issued and outstanding shares of capital stock of SHCM Holdings, Inc.
Furthermore, Buyer acknowledges that HCPIII Jesup, Inc., one of the Subsidiaries
has entered into those two (2) certain Agreements of Purchase and Sale (each, a
"SCHM ASSET PURCHASE AGREEMENT", and together with the SHCM Stock Purchase
Agreement, the "SHCM AGREEMENTS"), each dated December 6, 1997, respectively
with SHCM East Point Properties, Inc. and SHCM Atlanta Properties, Inc. to
acquire the fee simple interest in the property upon which are located the
Facilities known as the "Bonterra Nursing Home" and "Parkview Nursing Home" (the
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"SOUTHEASTERN FACILITIES"). The parties agree that the SCHM Agreements
constitute Contracts (as defined in Section 5.7 below). If all (but not less
than all) of the transactions contemplated by the SCHM Agreements are
consummated on or prior to the first anniversary of the Closing (and Premiere
shall not have waived any of its conditions to closing thereunder), then the
Base Amount (and, correspondingly, the Series A Merger Consideration) shall be
increased by One Million Five Hundred Thousand Dollars ($1,500,000), and shares
of IHS Stock, having a value (valued using the Applicable Valuation Date on the
date of determination in accordance with Section 3.1(a) below) equal to such One
Million Five Hundred Thousand Dollars ($1,500,000) shall be paid to the
Shareholders' Representative for distribution to the Principal Shareholders (in
accordance with their respective Proportionate Shares as additional Series A
Merger Consideration.
(II) The Company (prior to the Closing) and each Principal
Shareholder hereby jointly and severally represent and warrant to Buyer that if
each of the Southeastern Facilities was owned by HCPIII Jesup, Inc. on the date
hereof, and the transactions contemplated by the SCHM Agreements all had been
consummated prior to the date hereof, none of the representations and warranties
made by them pursuant to this Agreement would, by reason thereof, be rendered
false or inaccurate; it being understood that, without limiting the foregoing,
all agreements, leases, contracts, instruments and commitments relating to the
business of any Southeastern Facility or to which SCHM Holdings, Inc. or any of
its subsidiaries (collectively with SCHM Holdings, Inc., the "SCHM
SUBSIDIARIES") is a party or by which any SCHM Subsidiary or any of the assets
of any SCHM Subsidiary or any of the assets acquired pursuant to either of the
SCHM Asset Purchase Agreements are bound shall, for these purposes, be deemed to
be Contracts, the employees, directors, officers and agents of each SCHM
Subsidiaries shall, for these purposes, be deemed to be employees, directors,
officers and agents of a Subsidiary of the Company, the SCHM Subsidiaries shall,
for these purposes, be deemed to be Subsidiaries, the assets and the liabilities
of the SCHM Subsidiaries shall, for these purposes, be deemed to be assets and
liabilities of Subsidiaries (subject to Section 2.2(a)(vi)(C) and (D) above),
the assets acquired and liabilities assumed by the Subsidiaries pursuant to the
SCHM Asset Purchase Agreements would be deemed to be assets and liabilities of
Subsidiaries (subject to Section 2.2(a)(vi)(C) and (D) above), and all tax
returns, declarations of estimated tax and other reports required to be filed by
any of the SCHM Subsidiaries shall be deemed to be Tax Returns (as hereinafter
defined in Section 5.22). In furtherance of the foregoing, all of the disclosure
schedules of the Company and the Principal Shareholders to this Agreement (other
than the Financial Statements) have been prepared as if each of the Southeastern
Facilities was owned by HCPIII Jesup, Inc. on the date hereof, and the
transactions contemplated by the SCHM Agreements all had been consummated prior
to the date hereof; provided that each of such disclosure schedules indicates
which disclosures relate to the SCHM Facilities and the SCHM Subsidiaries.
Notwithstanding anything to the contrary contained in Section 2.4 or any other
provision of this Agreement, except for liabilities included in the
determination of the Aggregate SCHM Purchase Price, or in the determination of
working capital or long-term liabilities of the Company on a consolidated basis
in accordance with Section 2.2(a)(vi)(D), all liabilities of any SCHM Subsidiary
or arising under or out of any SCHM Agreement shall be Prohibited Liabilities
(as hereinafter defined in Section 2.3(b)) (the "SCHM PROHIBITED LIABILITIES").
Without limiting the generality of the foregoing, any liability with respect to
any wage and salary dispute including any employees of any SCHM Subsidiary shall
be a Prohibited Liability except to the extent taken into account in determining
the Aggregate SCHM Purchase Price or the working capital or long-term
liabilities as aforesaid.
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(III) No more than five (5) business days prior to the
scheduled closing date under the SCHM Agreements, and provided that all of the
conditions to purchaser's obligations to close under the SCHM Agreements shall
have been satisfied (and not waived without Buyer's prior written consent),
Buyer or one of its affiliates shall provide financing to the Company to
complete the transactions contemplated by the SCHM Agreements on terms and
conditions no less favorable to the Company than the terms and conditions
offered to the Company by Omega Healthcare Corporation as set forth in the term
sheet heretofore delivered by the Company to Buyer; provided, however, that
Buyer or its affiliate shall be granted an option to purchase the assets and/or
the issued and outstanding capital stock covered by the SCHM Agreements for a
price equal to the sum of (x) the amount of the financing provided as set forth
above, plus (y) $1,500,000, which purchase price may be paid by offsetting
amounts due to Buyer or such affiliate, by cash, or by delivery of shares of IHS
Stock (valued as of the date of exercise in accordance with Section 3.1 below);
provided, however, that Buyer in its sole discretion may elect, upon payment to
Premiere of the amount of the earnest money deposit paid to the sellers under
the SCHM Asset Purchase Agreements by the Company prior to the date hereof and
applied against the purchase price, to have the SCHM Asset Purchase Agreements
assigned to it or its affiliates in lieu of providing the financing to complete
the transactions contemplated thereby, in which case the option price referred
to above shall be reduced by the amount of the financing that would have been
provided therefor. The parties to such transactions shall be entitled to the
same conditions, representations, warranties, covenants, indemnifications
(subject to similar, but proportionately reduced, "deductibles" and
"indemnification caps"), restrictive covenants and other benefits and
protections to which such parties would have been entitled had the transactions
contemplated by the SCHM Agreements been closed by the Company's Subsidiaries
prior to the Closing Date.
(E) LEASE OF DADE COUNTY FACILITIES. (I) If the commencement
of both (but not just one) of those two (2) certain Leases (the "SKYLER LEASES")
dated December 31, 1997, each by and between Skyler Miami, Inc., as lessor and
HCPIII South Florida, Inc., as lessee, with respect to the Facilities known as
the "NORTH MIAMI NURSING AND REHABILITATION CENTER" and the "FOUNTAINHEAD
NURSING CENTER" (collectively, the "DADE COUNTY FACILITIES") has occurred prior
to the Closing, or the Company or any Subsidiary, or the Buyer, or any of its
subsidiaries, leases or manages both (but not just one) of the Dade County
Facilities on terms and conditions reasonably satisfactory to Buyer prior to the
first anniversary of the Closing, then the Base Amount (and, correspondingly,
the Series A Merger Consideration) shall be increased by $1,000,000, and shares
of IHS Stock having a value (using the Applicable Valuation Date as the date of
determination in accordance with Section 3.1(a) below) equal to One Million
Dollars ($1,000,000) shall be paid to the Shareholders' Representative for
distribution to the Principal Shareholders (in accordance with their respective
Proportionate Shares of the Series A Premiere Shares) as payment of Series A
Merger Consideration. Notwithstanding anything to the contrary contained in
Section 2.4 or any other provision this Agreement, all liabilities (the
"SV/SOUTH FLORIDA LIABILITIES") arising under or out of the Agreement between
Premiere Associates Management Company, Inc. and SV\South Florida Operations,
Inc. ("SV/SOUTH FLORIDA") relating to the termination of certain management
agreements (the "SV/SOUTH FLORIDA TERMINATION AGREEMENT"), or the Operations
Transfer Agreement between HCPIII South Florida, Inc. and SV/South Florida dated
as of December 31, 1997 (the "OPERATIONS TRANSFER AGREEMENT", and together with
the SV/South Florida Termination Agreement, the "SV/SOUTH FLORIDA AGREEMENTS")
shall be Prohibited Liabilities
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except to the extent such liabilities are taken into account in the
determination of the Actual Working Capital Amount or the Actual Long-term
Liabilities under Section 2.2(a). The Company and Principal Shareholders
represent and warrant that each of said Skyler Leases commenced on February 1,
1998, and that the Management Agreements referred to in the SV/South Florida
Termination Agreement have been terminated; and based on the foregoing, Buyer
acknowledges that the additional Series A Merger Consideration referred to in
this clause (i) is payable. Notwithstanding anything to the contrary set forth
in this subsection (e), if termination of any Management Agreement covering any
Dade County Facility, or if the entering into of any Skyler Lease shall
constitute a breach of any union contract, then the increase in the Base Amount
(and, correspondingly, the Series A Merger Consideration) contemplated by this
subsection (e) shall be postponed until such breach is resolved to the
satisfaction of Buyer, and the Principal Shareholders shall indemnify Buyer from
and against any Losses (as hereinafter defined) arising out of any such breach.
(II) The Company (prior to the Closing) and each Principal
Shareholder hereby jointly and severally represent and warrant to Buyer that if
each of the Dade County Facilities was leased by a Subsidiary on the date
hereof, and the transactions contemplated by the SV/South Florida Agreements all
had been consummated prior to the date hereof, none of the representations and
warranties made by them pursuant to this Agreement would, by reason thereof, be
rendered false or inaccurate; it being understood that, without limiting the
foregoing, all agreements, leases, contracts, instruments and commitments
relating to the business of any Dade County Facility shall, for these purposes,
be deemed to be Contracts, the employees, directors, officers and agents of each
Dade County Facility shall, for these purposes, be deemed to be employees,
directors, officers and agents of a Subsidiary of the Company, and any
liabilities arising under the Skyler Leases shall, for these purposes, be deemed
to be liabilities of Subsidiaries. In furtherance of the foregoing, all of the
disclosure schedules (other than the Financial Statements) of the Company and
the Principal Shareholders to this Agreement have been prepared as if each of
the Dade County Facilities was leased by a Subsidiary of the Company on the date
hereof, and the transactions contemplated by the SV/South Florida Agreements all
had been consummated prior to the date hereof; provided that each of such
disclosure schedules indicates which disclosures relate to the Dade County.
(F) SHAREHOLDERS' REPRESENTATIVE. Notwithstanding anything to
the contrary contained in this Section 2.2, Buyer shall make any payments of
Purchase Price adjustments to the Shareholders as instructed by Shareholders'
Representative (as hereinafter defined). Each Shareholder hereby designates
Swain, and Swain hereby accepts the designation as the representative of
Shareholders ( the "SHAREHOLDERS' REPRESENTATIVE") to act for and on behalf of
the Shareholders as provided in this Agreement. Each Shareholder shall be bound
by all actions taken or omitted by Shareholders' Representative on behalf of any
Shareholder as provided in this Agreement, and each Shareholder shall be deemed
to have received any notice deemed given or payment made to Shareholders'
Representative in accordance with the notice provisions of this Agreement on the
date deemed given or the date paid to Shareholders' Representative, and Buyer
shall be entitled to rely on all notices and consents given, and all settlements
entered into on behalf of any Shareholder to the extent authorized pursuant to
the terms of this Agreement notwithstanding any objections made by any
Shareholder prior to, concurrently with or subsequent to the giving of any such
notice or
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consent or the settlement of any such matter. Shareholders' Representative may
be replaced only if and when all of the Shareholders shall notify Buyer that a
new individual person (named in such notice) has been unanimously selected by
them to be the new Shareholders' Representative, in which case such new person
shall thereafter be the Shareholders' Representative.
2.3 ASSETS AND LIABILITIES.
(A) As of the Closing Date, the owned, leased and managed
assets (the "ASSETS") of the Company and its Subsidiaries (as hereinafter
defined in Section 5.1 (a)) will include all of the tangible and intangible
assets which comprise or are utilized or are held for use in connection with the
Company or any of the Subsidiaries or are necessary to the operation of the
business of the Company and the Subsidiaries as presently constituted (the
"BUSINESS"), including, without limitation, all property, plant, and equipment,
contract rights, leasehold interests, fixed and moveable equipment, vehicles,
furnishings, tangible personal property, inventory, supplies, cash, cash
equivalents, prepaid expenses and accounts receivable (other than accounts
receivable collected, cash expended and inventory, supplies, and other assets
consumed, used or disposed of, in each case, in the ordinary course of business,
consistent with prior practice and otherwise in conformance with the
requirements of this Agreement), goodwill, tradenames, trademarks, all patient
records and files, Certificates of Need, Medicare and Medicaid provider
agreements and numbers, provider agreements with third party payors, telephone
numbers, capital stock in subsidiaries, and to the extent permitted by law, all
permits, licenses and other governmental approvals. Notwithstanding anything to
the contrary contained herein, the Assets shall not include any capital stock
in, or assets, of Manatee or any of its subsidiaries, or of any Kansas
Subsidiary or of any Illinois Subsidiary. As of the Closing, all of the Assets
shall be free and clear of all Liens other than Permitted Liens (as such term is
defined in Section 5.6(c) below).
(B) As of the Closing, there will not be outstanding
against the Company or any of its subsidiaries any claim, lawsuit, liability,
obligation or debt of any kind or nature whatsoever (regardless of whether the
same would constitute a liability to be set forth on a balance sheet in
accordance with GAAP), whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition ("PROHIBITED LIABILITIES"), other than
(x) such liabilities as are taken into account in the determination of the
Actual Working Capital Amount or the Actual Long-term Liabilities under Section
2.2(a), (y) liabilities covered by insurance to the extent of insurance proceeds
collected (or reasonably expected to be collected) with respect thereto, and (z)
obligations arising out of services or products or other benefits to be provided
to the Company or its subsidiaries after Closing under Contracts (as hereinafter
defined in Section 5.7(a)) that are not to be terminated in accordance with
Section 2.4 below ("PERMITTED LIABILITIES"). It is expressly agreed that the
Principal Shareholders shall be responsible for all Prohibited Liabilities of
the Company or any of its subsidiaries, including, without limitation, (i)
liabilities of the Company or any of its subsidiaries arising out of
participation in the Medicare or Medicaid programs, or arrangements with any
other third party payor, or arrangements with any person or entity that
participates in the Medicare or Medicaid programs or any other third party payor
program, including without limitation, with respect to any excess reimbursement,
recapture, adjustment or overpayment whatsoever, in each case, attributable to
any period on or prior
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to the Closing Date ("REIMBURSEMENT LIABILITIES"), (ii) malpractice claims
asserted by patients or any other tort claims asserted, claims for breach of
contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions occurring on or
before the Closing Date (except to the extent of insurance proceeds collected
(or reasonably expected to be collected) with respect thereto), (iii) any
accounts payable or employment or other taxes (except to the extent of the
amount thereof, if any, included in the calculation of the Actual Working
Capital Amount or Actual Long-term Liabilities), and (iv) accrued but unpaid
compensation or other benefits to any of the employees, agents, consultants or
advisers of the Company or any of its subsidiaries, including accrued vacation
(except to the extent of the amount thereof, if any, included in the calculation
of the Actual Working Capital Amount or Actual Long- term Liabilities). As set
forth in Section 2.2(a)(vii) above, all liabilities of Manatee or any of its
direct or indirect subsidiaries, shall be Prohibited Liabilities, including,
without limitation, any Manatee Liability, as set forth in Section 2.2(a)(viii)
above, all liabilities of the Kansas Subsidiaries and the Illinois Subsidiaries
shall constitute Prohibited Liabilities, as set forth in Section 2.2(d)(ii)
above, the SCHM Prohibited Liabilities shall constitute Prohibited Liabilities,
and as set forth in Section 2.2(c) above the SV/South Florida Liabilities shall
be Prohibited Liabilities. At Closing, the Principal Shareholders shall assume
and undertake in a writing satisfactory to Buyer (the "UNDERTAKING") to perform
all Prohibited Liabilities when and as the same become due in accordance with
their terms. The Company, its subsidiaries and Buyer will not assume any
liabilities of any Shareholder or provide any guaranty therefor or obtain any
release of any of the same.
2.4 DESIGNATED CONTRACTS. Within ten (10) business days after
the date hereof, Buyer shall deliver to the Shareholders' Representative
Schedule 2.4 setting forth each of the Contracts identified on Schedule 5.7(b)
that the Company or any of its subsidiaries shall not retain as of the Closing
(the "DESIGNATED CONTRACTS"); provided that no Management Agreement or Tenancy
Lease shall be included on Schedule 2.4. Within five (5) days after Buyer shall
have delivered Schedule 2.4 to Shareholders' Representative, the Shareholders'
Representative may terminate this Agreement in accordance with Section 13.1 by
giving notice thereof during such five (5) day period if any Contracts shall be
listed on Schedule 2.4. If Shareholders' Representative shall not so notify
Buyer within such time period, then such right to terminate this Agreement shall
expire. Prior to the Closing, each Contract described on Schedule 5.26 and each
other Designated Contract shall be terminated (or the Company and its
subsidiaries shall otherwise be released from all liability with respect
thereto) at the sole cost and expense of the Principal Shareholders (or at the
cost of the Company or its subsidiaries to the extent such cost is expressly
included in the calculation of the Actual Working Capital Amount or Actual
Long-term Liabilities). It shall be a condition precedent of Buyer to the
Closing that all required consents shall have been obtained from each party to
each Contract (that is not a Designated Contract) with respect to which the
change in control contemplated by this Agreement requires such consent ("CONSENT
CONTRACTS"), except to the extent that the failure to obtain such consents with
respect to Consent Contracts that do not constitute Lease-Related Contracts (as
hereinafter defined) is not reasonably likely to have a material adverse effect
on the Company or the operation of the Business. The Company (prior to the
Closing only) and each Principal Shareholder hereby jointly and severally
represent and warrant to Buyer that Schedule 5.7(b) correctly identifies each
Consent Contract that is necessary for the Company or any Subsidiary to continue
as the lessee under any Lease other than the Georgia billing office Lease
identified as item 9 (ee) on Schedule 5.7(b) (each, a "LEASE-RELATED CONTRACT").
If the Company and Shareholders comply with their obligations under Section 9.4
below and any required consent
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is not obtained on or prior to Closing with respect to any Lease-Related
Contract, then Buyer shall not be permitted to terminate its obligations under
this Agreement by reason thereof, but the Base Amount (and, correspondingly, the
Series A Merger Consideration and the Series B Merger Consideration), shall be
reduced by the amount allocated to the Facility to which such Lease-Related
Contract relates as set forth on Annex A to Schedule 5.7(b); provided, however,
that if the aggregate amount of such reduction to be made by reason of this
Section 2.4 shall be equal to or exceed $7,000,000, then Buyer shall be entitled
to terminate its obligations under this Agreement. If the Company or any of its
subsidiaries shall enter into any agreement, lease, contract, instrument or
commitment after the date hereof and prior to Closing that would be deemed to be
"material" as defined in Section 5.7 below if it were in existence on the date
hereof, or if there shall be disclosed any agreement, lease, contract,
instrument or commitment that should have been disclosed on Schedule 5.7(b)
hereto but that was not so disclosed, then Buyer shall have five (5) business
days from the date on which so disclosed to Buyer to notify the Shareholders'
Representative as to whether such agreement, lease, contract, instrument or
commitment shall be a Designated Contract. If Buyer fails to so notify the
Shareholders' Representative then such agreement, lease, contract, instrument or
commitment shall not be deemed to be a Designated Contract. Without limiting the
generality of the foregoing, all of the employment agreements referred to in
Schedule 6.6A to the SCHM Stock Purchase Agreement other than the one-year
employment agreements with Brenda Canada, Sharon Leuzinger, Pamela Stripling,
Tama Douglas, and Paul Stickland substantially in the form heretofore provided
by Buyer to the Principal Shareholders, shall be terminated (or all amounts
payable under such employment agreements at any time shall be included as
current liabilities in the working capital of the Company and its subsidiaries
on a consolidated basis as of the Closing Date regardless of whether in
accordance with GAAP); provided further, that in the case of the employment
agreement with Timothy Johnson, such employment agreement need not be terminated
on the condition that any payments that may become due to such employee upon the
subsequent termination of his employment after the second anniversary of the
Closing Date (without releasing him from any restrictive covenants), shall be
Prohibited Liabilities (and shall not be subject to Section 12.6(b) below).
2.5 ESCROW INDEMNIFICATION.
(A) (I) At the Closing, pursuant to an Escrow Agreement to be
executed by the parties in substantially the form and substance of Exhibit
2.5(a)(i) hereto, the Escrow Deposit shall be deposited with CoreStates Bank,
N.A. or another escrow agent acceptable to Buyer and Shareholders'
Representative (the "ESCROWEE") and shall be held by the Escrowee, together with
all interest or income, if any, earned thereon in accordance with the Escrow
Agreement, as a non-exclusive source of indemnification from the Principal
Shareholders for any amount due to any Buyer Indemnitee (as such term is
hereinafter defined in Section 12.2) pursuant to Articles II, XII, or otherwise.
The Escrow Deposit (plus all interest or income earned thereon in accordance
with the Escrow Agreement) less any claims made for Losses (as such term is
defined in Section 12.2) and any amounts paid to Buyer or the Principal
Shareholders in accordance with Section 2.2(b) above shall be released to
Shareholders' Representative (for distribution to the Principal Shareholders) on
the second anniversary of the Closing Date (the "ESCROW RELEASE DATE"). If on
the Escrow Release Date, all amounts that may be due to the Principal
Shareholders with respect to the extension of the Carr/Foster Leases have not
been paid to the Principal Shareholders, then such unpaid amounts shall
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be delivered to Buyer in shares of IHS Stock, valued using the Closing Date as
the date of determination or cash, at Principal Shareholders' election; provided
however, that such delivery to Buyer shall not relieve Buyer of its obligations
with respect thereto under Section 2.2(b), above.
(II) At the Closing, pursuant to the Manatee Escrow
Agreement to be executed by the parties in substantially the form and substance
of Exhibit 2.5(a)(ii) hereto, the Manatee Escrow Deposit shall be deposited with
the Escrowee and shall be held by the Escrowee, together with all interest or
income, if any, earned thereon in accordance with the Manatee Escrow Agreement,
as a non-exclusive source of indemnification from the Principal Shareholders for
any amount due to any Buyer Indemnitee pursuant to Section 12.2(d), below. The
Manatee Escrow Deposit (plus all interest or income earned thereon in accordance
with the Manatee Escrow Agreement) less any claims made for Losses pursuant to
Section 12.2(d), below, shall be released to the Shareholders' Representative
(for distribution to the Principal Shareholders) on the earlier to occur of: (x)
the third anniversary of the Closing Date and (y) such date as Buyer, the
Company and their respective subsidiaries are fully released from the Manatee
Liability in writing satisfactory in form and substance to Buyer (the "MANATEE
RELEASE DATE").
(B) Subject to the limitations set forth in Article III below
(including without limitation, with respect to the sale of shares of IHS Stock
issued pursuant to this Agreement), if Shareholders' Representative shall so
request, the shares of IHS Stock constituting all or part of the Escrow Deposit
or Manatee Escrow Deposit, as the case may be, shall be sold in a bona fide
third party transaction if the entire proceeds (net of broker's fees and
commissions) of such sale shall become part of the Escrow Deposit or Manatee
Escrow Deposit, as the case may be, and shall be deposited with the Escrowee and
held pursuant to the Escrow Agreement or Manatee Escrow Agreement, as the case
may be, and Buyer shall have reasonably determined that a satisfactory procedure
shall have been established so that at all times before, during and after such
sale, the escrowed shares of IHS Stock to be sold and said proceeds (net of
broker's fees and commissions) thereof shall be subject to the sole possession
and control of the Escrowee pursuant to the terms of the Escrow Agreement or
Manatee Escrow Agreement, as the case may be and shall be, free and clear of all
Liens of third parties (other than Liens in favor of the Escrowee to the extent,
if any, provided in the Escrow Agreement or Manatee Escrow Agreement, as the
case may be ).
(C) If any shares of IHS Stock constituting any part of
the Escrow Deposit or Manatee Escrow Deposit, as the case may be shall be sold,
the gross proceeds thereof shall be held by the Escrowee pursuant to the terms
of the Escrow Agreement or Manatee Escrow Agreement, as the case may be, and
shall be invested in accordance with the instructions of Shareholders'
Representative (subject to the reasonable approval of Buyer) as provided in the
Escrow Agreement or Manatee Escrow Agreement, as the case may be. Any interest
or income or dividends paid on or in respect of all or any part of the Escrow
Deposit or Manatee Escrow Deposit ("ESCROW INCOME") shall be added to, and shall
thereafter constitute part of the Escrow Deposit or Manatee Escrow Deposit, as
the case may be, and shall be paid pro rata with any payment of the Escrow
Deposit or Manatee Escrow Deposit, as the case may be not constituting Escrow
Income.
(D) The costs, fees and expenses of the Escrowee shall be
borne equally by Buyer, on the one hand, and Principal Shareholders, on the
other hand.
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2.6 ANGELL TRANSACTIONS.
(A) ANGELL OPTIONS. On or prior to Closing, the Principal
Shareholders and the Company shall cause all of the Angell Options to be
exercised. The Angell Family Limited Partnership shall be permitted to exercise
the Angell Options to purchase up to an amount such that the Angell Group will
hold Series C Common Shares entitling the Angell Group to receive up to
$1,000,000 of IHS Shares if, but only if, each holder of the Angell Shares shall
have entered into the Angell Agreement. The Merger Consideration otherwise
allocated to the Series A Common Shares hereunder shall be reduced by the amount
of Merger Consideration payable to the holders of the Angell Shares under the
Angell Agreement.
(B) ANGELL GROUP NOTES. Buyer agrees that at the Closing it
shall guaranty the repayment of the Angell Group Notes and that the Angell Group
Notes may be amended to provide that they shall not be prepaid during the
three-year period following the Closing Date, if the Pledged Shares shall be
released from any Liens held by any or all members of the Angell Group.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. As set forth in this Agreement, the Merger
Consideration and various adjustments to the Merger Consideration shall be
payable by means of the delivery of shares of IHS Stock. Such deliveries shall
be made in accordance with the following:
(A) SHARE VALUE. Whenever shares of IHS Stock are to be
delivered pursuant to this Agreement, the number of shares of IHS Stock shall be
valued as of the Applicable Valuation Date (defined below) by using the average
closing New York Stock Exchange ("NYSE") price of IHS Stock for the sixty (60)
trading day period ending on the date which is two (2) trading days prior to the
applicable date of determination. Unless otherwise expressly provided elsewhere
in this Agreement, the applicable valuation date (the "APPLICABLE VALUATION
DATE") shall mean the date on which the dollar amount to be paid (whether by
reason of an indemnification claim or Base Amount adjustment or otherwise) is
finally determined.
(B) REGISTRATION RIGHTS. Buyer will use its best efforts to
cause to be prepared, filed and declared effective by the Securities and
Exchange Commission (the "COMMISSION"), within ninety (90) days following the
Closing Date, a registration statement (a "SHELF REGISTRATION STATEMENT") for
the registration of the IHS Stock issued to Shareholders, under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and Buyer shall maintain the
effectiveness of such registration statement for a period of one (1) year
following the Closing Date, or until no Shareholder shall own any of the shares
of IHS Stock issued pursuant to this Agreement, whichever shall occur first, in
each case except to the extent that an exemption from registration may be
available.
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(C) REGISTRATION EXPENSES. Shareholders shall not be
responsible for, and Buyer shall bear, all of the reasonable expenses of the
Buyer related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the Shelf Registration Statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of shares of IHS Stock and the costs
and expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of the shares of IHS Stock under the Blue Sky
laws of various jurisdictions. Buyer, however, shall not be required to pay or
incur underwriter's or brokerage discounts, commissions or expenses, or to pay
or incur any costs or expenses arising out of any Shareholder's failure to
comply with its obligations under this Article III, or to pay or incur any costs
or expenses arising out of the inclusion of any transferee of any Shareholder in
the Shelf Registration Statement.
(D) RESALE LIMITATIONS. The Principal Shareholders hereby
covenant with Buyer that all resales by the Principal Shareholders and, if any,
their transferees of such shares (other than transferees acquiring shares
pursuant to a sale pursuant to an effective registration statement or Rule 144
promulgated pursuant to the Securities Act ("RULE 144") and in accordance with
subsection (d)) of shares of IHS Stock issued pursuant to this Agreement shall
be effected solely through Salomon Smith Barney, Inc., as broker, and resales by
the Principal Shareholders and, if any, their transferees of such shares (other
than transferees acquiring shares pursuant to a sale pursuant to an effective
registration statement or Rule 144 and in accordance with this subsection (d)),
shall not at any time, in the aggregate, during the period commencing on the
Closing Date and ending 120 days after the Effective Date, exceed one hundred
and thirty thousand (130,000) shares (plus, if any shares of IHS Stock are
issued to the Principal Shareholders pursuant to subsection (k) below,
twenty-five percent (25%) of the number of such additionally issued shares)
during any thirty (30) day period, or thereafter exceed One Hundred Thousand
(100,000) shares during any thirty (30) day period. For purposes of this
subsection (d), the term Principal Shareholder shall include the Magnolia
Shareholder, but shall exclude the Angell Group members, if any, and the
Minority Shareholders with respect to any shares of IHS Stock received by them
by reason of the Merger. Notwithstanding the foregoing, Buyer agrees that the
foregoing volume restrictions shall not apply to: sales, until 150 days after
the Shelf Registration Statement is declared effective, of shares of IHS Stock
held in escrow and made pursuant to Section 2.5(b) above to satisfy
indemnification or Merger Consideration reduction obligations of the
Shareholders.
(E) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholders with respect to the shares of
IHS Stock as provided in this Section 3.1, after the Closing Buyer covenants and
agrees as follows:
(I) Buyer will promptly notify the Shareholders'
Representative, at any time when a prospectus relating to the Shelf Registration
Statement is required to be delivered under the Securities Act, of the happening
of any event known to Buyer as a result of which the prospectus included in the
Shelf Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
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(II) Buyer shall furnish the Shareholders' Representative
with such number of prospectuses as shall reasonably be requested by
Shareholders' Representative in connection with any actual or contemplated
resales.
(III) Subject to the ultimate sentence in Section 3.1(c)
above, Buyer shall take all necessary action which may be required in qualifying
or registering the shares of IHS Stock included in a Shelf Registration
Statement for offering and resale under the securities or Blue Sky laws of such
states as reasonably are requested by the Shareholders' Representative, provided
that Buyer shall not be obligated to qualify as a foreign corporation or dealer
to do business under the laws of any such jurisdiction.
(IV) The information included or incorporated by reference
in the Shelf Registration Statement will not, at the time such Shelf
Registration Statement becomes effective, contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
as necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or as necessary to
correct any statement in any earlier filing of such Shelf Registration Statement
or any amendments thereto. The Shelf Registration Statement will comply in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall indemnify the Shareholders and each person,
if any, who controls such Shareholders within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in such Shelf Registration Statement
executed by Buyer or based upon written information furnished by Buyer filed in
any jurisdiction in order to qualify shares of IHS Stock under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, NYSE or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to Buyer by any of the Shareholders specifically for use in such Shelf
Registration Statement (it being understood that Buyer may rely on the
representations and warranties of any Shareholder (relating to such Shareholder
only) made pursuant to this Agreement in preparing the Shelf Registration
Statement), any amendment or supplement thereto or any application, as the case
may be. If any action is brought against any of the Shareholders or any
controlling person of any of the Shareholders in respect of which indemnity may
be sought against Buyer pursuant to this subsection 3.1(e)(iv), such person
shall within thirty (30) days after the receipt thereby of a summons or
complaint, notify Buyer in writing of the institution of such action and Buyer
shall assume the defense of such action, including the employment and payment of
reasonable fees and expenses of counsel (reasonably satisfactory to the
applicable Shareholder or such controlling person). Such Shareholder or such
controlling person shall have the right to employ her, his, its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such Shareholder or such controlling person unless (A) the
employment of such counsel shall have been authorized in writing by Buyer in
connection with the defense of such action, or (B) Buyer shall not
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have employed counsel to have charge of the defense of such action within twenty
(20) days of the request therefor, or (C) such indemnified party or parties
shall have reasonably concluded and notified Buyer that there may be defenses
available to her, him, it or them which are different from or additional to
those available to Buyer (in which case, Buyer shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for the Shareholders and such controlling persons
shall be borne by Buyer.
(V) The Shareholders, and their successors and assigns,
shall severally, and not jointly, indemnify Buyer, its officers and directors
and each person, if any, who controls Buyer within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Exchange Act against all loss, claim, damage,
expense and liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Securities Act, the Exchange Act or any
other statute, common law or otherwise (Federal, State, local or otherwise),
arising from inaccuracies in or omissions from information furnished in writing
by or on behalf of any of such Shareholders, or any of their successors or
assigns specifically for inclusion in the Shelf Registration Statement, any
Exchange Act filing or any State Blue Sky Law filing.
(F) NOTICE OF SALE. No Shareholder shall resell or otherwise
transfer any interest in any of the shares of IHS Stock issued to such
Shareholder pursuant to this Agreement unless such Shareholder shall have
complied in all material respects, with all of his, her or its obligations under
this Agreement, and unless such Shareholder shall have given prior notice to
Buyer, describing in reasonable detail such Shareholder's intention to effect
the transfer and the manner of the proposed transfer. If the transfer is to be
pursuant to an effective Shelf Registration Statement as provided herein, such
Shareholder will resell only in compliance with the disclosure therein and
discontinue any offers and sales thereunder upon notice from Buyer to the
Shareholders' Representative that the Shelf Registration Statement relating to
the shares of IHS Stock being transferred is not "current" until Buyer gives
further notice that offers and sales may be recommenced. In the event of any
such notice from Buyer, Buyer agrees to file expeditiously such amendments to
such Shelf Registration Statement as may be necessary to bring it current during
the period specified in this Section 3.1 and to give prompt notice to
Shareholders' Representative when the Shelf Registration Statement has again
become current. If any of the Shareholders delivers to Buyer an opinion of
counsel reasonably acceptable to Buyer and its counsel in form and substance
reasonably acceptable to them and to the effect that the proposed transfer of
shares of IHS Stock may be made without registration under the Securities Act
and all applicable state securities laws, such Shareholder will, subject to
Section 3.1(d) above, be entitled to transfer said shares of IHS Stock in
accordance with the terms of the notice and opinion of their counsel.
(G) CONDITIONS. It shall be a condition precedent to the
obligations of the Buyer to take any action pursuant to this Article III that
the Shareholders' shall furnish to the Buyer such information regarding
themselves, the shares of IHS Stock held by them, the intended method of
disposition of such securities, and such other information as shall reasonably
be requested by Buyer to the extent necessary to effect the registration of
their shares of IHS Stock. In that connection, each Shareholder shall be
required represent and warrant to the Buyer that all such
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information which is given is both complete and accurate in all material
respects. It also shall be a condition precedent to the obligations of the Buyer
to take any action pursuant to this Article III that the Shareholders shall
deliver to the Buyer a statement in writing that they bona fide intend to
resell, transfer or otherwise dispose of the shares of IHS Stock. Each
Shareholder will, severally, promptly notify Buyer at any time when a prospectus
relating to a Shelf Registration Statement covering such Shareholder's shares
under this Section 3.1 is required to be delivered under the Securities Act, of
the happening of any event known to such Shareholder as a result of which the
prospectus included in such Shelf Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which such statements are
made.
(H) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of Buyer. Shareholders represent
and warrant to Buyer that the IHS Stock being issued hereunder are acquired, and
will be acquired, by the Shareholders for investment for their own accounts and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act or any applicable state securities law
other than pursuant to an effective registration statement or Rule 144; the
Shareholders acknowledge that the shares of IHS Stock issued to them pursuant to
this Agreement constitute restricted securities under Rule 144, and may have to
be held indefinitely, and the Shareholders agree that no shares of IHS Stock
issued to them pursuant to this Agreement may be sold, transferred, assigned,
pledged or otherwise disposed of except pursuant to an effective registration
statement or an exemption from registration under the Securities Act, the rules
and regulations thereunder, and under all applicable state securities laws. The
Shareholders represent and warrant that each has the knowledge and experience in
financial and business matters, is capable of evaluating the merits and risks of
the investment, is able to bear the economic risk of such investment, and is an
accredited investor within the meaning of Regulation D promulgated pursuant to
the Securities Act. The Shareholders represent and warrant that each has had the
opportunity to make inquiries of and obtain from representatives and employees
of Buyer such other information about Buyer as he, she or it deems necessary in
connection with such investment.
(I) LEGEND. It is understood that, prior to resale of any
shares of IHS Stock pursuant to an effective Shelf Registration Statement
pursuant to subsection (e) above, the certificates evidencing such shares of IHS
Stock shall bear the following (or a similar) legend (in addition to any legends
which may be reasonably required in the opinion of Buyer's counsel by the
applicable securities laws of any state), and upon resale of such shares
pursuant to such an effective registration, new certificates shall be issued for
the shares sold without such legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
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(J) CERTAIN TRANSFEREES. Except in the case of any transfer of
any shares of IHS Stock issued pursuant to this Agreement to a person pursuant
to the laws of intestacy and succession upon the death of a Shareholder or in an
open market transaction subsequent to the effective date of, and pursuant to,
the Shelf Registration Statement covering such shares of IHS Stock or in
accordance with Rule 144 promulgated under the Securities Act, no Shareholder
shall transfer any such shares of IHS Stock to any person or entity unless such
transferee shall have agreed in a writing, in form and substance satisfactory to
Buyer, to be bound by the provisions applicable to the Shareholders under this
Article III and such transfer shall be made in accordance with all applicable
Federal and state securities laws as set forth in subsection (g) above and
otherwise in accordance with this Article III.
(K) If, notwithstanding the use of its best efforts as
provided in subsection (b) above, Buyer does not cause the Shelf Registration
Statement to be prepared, filed and declared effective within one hundred and
fifty (150) days after the Closing Date, then as of the date that such Shelf
Registration Statement shall become effective (the "EFFECTIVE DATE"), the number
of Additional IHS Shares shall be adjusted so that the number of Additional IHS
Shares issued to the Principal Shareholders pursuant to this Agreement shall
have an aggregate fair market value equal to the original principal amount of
the Closing Loans based upon a price per share of such stock equal to the
average closing NYSE price of such stock for the thirty (30) trading day period
ending on the date which is two (2) trading days prior to such effective date
(the "ADJUSTED MARKET VALUE PER ADDITIONAL IHS SHARE"). Within five (5) business
days after such effective date Buyer shall deliver notice (the "ADJUSTMENT
NOTICE") to the Principal Shareholders of the Adjusted Market Value Per
Additional IHS Share and the number of shares to be delivered by Buyer to
Principal Shareholders (if the Adjusted Market Value Per Additional IHS Share
shall be less than the average market value per share used on the Closing Date
(the "INITIAL MARKET VALUE PER SHARE") or by the Principal Shareholders to Buyer
(if the Adjusted Market Value Per Additional IHS Share shall be greater than the
Initial Market Value Per Share) so as to effect the adjustment described in this
subsection 3.l(k). The number of shares to be delivered or issued, as the case
may be, shall be rounded up or down so that no fractional shares need be issued.
Within five (5) business days the parties shall make the delivery of the shares
of IHS Stock required in the Adjustment Notice.
(L) RULE 144 REPORTING. With a view to making available the
benefits of the certain rules and regulations of the Commission which may permit
the resale of restricted securities to the public without registration under
certain circumstances, the Buyer agrees, so long as there shall be outstanding
in the hands of the Shareholders 100,000 shares of IHS Stock issued pursuant to
this Agreement, to furnish to each Shareholder who so reasonably requests in
writing from time to time, a written statement by the Buyer as to its compliance
with the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the Buyer,
and such other reports and documents so filed with the Commission and that are
publicly available as such Shareholder may reasonably request from time to time
in availing himself, herself or itself of any rule or regulation of the
Commission allowing such holder to sell any such shares without registration.
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ARTICLE IV: THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The closing (the "CLOSING") of
the transactions contemplated by this Agreement shall take place by mail through
escrow arrangements satisfactory to the parties hereto on the day that is one
(1) business day after satisfaction of all of the conditions to closing set
forth in this Agreement, shall have been tendered, made or expressly waived, but
in no event later than March 31, 1998, unless all necessary regulatory approvals
have not been obtained. In such event, the Closing shall take place at such
other time and place upon which the parties may agree. The date on which the
Closing is held is referred to in this Agreement as the "CLOSING DATE".
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SHAREHOLDERS AND COMPANY
The Company (prior to the Closing) and each Principal
Shareholder hereby jointly and severally represent and warrant to Buyer as
follows:
5.1 ORGANIZATION AND STANDING OF THE COMPANY; SUBSIDIARIES.
(A) Except as set forth on Schedule 5.1(a), the Company
has no equity interest or investment, directly or indirectly, in any other
corporation, limited liability company or partnership, limited or general
partnership, joint venture, or other entity, organization or association.
Schedule 5.1(a) also sets forth the percentage equity interest and percentage
voting interest held directly or indirectly (in which case the nature of such
indirect interest also is set forth on Schedule 5.1(a)) in the entities, if any,
listed on Schedule 5.1(a) and whether or not such equity interest or voting
interest is held beneficially and of record. The parties agree that each entity
in which the Company holds an equity interest and that is identified as a
"Subsidiary" on Schedule 5.1(a) is sometimes referred to in this Agreement as a
"SUBSIDIARY". Except as set forth on Schedule 5.1(a), the financial results of
each Subsidiary are included in the Financial Statements (as such term is
hereinafter defined in Section 5.8) on a consolidated basis in accordance with
GAAP.
(B) Except as set forth on Schedule 5.1(b), each of the
Company and each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation. Copies of the
Articles of Incorporation and By-Laws of the Company and copies of the Articles
of Incorporation and By-Laws or other governance documents (such as certificates
of limited partnerships and limited partnership agreements in the case of
limited partnerships or articles of organization and operating agreements in the
case of limited liability companies) ("GOVERNING DOCUMENTS"), and all amendments
thereof to date, have been delivered to Buyer and are complete and correct. Each
of the Company and each Subsidiary has the power and authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it and to enter into this Agreement and each of the Transaction
Documents (as defined below in Section 5.2) to which it is a party and to
perform its obligations hereunder and thereunder. Each of the Company and each
Subsidiary is qualified to do business as a foreign corporation in each state
where the ownership of its assets or the conduct of its business would make such
qualification necessary.
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5.2 AUTHORITY. The Company has the full corporate power and
authority to make, execute, deliver and perform this Agreement (including all
Schedules and Exhibits hereto), and all other agreements, instruments,
certificates and documents required or contemplated hereby or thereby
(collectively "TRANSACTION DOCUMENTS") to be executed or delivered by it, and to
consummate all of the transactions contemplated hereby and thereby. Such
execution, delivery, performance and consummation have been duly authorized by
all necessary action, corporate or otherwise, on the part of the Company. Any
rights of any holder of equity in the Company to seek appraisal or to dissent to
the transactions contemplated hereby have been irrevocably waived.
(B) Each Principal Shareholder has the full legal power and
capacity to make, execute, deliver and perform this Agreement (including all
Schedules and Exhibits hereto), and all Transaction Documents to be executed or
delivered by him, her, or it, and to consummate all of the transactions
contemplated hereby and thereby. Such execution, delivery, performance and
consummation have been made in the exercise of each such Principal Shareholder's
free will and volition, and any necessary consents of holders of indebtedness of
such Principal Shareholders to the transactions contemplated by this Agreement
have been obtained. In the case of any Principal Shareholder that is not an
individual person, such execution, delivery, performance and consummation has
been duly authorized by all necessary action, corporate, limited partnership,
limited liability company or otherwise, on the part of such Principal
Shareholder and its equity holders.
5.3 BINDING EFFECT. This Agreement constitutes, and when delivered
at or prior to the Closing, each Transaction Document executed by any Principal
Shareholder or the Company will constitute, the legal, valid and binding
obligations of such Principal Shareholder or the Company, as the case may be,
enforceable against it, him or her, as the case may be, in accordance with their
respective terms.
5.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by any Principal
Shareholder or the Company nor the performance by any Principal Shareholder or
the Company of the transactions contemplated hereby and thereby, conflicts with,
or constitutes a breach of or a default under or will cause the termination of
(A) in the case of the Company, any Subsidiary or any Principal Shareholder that
is not an individual person, its Certificate of Incorporation or other Governing
Document; or (B) any judgment, order, writ, injunction, decree, statute, law,
rule, regulation, directive, mandate, ordinance or guideline ("GOVERNMENTAL
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES") applicable to it, him or her or the operation of
the Business or the ownership of any of the Assets; or (C) any agreement,
indenture, contract or instrument to which any Principal Shareholder is now a
party or by which any of them or any of their respective assets is bound.
5.5 CONSENTS. Except as set forth on Schedule 5.5, no
authorization, consent, approval, license, filing or registration by the
Company, any Subsidiary, any Shareholder or, to the best knowledge of the Group,
the Buyer, with any Governmental Authority, is or will be necessary in
connection with the entry into, execution, delivery and performance of this
Agreement or any of the Transaction Documents by the Company or any Principal
Shareholder, or for the consummation of the transactions contemplated hereby and
thereby.
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5.6 SCHEDULE OF ASSETS AND PROPERTIES; TITLE; CONDITION.
(A) (I) Set forth on Schedule 5.6(a)(i)-1 is a complete and
accurate list, arranged by Facility, of all material items of machinery, and all
material items of equipment, office equipment, and furniture, and any other
items of personal property, in each case that comprise or are utilized or are
held for use in connection with the Company or any of the Subsidiaries or are
necessary to the operation of the Business. For purposes of the foregoing,
"material" means an item having a value in excess of $10,000. Set forth on
Schedule 5.6(a)(i)-2 is a complete and accurate list, arranged by Facility (and
indicating the interest held therein), of all vehicles used in connection with
the Business or owned or leased by the Company or any Subsidiary. Said Schedules
5.6(a)(i)-1 and 5.6(a)(i)-2 also set forth which of such assets are owned by the
Company or any of the Subsidiaries (the "OWNED ASSETS"), leased by the Company
or any of the Subsidiaries (the "LEASED ASSETS"), or managed by the Company or
any of the Subsidiaries (the "MANAGED ASSETS").
(II) Set forth on Schedule 5.6(a)(ii) is a complete and
accurate list of all patents, trademarks, service marks, copyrights, or
applications for any of the same, franchises, proprietary rights and other
authorizations (other than Licenses as set forth on Schedule 5.10 hereof), if
any, and any other items of intangible or intellectual property that are owned,
possessed or used by the Company (owned, managed, leased or licensed) that
comprise or are utilized or are held for use in connection with the Company or
any of the Subsidiaries or are necessary to the operation of the Business (the
"PROPRIETARY RIGHTS"). There is no basis for any claim of infringement or
misappropriation by or against the Company or any Subsidiary with respect to any
of the Proprietary Rights.
(B) Except as set forth on Schedule 5.6(b), the Company or one
of its Subsidiaries has good and marketable title to all of the Owned Assets or
a good and valid leasehold interest in all of the Leased Assets, or the
unrestricted right to use all of the Managed Assets, subject to no liens,
claims, security interests, mortgages, pledges, charges, easements, rights of
set off, restraints on transfers, restrictions on use, options, or encumbrances
of any kind or nature whatsoever ("LIENS"), other than Permitted Liens (as
defined below in subsection (c)). Except as set forth on Schedule 5.6(b), no
person other than the Company or one of its Subsidiaries has any right to the
use or possession of any of such property and no currently effective financing
statement (other than financing statements granted by lessors of any Facilities
leased to the Company or one of the Subsidiaries or by operators of any
Facilities managed by any of the Company or Subsidiaries) with respect to any of
such personal property has been filed in any jurisdiction, and none of the
Company and the Subsidiaries has signed any such financing statement or any
security agreement authorizing any secured party thereunder to file any such
financing statement. Since formation, each of the Company and each Subsidiary
has conducted its business activities only under the corporate and/or trade
names set forth in Section 5.6(b) hereto. All of such personal property
comprising equipment, improvements, furniture and other tangible personal
property, whether owned, leased, managed or licensed, is in good operating
condition and repair except for normal wear and tear in the ordinary course of
business and except for items to be replaced in the ordinary course of business
consistent with past practice, and is functioning in the manner and for the
purpose for which it was intended and is in compliance with (and the operation
thereof is in compliance with) all applicable Governmental Requirements, and is
sufficient and suitable to operate the Business in a normal and efficient
manner.
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(C) "PERMITTED LIENS" means:
(I) each lien, if any, described on Schedule 5.6(c)
hereto;
(II) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days, that in the aggregate do not
exceed $50,000;
(III) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business, provided that each such deposit
shall be included in the Assets and shall not exceed $15,000 in any one case, or
$75,000 in the aggregate;
(IV) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation;
(V) (A) liens in favor of Magnolia or its wholly owned
subsidiaries, or (B) the rights of lessors of Leased Assets under the leases
thereof, or (C) Liens created by the owners of any Leased Facilities (as
hereinafter defined in Section 5.11(b)) to the extent permitted by the
applicable Tenancy Leases (as hereinafter defined in Section 5.11(b)) (but only
to the extent that such Liens will not have a material adverse effect on the
operation of the applicable Leased Facility), or (D) the rights of the owners of
Managed Assets under the applicable Management Agreements, or (E) Liens created
by the owners of Managed Facilities (as hereinafter defined in Section 5.11(b))
to the extent permitted by the applicable Management Agreement (but only to the
extent that such Liens will not have a material adverse effect on the operation
of the applicable Managed Facility); and
(VI) easements, rights-of-way, restrictions and other
encumbrances which, in the aggregate, are not substantial in amount with respect
to any Facility, and which do not in any case materially interfere with the
ordinary conduct of such Facility.
(D) Except as set forth on Schedule 5.6(d), none of the
personal property referred to in subsection (a) above is subject to a lease,
sublease, license, sublicense, conditional sale, or similar arrangement.
Schedule 5.6(d) sets forth the annual rental and unexpired lease term of each
such item, and all the information set forth thereon is true, complete and
correct.
(E) The accounts receivable of the Company and the
Subsidiaries are reflected properly on each of their books and records in
accordance with GAAP, have been billed or invoiced in the ordinary course of
business consistent with past practice, are not in dispute, and are bona fide.
(F) The quantities of inventory and supply items referred to
in subsection (a) above are reasonable in light of the present and anticipated
volume of the business of the Company and the Subsidiaries and the inventory and
supplies are good, usable, merchantable, and salable in the ordinary course of
the business of the Company and the Subsidiaries, in each case, as determined by
the Company in good faith and consistent with past practice.
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5.7 CONTRACTS.
(A) The Principal Shareholders have made available for review
by Buyer true, complete and correct copies of each agreement, lease, contract,
instrument or commitment relating to the Business or to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of the
Assets are bound ("CONTRACTS") that is in writing, and a written description of
each material oral Contract. Without limiting the foregoing, the Principal
Shareholders have delivered to Buyer true, complete and correct copies of each
material written Contract. Each material Contract was entered into and requires
performance in the ordinary course of business and is in full force and effect.
None of the Company and the Subsidiaries is in default under any material
Contract and there has not been asserted, either by or, to the knowledge of the
Group, against the Company or any Subsidiary under any material Contract, any
notice of default, set-off or claim of default. Except as set forth on Schedule
5.7(b), to the knowledge of the Group, the parties to the material Contracts,
other than the Company and the Subsidiaries, are not in default of any of their
respective obligations under any of the Contracts, and there has not occurred
any event which with the passage of time or the giving of notice (or both) would
constitute a default or breach under any material Contract. Except as set forth
in Schedule 5.7(b), all amounts payable or receivable under each of the
Contracts are, and will at the Closing Date, be on a current basis. Except as
set forth in Schedule 5.7(b), the change of control in the Company or any
Subsidiary to Buyer will not be deemed an assignment of, or require consent
under any material Contract. None of the Company, the Subsidiaries and the
Principal Shareholders has received notice or has reason to believe that any of
the material Contracts will be terminated by any party thereto within 90 days
after the date hereof pursuant to any provision thereof permitting any such
party to terminate such material Contract with or without cause. For purposes of
this Agreement, a Contract shall not be deemed to be "material" if: (i) it is
not required to be disclosed pursuant to subsection (b) below, and (ii) (x) it
is terminable by the Company or Subsidiary at a cost not to exceed $10,000 or
(y) it involves annualized payments of less than $50,000 and it is terminable at
no cost within thirty (30) days. Attached hereto as Exhibit 5.7(a) is a standard
form of therapy contract to which the Company or its Subsidiaries is a party. No
therapy or rehabilitation or respiratory services contract with Communi-Care of
America, Inc. or with any other third party deviates in any material respect
from such standard contract, except as set forth on Schedule 5.7(b).
(B) Except as listed on Schedule 5.7(b), no Company or
Subsidiary has any continuing rights or obligations under any written or
express, oral or implied:
(I) contract, agreement or commitment for the employment
or retention of, or collective bargaining, severance or termination of or with,
any director, officer, employee, consultant, sales representative, or agent or
group of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons (provided that the foregoing
shall not require the disclosure of immaterial oral agreements or oral
commitments such as "at will" contracts);
(II) contract, agreement or arrangement for the
acquisition or disposition of any assets, property or rights having a value in
excess of $10,000 or in excess of $25,000 in any series of related transactions
or requiring the consent of any party to the transfer and assignment of any such
assets, property or rights (by purchase or sale of assets, purchase or sale of
stock, merger or otherwise), including without limitation, option agreements;
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(III) contract, agreement, instrument or commitment which
contains any provisions requiring the Company or any Subsidiary to indemnify or
act for any other person or entity or to guaranty or act as surety for any other
person or entity;
(IV) contract, agreement or commitment restricting the
Company or any Subsidiary from, or in favor of the Company or any Subsidiary and
restricting any other person or entity from, conducting business anywhere in the
world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(V) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to the Business or any portion thereof or the
business of any other person or entity;
(VI) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment that involves annual payments in excess of $10,000;
(VII) contract, agreement or arrangement granting a
leasehold or other interest in personal property to the Company or any
Subsidiary, including without limitation, subleases, licenses and sublicenses
that involves annual payments in excess of $10,000;
(VIII) contract, agreement or arrangement granting a
leasehold or other interest in real property by any Company or Subsidiary,
including without limitation, subleases, licenses and sublicenses, other than
ordinary and customary rights of residents and patients of the Facilities;
(IX) contract, agreement or arrangement granting a
leasehold or other interest in real property to any Company or Subsidiary,
including without limitation, all Tenancy Leases (as defined in Section 5.11(b))
and Managed Leases (as defined in Section 5.11(c));
(X) management agreement with respect to any Facility (the
"MANAGEMENT AGREEMENTS");
(XI) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Company or any Subsidiary
not covered by clause (i) above;
(XII) agreement, consent order, plea bargain, settlement
or stipulation or similar arrangement with any Governmental Authority;
(XIII) agreement with respect to the settlement of any
litigation or other proceeding with any third person or entity;
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(XIV) agreement relating to the ownership, transfer,
voting or exercise of other rights with respect to any equity in the Company,
any Subsidiary or any other entity, including without limitation, registration
rights agreements, voting trust agreements and shareholder and proxy agreements;
or
(XV) agreement not made in the ordinary and normal course
of business and consistent with past practice, or that is not terminable by the
Company or the applicable subsidiary at any time within thirty (30) days at a
cost of not more than $10,000 or that involves annualized payments of in excess
of $50,000 that is not set forth in subsections (i) through (xiv) above.
5.8 FINANCIAL STATEMENTS.
(A) Attached hereto as Schedule 5.8(a) are the unaudited
financial statements of the Company and the Subsidiaries on a consolidated basis
for the fiscal quarters ended March 31, 1997, June 30, 1997, and September 30,
1997, and for the eleven (11) month period ended November 30, 1997, the audited
financial statements of the Company and the Subsidiaries on a consolidated basis
for the fiscal year ended December 31, 1995, and the audited financial
statements of the Company and the Subsidiaries on a consolidated basis for the
fiscal year ended December 31, 1996 (the "FINANCIAL STATEMENTS"). The Financial
Statements (including any related notes thereto) are true and correct in all
material respects and present fairly the financial condition and results of
operations of the Company as, at and for the periods therein specified and were
prepared in accordance with GAAP except as expressly set forth on Schedule
5.8(a). Each of the Financial Statements has been accompanied by the written
certification of the Chief Financial Officer of the Company and the Principal
Shareholders' to be true and correct in all material respects, to present fairly
the financial condition and results of operations of the Company and the
Subsidiaries on a consolidated basis as, at and for the periods therein
specified, and to have been prepared in accordance with GAAP except as expressly
set forth on Schedule 5.8(a). The books of account of the Company and the
Subsidiaries from which the Financial Statements were prepared accurately
reflect all of the items of income and expense, assets, liabilities and accruals
of the Company and the Subsidiaries. The income statements included in the
Financial Statements do not contain any items of special or nonrecurring income
or expense or any other income not earned or expense not incurred in the
ordinary course of business except as expressly specified therein, and such
financial statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(B) The unaudited balance sheet (the "BALANCE SHEET")
contained in the Financial Statements as of September 30, 1997 (the "BALANCE
SHEET DATE") reflects all liabilities as of the date thereof, and none of the
Company and the Subsidiaries has any liabilities that are not reflected thereon,
except for such current liabilities as have been incurred since the date of the
Balance Sheet in the ordinary course of business consistent with past practice,
and liabilities for the items and in the amounts listed on Schedule 5.8(b).
Except to the extent set forth or reserved against on the Balance Sheet there is
no basis for the assertion against the Company or any Subsidiaries of any
liability of any nature or in any amount (other than current or scheduled
liabilities as aforesaid).
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(C) Attached hereto as Schedule 5.8(c) are the unaudited
financial statements of the SCHM Subsidiaries on a consolidated basis for the
fiscal year ended June 30, 1997 and the five (5) month period ended November 30,
1997 (the "SCHM SUBSIDIARY FINANCIAL STATEMENTS"). The Financial Statements
(including any related notes thereto) are true and correct in all material
respects and present fairly the financial condition and results of operations of
the SCHM Subsidiaries as, at and for the periods therein specified and were
prepared in accordance with GAAP. The books of account of the SCHM Subsidiaries
from which the SCHM Subsidiary Financial Statements were prepared accurately
reflect all of the items of income and expense, assets, liabilities and accruals
of the SCHM Subsidiaries. The income statements included in the SCHM Subsidiary
Financial Statements do not contain any items of special or nonrecurring income
or expense or any other income not earned or expense not incurred in the
ordinary course of business except as expressly specified therein, and such
financial statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(D) Attached as Schedule 5.8(d) are the unaudited income
statements of the Dade County Facilities on a consolidated basis for the nine
(9) month period ended September 30, 1997 (the "DADE COUNTY FINANCIAL
STATEMENTS"). The Dade County Financial Statements (including any related notes
thereto) are true and correct in all material respects and present fairly the
financial condition and results of operations of the Dade County Facilities for
the periods therein specified and were prepared in accordance with GAAP. The
books of account of the Dade County Facilities from which the Dade County
Financial Statements were prepared accurately reflect all of the items of income
and expense, assets, liabilities and accruals of the Dade County Facilities. The
Dade County Financial Statements do not contain any items of special or
nonrecurring income or expense or any other income not earned or expense not
incurred in the ordinary course of business except as expressly specified
therein, and such financial statements include all adjustments, which consist
only of normal recurring accruals, necessary for such fair presentation.
5.9 MATERIAL CHANGES. Except as specifically described on
Schedule 5.9 hereto, since the Balance Sheet Date, there has not been any
material adverse change in the condition or prospects (financial or otherwise),
of the assets, properties or operations of the Company or any of its
Subsidiaries, and each of the Company and each of the Subsidiaries has conducted
its business only in the ordinary course, consistent with past practice. The
Company has identified and communicated to Buyer all material information that
is peculiar or unique to the Business (but not applicable generally to all
persons or entities in such business) with respect to any fact or condition
that, to the knowledge of the Group, might adversely affect the future prospects
(financial or otherwise) of any of the Business.
5.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 5.10
sets forth a description of each license, approval, permit, right or other
authorization, other than immaterial local business licenses, that is necessary
for the operation of any part of the Business (collectively, the "LICENSES").
The Company has delivered to Buyer true, correct and complete copies of all of
the Licenses and the applications therefor. Schedule 5.10 also sets forth a
description of each accreditation of the Business, copies of which the Principal
Shareholders have delivered to Buyer. The Company or one of the Subsidiaries, as
applicable, owns, possesses or has the legal right to use the Licenses, free and
clear of all Liens. None of the Company and the Subsidiaries is in default
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under, and none of the Company and the Subsidiaries has received any notice of
any claim or default or any other claim or proceeding relating to, any such
License. Except as set forth on Schedule 5.10, none of the Licenses will expire
prior to the first anniversary of the Closing Date or which may not be renewed
in the ordinary course of business. The Business is, as it is currently
conducted, licensed by all Governmental Authorities from which Licenses are
required to carry on the Business. No stockholder, director or officer, employee
or former employee of the Company or any Subsidiary, or any other person, firm
or entity owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part in any License, except for the licensors to the
Company or Subsidiary, and except for licenses of employees described on
Schedule 5.10 as such.
5.11 THE FACILITIES.
(A) Schedule 5.11(a) is a list of all of the Facilities, and
sets forth for each Facility all of the following information:
(I) the name of such Facility;
(II) the owner of the fee simple title to such Facility,
the lessee of such Facility (if applicable), and the manager of such Facility
(if applicable);
(III) (A) the number of licensed long-term care beds at
the Facility, (B) the current rates charged by the Facility to its patients or
residents, (C) the number of beds or units presently occupied in, and the
occupancy percentage at, the Facility, (D) the number of patients or residents
at the Facility: (x) who receive reimbursement from, or are participants in, any
federal or state Medicare or Medicaid program or (y) for whom payment is not
made by Medicare of Medicaid; and
(IV) whether said Facility is subject to a Short Lease
(and if so, the Short Lease Extension Allocation applicable to such Short
Lease), a Bishop Lease, or the New Greenville Lease, or is a Southeast Facility
or a Salem Facility.
(B) The Company or one of its Subsidiaries has good and
marketable title to the Facility that it listed as owned by it on Schedule
5.11(a)(ii) (the "OWNED FACILITY"), and has a good and valid leasehold interest
for the term specified in the applicable lease (each a "TENANCY LEASE") for each
Facility that it listed as leased by it on Schedule 5.11(a)(ii) (each a "LEASED
FACILITY"), the Company does not have knowledge that any person or entity listed
as the owner of any Leased Facility or of any Facility that is listed as managed
by the Company or one of its Subsidiaries on Schedule 5.11(a)(ii) (each a
"MANAGED FACILITY") does not have good and marketable title to such Leased or
Managed Facility, and the Company does not have knowledge that any person or
entity listed as the tenant of any Managed Facility does not have a good and
valid leasehold interest for a term that is at least as long as the term of the
applicable Management Contract for such Managed Facility, in each case, subject
to no Liens other than Permitted Liens;
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(C) To the best knowledge of the Company (but without
independent investigation), with respect to each Managed Facility that is
managed by the Company or any of its Subsidiaries pursuant to a Management
Agreement on behalf of an operator (each, a "LESSEE/OPERATOR") that leases
(rather than owns) such Managed Facility (each, a "MANAGED LEASED FACILITY"),
neither said Lessee/Operator nor the applicable landlord is in default of any of
its obligations under the lease (each, a "MANAGED LEASE") with respect to such
Managed Leased Facility, and there has not occurred any event which with the
passage of time or the giving of notice (or both) would constitute a default or
breach by either of them under said Managed Lease; and a true and complete copy
of each Managed Lease has been delivered to Buyer, and each such Managed Lease
is, to the best knowledge of the Company (but without independent
investigation), in full force and effect; and
(D) Except as set forth on Schedule 5.11(d), there are no
leases or other agreements of the Company as lessor or operator, granting to any
third party the right to use, occupy or manage any Facility (except the ordinary
and customary rights of the patients and residents of the Facilities), and no
person has any ownership interest or option or right of first refusal to acquire
any ownership interest in any Facility or any building or improvements thereon.
(E) No written notices of violation have been received by the
Company or any Subsidiary, or to the best knowledge of the Company (but without
independent investigation), by any owner of any Leased Facility or any
Lessee/Operator of any Managed Leased Facility, from any Governmental Authority
that remains in effect which prohibits or restricts the existing use of the
structures presently comprising the Facilities;
(F) Except as set forth on Schedule 5.11(f), to the best
knowledge of the Company, there is no plan, study or effort by any Governmental
Authority that would in any material way affect the present use or zoning of any
Facility or any part thereof, and to the best knowledge of the Company, there
are no assessments or proposed assessments and there is no existing, proposed or
contemplated plan to widen, modify or realign any street or highway or any
existing, proposed or contemplated eminent domain proceedings that would in any
material way affect any Facility;
(G) Except to the extent set forth on the engineering reports
attached hereto as Schedule 5.11(g), the buildings and other improvements
comprising each Facility and all of their systems, including without limitation,
the heating, ventilating and air conditioning systems, and the plumbing,
electrical, mechanical and drainage systems, and roofs are in good operating
condition, repair and working order, normal wear and tear excepted;
(H) No assessment for public improvements has been made
against any Facility that remains unpaid and for which the Company or any
Subsidiary is liable, and all public improvements ordered, commenced or
completed with respect to any Facility prior to the date of this Agreement and
for which the Company or any Subsidiary is liable, shall be paid for in full by
the Company prior to the Closing; and
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(I) None of the Company and the Subsidiaries has received any
written notice of material noncompliance from any Governmental Authority
regarding any of the improvements constructed at any Facility or the use or
occupancy thereof which remains uncured.
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12,
there are no disputes, claims, actions, suits or proceedings, arbitrations or
investigations, either administrative or judicial, pending, or, to the knowledge
of the Company, threatened or contemplated, nor, to the knowledge of the
Company, is there any basis therefor, against or affecting the Company, any
Subsidiary or any of the Assets, or the rights of the Company or any Subsidiary
therein or the ability of any Shareholder or the Company to consummate the
transactions contemplated herein, at law or in equity or otherwise, before or by
any Governmental Authority, including, without limitation, any of the foregoing
relating to the infringement of Proprietary Rights. None of the Company and the
Subsidiaries has received any requests for information with respect to the
transactions contemplated hereby from any Governmental Authority. Without
limiting the generality of the foregoing, the investigation by the Office of the
Inspector General of the United States of the Facility known as the "St.
Petersburg Healthcare Center" does not, to the best knowledge of the Company and
each Shareholder, involve any alleged violations of Governmental Requirements by
the Company, any Subsidiaries or any Shareholder.
5.13 EMPLOYEES. With respect to any employee of the Company or
any Subsidiary receiving an annual salary of $75,000 or more, Schedule
5.7(b)(i), Schedule 5.7(b)(ix) and Schedule 5.13 together contain a true,
complete and correct list of the name, position, current rate of compensation
(together with a description of any specific arrangements or rights concerning
such persons that are not reflected in any agreement or document referred to in
Schedule 5.7). Each of the Company and each Subsidiary is in compliance with all
Governmental Requirements applicable to any and all of the employee benefit
plans, agreements and arrangements referred to on Schedule 5.7(b)(i) or
5.7(b)(xi), including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). No such employee, consultant or
agent has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 5.7(b)(i) or 5.7(b)(xi). The Balance
Sheet contains an adequate reserve for vacation accruals. There are no severance
obligations or continuing sick pay obligations of any Company or Subsidiary
except as set forth on Schedule 5.13 or the calculations set forth on Exhibit
2.2(a)(vi)(E) above. Each employee, agent and consultant of the Company or any
Subsidiary has all licenses necessary to carry on his or her obligations as an
employee of the Company or any Subsidiary and to the knowledge of the Company
(but without independent investigation), each such licensee is in compliance
with all of the terms of all such licenses held by him or her. Except as set
forth on Schedule 5.13, none of the Company and the Subsidiaries has received
notice that any senior executive, facility administrator or director of nursing
will terminate his or her employment within 180 days after the Closing Date, and
the Company has no reason to believe that any such termination will be likely by
reason of any change of control in the Company (or any Subsidiary) contemplated
by this Agreement.
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5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT
PRACTICES, ETC. Since the date that is two (2) years prior to the date hereof,
there has been no material adverse change in the relationship between the
Company or any Subsidiary and its employees nor any strike or labor disturbance
by any of such employees affecting the Business and there is no indication that
such a change, strike or labor disturbance is likely. Except as set forth on
Schedule 5.14, no employees of the Company or any Subsidiary are represented by
any labor union or similar organization in connection with their employment by
or relationship with, the Company or any Subsidiary, and to the knowledge of the
Company, there are no pending or threatened activities the purpose of which is
to achieve such representation of all or some of such employees. Except as set
forth on Schedule 5.14, there are no pending suits, actions or proceedings
against the Company or any Subsidiary relating to any of its past or present
employees, and there are no threats of strikes, work stoppages or pending filed
grievances by any such employees. Except as set forth on Schedule 5.14, none of
the Company and the Subsidiaries has any collective bargaining or other labor
contracts. Except as disclosed on Schedule 5.14, no Facility has been audited by
the United States Department of Labor during the two (2) year period ending on
the date hereof.
5.15 ERISA. Except as set forth on Schedule 5.15, none of the
Company and the Subsidiaries maintains or make contributions to and none of the
Company and the Subsidiaries has at any time in the past maintained or made
contributions to any employee benefit plan which is subject to the minimum
funding standards of ERISA. Each plan identified on Schedule 5.15 is in
compliance with ERISA and is fully funded. None of the Company and the
Subsidiaries maintains or makes contributions to and none of them has, at any
time in the past, maintained or made contributions to any multi-employer plan
subject to the terms of the Multi-employer Pension Plan Amendment Act of 1980
(the "MULTI-EMPLOYER ACT").
5.16 QUESTIONNAIRE. The healthcare law questionnaire heretofore
delivered to the Company by Buyer (the "QUESTIONNAIRE") and attached hereto as
Exhibit 5.16 has been fully and accurately completed and does not contain any
material misstatement of any fact and does not omit any fact that would have to
be stated in order not to render any response to such Questionnaire materially
misleading.
5.17 INSURANCE AND SURETY AGREEMENTS. Schedule 5.17 contains a
true and correct list of: (A) all policies of fire, liability and other forms of
insurance held or owned by the Company or any Subsidiary or otherwise in force
and providing coverage for the Business or any of the Facilities or Assets
(including but not limited to medical malpractice insurance, and any state
sponsored plan or program for worker's compensation); (B) all bonds, indemnity
agreements and other agreements of suretyship made for or held by the Company or
otherwise in force and relating to the Business or any of the Facilities or
Assets, including a brief description of the character of the bond or agreement,
the name of the surety or the indemnifying party. Schedule 5.17 sets forth for
each such insurance policy the name of the insurer, the amount of coverage, the
type of insurance, the policy number, the annual premium and a brief description
of the nature of insurance included under each such policy and of any claims
made thereunder or increases in premiums therefore during the past two years.
Such policies are owned by and payable solely to the Company or one of its
Subsidiaries, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date. All insurance policies listed
on Schedule 5.17 are in full force and effect,
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all premiums due on or before the Closing Date have been or will be paid on or
before the Closing Date, none of the Company and the Subsidiaries has been
advised by any of its insurance carriers of an intention to terminate or modify
or materially raise the premiums for any such policies, nor have any of them
failed to comply with any of the material conditions contained in any such
policies.
5.18 RELATIONSHIPS. Except as disclosed on Schedule 5.18, no
officer, director or employee of the Company or of any Subsidiary, and no
Shareholder, no member of any Shareholder's immediate family or of the immediate
family of any principal or partner of any Shareholder, and no person or entity
which is controlled by, under common control with, or controlling any of them
(each, an "AFFILIATE") has, or at any time within the last two (2) years has
had, a material ownership interest in any business, corporate or otherwise, that
is a party to, or in any property that is the subject of, business relationships
or arrangements of any kind relating to the operation of the Business. Except as
set forth on Schedule 5.18, no Shareholder or Affiliate is guaranteeing any
obligations of the Company or of any Subsidiary.
5.19 ASSETS COMPRISING THE BUSINESS. The Assets, including
without limitation, all Owned Assets, Leased Assets and Managed Assets
(including without limitation, all inventory included therein), Facilities,
Contracts, Proprietary Rights and Licenses listed on the Schedules to this
Agreement, are all of the tangible and intangible properties (real, personal and
mixed), including, without limitation, all licenses, intellectual property,
permits and authorizations, contracts, leases and other agreements that are
necessary or material to the operation of the Business as now operated.
5.20 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule
5.20, since the Balance Sheet Date, none of the Company and the Subsidiaries
has:
(A) sold, assigned, transferred or disposed of any Assets,
except in the ordinary course of business consistent with past practice;
(B) mortgaged, pledged or subjected to any Lien of any
nature whatsoever any of the Assets, other than Permitted Liens;
(C) entered into any Contract, or made or suffered any
termination of any Contract, or made or suffered any modification or amendment
of any Contract except for terminations, modifications and amendments of
Contracts made in the ordinary course of business consistent with past practice
and which would not adversely affect earnings or otherwise be material, and none
of the Company and the Subsidiaries has received notice or has knowledge that
any Contract has been terminated or will be terminated or modified or amended
(as aforesaid);
(D) except in the ordinary course of business, consistent
with past practice, or otherwise to comply with any applicable minimum wage law,
increased the salaries or other compensation of any of its employees, or made
any increase in, or any additions to, other benefits to which any of such
employees may be entitled;
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(E) discharged or satisfied any Lien or encumbrance, or
satisfied, paid or prepaid any material liabilities, other than in the ordinary
course of business consistent with past practice, or failed to pay or discharge
when due any liabilities, the failure to pay or discharge of which has caused or
may cause any actual damage or risk of loss to the Company or any Subsidiary or
the Business or the Assets;
(F) incurred any liabilities, other than trade payables
and other operating liabilities that would be reflected on the date incurred as
current liabilities on a balance sheet of the Company and the Subsidiaries, on a
consolidated basis, in accordance with GAAP, and in the ordinary course of
business consistent with past practice;
(G) failed to collect accounts receivable in the ordinary
course of business consistent with past practice;
(H) changed any of the accounting principles followed by
it or the methods of applying such principles;
(I) canceled, modified or waived any debts or claims held
by it, other than in the ordinary course of business consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business; or
(J) issued any capital stock, or declared or paid or set
aside or reserved any amounts for payment of any dividend or other distribution
in respect of any equity interest or other securities, or redeemed or
repurchased any of its capital stock or other securities, or made any payment to
any Affiliate except for payments of compensation in the ordinary course of
business consistent with past practice and disclosed to Buyer as such;
(K) failed to collect, withhold and/or pay to any proper
Governmental Authority, any Taxes (as hereinafter defined in Section 5.22)
required by applicable Governmental Requirement to be so collected, withheld
and/or paid;
(L) instituted, settled or agreed to settle any
litigation, action or proceeding before any Governmental Authority relating to
it or its property or received any threat thereof, except for settlements of
cost report claims in the ordinary course of business consistent with past
practice and that have not had a material adverse effect on the Company or the
Business;
(M) entered into any material transaction other than in
the ordinary course of business consistent with past practice; or
(N) agreed or otherwise become committed to do any thing
described in any of subsections (a) through and including (m) above.
5.21 COMPLIANCE WITH LAWS.
(A) The Company and each Subsidiary is in compliance with,
and to the Group's knowledge, each of their respective licensed employees are in
material compliance with, all Governmental Requirements applicable to them, the
Assets or the operation of the Business.
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None of the Company and the Subsidiaries has received any claim or notice that
any of the Facilities or Assets is not in compliance with any applicable
Governmental Requirement. The Company shall report to Buyer, within five (5)
days after its receipt thereof, any written or oral claims or notices that any
of the licensed employees of it or any Subsidiary, any of the Facilities, or any
of the Assets is not in compliance with any of the foregoing.
(B) Except as set forth on the environmental reports
identified on Schedule 5.21(b), at all times, each of the Company and each
Subsidiary has complied, and is complying in all respects with all environmental
and related Governmental Requirements applicable to it, the Facilities, and its
Assets, including, but not limited to, the Resource Conservation and Recovery
Act of 1976, as amended, the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, the Federal Water Pollution Control Act,
as amended by the Clean Water Act, and subsequent amendments, the Federal Toxic
Substances Control Act, as amended, with respect to the environmental or
healthful state, condition or quality of any property (collectively
"ENVIRONMENTAL LAWS"). The foregoing representation and warranty applies to all
aspects of the operation of the Business and the use and ownership of the Assets
including, but not limited to, the use, handling, treatment, storage,
transportation and disposal of any hazardous, toxic or infectious waste,
material or substance (including medical waste), and to petroleum products,
material or waste whether performed on any of the Leased Properties, at any
Facility, or at any other location. No uncured notice from any Governmental
Authority has been served upon the Company or any Subsidiary, or any of its
agents or representatives claiming any violation of any Environmental Law, or
requiring or calling attention to the need for any work, repairs, or demolition,
on or in connection with any of such properties in order to comply with any
Environmental Law.
5.22 TAXES. Except for Taxes that have accrued in the ordinary
course of business since the Balance Sheet Date, the Balance Sheet sufficiently
provides for all accrued, deferred and unpaid federal, state, local and foreign
net or gross income, profits, property, sales, use, excise, license, franchise,
severance, stamp, occupation, premium, windfall profits tax, alternative and
add-on minimum taxes, customs duty, added value, payroll, employer's income,
withholding and social security taxes, excise or other taxes ("TAXES") and any
penalties, interest, governmental charges, assessments and deficiencies related
thereto, payable by the Company or any Subsidiary. All Taxes payable by the
Company or any Subsidiary, and all interest and penalties thereon, whether
disputed or not, have been paid in full when due, all tax returns, declarations
of estimated tax and other reports required to be filed in connection therewith
("TAX RETURNS") have been accurately prepared and completed on an appropriate
basis and duly and timely filed in accordance with all Governmental
Requirements, all computations and taxable income correctly and accurately made
and reported in accordance with all Government Requirements, and all
withholdings and deposits required by Governmental Requirements to be made by
the Company or any Subsidiary with respect to employee's withholding taxes have
been duly made. Except as set forth on Schedule 5.22, neither the Company nor
any of the Subsidiaries has any tax deficiency or claim outstanding, proposed or
assessed against it, and there is no basis for any such deficiency or claim.
There is not now in force any extension of time with respect to the date on
which any Tax Return was or is due to be filed by or with respect to the Company
or any Subsidiary or any waiver or agreement by the Company or any Subsidiary
for the extension of time for assessment of any Tax. None of the Company and the
Subsidiaries is a party to any pending action or proceeding, and, to the
knowledge of the Company, no action or proceeding has been threatened by any
Governmental Authority for assessment or collection of any Taxes, nor has any
claim for assessment or collection of Taxes been
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asserted against the Company or any Subsidiary. None of the Company and the
Subsidiaries is a party to any tax sharing agreement or arrangement. True and
complete copies of all Federal and State Tax Returns of the Company and the
Subsidiaries for the tax years ending December 31, 1996 and 1995 have been
delivered to Buyer.
5.23 ENCUMBRANCES CREATED BY THIS AGREEMENT. Neither the
execution and delivery of this Agreement nor the execution and delivery of any
of the Transaction Documents by the Company or any Shareholder creates, and the
consummation of the transactions contemplated hereby or thereby will not create,
any Liens on any of the Assets in favor of third parties.
5.24 QUESTIONABLE PAYMENTS. None of the Company's,
Subsidiaries and Shareholders has, and to the knowledge of the Company, no
director, officer, agent or employee of the Company or any Subsidiary has made
or received any illegal or unlawful payment, bribe, kickback, political
contribution or other similar questionable payment for any referrals or
otherwise in connection with the ownership or operation of the Business,
including, without limitation, any of the same that would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended.
5.25 REIMBURSEMENT MATTERS. Except as set forth on Schedule
5.25, each of the Company, each Subsidiary and, to the Company's knowledge, each
operator of any Managed Facility (each, a "MANAGED FACILITY OPERATOR"), to the
extent necessary to conduct its business in a manner consistent with past
practice, is qualified for participation in the Medicare and Medicaid programs,
and each other third party reimbursement source in which it participates. Except
as set forth on Schedule 5.25, none of the Company, any Subsidiary and any
Managed Facility Operator has any liability with respect to recoupment from the
Medicare or Medicaid programs or any other third party reimbursement source
(inclusive of managed care organizations) that would exceed the reserves or
allowances made therefor as set forth on the Balance Sheet, and there is no
basis for the assertion of any such recoupment claim, and none of the Company,
any Subsidiary and any Managed Facility Operator has received any notice of any
such assertion, including without limitation, any notice of denial or recoupment
from the Medicare or Medicaid programs, or any other third party reimbursement
source that arose out of any transactions completed prior to the date hereof,
and no Medicare or Medicaid investigation, survey, or audit is pending or, to
the knowledge of the Company, threatened with respect to the operation of the
business of any Facility. None of the Company, any Subsidiary and any Managed
Facility Operator nor, to the knowledge of the Company, any of their respective
licensed employees has been convicted of, or pled guilty or nolo contendere to
any criminal offense related to any Medicare or Medicaid program while such
person was an employee of any of them or after the termination of such person's
employment by any of them for acts committed while employed by any of them, and,
to the knowledge of the Company, none of such employees has committed any
offense which may serve as the basis for suspension, restriction, or exclusion
of the Company, any Subsidiary or any Managed Facility Operator from the
Medicare and Medicaid programs, or any other third party reimbursement source.
Except as set forth on Schedule 5.25, since January 1, 1998, none of the
Company, the Subsidiaries and the Managed Facility Operators has received any
notice from the Medicare or Medicaid programs or any other third party
reimbursement source to the effect that the basis on which it receives
reimbursement for its services is to be changed in any manner that could have a
material adverse effect on the Company and the Subsidiaries taken as a whole.
The Company has made available to Buyer true, complete and correct copies of the
most recent surveys and inspection reports from, and plans of correction
provided by, the Company, any Subsidiary or any Managed Facility Operator
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to, any governmental health care regulatory agency, intermediary or authority or
any other licensing organization and any and all correspondence between or on
behalf of any such regulatory agency, intermediary or authority or licensing
organization concerning any and all deficiencies, inadequacies or non-compliance
with regulations or standards applicable to any Facility. Except as set forth on
Schedule 5.25, there are no violations, orders or deficiencies issued or
recommended by any such Governmental Authority (including, without limitation,
licensing organizations), and except as set forth on Schedule 5.25, there are
(and within the past three (3) years there has been) no inspections, license
reviews, investigations or proceedings of any sort pending by or before any such
Governmental Authority that relate to any Facility. All such violations and
deficiencies have been fully remedied by the applicable Company, Subsidiary or
Managed Facility Operator or withdrawn by the applicable Governmental Authority.
During the twelve-month period immediately preceding the date hereof, no
Facility has been placed on "Vendor Hold" or similar status or become subject to
any other disciplinary or punitive action, or been cited for any violations that
are likely to lead to the Facility being placed on "Vendor Hold" or similar
status or subject to any other disciplinary or punitive action. Except as set
forth on Schedule 5.25, none of the Company, any Subsidiary and any Managed
Facility Operator has been served with any notice which (x) requires the
performance of any work or alterations on any Facility, or in the streets
bounding thereon, or (y) orders the installation, repair or alteration of any
public improvements on or about any Facility or the streets bounding thereon.
Each Facility is in material compliance with all "Conditions and Standards of
Participation" in the Medicare or Medicaid Programs. Each of the Company, the
Subsidiaries and the Managed Facility Operators has timely filed all required
cost reports with respect to Medicare and Medicaid, and has provided to Buyer
its audited and unaudited cost reports for Medicare and Medicaid and all other
rate compensation and reimbursement reports, audits and schedules prepared or
issued by, or filed with, any Governmental Authority with respect to the
operations of any Facility for the last three (3) years, and each such report is
complete and accurate in all material respects.
5.26 CAPITAL STOCK OF THE COMPANY. Schedule 5.26 sets forth a
complete list and description of all of the authorized capital stock of the
Company, the number of shares issued and outstanding of such capital stock and
the identity of each holder thereof, in each case indicating the number of
shares held. No shares of the Company's capital stock are held in the treasury
of the Company. The Company has only one class of capital stock. The
Shareholders are the lawful record and beneficial owners of all of the Subject
Shares as indicated on Schedule 5.26, free and clear of all Liens, and all of
such stock is duly authorized, validly issued, and fully paid and
non-assessable. Each Shareholder has the full legal power to transfer and
deliver the Subject Shares listed as owned by him, her or it on Schedule 5.26 in
accordance with this Agreement, and delivery of such Subject Shares to Buyer
pursuant hereto will convey good and marketable title thereto, free and clear of
all Liens. Except for the stock options granted as set forth on Schedule 5.26,
there are not now any and, on the Closing Date there will be no, subscription,
participation, preemptive or first refusal rights to purchase or otherwise
acquire shares of capital stock of the Company from the Company or any
Shareholder or any one else pursuant to any provision of law or the Articles of
Incorporation or ByLaws of the Company or by agreement or otherwise. Except for
the Angell Options granted as set forth on Schedule 5.26, there are not now any
and, on the Closing Date there shall not be any, outstanding warrants, options,
or other rights to subscribe for or purchase from the Company any shares of
capital stock of the Company or any Shareholder or any one else, nor are there
and there shall not be outstanding on the Closing Date, any securities
convertible into or exchangeable for any
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such shares. Except as described on Schedule 5.26, there are no voting
agreements, arrangements, trusts or restrictions relating to any of the Subject
Shares. The consent of each member of the Angell Group to the consummation of
the transactions contemplated by this Agreement has been obtained if and to the
extent such consent is required.
5.27 FINDERS. No broker or finder has acted for any
Shareholder or the Company in connection with the transactions contemplated by
this Agreement other than Robinson-Humphrey Company, Inc. (the "BROKER"), and
other than the Broker, no other broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, understandings or arrangements with any Shareholder or the Company.
5.28 SHAREHOLDER UNTRUE STATEMENT. None of the representations
and warranties of the Company or any Shareholder made in or pursuant to this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary, in light of the circumstance under which it was made,
in order to make any such representation not misleading in any material respect.
5.29 MANATEE, KANSAS AND ILLINOIS SUBSIDIARIES. None of the
Kansas or Illinois Subsidiaries has any material liabilities or assets
(including rights such as options), and except as set forth on Schedule 5.29, no
items of revenue, income or expense from any of them or from Manatee or any of
its subsidiaries was included in any of the Financial Statements.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF THE MINORITY
SHAREHOLDERS
Each Minority Shareholder hereby severally represents and
warrants to Buyer as follows:
6.1 AUTHORITY. Such Shareholder has the full legal power and
capacity to make, execute, deliver and perform this Agreement (including all
Schedules and Exhibits hereto), and all Transaction Documents to be executed or
delivered by him, her, or it, and to consummate all of the transactions
contemplated hereby and thereby. Such execution, delivery, performance and
consummation have been made in the exercise of each such Shareholder's free will
and volition, and any necessary consents of holders of indebtedness of such
Shareholder to the transactions contemplated by this Agreement have been
obtained.
6.2 BINDING EFFECT. This Agreement constitutes, and when
delivered at or prior to the Closing, each Transaction Document executed by such
Shareholder will constitute, the legal, valid and binding obligation of such
Shareholder enforceable against it, him or her, as the case may be, in
accordance with their respective terms.
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6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution
or delivery of this Agreement or any of the Transaction Documents by such
Shareholder nor the performance by such Shareholder of the transactions
contemplated hereby and thereby, conflicts with, or constitutes a breach of or a
default under or the termination of (A) any Shareholder that is not an
individual person, its Certificate of Incorporation or other Governing Document;
or (B) any Governmental Requirements applicable to it, him or her or the
operation of the Business or the ownership of any of the Assets; or (C) any
agreement, indenture, contract or instrument to which such Shareholder is now a
party or by which it, him or her or any of its, his or her respective assets is
bound.
6.4 CONSENTS. Except as set forth on Schedule 6.4, no
authorization, consent, approval, license, filing or registration by such
Shareholder with any Governmental Authority is or will be necessary in
connection with the entry into, execution, delivery and performance of this
Agreement or any of the Transaction Documents by such Shareholder, or for the
consummation of the transactions contemplated hereby and thereby.
6.5 CAPITAL STOCK. Such Shareholder is the lawful record and
beneficial owner of all of the shares of Company Stock as indicated on Schedule
5.26, free and clear of all Liens, and all of such stock is duly authorized,
validly issued, and fully paid and non-assessable. Such Shareholder has the full
legal power to transfer and deliver the Subject Shares listed as owned by him,
her or it on Schedule 5.26 in accordance with this Agreement, and delivery of
such Subject Shares to Buyer pursuant hereto will convey good and marketable
title thereto, free and clear of all Liens. Such Shareholder has no
subscription, participation, preemptive or first refusal rights to purchase or
otherwise acquire shares of capital stock of the Company from the Company or any
other Shareholder or any one else pursuant to any provision of law or the
Articles of Incorporation or By-Laws of the Company or by agreement or
otherwise. There are not now any and, on the Closing Date there shall not be,
outstanding any warrants, options, or other rights to subscribe for or purchase
from the Company any shares of capital stock of the Company in favor of such
Shareholder, nor does such Shareholder have any rights in any securities
convertible into or exchangeable for any such shares. Such Shareholder is not a
party to any voting agreement, arrangement, trust or restriction relating to any
of the Subject Shares.
6.6 UNTRUE STATEMENTS. To such Shareholder's actual knowledge
without investigation other than pursuant to such Shareholder's responsibility
as an officer or employee of the Company, all of the representations and
warranties set forth in Section 2.2(d)(ii) and 2.2(e)(ii), and in Article V are
true and correct in all material respects. The foregoing, however, shall not be
deemed to apply to the Manatee Liability.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the
Shareholders as follows:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
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7.2 POWER AND AUTHORITY. Buyer has the corporate power and
authority to execute, deliver and perform this Agreement, and as of the Closing,
Buyer will have the corporate power and authority to execute and deliver the
Transaction Documents required to be executed and delivered by it to the
Shareholders at the Closing.
7.3 BINDING AGREEMENT. This Agreement has been duly executed
and delivered by Buyer. This Agreement is, and when executed and delivered by
Buyer at the Closing, each of the Transaction Documents executed by Buyer will
be, the legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms.
7.4 SEC DOCUMENTS. Buyer has furnished the Company and the
Shareholders with a correct and complete copy of its report on Form 10-K for its
fiscal years ended December 31, 1996, its proxy statement prepared in connection
with its annual meeting held on June 20, 1997, and its special meeting held on
October 21, 1997 and each press release or other schedule or report required by
it to be publicly disclosed or filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Exchange Act since January 1, 1997 (the "SEC
DOCUMENTS"). As of their respective dates, none of the SEC Documents contained
any untrue statements, or omitted to make any disclosures, which, in light of
the circumstances would render any of such documents materially misleading, and
the SEC Documents complied when filed in all material respects with the then
applicable requirements of the Exchange Act, and the rules and regulations
promulgated by the Commission thereunder.
7.5 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution
or delivery of this Agreement and, as of the Closing Date, the execution and
delivery of the Transaction Documents, by Buyer nor the performance by Buyer of
the transactions contemplated hereby and thereby conflicts with, or constitutes
a breach of or a default under (A) the Certificate of Incorporation or By-laws
of Buyer, or (B) any law, rule, judgment, order, writ, injunction, or decree of
any court currently in effect applicable to Buyer, or (C) any Governmental
Requirement applicable to Buyer, or (d) any agreement, indenture, contract or
instrument to which the Buyer is now a party or by which any of the assets of
Buyer is bound.
7.6 CAPITAL STOCK. Buyer has duly authorized and reserved for
issuance the shares of IHS Stock to be issued in connection herewith, and, when
issued in accordance with the terms of Article III, such shares of IHS Stock
will be validly issued, fully paid, and nonassessable and free of preemptive
rights.
7.7 MATERIAL CHANGES. Except as set forth in SEC Documents
delivered to the Shareholders' Representative, or as set forth on Schedule 7.7
hereto, since September 30, 1997, there has not been any material adverse change
in the condition or prospects (financial or otherwise), of the assets,
properties or operations of the Buyer and its subsidiaries. Each Stockholder
acknowledges that the information set forth on Schedule 7.7 is not public
information and is confidential. Accordingly, each Stockholder agrees to hold
such information confidential, and to refrain from making any purchases or sales
of shares of IHS Stock until such time as Buyer notifies the Shareholders'
Representative that such information has become publicly available.
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7.8 NO UNTRUE STATEMENTS. To the Buyer's knowledge, all of the
representations and warranties set forth in this Article VII are true and
correct in all material respects.
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY
8.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING.
Prior to the Closing Date, Buyer may make, or cause to be
made, such investigation of the financial and legal condition of the Company,
the Subsidiaries and the Facilities as Buyer deems necessary or advisable to
familiarize itself therewith and/or with matters relating to their history or
operation. The Company shall permit Buyer and its authorized representatives
(including legal counsel and accountants), to have full access to the books and
records of the Company, the Subsidiaries and the Facilities upon reasonable
notice and during normal business hours, and the Company will furnish, or cause
to be furnished, to Buyer such financial and operating data and other
information and copies of documents with respect to the products, services,
operations and assets of the Company and the Subsidiaries as Buyer shall from
time to time reasonably request. The documents to which Buyer shall have access
shall include, but not be limited to, the Tax Returns and related work papers
since inception of the Company and the Subsidiaries; and the Company shall make,
or cause to be made, extracts thereof as Buyer or its representatives may
request from time to time to enable Buyer and its representatives to investigate
the affairs of the Company and the Subsidiaries and the accuracy of the
representations and warranties made in this Agreement. The Company shall cause
its accountants to cooperate with Buyer and to disclose the results of audits
relating to the Company and the Subsidiaries and to produce the working papers
relating thereto. Without limiting any of the foregoing, it is agreed that Buyer
will have full access to any and all agreements between and among the previous
and current shareholders regarding their ownership of shares or the management
or operation of the Company and the Subsidiaries. The Company will, subject to
mutually acceptable conditions and schedules, permit Buyer (or its
representatives) to meet with and interview the employees and representatives of
the Company and the Subsidiaries that are responsible for the responses to, or
have information with respect to, the questions set forth on the Questionnaire.
Notwithstanding anything to the contrary contained in this Section 8.1, none of
the Company and the Subsidiaries shall be required to disclose or make available
to Buyer prior to Closing any information if it reasonably believes, based on
the opinion of its legal counsel, that the disclosure thereof can not be made
without waiving the attorney/client privilege with respect thereto; provided,
however, that the failure to disclose such information by reason of this
sentence shall not be deemed to limit or modify any representations or
warranties of the Company, any Subsidiary or any Shareholder.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of
this Agreement and the Closing, the Company shall, and shall cause each
Subsidiary to, maintain its existence and conduct its business in good faith and
in the customary and ordinary course of business consistent with past practice.
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9.2 NEGATIVE COVENANTS OF THE COMPANY. Without the prior
written approval of Buyer, the Company shall not (and the Company shall cause
each Subsidiary not to), between the date hereof and the Closing (or the earlier
termination of this Agreement):
(A) cause or permit to occur any of the events or
occurrences described in Section 5.20 (Absence of Certain Events) of this
Agreement;
(B) dissolve, reorganize, merge, consolidate or enter into
a share exchange with or into any other entity;
(C) enter into any contract or agreement with any union or
other collective bargaining representative representing any employees (provided
that the foregoing shall not prohibit the Company or any Subsidiary from
negotiating in good faith with any union to the extent required by applicable
Governmental Requirements and Buyer shall not unreasonably withhold its consent
to any such contract or agreement);
(D) sell or dispose of any Assets other than supplies,
inventory and obsolete equipment sold, consumed or used in the usual and
ordinary course of business and consistent with past practice; the Company or
such Subsidiary shall replace all items thus disposed of with Assets of at least
the same quality, type and quantity having an aggregate value at least equal to
the aggregate value of the items sold or otherwise disposed of;
(E) make any change to its by-laws or articles of
incorporation;
(F) perform, take or fail to take any action or incur or
permit to exist any of the acts, transactions, events or occurrences of a type
which would have been inconsistent with the representations, warranties and
covenants set forth in this Agreement had the same occurred prior to the date
hereof; provided however, that the foregoing shall not prohibit the Company or
any Subsidiary from acquiring or disposing of assets, or incurring trade
payables, or entering into contracts or taking any other action that is in the
ordinary course of business and consistent with past practice and all
Governmental Requirements, in each case, to the extent not otherwise prohibited
by this Agreement;
(G) enter into any agreement, contract, commitment, lease
or instrument, except for agreements, in each case which are entered into in the
ordinary and customary course of business with unrelated third parties on
customary terms and conditions and for customary prices as disclosed to Buyer;
or
(H) except as permitted pursuant to Section 13.1(b) below,
take any action that would prevent consummation of the transactions contemplated
by this Agreement.
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9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the
Closing, the Company shall (and shall cause each Subsidiary to):
(A) maintain the Assets in substantially the state of
repair, order and condition as on the date hereof, reasonable wear and tear or
loss by casualty excepted;
(B) maintain in full force and effect all Licenses
currently in effect with respect to its business;
(C) maintain in full force and effect the insurance
policies and binders currently in effect, or the replacements thereof;
(D) use its reasonable efforts to preserve intact the
present business organization of the Company and the Subsidiaries; keep
available the services of the present employees and agents of the Company and
the Subsidiaries; and maintain the relations and goodwill with suppliers,
landlords, lessors, managed facility operators, employees, affiliated medical
personnel and any others having business relating to the Company or any
Subsidiary;
(E) maintain all of the books and records in accordance
with its past practices;
(F) comply in all material respects with all provisions of
the Contracts and with any other material agreements that the Company or any
Subsidiary enters into in the ordinary course of business after the date of this
Agreement, and comply in all material respects with the provisions of all
Governmental Requirements applicable to the business of the Company or any
Subsidiary;
(G) cause to be paid when due, all Taxes, imposed upon it
or on any of its properties or which it is required to withhold and pay over;
(H) promptly advise Buyer in writing of the threat or
commencement against the Company or any Subsidiary of any claim, action, suit or
proceeding, arbitration or investigation or any other event that could
materially adversely affect the operations, properties, assets or prospects of
the Company or any Subsidiary;
(I) promptly notify the Buyer in writing of the
termination of any material Contract; and
(J) promptly notify the Buyer in writing of any act, event
or occurrence that constitutes, or that will constitute on the Closing Date, a
breach by the Company of any Shareholder of any representation, warranty or
covenant made pursuant to this Agreement; and
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(K) promptly notify the Buyer in writing of any event
involving the Company or any Subsidiary which has had or may be reasonably
expected to have a material adverse effect on the business or financial
condition of the Company or any Subsidiary or may involve the loss of
relationships with any of the customers of the Company or any Subsidiary.
9.4 PURSUIT OF CONSENTS AND APPROVALS.
(A) Prior to the Closing, the Company shall use its best
efforts to obtain all consents and approvals of all parties other than
Governmental Authorities, including without limitation, any landlords and
mortgagees, necessary for the lawful consummation of the transactions
contemplated hereby and the lawful use, occupancy and enjoyment of the business
of the Company and the Subsidiaries by Buyer in accordance herewith ("REQUIRED
NON-GOVERNMENTAL APPROVALS"). Buyer shall cooperate with and use its
commercially reasonable efforts to assist the Company in obtaining all such
approvals.
(B) Prior to the Closing, the Buyer shall use its best
efforts to obtain all consents and approvals of Governmental Authorities
necessary for the lawful consummation of the transactions contemplated hereby
and the lawful use, occupancy and enjoyment of the business of the Company and
the Subsidiaries by Buyer in accordance herewith ("REQUIRED GOVERNMENTAL
APPROVALS", and together with the Required Non-Governmental Approvals, the
"REQUIRED APPROVALS"). The Company and each Shareholder shall cooperate with and
use its, his or her commercially reasonable efforts to assist the Buyer in
obtaining all such approvals.
(C) The Buyer, on the one hand, and the Shareholders on
the other hand, each shall bear fifty percent (50%) of the filing fees required
pursuant to the H-S-R Act (as defined in Section 10.9).
9.5 PURSUIT OF NONDISTURBANCE AGREEMENTS AND ESTOPPEL
CERTIFICATES. Prior to the Closing, the Company shall use its best efforts to
obtain nondisturbance agreements (the "NONDISTURBANCE AGREEMENTS") (on terms and
conditions reasonably satisfactory to Buyer) from all applicable mortgagees with
respect to all Leased Facilities and Managed Leased Facilities that will be
subject to mortgages after the Closing, and to obtain estoppel certificates (the
"ESTOPPEL CERTIFICATES") from all applicable landlords, mortgagees and Managed
Facility Operators with respect to all Leased Facilities and Managed Facilities
to the effect that there are no breaches of any representations, warranties or
covenants under any of the Tenancy Leases, Management Agreements or mortgages
affecting any of the Leased Facilities or Managed Facilities. Buyer shall
cooperate to assist the Company in obtaining all such approvals.
9.6 SUPPLEMENTARY FINANCIAL INFORMATION. Within forty-five
(45) days after the end of each calendar month between the date of this
Agreement and the Closing Date, the Company shall provide to Buyer unaudited
financial statements (including at a minimum, income statements and a balance
sheet) for such month then ended that shall present fairly the results of the
operations of the Company and the Subsidiaries, on a consolidated basis, at such
date and for the period covered thereby, all in accordance with GAAP, in each
case, certified as true and correct by the Company's chief financial officer and
the Principal Shareholders.
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9.7 EXCLUSIVITY. Until the earlier of the Closing Date or the
termination of this Agreement pursuant to Section 12.1, no Shareholder nor the
Company, nor any of their respective Affiliates, shall solicit or entertain any
offers or engage in any discussions or negotiations or enter into any agreement
or letter of intent directly or indirectly with any other party in respect of
the sale of any capital stock of the Company or any Subsidiary or of
substantially all of the assets of the Company or any Subsidiary, or in respect
of any merger, consolidation or other sale of the Company (any of said
transactions being referred to herein as a "PROHIBITED TRANSACTION"). The
Company shall promptly advise Buyer of any offer or solicitation that it
receives for a Prohibited Transaction, including, without limitation, the name
of the person making such offer or solicitation and the terms of such offer or
solicitation.
9.8 SPIN-OFFS. Notwithstanding anything to the contrary
contained in Section 9.2 or 9.3 above, prior to the Closing the Company shall
sell, without recourse: (x) all of the capital stock of each of Manatee and its
subsidiaries to the Principal Shareholders for approximately $750,000; and (y)
the Kansas Subsidiaries and the Illinois Subsidiaries for nominal consideration
to the Principal Shareholders or their Affiliates (other than the Subsidiaries).
9.9 CERTAIN BONUSES. Notwithstanding anything to the contrary
contained in Section 9.2 or 9.3 above, prior to the Closing the Company may pay
bonuses to the Principal Shareholders in an aggregate amount not to exceed
$100,000.
9.10 SPECIAL COUNSEL. Promptly following the date hereof, and
in any event within five (5) business days, the Company shall retain special
legal counsel (the "SPECIAL COUNSEL") reasonably acceptable to Buyer to
represent the Company and its Subsidiaries (other than Manatee and its
subsidiaries) with respect to any alleged Manatee Liability, including without
limitation, any alleged criminal liability with respect thereto. In connection
therewith, the Company shall, and it shall cause each Subsidiary (other than
Manatee and its subsidiaries) to provide such Special Counsel with all
information relating thereto in the possession of the Company or any Subsidiary
(other than Manatee and its subsidiaries) or to which the Company or any of its
Subsidiaries (other than Manatee and its subsidiaries) has access, including,
without limitation, any information with respect to which the Company or any
such Subsidiary (other than Manatee and its subsidiaries, or any Principal
Shareholder) may be entitled to assert the attorney client privilege or the
attorney work product doctrine or any other applicable privilege ("PROTECTED
INFORMATION"). To the extent permitted by applicable Governmental Requirements,
immediately prior to Closing, the Company may transfer any Protected Information
to Manatee (together with any privileges associated therewith) if Buyer shall
have been provided with a legal opinion from the Special Counsel in the form and
substance of paragraph 7 of Exhibit 10.28 hereto; provided that any such
transfer shall be made subject to the right of the Company, in the event
necessary to defend against any investigation by any Governmental Authority, to
review and utilize such Protected Information on terms and conditions, to the
extent possible, reasonably designed to preserve such privileges, in writing
reasonably satisfactory to Manatee and the Company. Access of the Special
Counsel to such Protected Information and delivery of such legal opinion shall
not be intended to waive any previously asserted privilege.
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9.11 ACQUISITION OF CHRISTOPHER MANOR OF ST. PETERSBURG, INC.
Notwithstanding anything to the contrary contained in Section 9.2 or 9.3 above,
prior to the Closing, the Company shall purchase for nominal consideration and
free and clear of all Liens all of the issued and outstanding shares of capital
stock of Christopher Manor of St. Petersburg, Inc. not owned by it legally and
beneficially as of the date hereof.
9.12 UPDATING. The Company and Principal Shareholders shall
notify Buyer of any changes or additions to any of their Schedules to this
Agreement by the delivery of updates thereof, if any, not later than two (2)
business days prior to the Closing. No such updates made pursuant to this
Section shall be deemed to cure any breach of any representation or warranty
made in this Agreement, nor shall any such notification be considered to
constitute or give rise to a waiver by Buyer of any condition set forth in this
Agreement.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the transactions contemplated
by this Agreement is subject to the satisfaction, prior to or at the Closing, of
each of the following conditions, any one or more of which may be waived by
Buyer, with any such waiver to be effective only if in writing. Upon failure of
any of the following conditions, Buyer may terminate this Agreement pursuant to
and in accordance with Article XII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company and each Shareholder made pursuant to this Agreement shall
be true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) at and as of the date hereof, and at and as of the Closing Date,
as though such representations and warranties were made at and as of such time
(as updated by the revising of Schedules contemplated by Section 9.12, to the
extent Buyer shall have accepted such updates in writing).
10.2 PERFORMANCE OF COVENANTS. Each of the Shareholders and the
Company shall have performed or complied in all material respects with their
respective agreements and covenants required by this Agreement to be performed
or complied with by them prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Shareholders
and the Company's President shall have executed and delivered to Buyer a
certificate dated the Closing Date, upon which Buyer may rely, certifying that
the conditions contemplated by Sections 10.1 and 10.2 applicable to them have
been satisfied.
10.4 OPINIONS OF COUNSEL. The Shareholders shall have delivered
to Buyer an opinion, dated the Closing Date, of their counsel, in the form and
substance of Exhibit 10.4. Said opinion shall be addressed to and may be relied
upon by Buyer.
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10.5 LEGAL MATTERS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any Governmental
Authority which prohibits or prevents the consummation of the transactions
contemplated by this Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a
certificate of the Secretary or other officer of the Company certifying as of
the Closing Date a copy of resolutions of its Boards of Directors authorizing
the execution and full performance of this Agreement and the Transaction
Documents and the incumbency of its officers.
10.7 MATERIAL CHANGE. Since the date hereof, there shall not
have been any material adverse change in the condition (financial or otherwise)
of the assets, properties, operations or prospects of the Company and the
Subsidiaries, taken as a whole (except to the extent covered by the condition
set forth in Section 10.30 below).
10.8 REQUIRED APPROVALS.
(A) Subject to Section 2.4 hereof, all Required Approvals
shall have been granted;
(B) None of the foregoing consents or approvals (i) shall
have been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Business or any business of Buyer (or
any of its subsidiaries or affiliates), or (ii) shall impose on Buyer (or any
subsidiary or affiliate of Buyer) any material condition or provision or
requirement with respect to the Business or any business of Buyer or the
respective operation thereof that is more restrictive than or different from the
conditions imposed upon such operation prior to Closing.
10.9 HART-SCOTT RODINO ACT. All applicable waiting periods
under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R
ACT") shall have expired or been terminated, and no action shall have been taken
or formal protest made by the United States Department of Justice or the Federal
Trade Commission or any other person or entity to prohibit the transactions
contemplated by this Agreement by reason of a claimed violation of any antitrust
laws. Without limiting the foregoing, no obligation arising out of the H-S-R Act
shall have been imposed on Buyer to divest any material portion of its business
or to restrict any of its business conduct by reason of the transactions
contemplated by this Agreement.
10.10 SURVEYS. Buyer shall have received, at Buyer's expense, a
standard real estate boundary and as built survey of each Facility in form and
substance reasonably satisfactory to Buyer, prepared by a land surveyor licensed
in the State in which such Facility is located and approved by Buyer that
confirms the condition of the property. If any such survey indicates that any
Liens exist that do not constitute Permitted Liens, the parties shall in good
faith agree upon a reasonable adjustment to the Base Amount (and,
correspondingly, to the Series A Merger Consideration and Series B Merger
Consideration on a proportionate basis) to reflect any damages that the Buyer
might sustain by reason thereof, and upon such adjustment being made, Buyer
shall be deemed to have been wholly compensated for any such damages and shall
not be entitled to indemnification with
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respect thereto. Nothing contained in this subsection shall be deemed to limit
Buyer's right to terminate this Agreement by reason of the failure of any other
condition, including, without limitation, Section 10.1 above.
10.11 TERMITE INSPECTIONS. Buyer shall have received, at Buyer's
expense, reports from qualified inspectors approved by Buyer with respect to any
termite, wood boring insect or other pest infestation at each Facility, and/or
resultant damage that has not been corrected in all material respects. If such
reports shall indicate any matters that would constitute a breach of any
representation or warranty by any Shareholder or the Company, then the parties
shall in good faith agree upon a reasonable adjustment to the Base Amount (and,
correspondingly, the Series A Merger Consideration and Series B Merger
Consideration on a proportionate basis) to reflect any damages that the Buyer
might sustain by reason thereof, and upon such adjustment being made, Buyer
shall be deemed to have been wholly compensated for any such damages and shall
not be entitled to indemnification with respect thereto. Nothing contained in
this subsection shall be deemed to limit Buyer's right to terminate this
Agreement by reason of the failure of any other condition, including, without
limitation, Section 10.1 above.
10.12 ZONING REPORT. Buyer shall have received, at Buyer's
expense, reports, from qualified zoning inspectors approved by Buyer with
respect to the compliance of each Facility with all applicable zoning
requirements, and if such reports shall indicate any matters that would
constitute a breach of any representation or warranty by any Shareholder or the
Company then the parties shall in good faith agree upon a reasonable adjustment
to the Base Amount (and, correspondingly, to the Series A Merger Consideration
and Series B Merger Consideration on a proportionate basis) to reflect any
damages that the Buyer might sustain by reason thereof, and upon such adjustment
being made, Buyer shall be deemed to have been wholly compensated for any such
damages and shall not be entitled to indemnification with respect thereto.
Nothing contained in this subsection shall be deemed to limit Buyer's right to
terminate this Agreement by reason of the failure of any other condition,
including, without limitation, Section 10.1 above.
10.13 TITLE INSURANCE. Buyer shall have obtained, at its
expense, at normal rates, a title commitment from a reputable title insurance
company selected by Buyer (the "TITLE COMPANY") for an owner's title policy
(owner's ALTA Policy Form B, as amended 10/17/70), insuring that title to each
Owned Facility and the leasehold interest in each Leased Facility and any option
to purchase any Managed Facility shall be good and marketable and free and clear
of all Liens and other title objections (including any lien or future claim from
materials or labor supplied for improvement of such property), except for
Permitted Liens, the standard exceptions normally contained in the ALTA Form B
Title Policy and schedules thereto. If any such title commitment indicates any
matter that would constitute a breach of any representation or warranty by any
Shareholder or the Company, then the parties shall agree upon a reasonable
adjustment to the Base Amount (and, correspondingly, to the Series A Merger
Consideration and Series B Merger Consideration on a proportionate basis) to
reflect any damages that the Buyer might sustain by reason thereof, and upon
such adjustment being made, Buyer shall be deemed to have been wholly
compensated for any such damages and shall not be entitled to indemnification
with respect thereto. Nothing contained in this subsection shall be deemed to
limit Buyer's right to terminate this Agreement by reason of the failure of any
other condition, including, without limitation, Section 10.1 above. At the
request of Buyer, the Principal Shareholders shall provide such affidavits to
the Title
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Company or take such other reasonable actions (at no expense to Buyer, the
Company or any of the Subsidiaries) that would enable the Title Company to
remove any of such standard exceptions (provided that the foregoing shall not be
deemed to require the Company or any Subsidiary to obtain any survey).
10.14 NON-COMPETITION AGREEMENTS. Each Principal Shareholder
shall have entered into a Non-competition Agreement in the form and substance
respectively of Exhibit 10.14- A-1 and Exhibit 10.14-A-2 (each a
"NON-COMPETITION AGREEMENT"), for no further consideration, with Buyer, pursuant
to which such Shareholder shall agree that after the Closing Date for the period
set forth below (the "NON-COMPETE PERIOD"), such Shareholder will not, directly
or indirectly, for herself, himself, or itself, or on behalf of any other
person, firm, entity or other enterprise, be employed by, be an officer,
director or manager of, act as a consultant for, be a partner in, have a
proprietary interest in, or loan money to any person, enterprise, partnership,
limited liability company, association, corporation, joint venture or other
entity which is directly or indirectly in the business of owning, operating or
managing any skilled nursing facility business, located in the States of South
Carolina, Georgia and Florida. The Non-Competition Agreements shall not prohibit
the ownership of less than 2% of the issued and outstanding stock of any
competitive business whose stock is listed on a national securities exchange or
traded on the NASDAQ national market system, and shall not prohibit any
Shareholder from carrying on certain other activities as more particularly
provided on Exhibit 10.14-A. Each Non-Competition Agreement also shall contain
confidentiality and non-solicitation provisions reasonably acceptable to Buyer.
The Non-Compete Period for each Principal Shareholder shall commence on the
Closing Date and end five (5) years from the Closing Date. Each Minority
Shareholder shall have entered into a Non-Solicitation Agreement in the form of
Exhibit 10.14-B hereto.
10.15 COST AND EXPENSES. The Shareholders shall have paid (or
assumed the liability with respect to) all costs, fees and expenses (including
without limitation, filing fees, transfer taxes, stamp taxes, legal fees and
broker, audit and appraisal fees) incurred by the Company or any of its
Subsidiaries in connection with the transactions contemplated by this Agreement.
10.16 CONSENTS. The condition set forth in Section 2.4 shall
have been satisfied.
10.17 CLOSING DATE BALANCE SHEET. The Principal Shareholders and
Company shall have furnished the Estimated Closing Date Balance Sheet to Buyer
certified as required by Section
2.2(a) hereof.
10.18 RESIGNATION OF COMPANY BOARDS OF DIRECTORS AND OFFICERS.
Each director and officer of the Company and each Subsidiary shall have
submitted his or her resignation to be effective no later than the Closing Date.
10.19 ESTIMATED CLOSING DATE LONG TERM LIABILITIES; NEGATIVE
WORKING CAPITAL.
(A) The long-term liabilities of the Company and its
subsidiaries on a consolidated basis as set forth on the Estimated Closing Date
Balance Sheet shall not exceed $33,000,000.
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(B) The negative working capital of the Company and the
Subsidiaries on a consolidated basis as set forth on the Estimated Closing Date
Balance Sheet shall not be more than $8,000,000.
10.20 TERMINATION OF ANGELL OPTIONS. All of the Angell Options,
shall have been terminated, canceled and satisfied in full, and Buyer shall have
purchased all of the Angell Shares, if any, pursuant to the terms of the Angell
Agreement.
10.21 CLOSING OF MAGNOLIA/MEDI-SERVE MERGER AGREEMENT. The
Closing shall have occurred under the Magnolia/Medi-Serve Merger Agreement.
10.22 WOODRUFF FACILITY. The Woodruff Facility shall be leased
to Magnolia pursuant to a "triple-net" lease with a term of at least 25 years,
with annual base rent of $330,000 per year (subject to annual 2% escalations),
and otherwise with terms and conditions reasonably satisfactory to Buyer.
10.23 SHAREHOLDER SETTLEMENTS. All accounts receivable or other
amounts due from, and all current or other liabilities due to, any Shareholder
or any Affiliate of any Shareholder shall be settled immediately prior to
Closing.
10.24 SPIN-OFFS. None of the Company and the Subsidiaries shall
be the legal or beneficial owner of any shares of the capital stock or assets of
Manatee, any Kansas Subsidiary or any Illinois Subsidiary, or be liable for any
liabilities of any of them.
10.25 ESCROW AGREEMENTS. The Escrow Agreement and the Manatee
Escrow Agreement shall have been executed and delivered by each party thereto
other than the Buyer.
10.26 IHS STOCK PRICE. The closing NYSE price of IHS Stock on
the last trading day prior to the Closing Date shall not be less than $10.
10.27 PRINCIPAL SHAREHOLDERS' LOANS. All of the transactions
contemplated by Section 2.1(c) shall have been completed.
10.28 OPINION OF SPECIAL COUNSEL. The Special Counsel shall have
delivered to Buyer a legal opinion acceptable to Buyer with respect to the
matters set forth on Exhibit 10.28 hereof.
10.29 TERMINATION OF RELATIONSHIP WITH MANATEE. All contractual
relationships between Manatee (and any of its subsidiaries) and the Company and
any of its other Subsidiaries shall have been terminated and all obligations and
liabilities among them shall have been settled or satisfied. Without limiting
the foregoing, Manatee shall no longer be a party to any loan agreement to which
the Company or any such other Subsidiary is a party, and no UCC termination
statements filed against the Company or any such other Subsidiary shall secure
any obligations of Manatee.
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10.30 CHRISTOPHER OF ST. PETERSBURG, INC.
(A) The Company shall have purchased for nominal
consideration and free and clear of all Liens all of the issued and outstanding
shares of capital stock of Christopher Manor of St. Petersburg, Inc. ("ST.
PETERSBURG") not owned by it legally and beneficially as of the date hereof.
(B) Buyer, in its good faith judgement, shall have
determined that since the Balance Sheet Date, no material adverse change with
respect to the assets, liabilities, operations, census, licensure requirements
or prospects of St. Petersburg or the Facility leased by it, shall have occurred
or shall be reasonably likely to occur. If the foregoing condition shall not be
satisfied prior to Closing, the parties shall nevertheless proceed to the
Closing as if such condition had been satisfied; provided however, the Base
Amount (and, correspondingly, the Series A Merger Consideration and Series B
Consideration, on a proportionate basis) shall be reduced by an amount equal to
$6,500,000, and all of the capital stock of St. Petersburg shall be transferred
to the Principal Shareholders at their cost and expense (including, without
limitation, any Taxes associated therewith) (and accordingly the liabilities and
assets of St. Petersburg shall not be included in the determination of working
capital or long-term liabilities for purposes of Section 2.2(a) above). In lieu
thereof, the parties may negotiate in good faith a reasonable reduction in the
Base Amount (and, correspondingly, the Series A Merger Consideration and Series
B Merger Consideration on a proportionate basis), in which case St. Petersburg
shall not be transferred to the Principal Shareholders.
10.31 ARTICLES OF MERGER. The Articles of Merger shall have been
executed, delivered, filed and accepted for filing by the Secretary of State of
North Carolina.
10.32 OTHER DOCUMENTS.
(A) The Shareholders and Company shall have furnished
Buyer with all other documents, certificates and other instruments required to
be furnished to Buyer by the Shareholders and Company pursuant to the terms
hereof, including, without limitation, the Undertaking and all stock
certificates evidencing the Subject Shares.
(B) All stock certificates representing all of the capital
stock in each of the Subsidiaries shall have been delivered to Buyer other than
the shares pledged to Omega Healthcare Corporation as disclosed on the
Disclosure Schedule hereto.
ARTICLE XI: CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
The obligation of the Shareholders to consummate the
transactions contemplated by this Agreement is subject to the satisfaction,
prior to or at the Closing, of each of the following conditions, any one or more
of which may be waived by Shareholder's Representative, with any such waiver to
be effective only if in writing. Upon failure of any of the following
conditions, Shareholders' Representative may terminate this Agreement pursuant
to and in accordance with Article XIII herein.
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11.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer made pursuant to this Agreement shall be true and correct in
all material respects (except those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) at
and as of the Closing Date as though such representations and warranties were
made at and as of such time.
11.2 PERFORMANCE OF COVENANTS. Buyer shall have performed or
complied in all material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer shall have
delivered to Shareholders a certificate of an officer of Buyer dated the Closing
Date upon which Shareholders may rely, certifying that the statements made in
Sections 11.1 and 11.2 are true, correct and complete as of the Closing Date.
11.4 OPINION OF COUNSEL. Buyer shall have delivered to
Shareholders an opinion, dated the Closing Date, of its counsel, in the form and
substance of Exhibit 11.4.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any Governmental
Authority which prevents the consummation of the transactions contemplated by
this Agreement shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. Shareholders shall have received
a certificate of the Secretary or other officer of Buyer certifying a copy of
resolutions of the Board of Directors of Buyer authorizing Buyer's execution and
full performance of this Agreement and the Transaction Documents and the
incumbency of the officers of Buyer.
11.7 HART-SCOTT RODINO ACT. All applicable periods under the
H-S-R Act shall have expired or been terminated, and no action shall have been
taken or formal protest made by the United States Department of Justice or the
Federal Trade Commission or any other person or entity to prohibit the
transactions contemplated by this Agreement by reason of a claimed violation of
any antitrust laws.
11.8 CLOSING OF MAGNOLIA/MEDI-SERVE STOCK PURCHASE AGREEMENT.
The closing shall have occurred under the Magnolia/Medi-Serve Stock Purchase
Agreement.
11.9 ESCROW AGREEMENTS. The Escrow Agreement and the Manatee
Escrow Agreement shall have been executed and delivered by each party thereto
other than the Shareholders.
11.10 TERMINATION OF GUARANTIES. Each Shareholder shall have
been released from any guaranty by him or her of any Permitted Liability, or
Buyer shall have agreed, in form and substance reasonably satisfactory to the
applicable Shareholder, to indemnify and hold such Shareholder harmless from all
liabilities arising out of any guaranty by him or her of any Permitted
Liability.
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11.11 IHS STOCK PRICE. The closing NYSE price of IHS Stock on
the last trading day prior to the Closing Date shall not be less than $10.
11.12 OTHER DOCUMENTS. Buyer shall have furnished Shareholders
with all documents, certificates and other instruments required to be furnished
to Shareholders by Buyer pursuant to the terms hereof.
ARTICLE XII: SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive the Closing Date and for a
period of two (2) years after the Closing notwithstanding any investigation at
any time made by or on behalf of the other party, provided that the
representations and warranties contained in Sections 5.22 (relating to Tax
matters), 5.24 (relating to Questionable Payments), and 5.25 (relating to
Medicare, Medicaid and other reimbursement matters), shall survive until thirty
(30) days after the end of the applicable period of limitations for audits by
the applicable Governmental Authority shall have expired, the representations
and warranties contained in Sections 5.26 (relating to capitalization) shall
have no expiration date, and the representation and warranty contained in
Section 5.3 and 6.3 insofar as they relate to the legality, validity, binding
effect and enforceability of the Non-Competition Agreements shall survive for
the term of the Non-Competition Agreements. All representations and warranties
related to any claim asserted in writing prior to the expiration of the
applicable survival period shall survive (but only with respect to such claim)
until such claim shall be resolved and payment in respect thereof, if any is
owing, shall be made.
12.2 INDEMNIFICATION BY SHAREHOLDERS. The Principal
Shareholders and the Company (subject to the limitations set forth in Section
15.11 hereof) jointly and severally, and the Minority Shareholders (subject to
the limitations set forth in Section 15.11 hereof), severally, shall indemnify
and defend Buyer and each of its officers, directors, agents, employees and
advisors, and their respective successors and assigns ("BUYER INDEMNITEES") and
hold each of them harmless against and with respect to any and all damage, loss,
liability, deficiency, cost and expense (including, without limitation,
reasonable attorney's fees and expenses) (all of the foregoing hereinafter
collectively referred to as "LOSS") resulting from or arising out of the
following (provided that each Minority Shareholder shall be obligated (severally
and not jointly) only as to a breach of his or her respective representations
and warranties and covenants made pursuant to this Agreement, and not as to any
other matters):
(A) any inaccuracy in any representation, or breach of any
warranty or certification, made by any Shareholder or the Company pursuant to
this Agreement;
(B) the breach of any covenant or undertaking by any
Shareholder or the Company made pursuant to this Agreement;
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(C) any Prohibited Liability, including, without
limitation, any Reimbursement Liabilities;
(D) any Loss arising out of the prior ownership, operation
or disposition of Manatee Medical Products and Services, Inc. ("MANATEE"), a
wholly owned subsidiary of Premiere, including without limitation, any
Reimbursement Liability (any of the foregoing being referred to as a "MANATEE
LIABILITY") or arising out of the prior ownership, operation or disposition of
any Kansas Subsidiary or any Illinois Subsidiary (together with any Manatee
Liability, the "SPIN- OFF LIABILITIES"); or
(E) any Loss arising out of the failure of the Contract
identified as item 3(sss) on Schedule 5.7(b) to be enforceable; or
(F) any Loss arising out of the guaranties provided by
Premiere or its Subsidiaries (other than Manatee and its subsidiaries) of
obligations of any Principal Shareholder; or
(G) any action, suit, proceeding, demand, claim,
assessment, judgment, settlement (to the extent approved by the Shareholders'
Representative, such approval not to be unreasonably withheld, delayed or
conditioned), cost or legal or other expense incident to any of the foregoing.
12.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend
Shareholders and, if there shall not be a Closing, Company, and hold them and
their respective advisors and their respective successors and assigns harmless
against and with respect to any and all Loss resulting from or arising out of:
(A) any inaccuracy in any representation, or breach of any
warranty or certification, made by Buyer pursuant to this Agreement;
(B) the breach of any covenant or undertaking by Buyer
made pursuant to this Agreement;
(C) any Loss resulting solely from Buyer's operation of
the Business after the Closing Date and not arising out of any breach of any
representation or warranty or covenant of any Shareholder or the Company; and
(D) any action, suit, proceeding, demand, claim,
assessment, judgment, settlement (to the extent approved by Buyer, such approval
not to be unreasonably withheld, delayed or conditioned), cost or legal or other
expenses incident to any of the foregoing.
12.4 ASSERTION OF CLAIMS. Any claims for indemnification under
Section 12.2(a) or 12.3(a) must be asserted by written notice on or prior to the
date on which such representation or warranty expires.
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12.5 CONTROL OF DEFENSE OF INDEMNIFICABLE CLAIMS.
(A) (I) Buyer shall give Shareholders' Representative
prompt notice of each claim for which it seeks indemnification. Failure to give
such prompt notice shall not relieve the Shareholders of their indemnification
obligation, provided that such indemnification obligation shall be reduced by
any damages Shareholders demonstrate they have suffered resulting from a failure
to give prompt notice hereunder. The Shareholders shall be entitled to
participate in the defense of such claim. If at any time the Shareholders
acknowledge in writing that the claim is fully indemnifiable by them under this
Agreement, and, if requested by Buyer, post adequate bond or security, they
shall have the right to assume control of the defense of such claim at their own
expense. If the Shareholders do assume control of the defense of any such claim,
the Buyer agrees not to settle such claim without the written consent of the
Shareholders' Representative, which consent shall not be unreasonably withheld,
delayed or conditioned. Nothing contained in this Section 12.5 shall prevent
either party from assuming control of the defense and/or settling any claim
against it for which indemnification is not sought under this Agreement.
(II) Notwithstanding the foregoing in clause (i), if
there shall be any claim for any Reimbursement Liability or tax liability, Buyer
will diligently and in good faith contest or appeal such claim using at least
the same standard of care as it would apply to contests or appeals with respect
to reimbursement liabilities or tax liabilities in general. Buyer may, in its
sole and absolute discretion, at any time discontinue any such contest or appeal
prior to the final determination thereof after all administrative appeals shall
have been taken (a "FINAL DETERMINATION"); provided, however, that if Buyer
intends to discontinue any such appeal or contest prior to Final Determination,
then Buyer must provide Shareholders' Representative with reasonable prior
written notice of such intent and of the current status of the appeal or
contest, and upon request of Shareholders' Representative, Buyer shall assign to
the Principal Shareholders all of its right, title and interest to contest and
appeal such Reimbursement Liability or tax liability on behalf of and in the
name of Buyer; it being understood, however, that any recovery with respect to
any such Reimbursement Liability or tax liability shall belong to Buyer. Buyer
may, in its sole discretion, elect not to so assign any of its right, title and
interest to contest and appeal any such Reimbursement Liability or tax
liability, in which case, Buyer shall not be entitled to be indemnified by the
Principal Shareholders with respect to the otherwise appealable or contestable
portion thereof.
(III) Buyer shall not be entitled to settle any claim
which is the subject matter of the Manatee Escrow Agreement without the prior
written consent of each Principal Shareholder (which consent shall not
unreasonably be withheld, delayed or conditioned) unless all applicable
Governmental Authorities agree (A) not to seek separate payment from either
Principal Shareholder and/or Don G. Angell, and (B) not to impose criminal or
material civil penalties against either Principal Shareholder and/or Don G.
Angell.
(B) The Shareholders' Representative shall give Buyer
prompt written notice of each claim for which any Shareholder seeks
indemnification. Failure to give such prompt notice shall not relieve the Buyer
of its indemnification obligation, provided that such indemnification obligation
shall be reduced by any damages Buyer demonstrates it has suffered resulting
from a failure to give prompt notice hereunder. The Buyer shall be entitled to
participate
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in the defense of such claim. If at any time Buyer acknowledges in writing that
the claim is fully indemnifiable by it under this Agreement, and, if requested
by Shareholders' Representative, post adequate bond of security, it shall have
the right to assume control of the defense of such claim at its own expense. If
the Buyer assumes control of the defense of any such claim, the Shareholders
shall not settle such claim without the written consent of the Buyer, which
consent shall not be unreasonably withheld, delayed or conditioned. Nothing
contained in this Section 12.5 shall prevent either party from assuming total
control of the defense and/or settling any claim against it for which
indemnification is not sought under this Agreement.
12.6 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(A) Notwithstanding any other provision of this Agreement,
the aggregate indemnification obligations of the Principal Shareholders, on the
one hand, and Buyer, on the other hand, shall not exceed an amount equal to
Thirty Seven Million Dollars ($37,000,000).
(B) Notwithstanding any other provision of this Agreement,
after the Closing, the Principal Shareholders on the one hand, and Buyer, on the
other hand, shall not have any obligation to indemnify the other party hereto
for any Losses incurred by it or them unless, until and to the extent the
aggregate amount of such Losses equals or exceeds $250,000; provided, however,
that the foregoing shall not apply to: (i) any obligations with respect to
payments of, or adjustments to, the Base Amount (and the Series A or Series B
Merger Consideration) under Article II above, (ii) claims made by Buyer pursuant
to Sections 12.2(b), (c), (d) or (f) above, or (iii) claims arising out of any
breaches of representations or warranties of any Principal Shareholder to the
extent that such Principal Shareholder had actual knowledge that such
representation or warranty was incorrect or inaccurate in any material respect
at the time made, or (iv) claims arising out of any breach of the
representations and warranties contained in Section 5.26. The limitation set
forth in this Section 12.6(b) shall not apply to any indemnification obligations
arising out of any breach of the representations and warranties contained in
Section 5.11(g) or 5.21(b).
(C) Upon payment in full by an indemnifying party of any
indemnification claim, whether such payment is effected by setoff or otherwise,
or upon the payment in full by an indemnifying party of any judgment with
respect to a third-party claim, the indemnifying party shall be subrogated (to
the extent permitted by applicable law) to the extent of such payment to the
rights of the indemnified party against any landlords (other than Magnolia and
its subsidiaries), vendors, fee mortgagees, insurance carrier, workmens'
compensation fund, attorneys, title insurance carrier, engineers, any
Shareholder, surveyors, environmental inspectors, zoning experts and the other
parties to the SCHM Agreements and the SV/South Florida Agreements. The
foregoing shall not be deemed to require any Shareholder to reimburse the
Company or any Subsidiary for any legal fees previously advanced or for any
amounts accrued, in each case, to the extent set forth in the Financial
Statements or the Closing Date Balance Sheet.
12.7 WARN ACT LIABILITY. In reliance on the representations and
warranties of t he Company and the Shareholders made pursuant to this Agreement,
Buyer agrees to assume any liability arising under the Worker Adjustment and
Retraining Notification Act (the "WARN ACT") out of any failure to give any
required notices to appropriate persons with respect to any employment
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loss that may arise as a result of the termination by Buyer of the employment of
any employees of the Company or any of the Subsidiaries following the Closing
Date, except to the extent that any notifications are required by reason of
actions taken by the Company or any Subsidiary prior to the Closing Date.
12.8 CERTAIN WAIVERS. Effective as of the Closing, each
Shareholder hereby knowingly waives all rights that he or she may have to
indemnification against the Company or any Subsidiary (other than Manatee)
(except to the extent of insurance proceeds actually collectible by the Company
or a Subsidiary with respect thereto or except for amounts previously paid or
advanced by the Company to Shareholders in respect thereof), including, without
limitation any right to receive advancement or reimbursement of legal fees or
costs, or to insurance with respect to any claim against him or her arising out
of any investigation by the Office of Inspector General of the United States or
any matter related thereto. Effective as of the Closing, each Shareholder also
hereby knowingly waives any claims that he or she may have against Magnolia or
any of its subsidiaries on or prior to Closing arising out of the transactions
contemplated by this Agreement or the Magnolia/Med-Serve Merger Agreement. The
foregoing shall not be deemed to require any Shareholder to reimburse the
Company or any Subsidiary for any legal fees accrued, to the extent set forth on
the Closing Date Balance Sheet.
12.9 CERTAIN ASSISTANCE. After the Closing, for a reasonable
amount of time not to exceed ninety (90) days, Buyer shall endeavor to assist
Manatee and its subsidiaries with preparing its billing, payroll and
bookkeeping. It will also promptly forward to Manatee any of Manatee's accounts
receivable that are delivered to it. Notwithstanding the foregoing, Buyer and
the Company and the Subsidiaries shall have no obligation to expend any funds
(beyond ordinary and reasonable wages) with respect to the foregoing and shall
have no liability with respect to any failure to perform any of the foregoing.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time
at or prior to the time of Closing by:
(A) Buyer, if any condition precedent to the obligations
of Buyer under this Agreement, including without limitation those conditions set
forth in Article X hereof, have not been satisfied by the Closing Date or
pursuant to Section 14.1, or otherwise as expressly provided in this Agreement;
(B) Shareholders' Representative, if any condition
precedent to the obligations of the Shareholders hereunder, including without
limitation those conditions set forth in Article XI hereof, have not been
satisfied by the Closing Date, or otherwise as expressly provided in this
Agreement;
(C) the mutual consent of Buyer and Shareholders'
Representative.
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13.2 EFFECT OF TERMINATION. If a party terminates this
Agreement because one of its conditions precedent has not been fulfilled, or if
this Agreement is terminated by mutual consent, this Agreement shall become null
and void without any liability of any party to the other; provided, however,
that if such termination is by reason of the breach by any party of any of its
representations, warranties or obligations under this Agreement, the other party
shall be entitled to be indemnified for any Losses incurred by it by reason
thereof in accordance with Section 12.2 or 12.3, as the case may be, hereof (and
for such purposes such Section 12.2 or 12.3, as the case may be, shall survive
the termination of this Agreement). Furthermore, nothing in this Section 13.2
shall affect Buyer's right to specific performance of the obligations of the
Shareholders at Closing hereunder.
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. Shareholders shall bear the risk
of all loss or damage to any of the Assets from all causes which occur prior to
the Closing. If at any time prior to the Closing any of the Assets are damaged
or destroyed as a result of fire, other casualty or for any reason whatsoever
and such will likely have a material adverse effect on the operation or
financial condition of any Facility, Shareholders' Representative shall
immediately give notice thereof to Buyer. Buyer shall have the right, in its
sole and absolute discretion, within ten (10) days of receipt of such notice, to
(1) elect not to proceed with the Closing and terminate this Agreement, or (2)
proceed to Closing and consummate the transactions contemplated hereby and
receive any and all insurance proceeds received or receivable by the Company,
any Subsidiary or any Shareholder on account of any such casualty (and such
insurance proceeds shall not be included as current assets for purposes of
determining Closing Date Working Capital nor shall the cost of such
reconstruction be included as a liability to the extent of insurance reasonably
collectible with respect thereto). Nothing contained in this Section 14.1 shall
limit or adversely affect the right of Buyer to receive indemnification for any
Losses incurred by it by reason of any breach by any Shareholder or the Company
of any representation, warranty or obligation under this Agreement in accordance
with Section 12.2 hereof (and for such purposes such Section 12.2 shall survive
the termination of this Agreement).
ARTICLE XV: MISCELLANEOUS
15.1 PERFORMANCE. In the event of a breach by any Shareholder
or the Company of its obligations hereunder, the Buyer shall have the right, in
addition to any other remedies which may be available, to obtain specific
performance of the terms of this Agreement, and the breaching party hereby
waives the defense that there may be an adequate remedy at law.
15.2 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to
the benefit of each party hereto and its successors and proper assigns. Prior to
Closing, Shareholders, the Company and Buyer may not assign their respective
interests under this Agreement to any other person or entity without the prior
written consent of the other parties hereto; provided, however, that Buyer may
assign its rights, duties and obligations hereunder to one or more subsidiaries
or affiliates of Buyer; and further provided that in the instance of such
assignment Buyer shall remain
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responsible for consummating the Closing as provided in this Agreement (such
responsibility to include, without limitation, delivery of IHS Stock (and not
the stock of any other entity) as provided herein). Buyer shall be entitled to
assign its rights under this Agreement after the Closing.
15.3 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement
and the Exhibits and Schedules hereto embody the entire agreement and
understanding of the parties and supersede any and all prior agreements,
arrangements and understandings relating to matters provided for herein;
provided, however that any confidentiality agreements among the parties shall
survive until the Closing, at which time they shall terminate except to the
extent provided in this Agreement. The captions used herein are for convenience
only and shall not control or affect the meaning or construction of the
provisions of this Agreement. This Agreement may be executed in one or more
counterparts, and all such counterparts shall constitute one and the same
agreement.
15.4 COOPERATION - FURTHER ASSISTANCE. From time to time, as
and when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed and delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
necessary to carry out the intent and purposes of this Agreement.
15.5 NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed to be properly given when personally delivered
to the party or parties entitled to receive the notice or three (3) business
days after sent by certified or registered mail, postage prepaid, or on the
business day after sent by nationally recognized overnight courier, in each
case, properly addressed to the party or parties entitled to receive such notice
at the address stated below:
If to the Company or any Shareholder,
to the Shareholders' Representative at:
Stewart Swain
115 Fieldwood Drive
Advance, North Carolina 27006
with a copy to: George E. Hollodick, Esq.
Blanco Tackabery Combs & Matamoros, P.A.
110 South Stratford Road, Suite 500
Winston-Salem, NC 27104
If to the Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Elizabeth B. Kelly,
Executive Vice President
and
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with a copy to: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall A. Elkins, General Counsel
and
Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Andrew S. Bogen
15.6 WAIVER, DISCHARGE, ETC. This Agreement shall not be
released, discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
15.7 RIGHTS OF PERSONS NOT PARTIES. Except as expressly
provided with respect to indemnification rights, nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
15.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina,
disregarding any contrary rules relating to the choice or conflict of laws.
15.9 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after
the execution and delivery of this Agreement by the parties hereto, this
Agreement may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
15.10 SEVERABILITY. Any provision, or distinguishable portion of
any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction only, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the parties waive any provision of
law which renders a provision hereof prohibited or unenforceable in any respect.
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15.11 JOINT AND SEVERAL. The Principal Shareholders and Company
(unless there shall be a Closing, in which case the Company shall have no
liability under this Agreement) shall be jointly and severally liable for all
representations, warranties and covenants made by any of them pursuant to this
Agreement. Each Minority Shareholder shall be liable only for such Minority
Shareholder's own representations, warranties and covenants made by such
Minority Shareholder pursuant to this Agreement. The Minority Shareholders
acknowledge that they have no rights to the Escrow Deposit or the Manatee Escrow
Deposit. After the Closing no Shareholder shall have any right of contribution
or indemnity from the Company and no right of subrogation to proceed against the
Company with respect to any of the foregoing or otherwise. For all purposes of
this Agreement, any reference to the "knowledge" of any Principal Shareholder or
to any of them having received "notice" of any matter or any similar
qualification shall be deemed to include the knowledge of each of the
Shareholders or notices to any of the Shareholders, as the case may be. For all
purposes of this Agreement, any reference to the "knowledge" of the Company or
to its having received "notice" of any matter or any similar qualification shall
be deemed to include the knowledge of each of the Shareholders, directors,
facility administrators, directors of nursing, the director of legal affairs and
the executive officers of the Company or any Subsidiary or notices to any of
them, as the case may be.
15.12 RECORDS. On the Closing Date, Shareholders shall deliver,
or cause to be delivered, to Buyer all records and files not then in Buyer's
possession relating to the operations of the Company; provided, however, that
the Shareholders' accountants and attorneys may retain duplicate copies of the
same; provided, further that such retention shall not relieve any Shareholder of
any of his or her obligations under any Non-Competition or Non-Solicitation
Agreement.
15.13 LATE DELIVERY OF EXHIBIT 2.2(A)(VI)(E). The parties
acknowledge that Exhibit 2.2(a)(vi)(E) has not been delivered to Buyer as of the
date hereof. The Principal Shareholdres agree to use their best efforts to
deliver such Exhibit by no later than March 6, 1998. Buyer shall use its best
efforts to notify the Shareholders' Representative by no later than two business
days after its receipt of such Exhibit as to whether such Exhibit is reasonably
acceptable to Buyer. If such Exhibit is not reasonably acceptable to Buyer, then
the parties shall, notwithstanding anything to the contrary contained in this
Agreement, agree to a reasonable adjustment to the amount of the accrual
referred to in Section 2.2(a)(vi)(E).
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IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Agreement as of the day and year
first above written.
COMPANY:
PREMIERE ASSOCIATES, INC.
By:
-------------------------------------
Its:
------------------------------------
PRINCIPAL SHAREHOLDERS:
----------------------------------------
W. Stewart Swain
----------------------------------------
L.P. Herzog
MINORITY SHAREHOLDERS:
----------------------------------------
Jewell Austin
----------------------------------------
Troy Curry
----------------------------------------
Bruce W. Covell, Jr.
----------------------------------------
M. Rebecca Muenchow
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BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:
-------------------------------------
------------------------,
Executive Vice President
INTEGRATED HEALTH SERVICES AT
HAWTHORNE NURSING CENTER, INC.
By:
-------------------------------------
Its:
------------------------------------
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
"ACTUAL LONG-TERM LIABILITIES" ........................ shall have the meaning as set forth in Section 2.2(a)(iii).
"ACTUAL WORKING CAPITAL" .............................. shall have the meaning as set forth in Section 2.2(a)(iii).
"ADDITIONAL SWAIN IHS SHARES".............................shall have the meaning as set forth in Section 2.1(f)(i).
"ADJUSTED MARKET VALUE PER ADDITIONAL IHS SHARE"...................................................................
.............................................................shall have the meaning as set forth in Section 3.1(k).
"ADJUSTMENT NOTICE"..........................................shall have the meaning as set forth in Section 3.1(k).
"AGGREGATE SCHM PURCHASE PRICE".......................shall have the meaning as set forth in Section 2.2(a)(vi)(C).
"AGREEMENT".........................................shall have the meaning as set forth in the Introduction hereto.
"ANGELL"............................................shall have the meaning as set forth in the Introduction hereto.
"ANGELL AGREEMENT"..................................shall have the meaning as set forth in the Introduction hereto.
"ANGELL GROUP"......................................shall have the meaning as set forth in the Introduction hereto.
"ANGELL GROUP MEMBER"...............................shall have the meaning as set forth in the Introduction hereto.
"ANGELL GROUP NOTES"................................shall have the meaning as set forth in the Introduction hereto.
"ANGELL OPTIONS"....................................shall have the meaning as set forth in the Introduction hereto.
"ARBITRATING ACCOUNTANTS" .............................. shall have the meaning as set forth in Section 2.2(a)(iv).
"APPLICABLE VALUATION DATE" ................................ shall have the meaning as set forth in Section 3.1(a).
"ARTICLES OF MERGER"............................................shall have the meaning as set forth in Section 1.1.
"ASSETS".....................................................shall have the meaning as set forth in Section 2.3(a).
"AUSTIN"............................................shall have the meaning as set forth in the Introduction hereto.
"BALANCE SHEET" ............................................ shall have the meaning as set forth in Section 5.8(b).
"BALANCE SHEET DATE" ....................................... shall have the meaning as set forth in Section 5.8(b).
"BASE AMOUNT".............................................shall have the meaning as set forth in Section 2.1(a)(i).
"BISHOP LEASES" ............................................ shall have the meaning as set forth in Section 2.2(c).
"BROKER" ..................................................... shall have the meaning as set forth in Section 5.27.
"BUSINESS" ................................................. shall have the meaning as set forth in Section 2.3(a).
"BUYER'S INDEMNITEES" ........................................ shall have the meaning as set forth in Section 12.2.
"BUYER'S REVIEW" ......................................... shall have the meaning as set forth in Section 2.2(iii).
"CARR FACILITIES"........................................shall have the meaning as set forth in the Section 2.2(b).
"CARR/FOSTER LEASE" ........................................ shall have the meaning as set forth in Section 2.2(b).
"CATHCART"..........................................shall have the meaning as set forth in the Introduction hereto.
"CATHCART SHARES"...................................shall have the meaning as set forth in the Introduction hereto.
"CLOSING"...................................................... shall have the meaning as set forth in Section 4.1.
"CLOSING DATE BALANCE SHEET" ............................. shall have the meaning as set forth in Section 2.2(iii).
"CLOSING SWAIN LOAN"......................................shall have the meaning as set forth in Section 2.1(f)(i).
"CLOSING HERZOG LOAN"....................................shall have the meaning as set forth in Section 2.1(f)(ii).
"CLOSING LOANS"..........................................shall have the meaning as set forth in Section 2.1(f)(ii).
"COMMISSION".................................................shall have the meaning as set forth in Section 3.1(b).
"COMPANY"...........................................shall have the meaning as set forth in the Introduction hereto.
"CONSENT CONTRACTS" ........................................... shall have the meaning as set forth in Section 2.4.
"CONTRACTS" ................................................ shall have the meaning as set forth in Section 5.7(a).
"COVELL"............................................shall have the meaning as set forth in the Introduction hereto.
"CURRY".............................................shall have the meaning as set forth in the Introduction hereto.
"DADE COUNTY FACILITIES"..................................shall have the meaning as set forth in Section 2.2(e)(i).
</TABLE>
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<TABLE>
<S> <C>
"DADE COUNTY FINANCIAL STATEMENTS"...........................shall have the meaning as set forth in Section 5.8(e).
"DELAY PAYMENT NOTICE" .................................... shall have the meaning as set forth in Section 2.2(iv).
"DESIGNATED CONTRACTS" ........................................ shall have the meaning as set forth in Section 2.4.
"EFFECTIVE DATE".............................................shall have the meaning as set forth in Section 3.1(k).
"EMPLOYMENT AGREEMENTS" .................................. shall have the meaning as set forth in Section 10.16(a).
"ENVIRONMENTAL LAWS.........................................shall have the meaning as set forth in Section 5.21(b).
"ERISA"........................................................shall have the meaning as set forth in Section 5.13.
"ESCROW DEPOSIT"......................................shall have the meaning as set forth in Section 2.1(c)(iv)(A).
"ESCROW INCOME" ............................................ shall have the meaning as set forth in Section 2.5(c).
"ESCROW RELEASE DATE"......................................shall have the meaning as set forth in Section 2.5(a)(i)
"ESCROWEE" .............................................. shall have the meaning as set forth in Section 2.5(a)(i).
"ESTIMATED CLOSING DATE BALANCE SHEET........................shall have the meaning as set forth in Section 2.2(ii)
"ESTIMATED CLOSING DATE WORKING CAPITAL"...........................................................................
........................................................ shall have the meaning as set forth in Section 2.2(a)(i).
"ESTOPPEL CERTIFICATES".........................................shall have the meaning as set forth in Section 9.5.
"EXCHANGE ACT"...........................................shall have the meaning as set forth in Section 3.1(e)(iv).
"FACILITIES"........................................shall have the meaning as set forth in the Introduction hereto.
"FINAL DETERMINATION"...................................shall have the meaning as set forth in Section 12.5(a)(ii).
"FINANCIAL STATEMENTS".......................................shall have the meaning as set forth in Section 5.8(a).
"FOSTER FACILITIES"..........................................shall have the meaning as set forth in Section 2.2(b).
"FOUNTAINHEAD NURSING CENTER".............................shall have the meaning as set forth in Section 2.2(e)(i).
"GAAP" ................................................. shall have the meaning as set forth in Section 2.2(a)(ii).
"GOVERNMENTAL AUTHORITIES" .................................... shall have the meaning as set forth in Section 5.4.
"GOVERNING DOCUMENTS" ...................................... shall have the meaning as set forth in Section 5.1(b).
"GOVERNMENTAL REQUIREMENTS" ................................... shall have the meaning as set forth in Section 5.4.
"GROUP MEMBER"......................................shall have the meaning as set forth in the Introduction hereto.
"GROUP PARTICIPANT".................................shall have the meaning as set forth in the Introduction hereto.
"H-S-R ACT" .................................................. shall have the meaning as set forth in Section 10.9.
"HERZOG"............................................shall have the meaning as set forth in the Introduction hereto.
"HERZOG NOTE"............................................shall have the meaning as set forth in Section 2.1(c)(ii).
"HERZOG STOCK PLEDGE AGREEMENT"..........................shall have the meaning as set forth in Section 2.1(c)(ii).
"IHS STOCK" ............................................. shall have the meaning as set forth in Section 2.1(c)(i).
"ILLINOIS SUBSIDIARIES"................................shall have the meaning as set forth in Section 2.2(a)(viii).
"INITIAL MARKET VALUE PER SHARE".............................shall have the meaning as set forth in Section 3.1(k).
"KANSAS SUBSIDIARIES"..................................shall have the meaning as set forth in Section 2.2(a)(viii).
"LEASED RELATED CONTRACT".......................................shall have the meaning as set forth in Section 2.4.
"LEASED ASSETS" ......................................... shall have the meaning as set forth in Section 5.6(a)(i).
"LEASED FACILITY"...........................................shall have the meaning as set forth in Section 5.11(b).
"LETTER OF TRANSMITTAL"......................................shall have the meaning as set forth in Section 2.1(d).
"LICENSES" ................................................... shall have the meaning as set forth in Section 5.10.
"LIENS" .................................................... shall have the meaning as set forth in Section 5.6(b).
"LOSS" ....................................................... shall have the meaning as set forth in Section 12.2.
"MAGNOLIA"..........................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA FACILITIES"...............................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA/MEDI-SERVE MERGER AGREEMENT".............................................................................
</TABLE>
71
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<TABLE>
<S> <C>
....................................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA FACILITIES"...............................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA SHARES"...................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA SHAREHOLDER"..............................shall have the meaning as set forth in the Introduction hereto.
"MANAGED ASSETS" ........................................ shall have the meaning as set forth in Section 5.6(a)(i).
"MANAGED FACILITY"..........................................shall have the meaning as set forth in Section 5.11(b).
"MANAGED FACILITY OPERATOR"....................................shall have the meaning as set forth in Section 5.25.
"MANAGED LESSEE/OPERATOR....................................shall have the meaning as set forth in Section 5.11(c).
"MANAGED LEASED FACILITY"...................................shall have the meaning as set forth in Section 5.11(c).
"MANAGED LEASE".............................................shall have the meaning as set forth in Section 5.11(c).
"MANAGEMENT AGREEMENTS" ................................. shall have the meaning as set forth in Section 5.7(a)(x).
"MANATEE"...................................................shall have the meaning as set forth in Section 12.2(d).
"MANATEE ESCROW DEPOSIT"..............................shall have the meaning as set forth in Section 2.1(c)(iv)(A).
"MANATEE LIABILITY".........................................shall have the meaning as set forth in Section 12.2(d).
"MANATEE RELEASE DATE" ................................. shall have the meaning as set forth in Section 2.5(a)(ii).
"MEDI-SERVE"........................................shall have the meaning as set forth in the Introduction hereto.
"MEDI-SERVE SHARES".................................shall have the meaning as set forth in the Introduction hereto.
"MERGER TIME"...................................................shall have the meaning as set forth in Section 1.2.
"MINORITY SHAREHOLDERS".............................shall have the meaning as set forth in the Introduction hereto.
"MUENCHOW"..........................................shall have the meaning as set forth in the Introduction hereto.
"MULTI-EMPLOYER ACT" ......................................... shall have the meaning as set forth in Section 5.15.
"NCGCL".........................................................shall have the meaning as set forth in Section 1.1.
"NEWCO".............................................shall have the meaning as set forth in the Introduction hereto.
"NEW GREENVILLE FACILITY"...........................shall have the meaning as set forth in the Introduction hereto.
"NEW GREENVILLE LEASE"..............................shall have the meaning as set forth in the Introduction hereto.
"NEW HERZOG PREMIERE SHARES".............................shall have the meaning as set forth in Section 2.1(f)(ii).
"NEW PREMIERE SHARES"....................................shall have the meaning as set forth in Section 2.1(f)(ii).
"NEW SWAIN PREMIERE SHARES"...............................shall have the meaning as set forth in Section 2.1(f)(i).
"NON-COMPETITION AGREEMENT" ................................. shall have the meaning as set forth in Section 10.14.
"NON-COMPETE PERIOD" ........................................ shall have the meaning as set forth in Section 10.14.
"NON-DISTURBANCE AGREEMENTS.....................................shall have the meaning as set forth in Section 9.5.
"NORTH MIAMI NURSING AND REHABILITATION CENTER
..........................................................shall have the meaning as set forth in Section 2.2(e)(i).
"NYSE".......................................................shall have the meaning as set forth in Section 3.1(a).
"OPERATIONS TRANSFER AGREEMENT" ......................... shall have the meaning as set forth in Section 2.2(e)(i).
"OWNED ASSETS" .......................................... shall have the meaning as set forth in Section 5.6(a)(i).
"OWNED FACILITY"............................................shall have the meaning as set forth in Section 5.11(b).
"PERMITTED LIABILITIES" .................................... shall have the meaning as set forth in Section 2.3(b).
"PLAN OF MERGER"................................................shall have the meaning as set forth in Section 1.2.
"PLEDGED SHARES"....................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE"..........................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE MANAGED FACILITIES".......................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE OWNED FACILITY"...........................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE OPERATED FACILITIES"......................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE SHARES"...................................shall have the meaning as set forth in the Introduction hereto.
</TABLE>
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<TABLE>
<S> <C>
"PRIMARY ESCROW"......................................shall have the meaning as set forth in Section 2.1(c)(iv)(A).
"PRINCIPAL SHAREHOLDERS"............................shall have the meaning as set forth in the Introduction hereto.
"PRINCIPAL SHAREHOLDERS' NOTE"...........................shall have the meaning as set forth in Section 2.1(f)(ii).
"PRINCIPAL SHAREHOLDERS' STOCK PLEDGE AGREEMENT"...................................................................
.........................................................shall have the meaning as set forth in Section 2.1(f)(ii).
"PROHIBITED LIABILITIES" ................................... shall have the meaning as set forth in Section 2.3(b).
"PROHIBITED TRANSACTION" ...................................... shall have the meaning as set forth in Section 9.7.
"PROPRIETARY RIGHTS" ................................... shall have the meaning as set forth in Section 5.6(a)(ii).
"PURCHASE PRICE" ........................................... shall have the meaning as set forth in Section 2.1(a).
"QUESTIONNAIRE" .............................................. shall have the meaning as set forth in Section 5.16.
"REIMBURSEMENT LIABILITIES" ................................ shall have the meaning as set forth in Section 2.3(b).
"REQUIRED APPROVALS".........................................shall have the meaning as set forth in Section 9.4(b).
"REQUIRED NON-GOVERNMENTAL APPROVALS"..............................................................................
.............................................................shall have the meaning as set forth in Section 9.4(a).
"REQUIRED GOVERNMENTAL APPROVALS"..................................................................................
.............................................................shall have the meaning as set forth in Section 9.4(b).
"RULE 144"...................................................shall have the meaning as set forth in Section 3.1(d).
"SEC" ......................................................... shall have the meaning as set forth in Section 7.4.
"SEC DOCUMENTS" ............................................... shall have the meaning as set forth in Section 7.4.
"SERIES A MERGER CONSIDERATION PER SHARE"..........................................................................
.........................................................shall have the meaning as set forth in Section 2.1(a)(ii).
"SERIES B MERGER CONSIDERATION PER SHARE"..........................................................................
.........................................................shall have the meaning as set forth in Section 2.1(a)(ii).
"SERIES C MERGER CONSIDERATION PER SHARE"..........................................................................
.........................................................shall have the meaning as set forth in Section 2.1(a)(ii).
"SERIES D MERGER"..................................................................................................
.........................................................shall have the meaning as set forth in Section 2.1(a)(ii).
"SERIES A PREMIERE SHARES".........................................................................................
....................................................shall have the meaning as set forth in the Introduction hereto.
"SERIES B PREMIERE SHARES"..........................shall have the meaning as set forth in the Introduction hereto.
"SERIES C PREMIERE SHARES"..........................shall have the meaning as set forth in the Introduction hereto.
"SERIES D PREMIERE SHARES"................................shall have the meaning as set forth in Section 2.1(f)(i).
"SHAREHOLDERS' REPRESENTATIVE" ............................. shall have the meaning as set forth in Section 2.2(f).
"SHORT LEASE EXTENSION ALLOCATION" ......................... shall have the meaning as set forth in Section 2.2(b).
"SHCM STOCK PURCHASE AGREEMENT"...........................shall have the meaning as set forth in Section 2.2(d)(i).
"SHCM AGREEMENTS".........................................shall have the meaning as set forth in Section 2.2(d)(i).
"SCHM SUBSIDIARIES".........................................shall have the meaning as set forth in Section 2.2(ii).
"SCHM ASSET PURCHASE AGREEMENT"...........................shall have the meaning as set forth in Section 2.2(d)(i).
"SCHM SUBSIDIARIES FINANCIAL STATEMENTS"...........................................................................
.............................................................shall have the meaning as set forth in Section 5.8(d).
"SCHM PROHIBITED LIABILITIES"...............................shall have the meaning as set forth in Section 2.2(ii).
"SECURITIES ACT".............................................shall have the meaning as set forth in Section 3.1(b).
"SHAREHOLDER".......................................shall have the meaning as set forth in the Introduction hereto.
"SHELF REGISTRATION STATEMENT"...............................shall have the meaning as set forth in Section 3.1(b).
"SHORT LEASE"...............................................shall have the meaning as set forth in Section 2.2(b).
</TABLE>
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<TABLE>
<S> <C>
"SKYLER LEASES"...........................................shall have the meaning as set forth in Section 2.2(e)(i).
"SOUTHEASTERN FACILITIES" ............................... shall have the meaning as set forth in Section 2.2(d)(i).
"SPECIAL COUNSEL"..............................................shall have the meaning as set forth in Section 9.10.
"SPIN-OFF LIABILITIES"......................................shall have the meaning as set forth in Section 12.2(d).
"SUBSIDIARIES"......................................shall have the meaning as set forth in the Introduction hereto.
"SUBJECT SHARES"....................................shall have the meaning as set forth in the Introduction hereto.
"SUPPLEMENTAL ESCROW DEPOSIT" ....................... shall have the meaning as set forth in Section 2.1(c)(iv)(A).
"SURVIVING CORPORATION".........................................shall have the meaning as set forth in Section 1.1.
"SV/SOUTH FLORIDA" ...................................... shall have the meaning as set forth in Section 2.2(e)(i).
"SV/SOUTH FLORIDA LIABILITIES" .......................... shall have the meaning as set forth in Section 2.2(e)(i).
"SV/SOUTH FLORIDA AGREEMENTS" ........................... shall have the meaning as set forth in Section 2.2(e)(i).
"SV/SOUTH FLORIDA TERMINATION AGREEMENTS"..........................................................................
........................................................ shall have the meaning as set forth in Section 2.2(e)(i).
"SWAIN".............................................shall have the meaning as set forth in the Introduction hereto.
"SWAIN NOTE"..............................................shall have the meaning as set forth in Section 2.1(f)(i).
"SWAIN PLEDGE AGREEMENT"..................................shall have the meaning as set forth in Section 2.1(f)(i).
"TAXES" ...................................................... shall have the meaning as set forth in Section 5.22.
"TAX RETURNS"..................................................shall have the meaning as set forth in Section 5.22.
"TENANCY LEASES"............................................shall have the meaning as set forth in Section 5.11(b).
"TITLE COMPANY" ............................................. shall have the meaning as set forth in Section 10.13.
"TRANSACTION DOCUMENTS" ....................................... shall have the meaning as set forth in Section 5.2.
"UNDERTAKING"................................................shall have the meaning as set forth in Section 2.3(b).
"WARN ACT".....................................................shall have the meaning as set forth in Section 12.7.
"WOODRUFF FACILITY".................................shall have the meaning as set forth in the Introduction hereto.
</TABLE>
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<PAGE>
SCHEDULE 2.2(B)
Facility Amount
Heart of Georgia $1,000,000
Old Capital 375,000
Heritage Inn 375,000
Hart Care 500,000
Rockmart 250,000
Macon 1,100,000
Dublin 1,150,000
Oceanside/Savannah Beach 250,000
75
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Annex A to Schedule 2.4
Riverfront Facility $3,100,000
Woodbridge Facility $2,000,000
St. Petersburg Facility $6,500,000
76
<PAGE>
SCHEDULE 7.7
Buyer has made a decision to exit from the following business lines in
the fourth quarter of 1997:
Outpatient Rehabilitation Services
Network Services
Physician Practices
One Home Care Management Contract.
Buyer anticipates taking a fourth quarter write-down with respect to
these business lines to net realizable value in an amount between $100 million
to $125 million.
77
-----------------------------
PROPERTY PURCHASE AGREEMENT
DATED AS OF JUNE 30, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
INTEGRATED HEALTH SERVICES OF FLORIDA AT HOLLYWOOD
HILLS, INC.
MEDICAL ASSOCIATES IV LIMITED PARTNERSHIP,
HILLCO PCS (HIALEAH) LIMITED PARTNERSHIP,
MEDICAL ASSET FUND, LLC,
TODD P. ROBINSON,
DR. JOHN J. SHEEHAN, SR.,
AND
HIALEAH ACQUISITION FUND, L.P.
-----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I: SALE AND PURCHASE OF PROPERTY....................................2
1.1 Acquired Property ...............................................2
1.2 Excluded Property ...............................................3
1.3 No Assumption of Liability.......................................3
ARTICLE II: PURCHASE PRICE..................................................4
2.1 Determination and Payment of Purchase Price.....................4
2.2 Transfer and Sales Taxes........................................4
2.3 Certain Adjustments.............................................5
2.4 Prorated Items..................................................5
ARTICLE III: IHS STOCK.......................................................5
3.1 IHS Stock.......................................................5
ARTICLE IV: THE CLOSING......................................................10
4.1 The Closing.....................................................10
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF GROUP MEMBERS..................10
5.1 Organization and Standing.......................................10
5.2 Authority.......................................................11
5.3 Binding Effect..................................................11
5.4 Absence of Conflicting Agreements...............................12
5.5 Consents........................................................12
5.6 Title to Personal Property......................................12
5.7 Contracts.......................................................12
5.8 Title, Condition of the Real Property...........................13
5.9 Legal Proceedings...............................................14
5.10 Compliance with Laws............................................14
5.11 Finders.........................................................14
5.12 Tax Returns ....................................................15
5.13 Encumbrances Created by this Agreement .........................15
5.14 Equity Holders .................................................15
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF IHS AND BUYER ................15
6.1 Organization and Standing ......................................15
6.2 Power of Authority .............................................15
6.3 Binding Agreement ..............................................15
6.4 SEC Documents ..................................................15
(i)
<PAGE>
6.5 Absence of Conflicting Agreements ..............................16
6.6 Consents .......................................................16
6.7 Capital Stock ..................................................16
6.8 Finders ........................................................16
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE FACILITY................16
7.1 Maps, Plans, Surveys, etc ......................................16
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING .....................17
8.1 Negative Covenants of the Parties ..............................17
8.2 Affirmative Covenants ..........................................17
8.3 Pursuit of Consents and Approvals ..............................17
8.4 Exclusivity ....................................................17
ARTICLE IX: CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND IHS............17
9.1 Representations and Warranties .................................17
9.2 Performance of Covenants .......................................17
9.3 Delivery of Closing Certificate ................................18
9.4 Legal Matters ..................................................18
9.5 Approvals ......................................................18
9.6 Title Insurance ................................................18
9.7 Deed ...........................................................19
9.8 Property Transferred at Closing ................................19
9.9 Authorization Documents ........................................19
9.10 Opinion of Counsel .............................................19
9.11 Additional Items to be Delivered ...............................19
9.12 Intentionally Omitted ..........................................19
9.13 Certain Reports ................................................20
9.14 Other Documents ................................................20
ARTICLE X: CONDITIONS PRECEDENT TO OBLIGATIONS OF GROUP MEMBERS.............20
10.1 Representations and Warranties ..................................20
10.2 Performance of Covenants ........................................20
10.3 Delivery of Closing Certificate .................................20
10.4 Legal Matters ...................................................20
10.5 Authorization Documents .........................................20
10.6 Opinion of Counsel ..............................................21
10.7 Other Documents .................................................21
(ii)
<PAGE>
ARTICLE XI: OBLIGATIONS OF PARTIES AFTER CLOSING ...........................21
11.1 Discharge of Liabilities ........................................21
11.2 Survival of Representations and Warranties ......................21
11.3 Indemnification by Group Members ................................21
11.4 Indemnification by Buyer and IHS ................................21
11.5 Assertion of Claims .............................................22
11.6 Control of Defense of Indemnifiable Claims ......................22
ARTICLE XII: TERMINATION ...................................................23
12.1 Termination .....................................................23
12.2 Effect of Termination ...........................................24
ARTICLE XIII: CASUALTY, RISK OF LOSS .......................................24
13.1 Casualty, Risk of Loss ..........................................24
ARTICLE XIV: MISCELLANEOUS PROVISIONS ......................................24
14.1 Public Announcements ............................................24
14.2 Costs and Expenses ..............................................24
14.3 Performance .....................................................25
14.4 Benefit and Assignment ..........................................25
14.5 Effect and Construction of this Agreement .......................25
14.6 Cooperation - Further Assistance ................................25
14.7 Notices .........................................................25
(iii)
<PAGE>
SCHEDULES
Schedule 1.1A - Description of Real Property
Schedule 2.3 - Allocation of Purchase Price
Schedule 5.5 - Seller's Consents
Schedule 5.6 - Personal Property Encumbrances
Schedule 5.7 - Leasehold defaults of Buyer
Schedule 5.8(a) - Title Exceptions
Schedule 5.14 - Equity Interests in the Seller
Schedule 6.6 - Buyer's Consents
EXHIBITS
--------
Exhibit 2.1(c) - Promissory Note
Exhibit 9.7 - Special Warranty Deed
Exhibit 9.8-1 - Bill of Sale
Exhibit 9.8-2 - Assignment and Assumption of Contracts and Lease
Exhibit 9.10 - Opinion of Seller's Counsel
Exhibit 10.6 - Opinion of Buyer's Counsel
(iv)
<PAGE>
--------------------------
PROPERTY PURCHASE AGREEMENT
--------------------------
This Property Purchase Agreement (this "AGREEMENT") is made as
of the 30th day of June, 1998, among Integrated Health Services, Inc., a
Delaware corporation having an address at 10065 Red Run Boulevard, Owings Mills,
Maryland 21117 ("IHS"), Integrated Health Services of Florida at Hollywood
Hills, Inc., a Delaware corporation having an address at 10065 Red Run
Boulevard, Owings Mills, MD 21117 ("BUYER"), Medical Associates IV Limited
Partnership, a North Carolina limited partnership having an address at 2307
Princess Anne Drive, Greensboro, N.C. 27408 ("SELLER"), Hillco PCS (Hialeah)
Limited Partnership, a Florida limited partnership having an address at 2307
Princess Anne Drive, Greensboro, NC 27408 ("HILLCO"), Medical Asset Fund, LLC, a
Georgia limited liability company having an address at P.O. Box 1073, Cleveland,
TN 37364-1073 ("MAF"), Todd P. Robinson, an individual having an address at 2307
Princess Anne Drive, Greensboro, N.C. 27408 ("ROBINSON"), Dr. John J. Sheehan,
Sr., an individual having an address at 124 Florentine, Horseshoe Bay West, TX
78657 ("Sheehan"), and Hialeah Acquisition Fund, L.P., a Tennessee limited
partnership having an address at P.O. Box 1073, Cleveland, TN 37364-1073
("HIALEAH L.P.", and together with Hillco, MAF, Robinson, and Dr. Sheehan the
"EQUITY HOLDERS", and each an "EQUITY HOLDER"). The Equity Holders and the
Seller are sometimes referred to collectively as the "GROUP" and each as a
"GROUP MEMBER" or a "MEMBER OF THE GROUP".
BACKGROUND
----------
A. Buyer is a subsidiary of IHS.
B. Seller is the owner of the Property (as such term is
hereinafter defined) relating to the skilled nursing facility known as the
"HIALEAH CONVALESCENT HOME", and having an address at 190 West 28th Street,
Hialeah, Florida (the "FACILITY").
C. Buyer desires to purchase the Property.
D. The Equity Holders are directly or indirectly the holders
of the equity in Seller.
E. The Property is being leased to SHCM Hialeah, Inc. F/K/A
Angell Care of Hialeah, Inc. (the "LESSEE") under the Lease (the "LEASE") dated
as of January 31, 1984, as amended July 1, 1991, and further amended June 28,
1996, between Lessee and Seller.
F. IHS or one of its subsidiaries (other than Buyer) has the
right to acquire all of the Lessee's rights under the Lease.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, agreements and representations and warranties herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I: SALE AND PURCHASE OF PROPERTY
----------------------------------------
1.1 ACQUIRED PROPERTY . Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined), Buyer, in reliance upon
the covenants, representations, warranties and agreements of the Group Members
contained herein or made pursuant hereto, will acquire from Seller, and Seller,
in reliance upon the covenants, representations, warranties and agreements of
Buyer and IHS contained herein or made pursuant hereto, will sell, assign,
transfer and convey, free and clear of all Encumbrances (as such term is
hereinafter defined in Section 5.6), other than Permitted Encumbrances (as such
term is hereinafter defined in Section 5.8) to Buyer, all of Seller's rights,
title and interest, if any, in and to the following property (collectively, the
"PROPERTY"):
(A) the real property described on Schedule 1.1(a) attached
hereto (the "LAND");
(B) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind and nature including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits
and lines (on-site and off-site), and parking areas and roadways appurtenant to
such buildings and structures presently or hereafter situated upon the Land
(collectively, the "IMPROVEMENTS");
(C) all easements, rights of way, licenses, leases, permits,
rights, privileges, tenements, hereditaments and uses appurtenant or applicable
to the Land, the Improvements, or the ownership or operation of the Facility,
including, but not limited to, the entire rights, title and interest of Seller
in and to any land lying in the bed of any and all public and private streets,
roads, avenues, highways or passageways, open or proposed, in front of or
abutting the Land (collectively, the "RIGHTS");
(D) all permanently affixed equipment, machinery, fixtures,
and other items of property, including all components thereof, now or hereafter
located in, on or used in connection with, and permanently affixed to or
incorporated into the Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, and built-in oxygen and vacuum
systems, all of which, to the greatest extent permitted by law, are hereby
deemed by the parties hereto to constitute real property, together with all
replacements, modifications, alterations and additions thereto (collectively the
"FIXTURES");
2
<PAGE>
(E) all machinery, equipment, furniture,furnishings, movable
walls or partitions, computers or trade fixtures or other personal property
located at the Facility, including without limitation, all items of furniture,
furnishings, equipment, vehicles, supplies and inventory, together with all
replacements, modifications, alterations, and additions thereto, except items,
if any, included within the definition of Fixtures (collectively, the "TANGIBLE
PERSONAL PROPERTY");
(F) the Lease, and all rights, and benefits arising thereunder
on or after the Closing, and all security deposits held by Seller, or in which
Seller has any rights, including, any security deposit under the Lease or with
public utilities; and
(G) to the extent assignable, all intangible rights of Seller
of every kind and description, used in the maintenance or operation of the Land,
or the Improvements, or other Property and, including without limitation, all
warranties, trademarks, servicemarks, tradestyles, building and property names
(including, but not limited to any name by which the Facility is commonly
known), and building signs on or relating to the Land or the Improvements, and
also including, without limitation, all rights arising under or out of any
purchase agreements covering any of the Property (the "INTANGIBLES").
All Property which constitutes real property is referred to herein as
"REAL PROPERTY" and all other Property is referred to as "PERSONAL PROPERTY."
1.2 EXCLUDED PROPERTY . Notwithstanding the foregoing, the
Property shall not include, and Seller shall not sell, transfer, convey or
assign the following property to Buyer: the right to receive refunds of any
sales tax paid by Seller prior to the Closing, the Seller's limited partnership
certificate and limited partnership agreement, qualifications to do business in
any jurisdiction, taxpayer identification numbers, and other documents related
specifically to Seller's limited partnership organization and maintenance, cash
(provided that security deposits shall be included in the Property), and any
rights arising under the Lease to the extent arising out of services or products
or other benefits provided by the Seller prior to the Closing (collectively,
"EXCLUDED PROPERTY").
1.3 NO ASSUMPTION OF LIABILITY .
(A) Buyer shall not assume, nor in any way be liable or
responsible for, anyclaim, lawsuit, liability, obligation or debt of any kind or
nature whatsoever, whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition (collectively, "LIABILITIES") of the
Seller, or arising out of the ownership, operation or maintenance of any of the
Property on or prior to the Closing, including without limitation, any liability
arising out of the Lease or any Contract (whether or not a Designated Contract)
("UNASSUMED LIABILITIES").
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(B) Notwithstanding the foregoing, subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall assume and undertake
to perform when and as the same shall become due, all obligations arising out of
services or products or other benefits to be provided to Buyer after Closing
under the Lease (the "ASSUMED LIABILITIES").
ARTICLE II: PURCHASE PRICE
2.1 DETERMINATION AND PAYMENT OF PURCHASE PRICE . The purchase
price (the "PURCHASE Price") for the Property shall be TWELVE MILLION DOLLARS
($12,000,000), which shall be payable at the Closing (as hereinafter defined in
Section 4.1) as follows:
(A) SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000)
shall be paid in cash by wire transfer of immediately available funds;
(B) TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000)
shall be paid by the delivery of newly issued shares of the Common Stock, par
value $.001, of IHS (the "IHS STOCK") valued using the Closing Date (as
hereinafter defined) as the date of determination in accordance with Section 3.1
below); and
(C) THREE MILLION DOLLARS ($3,000,000) shall be paid by the
issuance of an unsecured promissory note of Buyer in the form of Exhibit 2.1(c)
(the "NOTE") and providing, inter alia, for the payment of principal in five
installments as follows:
January 1, 1999 $760,000
January 1, 2000 $560,000
January 1, 2001 $560,000
January 1, 2002 $560,000
January 1, 2003 $560,000
Such installments shall be paid by the delivery of shares of IHS Stock (with
such shares to be valued in accordance with Section 3.1(a) below using the date
that the delivery thereof becomes due as the date of determination). Buyer in
its sole discretion may elect to pay all or any part of such principal
installments in cash. The outstanding principal under the Note, from time to
time, shall bear interest at the rate of eight percent (8%) per anum, with such
accrued and unpaid interest to be paid in cash on each date when a principal
payment becomes due. Buyer in its sole discretion may elect to prepay all or any
principal outstanding under the Note from time to time or at any time; provided
that any such prepayment shall be made in cash. The Note shall be executed and
delivered in Maryland.
2.2 TRANSFER AND SALES TAXES . All state and local real estate and
other property transfer, recording fees and similar taxes arising out of the
transactions contemplated herein shall be borne fifty percent (50%) by Seller
and fifty percent (50%) by Buyer. Any income or gains taxes arising out of the
transactions contemplated herein shall be borne by Seller.
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2.3 CERTAIN ADJUSTMENTS . The Purchase Price shall be allocated as
agreed in good faith by and between Buyer and Seller.
2.4 PRORATED ITEMS . On the Closing Date, the following
adjustments and prorations shall be computed as of 11:59 P.M. on the Closing
Date with respect to the following taxes (unless otherwise stated herein) and
the cash portion of the Purchase Price shall be adjusted, upward or downward as
appropriate, to reflect such prorations:
(A) RENT. All rent under the Lease shall be adjusted and
apportioned as of the Closing Date.
(B) OTHER PRORATIONS. All other charges and fees customarily
prorated and adjusted in similar transactions in the locale in which the
Property is situated shall be prorated as of the Closing Date in accordance with
such custom.
In the event that accurate prorations and other adjustments cannot
be made as of the Closing Date because current bills or statements are not
obtainable (as, for example, utility bills), the parties shall prorate and pay
their respective shares of such within 15 days after receipt of the final bill
of statement, but in no event later than sixty (60) days after Closing. The
Seller shall use its best efforts to have all utility meters read on the Closing
Date so as accurately to determine the proration of current utility bills.
ARTICLE III: IHS STOCK
3.1 IHS STOCK . As set forth in this Agreement, a portion of the
Purchase Price shall be payable by means of the delivery of shares of IHS Stock.
Such deliveries shall be made in accordance with the following:
(A) SHARE VALUE. Whenever shares of IHS Stock are to be
delivered pursuant to this Agreement, the number of shares of IHS Stock shall be
valued as of the applicable date of determination by using the average closing
New York Stock Exchange ("NYSE") price of IHS Stock for the twenty (20) trading
day period ending on the date which is two (2) trading days prior to the
applicable date of determination.
(B) REGISTRATION RIGHTS.
(I) IHS will use its best efforts to cause to be prepared,
filed and declared effective by the Securities and Exchange Commission (the
"COMMISSION"), within one hundred and twenty (120) days following the Closing
Date, a registration statement (a "REGISTRATION STATEMENT") for the registration
of the shares of IHS Stock issued to Seller at Closing, under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), and IHS shall maintain the
effectiveness of such registration statement for a period of one (1) year
following the Closing Date, or until Seller shall no longer own any of the
shares of IHS Stock issued at Closing pursuant to this Agreement, whichever
shall occur first, in each case except to the extent that an exemption from
registration may be available.
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(II) IHS will use its best efforts to cause to be prepared,
filed and declared effective by the Commission, within one hundred and twenty
(120) days following the issuance of any shares of IHS Stock pursuant to the
Note ("NOTE SHARES"), a Registration Statement for the registration of such Note
Shares, under the Securities Act, and IHS shall maintain the effectiveness of
such registration statement for a period of one (1) year following the date of
such issuance, or until Seller shall no longer own any of such Note Shares,
whichever shall occur first, in each case except to the extent that an exemption
from registration may be available.
(C) REGISTRATION EXPENSES. Seller shall not be responsible
for, and IHS shall bear, all of the reasonable expenses of IHS related to such
registration including, without limitation, the fees and expenses of its counsel
and accountants, all of its other costs, fees and expenses incident to the
preparation, printing, registration and filing under the Securities Act of the
Registration Statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and each
amendment or supplement thereto to underwriters, dealers and other purchasers of
IHS Stock and the costs and expenses (including fees and disbursements of its
counsel) incurred in connection with the qualification of IHS Stock under the
Blue Sky laws of various jurisdictions. IHS, however, shall not be required to
pay or incur underwriter's or brokerage discounts, commissions or expenses, or
to pay or incur any costs and expenses in excess in the aggregate of $20,000 for
Blue Sky qualifications of any shares of Seller's IHS Stock, or to pay or incur
any costs or expenses arising out of Seller's failure to comply with its
obligations under this Article III, or to pay or incur any costs or expenses
arising out of the inclusion of any transferee of Seller in any Registration
Statement.
(D) RESALE LIMITATIONS. Seller hereby covenants with IHS that
all resales of IHS Stock issued pursuant to this Agreement shall be effected
solely through Salomon Smith Barney, Inc., as broker.
(E) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Seller with respect to the shares of IHS
Stock as provided in this Section 3.1, IHS covenants and agrees as follows:
(I) IHS will promptly notify the Seller at any time when a
prospectus relating to any Registration Statement is required to be delivered
under the Securities Act, of the happening of any event known to IHS as a result
of which the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
(II) IHS shall furnish the Seller with such number of
prospectuses asshall reasonably be requested by Seller in connection with any
actual or contemplated resales.
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(III) Subject to the ultimate sentence in Section 3.1(c)
above, IHS shall take all necessary action which may be required in qualifying
or registering shares of IHS Stock included in any Registration Statement for
offering and resale under the securities or Blue Sky laws of such states as
reasonably are requested by the Seller provided that IHS shall not be obligated
to qualify as a foreign corporation or dealer to do business under the laws of
any such jurisdiction.
(IV) The information included or incorporated by reference
in the Registration Statements will not, at the time such Registration
Statements become effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein as necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or as necessary to correct any statement in any
earlier filing of such Registration Statements or any amendments thereto. The
Registration Statements will comply in all material respects with the provisions
of the Securities Act and the rules and regulations thereunder. IHS shall
indemnify the Seller and each person, if any, who controls the Seller within the
meaning of ss.15 of the Securities Act or ss.20(a) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Securities Act, the Exchange Act or any
other statute, common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any of
such Registration Statements executed by IHS or based upon written information
furnished by IHS filed in any jurisdiction in order to qualify IHS Stock under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, NYSE or any securities exchange; or the omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to IHS or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to IHS by the
Seller for use in any Registration Statement (it being understood that IHS may
rely on the representations and warranties of the Group Members made pursuant to
this Agreement in preparing the Registration Statement), any amendment or
supplement thereto or any application, as the case may be. If any action is
brought against the Seller or any controlling person of the Seller in respect of
which indemnity may be sought against IHS pursuant to this subsection
3.1(e)(iv), such person shall within thirty (30) days after the receipt thereby
of a summons or complaint, notify IHS in writing of the institution of such
action and IHS shall assume the defense of such action, including the employment
and payment of reasonable fees and expenses of counsel (reasonably satisfactory
to the Seller or such controlling person). Seller or such controlling person
shall have the right to employ her, his, its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
Seller or such controlling person unless (A) the employment of such counsel
shall have been authorized in writing by IHS in connection with the defense of
such action, or (B) IHS shall not have employed counsel to have charge of the
defense of such action within fifteen (15) days of the date of its receipt of
written request therefor referencing the consequences of failure to timely
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retain such counsel as set forth in this clause (iv), or (C) such indemnified
party or parties shall have reasonably concluded and notified IHS that there may
be defenses available to her, him, it or them which are different from or
additional to those available to IHS (in which case, IHS shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for the Seller and/or such controlling persons
shall be borne by IHS.
(V) The Seller, and its successors and assigns, shall
indemnify IHS, its officers and directors and each person, if any, who controls
IHS within the meaning of ss.15 of the Securities Act or ss.20(a) of the
Exchange Act against all loss, claim, damage, expense and liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or otherwise
(Federal, State, local or otherwise), arising from information furnished (or
required to be furnished in accordance with this Agreement) by or on behalf of
any of the Group Members, or any of their successors or assigns for inclusion in
the Registration Statement, any Exchange Act filing or any State Blue Sky Law
filing.
(F) NOTICE OF SALE. Seller shall not resell or otherwise
transfer any interest in any of the shares of IHS Stock issued to Seller
pursuant to this Agreement unless Seller shall have complied with all of his,
her or its obligations under this Agreement and except in the case of proposed
sales solely pursuant to an effective Registration Statement, unless Seller
shall have given prior notice to IHS, describing in reasonable detail Seller's
intention to effect the transfer and the manner of the proposed transfer. If the
transfer is to be pursuant to an effective Registration Statement as provided
herein, Seller will resell only in compliance with the disclosure therein and
discontinue any offers and sales thereunder upon notice from IHS to the Sellers
that the Registration Statement relating to the shares of IHS Stock being
transferred is not "current" until IHS gives further notice that offers and
sales may be recommenced. In the event of any such notice from IHS, IHS agrees
to file expeditiously such amendments to such Registration Statement as may be
necessary to bring it current during the period specified in this Section 3.1
and to give prompt notice to Seller when the Registration Statement has again
become current. If Seller delivers to IHS an opinion of counsel reasonably
acceptable to IHS and its counsel in form and substance reasonably acceptable to
them and to the effect that the proposed transfer of shares of IHS Stock may be
made without registration under the Securities Act and all applicable state
securities laws, Seller will, subject to Section 3.1(d) above, be entitled to
transfer said shares of IHS Stock in accordance with the terms of the notice and
opinion of their counsel.
(G) CONDITIONS. It shall be a condition precedent to the
obligations of IHS to take any action pursuant to this Article III that the
Seller shall furnish to the IHS such information regarding itself, the shares of
IHS Stock held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of their shares of IHS Stock or
as otherwise shall reasonably be requested by IHS. In that connection, Seller
shall be required to represent and warrant to IHS that all such information
which is given is both complete
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and accurate in all material respects. It also shall be a condition precedent to
the obligations of IHS to take any action pursuant to this Article III that the
Seller shall deliver to IHS a statement in writing that it bona fide intends to
resell, transfer or otherwise dispose of the shares of IHS Stock. Seller will
promptly notify IHS at any time when a prospectus relating to a Registration
Statement covering Seller's shares under this Section 3.1 is required to be
delivered under the Securities Act, of the happening of any event known to
Seller as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which such statements are made.
(H) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of IHS. Seller represents and
warrants to IHS that the IHS Stock being issued hereunder is being acquired, and
will be acquired, by the Seller for investment for its own account and not with
a view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act or any applicable state securities law; the Seller
acknowledges that the shares of IHS Stock issued to it pursuant to this
Agreement constitute restricted securities under Rule 144 promulgated by the
Commission pursuant to the Securities Act, and may have to be held indefinitely,
and the Seller agrees that no shares of IHS Stock issued to it pursuant to this
Agreement may be sold, transferred, assigned, pledged or otherwise disposed of
except pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Seller represents and warrants
that it has the knowledge and experience in financial and business matters, is
capable of evaluating the merits and risks of the investment, is able to bear
the economic risk of such investment, and is an accredited investor within the
meaning of Regulation D promulgated pursuant to the Securities Act. The Seller
represents and warrants that it has had the opportunity to make inquiries of and
obtain from representatives and employees of IHS such other information about
IHS as he, she or it deems necessary in connection with such investment.
(I) LEGEND. It is understood that, prior to resale of any
shares of IHS Stock pursuant to an effective Registration Statement pursuant to
subsection (e) above, the certificates evidencing such shares of IHS Stock shall
bear the following (or a similar) legend (in addition to any legends which may
be required in the opinion of IHS's counsel by the applicable securities laws of
any state), and upon resale of such shares pursuant to such an effective
registration, new certificates shall be issued for the shares sold without such
legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
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(J) CERTAIN TRANSFEREES. Except in the case of any transfer of
any shares of IHS Stock issued pursuant to this Agreement to a person in an open
market transaction subsequent to the effective date of, and pursuant to, a
Registration Statement covering such shares of IHS Stock, Seller shall not
transfer any such shares of IHS Stock to any person or entity unless such
transferee shall have agreed in a writing, in form and substance satisfactory to
IHS, to be bound by the provisions applicable to the Seller under this Article
III and such transfer shall be made in accordance with all applicable Federal
and state securities laws as set forth in subsection (g) above and otherwise in
accordance with this Article III.
ARTICLE IV: THE CLOSING
4.1 THE CLOSING . The closing of the transactions contemplated
by this Agreement (the "CLOSING") shall take place pursuant to escrow
arrangements, reasonably satisfactory to the parties hereto, when all conditions
to the Closing are satisfied, including, without limitation, receipt of all
necessary regulatory approvals in connection with the transactions contemplated
by this Agreement, but in any event, no later than June 30, 1998, subject to
extension until July 31, 1998 at the discretion of IHS, if all of such
conditions shall not then have been satisfied (the "CLOSING DATE").
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF GROUP MEMBERS
The Group Members, jointly and severally (except as otherwise
hereinafter expressly provided), represent and warrant to Buyer and IHS as
follows, provided, however, that the representations and warranties contained in
Sections 5.1, 5.2, 5.3, 5.4 and 5.5 are made severally by each Group Member with
respect to itself, himself or herself only and provided further, that the Group
Members jointly and severally, make such representations and warranties with
respect to Seller.
5.1 ORGANIZATION AND STANDING .
(A) Each Group Member that is a corporation is duly
organized, validly existing and i n good standing under the laws of its state of
incorporation. Copies of its Articles of Incorporation and By-Laws, and all
amendments thereof to date (the "CORPORATE DOCUMENTS"), have been delivered to
Buyer and are complete and correct. Each such Group Member has the power and
authority to own the property and assets now owned by it and to conduct the
business presently being conducted by it and to enter into this Agreement and
each of the Transaction Documents (as defined below in Section 5.2) to which it
is a party and to perform its obligations hereunder and thereunder. Each such
Group Member is qualified to do business as a foreign corporation in each state
where the ownership of its assets or the conduct of its business would make such
qualification necessary.
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(B) Each Group Member that is a limited liability company
is duly organized, validly existing and in good standing under the laws of its
state of formation. Copies of it Certificate of Formation and Operating
Agreement, and all amendments thereof to date (the "LIMITED LIABILITY COMPANY
Documents"), have been delivered to Buyer and are complete and correct. Each
such Group Member has the power and authority to own the property and assets now
owned by it and to conduct the business presently being conducted by it and to
enter into this Agreement and each of the Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. Each such Group
Member is qualified to do business as a foreign limited liability company in
each state where the ownership of its assets or the conduct of its business
would make such qualification necessary.
(C) Each Group Member that is a limited partnership is
duly organized, validly existing and in good standing under the laws of its
state of organization. Copies of it Limited Partnership Certificate and Limited
Partnership Agreement, and all amendments thereof to date (the "LIMITED
PARTNERSHIP DOCUMENTS", and together with the Corporate Documents and the
Limited Liability Company Documents, the "GOVERNING DOCUMENTS"), have been
delivered to Buyer and are complete and correct. Each such Group Member has the
power and authority to own the property and assets now owned by it and to
conduct the business presently being conducted by it and to enter into this
Agreement and each of the Transaction Documents to which it is a party and to
perform its obligations hereunder and thereunder. Each such Group Member is
qualified to do business as a foreign limited partnership in each state where
the ownership of its assets or the conduct of its business would make such
qualification necessary.
(D) Each Group Member that is an individual is of legal
age and otherwise has the capacity to enter into this Agreement and the
Transaction Documents to which he is a party, and is doing so by his own free
act of volition.
5.2 AUTHORITY . Each Group Member that is not an individual has
the full power and authority to make, execute, deliver and perform this
Agreement (including all Schedules and Exhibits hereto), and all other
agreements, instruments, certificates and documents required or contemplated
hereby or thereby (collectively "TRANSACTION DOCUMENTS") to be executed or
delivered by it, and to consummate all of the transactions contemplated hereby
and thereby. The execution, delivery, performance and consummation of this
Agreement and the Transaction Documents have been duly authorized by all
necessary action, corporate, limited liability company, limited partnership or
otherwise, on the part of such Group Member, and all necessary consents of
holders of indebtedness of such Group Member to the transactions contemplated by
this Agreement have been obtained.
5.3 BINDING EFFECT . This Agreement and all Transaction Documents
constitute the legal, valid and binding obligations of each Group Member that is
a party thereto, enforceable against such Group Member in accordance with their
respective terms.
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5.4 ABSENCE OF CONFLICTING AGREEMENTS . Neither the execution or
delivery by any Group Member of this Agreement or any of the Transaction
Documents nor the performance by any Group Member of the transactions
contemplated hereby and thereby, conflicts with, or constitutes a breach of or a
default under (A) such Group Member's Governing Documents; (B) except for the
Required Approvals, any judgment, order, writ, injunction, decree, statute, law,
rule, regulation, directive, mandate, ordinance or guideline ("GOVERNMENTAL
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES") applicable to it, him or her or the ownership of
any of the Property, or (C) any agreement, indenture, contract or instrument to
which any Group Member is now a party or by which any of them or any of their
respective assets is bound.
5.5 CONSENTS . No authorization, consent, approval, license,
exemption by filing or registration with any Governmental Authority is or will
be necessary for any Group Member to obtain in connection with it, his or her
entry into, execution, delivery and performance of this Agreement, any of it,
his or her Transaction Documents, or for the consummation of the transactions
contemplated hereby and thereby.
5.6 TITLE TO PERSONAL PROPERTY . Except for the rights granted to
the Lessee under the Lease, Seller has good and marketable title to all Personal
Property subject to no liens, claims, security interests, mortgages, pledges,
charges, easements, rights of set off, restraints on transfers, restrictions on
use, options, or encumbrances of any kind or nature whatsoever ("ENCUMBRANCES"),
other than Permitted Encumbrances. Except for Lessee's rights pursuant to the
Lease, no other person has any right to the use or possession of any of Personal
Property and, except as set forth on Schedule 5.6, Seller has not signed any
security agreement authorizing or granting a security interest in and to the
Personal Property.
5.7 CONTRACTS . Except for the Lease, there is no agreement,
lease, contract, instrument or commitment relating to the Property or to which
the Seller is a party or by which the Seller or any of the Property is bound. A
true, complete and correct copy of the Lease has been delivered to Buyer. The
Lease was entered into and requires performance in the ordinary course of
business and is in full force and effect. The Seller is not in default under the
Lease and there has not been asserted, either by or against the Seller under the
Lease, any notice of default, set-off or claim of default. Except as set forth
on Schedule 5.7, to the knowledge of the Group Members, the Lessee is not in
default of any of its obligations under the Lease, and there has not occurred
any event which with the passage of time or the giving of notice (or both) would
constitute a default or breach under the Lease. Except as set forth in Schedule
5.7, all amounts payable or receivable under the Lease are, and will at the
Closing Date, be on a current basis. Except as set forth in Schedule 5.7, the
assignment of the Lease and the transactions contemplated by this Agreement will
not require consent under the Lease.
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5.8 TITLE, CONDITION OF THE REAL PROPERTY .
(A) Other than the mortgages described on the title
insurance commitment heretofore delivered to Buyer, which mortgages shall be
satisfied and released in a manner satisfactory to Buyer prior to Closing,
Seller has good and marketable fee simple title to the Real Property, free and
clear of all Encumbrances and title exceptions of any kind whatsoever except for
the title exceptions set forth on Schedule 5.8(a) and for the Lease (the
"PERMITTED ENCUMBRANCES").
(B) Except for the Lease, there are no leases or other
agreements of Seller as lessor or licensor, granting any third party the right
to use or occupy any of the Property (except for rights granted by Lessee as
lessee under the Lease, such as the rights of the patients of the Facility) and
no person, firm or entity has any ownership interest or option or right of first
refusal to acquire any ownership interest in any or all of the Real Property.
(C) Seller has delivered to Buyer copies of any notice of
violation of any Governmental Requirement affecting the Real Property issued to,
or received by, Seller from any Governmental Authority.
(D) Seller has not received any notice of any plan, study
or effort by any Governmental Authority which in any way affects or would affect
the present use or zoning of the Real Property or any part thereof. Seller has
not received any notice of any assessments or proposed assessments or proposed
or contemplated plan to widen, modify or realign any street or highway or any
existing, proposed or contemplated eminent domain proceedings that would affect
the Real Property in any way whatsoever. No subdivision plan or plans
(preliminary or otherwise) have been or will be filed by Seller with respect to
the Real Property.
(E) There is no proceeding pending to which Seller is a
party relating to the assessed valuation of any portion of the Real Property,
and Seller has not received any assessment for public improvements against the
Real Property that remains unpaid or unperformed.
(F) Seller has not received any notice of noncompliance
from any Governmental Authority regarding any of the Improvements or the use or
occupancy thereof.
Except to the extent that Lessee shall be liable therefor under the Lease,
to the best of Seller's knowledge, the Improvements and all of their systems,
and the Fixtures, including without limitation, the heating, ventilating and air
conditioning systems, and the plumbing, electrical, mechanical and drainage
systems, and roofs are in good operating condition, repair and working order
(except for normal wear and tear that has not had a material adverse effect on
the condition thereof), and have passed all previous safety and/or licensing
inspections.
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5.9 LEGAL PROCEEDINGS . There are no disputes, claims, actions,
suits or proceedings, arbitrations or investigations, either administrative or
judicial, to which Seller is a party or is subject, pending, or, to the
knowledge of the Group Members, threatened or contemplated, nor, to the
knowledge of the Group Members, is there any basis therefor, against or
affecting any of the Property or Seller's rights therein or Seller's ability to
consummate the transactions contemplated herein, at law or in equity or
otherwise, before or by any Governmental Authority. Seller has received no
written requests for information with respect to the transactions contemplated
hereby from any Governmental Authority.
5.10 COMPLIANCE WITH LAWS .
(A) Except to the extent that Lessee shall be liable
therefor under the Lease, to the best of Seller's knowledge, Seller is in
compliance with all Governmental Requirements applicable to it or the Property.
The Seller has not received any claim or notice that any of the Property is not
in compliance with any applicable Governmental Requirement. The Group Members
shall report to Buyer, within five (5) days after receipt thereof, any written
or oral claims or notices that any of the Property is not in compliance with any
of the foregoing.
(B) Except to the extent the Lessee shall be liable therefor
under the Lease, at all times, to the best of Seller's knowledge, Seller has
complied, and is complying in all respects with all environmental and related
Governmental Requirements applicable to it and the Property, including, but not
limited to, the Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended by the Clean Water
Act, and subsequent amendments, the Federal Toxic Substances Control Act, as
amended, with respect to the environmental or healthful state, condition or
quality of any property (collectively "ENVIRONMENTAL LAWS"). The foregoing
representation and warranty applies to all aspects of the use and ownership of
the Property including, but not limited to, the use, handling, treatment,
storage, transportation and disposal of any hazardous, toxic or infectious
waste, material or substance (including medical waste), and to petroleum
products, material or waste whether performed on Property, or at any other
location. No notice from any Governmental Authority has ever been served upon
the Seller, or any of its agents or representatives claiming any violation of
any Environmental Law, or requiring or calling attention to the need for any
work, repairs, or demolition, on or in connection with any of such properties in
order to comply with any Environmental Law.
5.11 FINDERS . No broker or finder has acted for any Group Member
in connection with the transactions contemplated by this Agreement, and no
broker or finder is entitled to any broker's or finder's fee or other commission
in respect thereof based in any way on agreements, understandings or
arrangements with any Group Member.
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5.12 TAX RETURNS . Seller has filed all Federal, state, county and
local real estate and personal property, and other tax returns and abandoned
property reports (if any) to date that are due and required to be filed by it
prior to the date hereof, and there are no claims, liens, or judgments for taxes
due and payable prior to the date hereof from Seller affecting any of the
Property, and no basis for any such claim, lien, or judgment exists.
5.13 ENCUMBRANCES CREATED BY THIS AGREEMENT . The execution and
delivery of this Agreement and any of Transaction Documents does not, and the
consummation of the transactions contemplated hereby or thereby will not, create
any Encumbrances on any of the Property in favor of third parties.
5.14 EQUITY HOLDERS . Schedule 5.14 sets forth all of the
outstanding percentage interests in the Seller, and the holders thereof.
Schedule 5.14 also sets forth all of the outstanding membership interests and
outstanding shares of capital stock in each of the partners of the Seller and
the holders thereof.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF IHS AND BUYER
IHS and Buyer jointly and severally represent and warrant to
Seller as follows:
6.1 ORGANIZATION AND STANDING . Each of IHS and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
6.2 POWER OF AUTHORITY . Each of IHS and Buyer has the corporate
power and authority to execute, deliver and perform this Agreement, and as of
the Closing, each of IHS and Buyer will have the corporate power and authority
to execute and deliver the Transaction Documents required to be executed and
delivered by them to the Seller at the Closing.
6.3 BINDING AGREEMENT . This Agreement has been duly executed and
delivered by IHS and Buyer. This Agreement is, and when executed and delivered
by Buyer and IHS at the Closing, each of the Transaction Documents executed by
Buyer and IHS will be, the legal, valid and binding obligation of Buyer and IHS,
enforceable against Buyer and IHS in accordance with their respective terms.
6.4 SEC DOCUMENTS . IHS has furnished the Group Members with a
correct and complete copy of its report on Form 10-K for its fiscal years ended
December 31, 1997 (the"10-K"), its report on Form 10-Q for its fiscal quarter
ended March 31, 1998 (the"10-Q"), and its proxy statement prepared in connection
with its annual meeting held on May 22, 1998 (the "PROXY STATEMENT"). As of
their respective dates, none of the 10-K, 10-Q, and Proxy Statement and any
press release or other schedule or report required by IHS to be publicly
disclosed or filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act since January 1, 1998 (all of the foregoing being
the "SEC DOCUMENTS") contained any untrue statements, or
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omitted to make any disclosures, which, in light of the circumstances would
render any of such documents materially misleading, and the SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Exchange Act, and the rules and regulations promulgated by
the Commission thereunder.
6.5 ABSENCE OF CONFLICTING AGREEMENTS . Neither the execution or
delivery of this Agreement and, as of the Closing Date, the execution and
delivery of the Transaction Documents, by Buyer or IHS nor the performance by
Buyer or IHS of the transactions contemplated hereby and thereby conflicts with,
or constitutes a breach of or a default under (A) the Certificate of
Incorporation or By-laws of Buyer or IHS, or (b) any Governmental Requirement
applicable to Buyer or IHS, or (d) any agreement, indenture, contract or
instrument to which the Buyer or IHS is now a party or by which any of the
assets of Buyer or IHS is bound.
6.6 CONSENTS . Except as set forth on Schedule 5.5, no
authorization, consent, approval, license, exemption by, filing or registration
with any Governmental Authority, is or will be necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by Buyer or IHS.
6.7 CAPITAL STOCK . IHS has duly authorized and reserved for
issuance the IHS Stock, and, when issued in accordance with the terms of Article
III, the IHS Stock will be validly issued, fully paid, and nonassessable and
free of preemptive rights.
6.8 FINDERS . No broker or finder has acted for Buyer or IHS in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any broker's or finder's fee or other commission in
respect thereof based in any way on agreements, understandings or arrangements
with Buyer or IHS.
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE FACILITY
7.1 MAPS, PLANS, SURVEYS, ETC . As promptly as possible after the
date hereof, Seller shall deliver, or cause to be delivered, to Buyer, without
charge, copies of all plans, maps, surveys, descriptions, title reports and
certificates of occupancy respecting the Property and the use and occupancy
thereof in Seller's possession or under Seller's control that exist as of the
date of this Agreement, which materials shall be returned to Seller if this
Agreement is terminated. Prior to the Closing Date, Buyer may make, or cause to
be made, such investigation of the condition of the Seller and the Property as
Buyer deems necessary or advisable to familiarize itself therewith. The Group
Members shall permit Buyer and its authorized representatives (including legal
counsel, accountants and investigating agencies), to have full access to the
books and records of the Seller upon reasonable notice and during normal
business hours, and the Company will furnish, or cause to be furnished, to Buyer
such financial and operating data and other information and copies of documents
with respect to the Property as Buyer shall from time to time reasonably
request. The Seller shall cause its accountants to cooperate with Buyer.
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ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
8.1 NEGATIVE COVENANTS OF THE PARTIES . Without the prior written
approval of Seller or Buyer, as the case may be, neither Buyer nor Seller shall,
between the date hereof and the Closing, perform, take or fail to take any
action or incur or permit to exist any of the acts, transactions, events or
occurrences of a type which would have been inconsistent with the
representations, warranties and covenants made by it as set forth in this
Agreement had the same occurred prior to the date hereof.
8.2 AFFIRMATIVE COVENANTS . Between the date hereof and the
Closing, Seller shall comply with all provisions of the Contracts, including
without limitation, payment of all amounts coming due thereunder, and shall not
modify, amend, terminate or supplement any of same.
8.3 PURSUIT OF CONSENTS AND APPROVALS . Prior to the Closing,
Buyer and Seller jointly shall diligently undertake to obtain all Required
Approvals.
8.4 EXCLUSIVITY . Until the earlier of the Closing Date or the
termination of this Agreement pursuant to Section 12.1, no Group Member, nor any
of their respective affiliates, shall solicit or entertain any offers or engage
in any discussions or negotiations or enter into any agreement or letter of
intent directly or indirectly with any other party in respect of the sale of any
of the Property or of any of the equity in the Seller (any of said transactions
being referred to herein as a "PROHIBITED TRANSACTION"). The Group Members shall
promptly advise Buyer of any offer or solicitation that it receives for a
Prohibited Transaction, including, without limitation, the name of the person
making such offer or solicitation and the terms of such offer or solicitation.
ARTICLE IX: CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND IHS
Unless expressly waived by Buyer in writing and IHS, their
respective obligations to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, prior to or at the Closing, of each
of the following conditions. Upon failure of any of the following conditions
Buyer or IHS may terminate this Agreement pursuant to and in accordance with
Article XII herein.
9.1 REPRESENTATIONS AND WARRANTIES . The representations and
warranties of the Group Members made pursuant to this Agreement shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made at and as of such time.
9.2 PERFORMANCE OF COVENANTS . Each Group Member shall have
performed or complied with each agreement, covenant and obligation required by
this Agreement to be performed or complied with by such Group Member prior to or
at the Closing.
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9.3 DELIVERY OF CLOSING CERTIFICATE . The Group Members shall have
executed and delivered to Buyer and IHS a certificate dated the Closing Date
upon which they may rely, certifying that the conditions set forth in Sections
9.1 and 9.2 have been satisfied as of the Closing Date.
9.4 LEGAL MATTERS . No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person that questions the validity or legality of this Agreement or the
consummation of the transactions contemplated hereby.
9.5 APPROVALS .
(A) The consent or approval of all Government Authorities
necessary for the consummation of the transactions contemplated hereby (the
"REQUIRED APPROVALS") shall have been granted.
(B) None of the foregoing Required Approvals (i) shall have
been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Property or the Facility, or (ii) shall
impose on Buyer or IHS any material condition or provision or requirement with
respect to the Property or the Facility or its operation that is more
restrictive than or different from the conditions imposed upon such operation
prior to Closing.
9.6 TITLE INSURANCE . Buyer shall have obtained, at its expense,
at normal rates, a title commitment from a reputable title insurance company
selected by Buyer (the "TITLE COMPANY") for an owner's title policy (owner's
ALTA Policy Form B, as amended 10/17/70), insuring that title to the Real
Property shall be in fee simple and shall be good and marketable and free and
clear of all Encumbrances or rights of use or possession and other title
objections (including any lien or future claim from materials or labor supplied
for improvement of such property), except for Permitted Encumbrances; provided,
however, that, at the request of Buyer, Seller shall provide such affidavits and
standard indemnities to the Title Company and take such other reasonable actions
that would enable the Title Company to remove any standard exceptions included
as Permitted Encumbrances, but shall not be required to pay any premium or incur
any out-of-pocket expense to do so. Seller shall, if required by the
aforementioned title insurance company in connection with the issuance of the
aforementioned owner's title policy, have executed a gap indemnity agreement in
a form acceptable to such title insurance company. With respect to the standard
survey exceptions, Buyer may obtain prior to the Closing a survey, at Buyer's
expense, but if such survey (or study) discloses any Encumbrance that is not a
Permitted Encumbrance, Buyer may consider such a defect in title and may, at its
option, elect to cancel this Agreement pursuant to Section 12.1 hereof. In
addition to such title policy, Buyer, at its expense, must receive a zoning
opinion or report in form and substance reasonably satisfactory to it.
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9.7 DEED . Seller shall have executed and delivered to Buyer a
special warranty deed for the Real Property with warranty against grantor's acts
in the form of Exhibit 9.7 hereto, and subject only to the Permitted
Encumbrances.
9.8 PROPERTY TRANSFERRED AT CLOSING . Seller shall have delivered
or caused to be delivered to Buyer possession of the Property (or the right to
obtain possession on demand) together with such instruments of sale and
transfer, including without limitation, a Bill of Sale in the form of Exhibit
9.8-1 and an Assignment and Assumption of Contracts and Lease in the form of
Exhibit 9.8-2 (the "ASSIGNMENT AGREEMENT"), sufficient to vest in Buyer good and
marketable title to the Personal Property, free and clear of all Encumbrances
other than the Permitted Encumbrances.
9.9 AUTHORIZATION DOCUMENTS . Buyer shall have received a
certificate of the Group Members certifying authorization of their execution,
delivery and full performance of this Agreement and the Transaction Documents,
and certifying a copy of the Certificate of Limited Partnership and Limited
Partnership Agreement of Seller.
9.10 OPINION OF COUNSEL . Seller shall have delivered to Buyer an
opinion dated as of the Closing Date, of counsel to Seller, in the form and
substance attached hereto as Exhibit 9.10(a). Said opinion shall be addressed to
and may be relied upon by Buyer, its counsel, Buyer's lenders and their counsel,
and the Title Company.
9.11 ADDITIONAL ITEMS TO BE DELIVERED . At or prior to the
Closing, Seller shall have delivered the following to Buyer:
(A) all keys to the Improvements in the possession or control
of Seller;
(B) to the extent in the possession or control of Seller, the
originals (if available, otherwise legible and complete photocopies) of all
building permits, certificates of occupancy, zoning certificates and other
governmental permits and licenses required in connection with the ownership,
use, operation or maintenance of the Property;
(C) to the extent they are in the possession or control of
Seller, all architectural, engineering, mechanical, HVAC, electrical and
landscaping plans, drawings, and specifications, including "as built" plans and
specifications for each of the Improvements; and
(D) all other documents, correspondence, files, records,
memoranda, reports and other items within the possession or control of Seller or
its agents or attorneys pertaining to the Property which Buyer or its counsel
may reasonably request.
9.12 INTENTIONALLY OMITTED .
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9.13 CERTAIN REPORTS . Buyer shall have received, at Buyer's
expense, reports from qualified engineers and inspectors approved by Buyer with
respect to the physical condition of the Property and any termite, wood boring
insect or other pest infestation at the Facility, and/or resultant damage that
has not been corrected in all material respects. If any of such reports shall
indicate any matters that would constitute a breach of any representation or
warranty by any Group Member, then the Buyer may terminate this Agreement in
accordance with Section 12.1 hereof. The condition set forth in this Section
9.13 shall be deemed satisfied unless Buyer otherwise notifies Seller on or
prior to June 20, 1998.
9.14 OTHER DOCUMENTS . Seller shall have furnished Buyer with all
other documents, certificates and other instruments required to be furnished to
Buyer by Seller pursuant to the terms hereof, including, without limitation,
assignments of warranties to the extent assignable.
ARTICLE X: CONDITIONS PRECEDENT TO OBLIGATIONS OF GROUP MEMBERS
Unless expressly waived in writing by Seller, the obligation of
the Group Members to consummate the transactions contemplated by this Agreement
is subject to the satisfaction, prior to or at the Closing, of each of the
following conditions:
10.1 REPRESENTATIONS AND WARRANTIES . The representations and
warranties of Buyer and IHS made pursuant to this Agreement shall be true in all
material respects at and as of the Closing Date as though such representations
and warranties were made at and as of such time.
10.2 PERFORMANCE OF COVENANTS . Buyer and IHS shall have performed
or complied with each of its agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing,
including payment of the Purchase Price.
10.3 DELIVERY OF CLOSING CERTIFICATE . Buyer and IHS shall have
delivered to Seller a certificate of an officer of Buyer and IHS dated the
Closing Date upon which Seller can rely, certifying that the conditions set
forth in Sections 10.1 and 10.2 have been satisfied as of the Closing Date.
10.4 LEGAL MATTERS . No suit, actions, investigation or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person that questions the validity or legality of this Agreement or the
transactions contemplated hereby.
10.5 AUTHORIZATION DOCUMENTS . Seller shall have received a
certificate of the Secretary or other officer of Buyer and IHS certifying a copy
of resolutions of the Board of Directors of Buyer and IHS authorizing the
execution and full performance by Buyer and IHS of this Agreement and the
Transaction Documents and the incumbency of the officers of Buyer and IHS.
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10.6 OPINION OF COUNSEL . Buyer and IHS shall have delivered to
Seller an opinion, dated as of the Closing Date, of counsel to Buyer and IHS, in
the form and substance attached hereto as Exhibit 10.6.
10.7 OTHER DOCUMENTS . Buyer and IHS shall have furnished Seller
with all documents, certificates and other instruments required to be furnished
to Seller by Buyer or IHS pursuant to the terms hereof.
ARTICLE XI: OBLIGATIONS OF PARTIES AFTER CLOSING
11.1 DISCHARGE OF LIABILITIES . Seller shall pay all of its
liabilities and obligations (other than Assumed Liabilities), if any, with
respect to the Property as and when the same shall become due and payable.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . All
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive until the second anniversary of
the Closing Date notwithstanding any investigation at any time made by or on
behalf of the other party.
11.3 INDEMNIFICATION BY GROUP MEMBERS . The Group Members, jointly
and severally, shall indemnify and defend Buyer and IHS and each of their
respective officers, directors, agents, employees and advisors, and their
respective successors and assigns ("BUYER INDEMNITEES") and hold each of them
harmless against and with respect to any and all damage, loss, liability,
deficiency, cost and expense (including, without limitation, reasonable
attorney's fees and expenses) (all of the foregoing hereinafter collectively
referred to AS "LOSS") resulting from or arising out of:
(A) any inaccuracy in any representation, or breach of any
warranty or certification, made by any Group Member pursuant to this Agreement;
(B) the breach of any covenant, obligation or undertaking
by any Group Member made pursuant to this Agreement;
(C) any Unassumed Liability; or
(D) any action, suit, proceeding, demand, assessment,
judgment, settlement (to the extent approved by the Seller, such approval not to
be unreasonably withheld, delayed or conditioned), cost or legal or other
expense alleging or incident to any of the foregoing.
11.4 INDEMNIFICATION BY BUYER AND IHS . Buyer and IHS shall,
jointly and severally, indemnify and defend the Group Members and their
respective partners, officers, directors, employees, advisors and their
respective successors and assigns harmless against and with respect to any and
all Loss resulting from or arising out of:
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(A) any inaccuracy in any representation, or breach of any
warranty or certification, made by Buyer or IHS pursuant to this Agreement;
(B) the breach of any covenant, obligation or undertaking
by Buyer or IHS made pursuant to this Agreement;
(C) any Assumed Liability; or
(D) any action, suit, proceeding, demand, assessment,
judgment, settlement (to the extent approved by Buyer, such approval not to be
unreasonably withheld, delayed or conditioned), cost or legal or other expenses
incident to any of the foregoing.
11.5 ASSERTION OF CLAIMS . Any claims for indemnification under
Section 11.3(a) or 11.4(a) must be asserted by written notice on or prior to the
second anniversary of the Closing Date.
11.6 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS .
(A) Buyer shall give Seller prompt notice of each claim for
which it seeks indemnification. Failure to give such prompt notice shall not
relieve the Group Members of their indemnification obligation, provided that
such indemnification obligation shall be reduced by any damages the Group
Members demonstrate they have suffered resulting from a failure to give prompt
notice hereunder. The Seller shall be entitled to participate in the defense of
such claim. If at any time the Group Members acknowledge in writing that the
claim is fully indemnifiable by them under this Agreement, and, if reasonably
requested by Buyer, post adequate bond or security, they shall have the right to
assume control of the defense of such claim at their own expense; provided,
however, no such bond shall be required if such matter is fully covered by
insurance or is otherwise the obligation of the Lessee.
(B) The Seller shall give Buyer prompt written notice of
each claim for which any Group Member seeks indemnification. Failure to give
such prompt notice shall not relieve the Buyer or IHS of its indemnification
obligation, provided that such indemnification obligation shall be reduced by
any damages Buyer or IHS demonstrates it has suffered resulting from a failure
to give prompt notice hereunder. IHS and the Buyer shall be entitled to
participate in the defense of such claim. If at any time Buyer acknowledges in
writing that the claim is fully indemnifiable by it under this Agreement, and,
if requested by Seller post adequate bond of security, it shall have the right
to assume control of the defense of such claim at its own expense.
(C) Nothing contained in this Section 11.6 shall prevent
either party from assuming total control of the defense and/or settling any
claim against it for which indemnification is not sought under this Agreement.
No party shall settle any claim for which indemnification is sought without the
written consent of the Seller and Buyer, which consent shall not be unreasonably
withheld, delayed or conditioned.
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(D) Any Buyer Indemnitee shall be entitled to, but shall no
be required to, offset any claim made by such Buyer Indemnitee pursuant to this
Agreement against any amount payable under the Note. Buyer shall not be
permitted such offsets if Seller is complying with all of its obligations under
this Section 11.6, provided, however, (i) such matter is covered by insurance
and/or Seller posts a bond or provides other reasonably acceptable security, or
(ii) the remaining balance of the Note is greater than twice the amount claimed,
in which event, Buyer shall be entitled to escrow any scheduled principal
payments pursuant to a commercially reasonable escrow agreement.
(E) If any of the Group Members shall be subject to a
dispute with Buyer or IHS with respect to indemnification rights or matters ,
they shall, unless Buyer elects otherwise in its sole and absolute discretion,
be required to act as a group with respect to any and all rights and obligations
with respect to the resolutions of dispute and Seller shall act as their sole
representative and shall be bound by all actions taken or omitted by Seller on
behalf of any Group Member as provided in this Agreement, and each Group Member
shall be deemed to have received any notice deemed given or payment made to
Seller in accordance with the notice provisions of this Agreement on the date
deemed given or the date paid to Seller and Buyer and IHS shall be entitled to
rely on all notices and consents given, and all settlements entered into on
behalf of any Group Member to the extent authorized pursuant to the terms of
this Agreement notwithstanding any objections made by any Group Member prior to,
concurrently with or subsequent to the giving of any such notice or consent or
the settlement of any such matter.
(F) Upon payment in full by an indemnifying party of any
indemnification claim, whether such payment is effected by setoff or otherwise,
or upon the payment in full by an indemnifying party of any judgment with
respect to a third-party claim, the indemnifying party shall be subrogated (to
the extent permitted by applicable law) to the extent of such payment to the
rights of the indemnified party against any vendors, fee mortgagees, insurance
carrier, workmens' compensation fund, attorneys, title insurance carrier,
engineers, surveyors, environmental inspectors, zoning experts and the other
parties to the Transaction Documents.
ARTICLE XII: TERMINATION
12.1 TERMINATION . This Agreement may be terminated at any time at
or prior to the time of Closing by:
(A) Buyer, if any condition precedent to Buyer's
obligations hereunder, including without limitation those conditions set forth
in Section 2.4 or Article IX hereof, have not been satisfied by the Closing Date
or pursuant to Section 13.1 if any portion of the Property is damaged or
destroyed;
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(B) Seller, if any condition precedent to Seller's
obligations hereunder, including without limitation those conditions set forth
in Article X hereof, have not been satisfied by the Closing Date; or
(C) the mutual consent of Buyer and Seller.
12.2 EFFECT OF TERMINATION . If a party terminates this Agreement
because one of its conditions precedent has not been satisfied, or if this
Agreement is terminated by mutual consent, this Agreement shall become null and
void without any liability to the terminating party except to the extent that
said terminating party shall have been in breach of this Agreement. If such
termination is by Buyer pursuant to Section 12.1(a) as a result of a breach by
any Group Member of any of its representations, warranties, obligations or
covenants made pursuant to this Agreement, nothing herein shall affect the right
of Buyer and IHS to damages on account of such breach or to elect specific
performance or injunctive relief on account of such breach, and (ii) if such
termination is by Seller pursuant to Section 12.1 (b) as a result of a breach by
Buyer or IHS of any of its representations, warranties, obligations or covenants
in this Agreement, nothing herein shall affect the Group Members' right to
damages on account of such breach.
ARTICLE XIII: CASUALTY, RISK OF LOSS
13.1 CASUALTY, RISK OF LOSS . If at any time prior to the Closing
any portion of the Property is damaged or destroyed as a result of fire, other
casualty or for any reason whatsoever. Buyer shall have the right, in its sole
and absolute discretion, within thirty (30) days of receipt of such notice (and
the scheduled Closing Date shall be correspondingly extended), to (1) elect not
to proceed with the Closing and terminate this Agreement, or (2) proceed to
Closing and consummate the transactions contemplated hereby and receive any and
all insurance proceeds received or receivable by Seller on account of any such
casualty, in which case Buyer shall be deemed to have accepted the Property in
its damaged condition and waived any right to indemnification or other claim due
from Seller with respect to such casualty.
ARTICLE XIV: MISCELLANEOUS PROVISIONS
14.1 PUBLIC ANNOUNCEMENTS . Any general public announcements or
similar media publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as Buyer shall
determine, subject to the reasonable approval of Seller.
14.2 COSTS AND EXPENSES . Except as expressly otherwise provided
in this Agreement, each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
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14.3 PERFORMANCE . In the event of a breach by any Group Member of
its, his or her obligations hereunder, Buyer and IHS shall have the right, in
addition to any other remedies which may be available, to obtain specific
performance of the terms of this Agreement, and the Group Members hereby waive
the defense that there may be an adequate remedy at law and any requirement that
Buyer post any bond or security. Should any party default in its performance, or
other remedy, the prevailing party shall be entitled to its reasonable
attorneys' fees.
14.4 BENEFIT AND ASSIGNMENT . This Agreement binds and inures to
the benefit of each party hereto and its successors and proper assigns. Buyer
may assign its rights and interest under this Agreement to any other person or
entity; provided that IHS shall continue to be liable for all of its obligations
hereunder.
14.5 EFFECT AND CONSTRUCTION OF THIS AGREEMENT . This Agreement
and the Exhibits and Schedules hereto embody the entire agreement and
understanding of the parties and supersede any and all prior agreements,
arrangements and understandings relating to matters provided for herein. The
captions used herein are for convenience only and shall not control or affect
the meaning or construction of the provisions of this Agreement. This Agreement
may be executed in one or more counterparts, and all such counterparts shall
constitute one and the same instrument.
14.6 COOPERATION - FURTHER ASSISTANCE . Subject to the terms and
conditions herein provided, each of the parties hereto shall use its best
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such additional documents and instruments,
and to do, or cause to be done, all things necessary, proper and advisable under
the provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement.
14.7 NOTICES . All notices required or permitted hereunder shall
be in writing and shall be deemed to be properly given when personally delivered
to the party or parties entitled to receive the notice or three (3) business
days after sent by certified or registered mail, postage prepaid, or on the
business day after sent by nationally recognized overnight courier, in each
case, properly addressed to the party or parties entitled to receive such notice
at the address stated below:
If to any Group Member,
to the Seller at: Todd Robinson
2307 Princess Anne Drive
Greensboro, NC 27408
with a copy to: Ronald Matamoros, Esq.
Blanco Tackabery Combs & Matamoros
110 South Strafford Road
Winston-Salem, NC 27104-4244
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If to the Buyer or IHS: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Daniel J. Booth,
Senior Vice President
and
with a copy to: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall A. Elkins, General Counsel
and
Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Andrew S. Bogen
14.8 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
its duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
14.9 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
14.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the state of Florida
applicable to contracts executed, delivered and to be fully performed in the
state of Florida, disregarding any contrary rules relating to the choice or
conflict of laws.
14.11 SEVERABILITY. Any provision, or distinguishable portion of
any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, the parties waive any provision of law
which renders a provision hereof prohibited or unenforceable in any respect.
26
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
INTEGRATED HEALTH SERVICES, INC.
By:/s/ Daniel J. Booth
----------------------------------
Title: Daniel J. Booth
-------------------------------
Senior Vice President
INTEGRATED HEALTH SERVICES OF
FLORIDA AT HOLLYWOOD HILLS, INC.
By:/s/ Daniel J. Booth
----------------------------------
Title: Daniel J. Booth
-------------------------------
Senior Vice President
MEDICAL ASSOCIATES IV LIMITED
PARTNERSHIP
By: Hillco PCS (Hialeah) Limited Partnership
Its: General Partner
By: Medical Asset Fund, LLC
Todd Robinson, Manager
By:
----------------------------------
John J. Sheehan, Jr., Manager
HILLCO PCS (HIALEAH)
LIMITED PARTNERSHIP
By: Medical Asset Fund, LLC
Its: General Partner
By:
----------------------------------
Its: Manager
MEDICAL ASSET FUND, LLC
27
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
INTEGRATED HEALTH SERVICES, INC.
By:
----------------------------------
Title:
-------------------------------
INTEGRATED HEALTH SERVICES OF
FLORIDA AT HOLLYWOOD HILLS, INC.
By:
----------------------------------
Title:
-------------------------------
MEDICAL ASSOCIATES IV LIMITED
PARTNERSHIP
By: Hillco PCS (Hialeah) Limited Partnership
Its: General Partner
By: Medical Asset Fund, LLC
By: /s/ Todd Robinson
----------------------------------
Todd Robinson, Manager
By:/s/ John J. Sheehan, Jr.
----------------------------------
John J. Sheehan, Jr., Manager
HILLCO PCS (HIALEAH)
LIMITED PARTNERSHIP
By: Medical Asset Fund, LLC
Its: General Partner
By:/s/ John J. Sheehan, Jr.
----------------------------------
Its: Manager
MEDICAL ASSET FUND, LLC
By: /s/ Todd Robinson
----------------------------------
Todd Robinson, Manager
By:/s/ John J. Sheehan, Jr.
----------------------------------
John J. Sheehan, Jr., Manager
27
<PAGE>
EQUITY HOLDERS:
/s/ Todd P. Robinson
- ------------------------------------
Todd P. Robinson
- ------------------------------------
Dr. John J. Sheehan, Sr.
HIALEAH ACQUISITION FUND, L.P.
By:
----------------------------------
Its: General Partner
----------------------------------
28
<PAGE>
EQUITY HOLDERS:
- ------------------------------------
Todd P. Robinson
/s/ Dr. John J. Sheehan, Sr.
- ------------------------------------
Dr. John J. Sheehan, Sr.
HIALEAH ACQUISITION FUND, L.P.
By:/s/ Margaret P. Sheehan
----------------------------------
Its: General Partner
28
SETTLEMENT AGREEMENT
AGREEMENT this 8th day of July, 1998, between Incon Development, Inc., a
New Hampshire corporation with a principal place of business at 5 Flagstone
Drive, Hudson, New Hampshire ("Incon") and Integrated Health Services, Inc., a
Delaware corporation with a principal place of business at 10065 Red Run
Boulevard, Owings Mills, Maryland ("IHS").
WHEREAS, Incon is the plaintiff in an action presently pending in
Hillsborough County Superior Court, Southern District, captioned Incon
Development, Inc. v. Integrated Health Services, Inc., Docket No. 97-C-251 (the
"Litigation"), which alleges breach of contract and other theories of recovery
against IHS arising out of an agreement fully executed on March 27, 1996 between
IHS and Incon, and IHS has defended against the Litigation alleging breach of
contract on the part of Incon; and
WHEREAS, the parties believe that the purchase of certain products by IHS
from Incon and the exchange of other consideration identified below would be
mutually beneficial and an appropriate way to resolve the Litigation.
NOW, THEREFORE, the parties hereto agree as follows:
1. IHS has, on the date hereof, issued 39,012 shares of IHS common stock
(the "Shares") to Incon having a total fair market value of one and one-half
million dollars ($1,500,000). IHS agrees that to the extent Incon receives less
than an average of $38.45 per share (before brokerage commissions) for the
Shares sold by Incon during the two (2) trading days following the date Incon is
notified that the registration statement covering the resale of the shares has
been declared effective under the Securities Act of 1933, it will pay the
difference between the product determined by multiplying $38.45 by the number of
shares sold; provided that IHS shall not be required to pay more than one
hundred thousand dollars ($100,000) in cash, and any excess will be paid through
the issuance of additional unregistered shares of IHS common stock. IHS agrees
to pay Incon interest on a monthly basis on one and one-half million dollars
($1,500,000) accruing from June 10, 1998 at a rate equal to the prime rate plus
one point (as of June 10, 1998) calculated on a per annum basis, payable on the
tenth day of each month beginning July 10, 1998. Should IHS common stock not
become fully registered by September 28, 1998, then Incon shall have the right
to put the Shares to IHS in exchange for one and one-half million dollars
($1,500,000) (plus any outstanding interest) in cash or cash equivalent payable
forthwith in full satisfaction of its obligations enumerated in this paragraph.
In the event that the sale price of the stock exceeds one and one-half million
dollars ($1,500,000) plus any outstanding interest, the excess will serve to
offset any amount of interest IHS might otherwise owe to Incon. Any additional
excess amount will be refunded in cash to IHS forthwith.
<PAGE>
2. Incon represents to IHS that:
(a) It is acquiring the Shares for investment purposes only, and not
with the view to, or for resale in connection with, any distribution thereof. It
understands that the Shares have not been registered under the Securities Act of
1933, as amended ("the "Securities Act"), or under the securities laws of the
various states, by reason of a specified exemption from the registration
provisions thereunder which depends upon, among other things, the bona fide
nature of Incon's investment intent as expressed herein.
(b) It acknowledges that the Shares must be held indefinitely unless
they are subsequently registered under the Securities Act and under applicable
state securities laws or an exemption from such registration is available. It
has been advised or is aware that Rule 144 promulgated under the Securities Act,
which permits limited resales of securities purchased in a private placement,
will not be available for a period of one year from the date hereof for resale
of the Shares and, at the end of such one year period, may not be available.
Consequently, Incon acknowledges that the Shares are an illiquid investment.
(c) It has received and carefully reviewed all information which it
deemed relevant in connection with its investment made hereby, including without
limitation IHS' filings with the Securities and Exchange Commission. In
addition, Incon acknowledges that it has had the opportunity to ask questions
of, and receive answers from, IHS' representatives concerning IHS' business,
financial condition and results of operations.
(d) It is aware that no federal or state or other agency has passed
upon or made any finding or determination concerning the fairness of the
transactions contemplated hereby and it must forego the security, if any, that
such a review would provide.
(e) It is an "Accredited Investor" as that term is defined in Rule
501(a) of Regulation D under the Securities Act.
(f) It understands that all certificates for the Shares issues to it
shall bear a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN
OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT SUCH DEPOSITION
WILL NOT REQUIRE REGISTRATION OF
2
<PAGE>
SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS."
3. IHS has paid Incon two hundred thousand dollars ($200,000) for the
purchase of certain products listed among those identified in the attached
Exhibit A. IHS agrees that in addition to being responsible for all costs of
shipping these products, it is also responsible for nine thousand dollars
($9,000) in handling costs and eighteen thousand dollars ($18,000) in destroyed
or damaged product, and therefore, will receive only one hundred seventy-three
thousand dollars ($173,000) worth of products. Any delay by IHS in taking
possession of the products shall not constitute a waiver of its rights to the
products.
4. Incon represents and warrants that the products identified in Exhibit A
have been warehoused for some time in Nashua, New Hampshire and are in their
original packaging. Incon is not aware of any deterioration of clinical
effectiveness and, following an inspection of those packages, IHS is not aware
of any such deterioration. Beyond that, Incon makes no representation or
warranty that the products are mechantable , fit for a particular purpose, or
otherwise of any particular quality. In addition, apart from the representations
contained herein, IHS agrees to indemnify and hold Incon harmless for any claim
brought against Incon arising out of the quality of the products identified in
Exhibit A.
5. The parties will execute and file with the Hillsborough County Superior
Court, Southern District, the docket markings attached as Exhibit B upon
exchange of the consideration identified herein.
6. The parties have executed the releases attached hereto as Exhibits C and
D. The release running to Incon (Exhibit C) will be delivered to Michael
Pignatelli, counsel for Incon, as Escrow Agent ("Incon Escrow Agent"). Upon
exchange of all other consideration identified herein, Incon Escrow Agent is
authorized to distribute said release to Incon. The release running to IHS
(Exhibit D) will be delivered to Michael Harvell, counsel for IHS, as Escrow
Agent ("IHS Escrow Agent"). Upon exchange of all other consideration identified
herein, IHS Escrow Agent is authorized to distribute said release to IHS.
7. Nothing in this Agreement is to be construed as an admission of
liability on the part of either party.
8. The parties agree that any disputes concerning or arising out of the
terms of this Settlement Agreement are to be governed by the internal law of New
Hampshire.
9. This Agreement and attachments reflect the entire understanding of the
parties and supersedes any and all prior agreements or understandings between
them.
3
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands.
Incon Development, Inc.
/s/ BY /s/
- --------------------------------------- -----------------------------
Witness
Integrated Health Services, Inc.
/s/ BY /s/
- --------------------------------------- -----------------------------
Witness
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
IHS
INVENTORY
PRODUCT OWNERSHIP IHS
TRANSFER/WAREHOUSE SEGREGATION UNIT PURCHASE
CATALOG # 7/1/98 COST EXTENSION
--------- ----------- ---- ---------
<S> <C> <C> <C> <C> <C>
ADULT DIAPERS:
1000-01 Embrace Ultra Regular Fit w/Polymer, Small 222 33.45 $ 7,425.90
1000-02 Embrace Ultra Regular Fit w/Polymer, Medium 288 30.65 $ 8,152.90
1001-01 Embrace Ultra Full Fit w/Polymer, Small 115 34.28 $ 3,942.20
1001-02 Embrace Ultra Full Fit w/Polymer, Small 341 31.81 $ 10,647.21
LINER SYSTEM:
1200-10 Embrace 10 x 24 Regular Pad 950cc 175 35.65 $ 8,238.75
1200-20 Embrace 10 x 24 Super Absorbent Pad 1250cc 100 43.26 $ 4,326.00
1200-02 Embrace Contour Liner, Regular 242 31.29 $ 7,572.18
1200-04 Embrace Contour Liner Super Absorbent, Overnight 550 47.30 $ 26,016.00
1200-99 Embrace Large Mesh Pants 35 51.51 $ 1,502.85
UROLOGICALS: 01
3000-16 Embrace Urethral Tray 14fr.-16fr. 106 34.32 $ 3,637.92
3000-01 Embrace Urethral Tray with Plastic Cath eter 30 28.64 859.20 Expired
3002-10 Embrace Insert Tray 10cc. BZK 95 26.76 $ 2,542.20
3002-30 Embrace Insert Tray 30cc, PVI 265 28.40 $ 7,524.00 Expired
IRRIGATION
3007-10 Embrace Irrigation Solution Water, 110ml 75 24.50 $ 1,837.50 Expired
UROLOGICALS: 02
3004-60 Embrace Irrigation Syringe, Piston 60cc, Sterile 873 83.90 $ 73,244.70
3009-00 Embrace Drainage Bag w/Anti-Reflux & Sample Port 41 34.00 $ 1,394.00
3009-10 Embrace Leg Bag, 500 ml, Medium 9 53.12 $ 478.08
3009-20 Embrace Leg Bag, 1000ml, Large 13 53.12 $ 690.56
VINVL EXAM GLOVES:
2001-01 Embrace Vinyl Exam, Small 5 35.80 $ 179.00
POWER FREE EXAM GLOVES:
2002-02 Powder Free Exam, Medium 14 55.37 $ 775.18
LATEX EXAM GLOVES:
2000-01 Embrace Latex Exam, Small 100 35.27 $ 3,527.00
----- ------------
Total 3,672 $ 173,014.33
----- ------------
$ 173,000.00
Variance $ 14.33
============
</TABLE>
<PAGE>
EXHIBIT B
THE STATE OF NEW HAMPSHIRE
HILLSBOROUGH, SS SUPERIOR COURT
SOUTHERN DISTRICT
97-C-251
INCON DEVELOPMENT, INC.
v.
INTEGRATED HEALTH SERVICES, INC.
DOCKET MARKINGS
---------------
The parties agree that the docket shall be marked: "Neither Party. No
Interest. No Costs. No further action for the same cause."
Respectfully submitted,
INTEGRATED HEALTH SERVICES, INC.
By Its Attorneys,
SHEEHAN PHINNEY BASS & GREEN,
PROFESSIONAL ASSOCIATION
Date: May ___, 1998 By:
------------------------------
David W. McGrath, Esq.
1000 Elm Street
PO Box 3701
Manchester, NH 03701-3701
(603) 668-0300
<PAGE>
INCON DEVELOPMENT, INC.
By Its Attorneys,
RATH, YOUNG & PIGNATELLI,
PROFESSIONAL ASSOCIATION
Date: By:
------------------------ ------------------------
Michael Pignatelli, Esq.
20 Trafalgar Square
Nashua, NH 03063
(603) 889-9952
`
<PAGE>
EXHIBIT C
GENERAL RELEASE
---------------
NOW COMES Integrated Health Services, a Delaware corporation with its
principal place of business in Owings Mills, Maryland (hereinafter referred to
as "the Releasor"), for and in consideration of a cross-release of even date and
other good and valuable consideration, the receipt whereof is hereby
acknowledged and hereby remises, releases and forever discharges and by these
presents does for themselves, their employees, directors, shareholders,
affiliates, subsidiaries, successors, heirs and assigns, remise, release and
forever discharge Incon Development, Inc. a New Hampshire corporation with its
principal place of business in Hudson, New Hampshire, its employees, directors,
shareholders, agents, affiliates, successors, heirs and assigns (hereinafter
referred to as "the Releasee") from all manner of action and actions, cause and
causes of action, suits, debts, dues, sums of money, accounts, reckoning, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims and
demands whatsoever, in law or in equity, which against the Releasee, the
Releasor ever had, now has or which its successors, heirs or assigns, hereafter
can, shall or may have for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the day of these presents, with
particular reference, but without any limitation, to all claims and cause of
action made or which could have been made associated with a contract dated March
_____, 1996 between Releasor and Releasee for the purchase and sale of certain
products to be used in Releasor's nursing home business, except that Releasor
does not release any claim it might have against Releasee arising out of the
Settlement Agreement dated ___________________
INTEGRATED HEALTH SERVICES, INC.
Dated: ________________ By:_______________________________
Its ______________, duly authorized
<PAGE>
STATE OF MARYLAND
COUNTY OF ________________ SS
On this ___ day of April, 1998, personally appeared ______________ as
________________ of Integrated Health Services, Inc., known to me or
satisfactorily proven to be the person described in the foregoing instrument,
and acknowledged that he/she was duly authorized and that he/she executed the
same on behalf of the Corporation for the purposes therein contained.
Before me,
----------------------------------
Notary Public/Justice of the Peace
My Commission expires:
------------
<PAGE>
EXHIBIT D
GENERAL RELEASE
---------------
NOW COMES Incon Development, Inc., a New Hampshire corporation with its
principal place of business in Hudson, New Hampshire (hereinafter referred to as
"the Releasor"), for and in consideration of a cross-release of even date and
other good and valuable consideration, the receipt whereof is hereby
acknowledged and hereby remises, releases and forever discharges and by these
presents does for themselves, their employees, directors, shareholders,
affiliates, subsidiaries, successors, heirs and assigns, remise, release and
forever discharge Integrated Health Services, Inc., a Delawarecorporation with
its principal place of business in Owings Mills, Maryland, its employees,
directors, shareholders, agents, affiliates, successors, heirs and assigns
(hereinafter referred to as "the Releasee") from all manner of action and
actions, cause and causes of action, suits, debts, dues, sums of money,
accounts, reckoning, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, claims and demands whatsoever, in law or in equity, which
against the Releasee, the Releasor ever had, now has or which its successors,
heirs or assigns, hereafter can, shall or may have for, upon or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the day of
these presents, with particular reference, but without any limitation, to all
claims and cause of action made or which could have been made associated with a
contract dated March _____, 1996 between Releasor and Releasee for the purchase
and sale of certain products to be used in Releasee's nursing home business,
except that Releasor does not release any claim it might have against Releasee
arising out of the Settlement Agreement dated _____________.
INCON DEVELOPMENT, INC.
Dated: ________________ By:_______________________________
Its ______________, duly authorized
<PAGE>
STATE OF NEW HAMPSHIRE
COUNTY OF ________________ SS
On this ___ day of April, 1998, personally appeared ______________ as
________________ of Incon Development, Inc., known to me or satisfactorily
proven to be the person described in the foregoing instrument, and acknowledged
that he/she was duly authorized and that he/she executed the same on behalf of
the Corporation for the purposes therein contained.
Before me,
----------------------------------
Notary Public/Justice of the Peace
My Commission expires:
-------------
-----------------------------
PARTNERSHIP INTEREST PURCHASE
AGREEMENT
Dated as of June 1, 1998
among
WEST COAST CAMBRIDGE, INC.
INTEGRATED HEALTH SERVICES, INC.
T(2) MEDICAL, INC.
and
CORAM HEALTHCARE CORPORATION
-----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: DEFINITIONS............................................................................................1
1.1 Defined Terms.........................................................................................1
1.2 Other Defined Terms...................................................................................6
ARTICLE II: PURCHASE AND SALE OF ASSETS...........................................................................7
2.1 Transfer of Assets....................................................................................7
2.2 Assumption of Liabilities.............................................................................7
2.3 Excluded Liabilities..................................................................................7
2.4 Determination and Payment of Purchase Price...........................................................8
2.5 Closing Costs; Transfer Taxes and Fees...............................................................13
2.6 Tax Clearance Certificate............................................................................13
ARTICLE III: CLOSING.............................................................................................13
3.1 Closing..............................................................................................13
3.2 Conveyance at Closing and Other Closing Documents....................................................13
3.3 Certain Bring-Downs..................................................................................15
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................15
4.1 Organization of Coram, Seller and the Partnership; Organizational Documents
....................................................................................................15
4.2 Subsidiaries.........................................................................................15
4.3 Authorization........................................................................................15
4.4 Absence of Certain Changes or Events.................................................................16
4.5 Assets...............................................................................................18
4.6 Contracts and Commitments............................................................................18
4.7 Permits; Consents and Approvals......................................................................19
4.8 No Conflict or Violation.............................................................................20
4.9 Financial Statements.................................................................................20
4.10 Books and Records....................................................................................21
4.11 Litigation...........................................................................................21
4.12 Labor Matters........................................................................................21
4.13 Liabilities..........................................................................................21
4.14 Compliance with Law..................................................................................22
4.15 No Brokers...........................................................................................22
4.16 No Other Agreement to Sell the Assets................................................................22
4.17 Proprietary Rights...................................................................................22
4.18 Employee Benefit Plans...............................................................................23
4.19 Transactions with Certain Persons....................................................................28
4.20 Tax Matters..........................................................................................29
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.21 Insurance............................................................................................30
4.22 Accounts Receivable..................................................................................30
4.23 Inventory............................................................................................30
4.24 Payments.............................................................................................30
4.25 Customers, Distributors and Suppliers................................................................30
4.26 Compliance With Environmental Laws...................................................................31
4.27 Compliance with Health Care Laws; Settlement Agreement...............................................33
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................35
5.1 Organization of Buyer and IHS........................................................................35
5.2 Authorizations.......................................................................................35
5.3 No Conflict or Violation.............................................................................35
5.4 Consents and Approvals...............................................................................35
5.5 No Brokers...........................................................................................35
5.6 SEC Documents........................................................................................36
5.7 Capital Stock........................................................................................36
ARTICLE VI: COVENANTS OF SELLER AND BUYER........................................................................36
6.1 Further Assurances...................................................................................36
6.2 Employee Matters.....................................................................................36
6.3 Allocation of Purchase Price.........................................................................36
6.4 Employee Benefits....................................................................................36
ARTICLE VII: [INTENTIONALLY OMITTED].............................................................................37
ARTICLE VIII: [INTENTIONALLY OMITTED]............................................................................37
ARTICLE IX: CONSENTS TO ASSIGNMENT...............................................................................37
9.1 Consents to Assignment...............................................................................37
ARTICLE X: ACTIONS BY SELLER AND BUYER AFTER THE CLOSING.........................................................37
10.1 Books and Records....................................................................................37
10.2 Cooperation and Records Retention; Payment of Liabilities............................................37
10.3 Survival of Representations, Etc.....................................................................38
10.4 Indemnification......................................................................................38
10.5 Taxes................................................................................................41
ARTICLE XI: MISCELLANEOUS........................................................................................41
11.1 .....................................................................................................41
11.2 Assignment...........................................................................................41
11.3 Notices..............................................................................................41
11.4 Choice of Law........................................................................................42
11.5 Entire Agreement, Amendments and Waivers.............................................................42
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
11.6 Multiple Counterparts.................................................................................43
11.7 Expenses..............................................................................................43
11.8 Invalidity............................................................................................43
11.9 Titles; Gender........................................................................................43
11.10 Public Statements and Press Releases..................................................................43
11.11 Confidentiality.......................................................................................43
11.12 Certain Distributions.................................................................................44
11.13 Cumulative Remedies...................................................................................44
11.14 Arbitration...........................................................................................44
11.15 Joint and Several.....................................................................................45
</TABLE>
4
<PAGE>
------------------------------------
PARTNERSHIP INTEREST PURCHASE AGREEMENT
------------------------------------
This Partnership Interest Purchase Agreement (this "AGREEMENT") is
made as of the 1st day of June, 1998, among West Coast Cambridge, Inc., a
California corporation (the "BUYER"), Integrated Health Services, Inc., a
Delaware corporation ("IHS"), Coram Healthcare Corporation, a Delaware
corporation ("CORAM"), and T(2) Medical, Inc., a Delaware corporation (the
"SELLER").
PREMISES
--------
WHEREAS, South Georgia Lithotripsy Partners, a Georgia general
partnership (the "PARTNERSHIP"), is in the lithotripsy services business; and
WHEREAS, the Seller is the owner of a 69.03% partnership interest (the
"PARTNERSHIP INTEREST") in the Partnership; and
WHEREAS, Buyer wishes to acquire Seller's Partnership Interest and
certain related assets and rights from the Seller, and the Seller wishes to sell
the Partnership Interest and such related assets and rights to Buyer, in
accordance with the terms and conditions hereinafter set forth; and
WHEREAS, Buyer is a wholly owned subsidiary of IHS, and Seller is a
wholly owned subsidiary of Coram; and
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties hereto, the parties hereto intending to be
legally bound, agree as follows:
ARTICLE I: DEFINITIONS
----------------------
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"1997 BUDGET ACTS" shall mean the Taxpayer Relief Act of 1997 and the
Balanced Budget Bill of 1997.
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, governmental inquiry
(including any request for information), criminal prosecution, investigation or
unfair labor practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
<PAGE>
"ASSETS" shall mean all right, title and interest of the Seller in,
under and to: (I) the Partnership Interest and the Partnership Agreement of
South Georgia Lithotripsy Partners (the "PARTNERSHIP AGREEMENT"), dated as of
July 1, 1992, between Seller and South Georgia Lithotripsy, J.V. (the "OTHER
PARTNER"), and all rights arising out of the Partnership Interest or the
Partnership Agreement (the "PARTNERSHIP RIGHTS"), including without limitation,
all rights to distributions from the Partnership (other than the distributions
made on prior to, or after the date hereof in accordance with Section 11.12
below), and all rights to Seller's Capital Account (as such term is defined in
the Partnership Agreement); (II) the Amended and Restated South Georgia
Lithotripsy Associates, Inc. Management Agreement (the "MANAGEMENT AGREEMENT"),
dated as of July 1, 1992, between the Partnership and Seller (as the assignee of
Heritage Group, Inc.); (III) the Non-Compete and Investment Representation
Agreement (the "NON- COMPETE AGREEMENT"), dated as of July 1, 1992, by and among
those persons listed on Schedule "A" thereto (who are the partners of the Other
Partner and the shareholders of South Georgia Lithotripsy Associates, Inc., a
Georgia corporation and the sole general partner of the Other Partner (the
"OTHER PARTNER'S GP"); (IV) the Option Agreement (the "OPTION AGREEMENT" and
together with the Partnership Agreement, the Management Agreement, and the
Non-Compete Agreement, the "MAIN AGREEMENTS", and each a "MAIN AGREEMENT"),
dated as of July 1, 1992, between the Seller and the Other Partner; (V) Contract
Rights; (VI) Books and Records; (VII) Proprietary Rights; (VIII) claims, causes
of action, chooses in action, rights of recovery and of set-off of any kind,
against any person or entity, arising in connection with or related to the
Business, including , without limitation, any liens, security interests, pledges
or other rights to payment; (IX) supplies, sales literature, promotional
literature, customer and supplier lists, art work, display units, telephone and
fax numbers and purchasing records, in each case, relating primarily to the
Business; and (X) prospects, assets and rights of whatever nature and wherever
located and used or useful primarily in connection with the Business.
"BALANCE SHEET" shall mean the unaudited consolidated balance sheet as
of December 31, 1997 included in the Financial Statements.
"BALANCE SHEET DATE" shall mean December 31, 1997.
"BOOKS AND RECORDS" shall mean (a) all records and lists primarily
pertaining to the Assets, (b) all records and lists pertaining primarily to the
Business or to customers, suppliers or personnel of the Partnership or the
Seller associated primarily with the Business, (c) all product, business and
marketing plans of Seller primarily relating to the Business, and (d) all books,
ledgers files, reports, plans, drawings and operating records of every kind
maintained by Seller primarily relating to the Business, other than documents of
the Seller covered by the attorney-client privilege.
"BUSINESS" shall mean the lithotripsy service business conducted by
the Partnership (including all assets, rights and liabilities of the Seller and
the Partnership relating to the Business) currently, at any time in the past, or
at any time in the future, up to and including the Closing Date, but excluding
the Excluded Assets and Excluded Liabilities.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"CONTRACT" shall mean any agreement, contract, note, loan, evidence of
indebtedness, guaranty, purchase order, letter of credit, indenture, security or
pledge agreement, franchise agreement, capital or operating Lease, undertaking,
practice, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which (i) the Partnership is a party or is bound or
(ii) the Seller is a party or is
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bound and which relates primarily to the Business or the Assets, and shall
include, without limitation, all of the Main Agreements.
"CONTRACT RIGHTS" shall mean all of Seller's rights and obligations
under (i) the Main Agreements (ii) the other Contracts listed on Schedule 4.6
and (iii) any other Contract entered into in the conduct of the Business.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgement, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"DEFAULT" shall mean (a) a breach of or default under any Contract,
(b) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract, or
(c) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"DISCLOSURE SCHEDULE" shall mean a schedule executed and delivered to
Buyer as of the date hereof by the Seller which sets forth the exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by this Agreement. Unless otherwise specified, each
reference in this Agreement to any numbered schedule is a reference to all
schedules included in the Disclosure Schedule.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the name thereof.
"ENTITIES" shall mean the Partnership and the Seller.
"EXCLUDED ASSETS" shall mean (i) all rights of Seller to any refund or
income taxes paid by Seller for any period prior to the Closing in respect of
its interest in the Partnership, (ii) all tangible personal property of the
Seller (other than Books and Records) that are located at Parent's Denver,
Colorado office at 1125 Seventeenth Street, Suite 2100 which are not issued or
held for use principally in the Business, (iii) all rights under any Contract
otherwise assigned to Buyer (or the benefit of which is provided to Buyer as
provided herein) to assert any set offs with respect to matters that do not
constitute Assumed Liabilities and have occurred prior to Closing, defenses or
counterclaim with respect to matters that do not constitute Assumed Liabilities
and have occurred prior to Closing in respect of any Excluded Liability, (iv)
all cash or cash equivalents held by the Seller in respect of the Business but,
subject to Section 11.12, not the cash and cash equivalents of the Partnership,
(v) the right to cash distributions from the Partnership to the extent provided
in Section 11.12 below, and (vi) the rights of Seller to its corporate name.
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"FINANCIAL STATEMENTS" shall mean the unaudited balance sheet of the
Partnership as at December 31, 1997, the unaudited income statement of the
Partnership for the one-year period ending on December 31, 1997, the unaudited
balance sheet of the Partnership as at April 30, 1998, and the unaudited income
statement of the Partnership for the 4 month period ending on April 30, 1998.
"FUNDED DEBT" shall mean any Liability with respect to indebtedness
for borrowed money (other than Intercompany Debt).
"HEALTH CARE LAWS" shall mean the Regulations referred to in Sections
4.27(b) through and including 4.27(e).
"INDEMNIFICATION AGREEMENT" shall mean the Indemnification Agreement
dated as of July 2, 1992, among Seller, the Other Partner, the Other Partner's
GP, and each of the shareholders of the Other Partner's GP.
"INSURANCE POLICIES" shall mean the insurance policies related to the
Business listed on Schedule 4.21.
"INTERCOMPANY DEBT" shall mean all accounts, notes and other amounts
receivable by or due to Coram or Seller or any of their respective Affiliates
from the Partnership related to the Business and existing on the Closing Date.
"LEASE" shall mean any lease with respect to personal or real
property.
"LIABILITIES" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured or other.
"MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT" means any
change, effect, event or occurrence that has, or is reasonably likely to have,
individually or in the aggregate with other changes, effects, events or
occurrences, a material adverse impact on the financial position or results of
operations of the Business or the Assets taken as a whole; provided, however,
that "material adverse change" or "material adverse effect" shall be deemed to
exclude the impact of (i) changes in generally accepted accounting principles,
(ii) changes in general economic conditions which affect in general the health
care industry, (iii) changes or effects arising out of or in connection with the
1997 Budget Acts, and (iv) changes or effects arising out of or in connection
with amendments to or the adoption of new Regulations by HCFA, whether proposed
prior to or after the date hereof.
"ORDINARY COURSE OF BUSINESS" OR "ORDINARY COURSE" or any similar
phrase shall mean with respect to any party hereto or the Partnership, the
ordinary course of the Business conducted by that party or the Partnership and
consistent with past practice of that party or the Partnership.
"ORGANIZATIONAL DOCUMENTS" shall mean the articles or certificates of
incorporation, bylaws, shareholder agreements, agreements providing for rights
of first refusal, preemptive rights or options with respect to the purchase of
stock, other securities or assets, and any similar documents or contracts, and
all amendments and supplements to any of the foregoing, relating to the
organization, ownership, management or structure of a corporation.
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"PATENTS" shall mean all patents and patent applications and
registered design and registered design applications.
"PERMITS" shall mean all certificates of need, licenses, permits,
franchises, approvals, authorizations, consents or orders of, or filings with,
any governmental authority, whether foreign, federal, state or local, or any
other person, necessary for the conduct of, or relating to the operation of the
Business or the ownership of the assets used or held for use in the Business,
including all licenses, franchises, permits, accreditation, certificates of need
and other provider agreements required under Title XVIII and IX of the Social
Security Act and other applicable laws for reimbursement of services rendered or
goods sold or leased.
"PERMITTED ENCUMBRANCES" shall mean (i) liens for any Taxes not yet
due and payable as to which adequate reserves have been established and (ii)
terms and conditions and rights of other parties under the Partnership Agreement
and any Contracts under which Contract Rights are conveyed to Buyer pursuant
hereto.
"PROPRIETARY RIGHTS" shall mean all of the Copyrights, Patents,
Trademarks, technology rights and licenses, computer software, trade secrets,
franchises, know-how, inventions, designs, specifications, plans, drawings and
intellectual property rights (i) owned by the Seller and used principally in
connection with the Business or (ii) owned by the Partnership.
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, and orders of
any foreign, federal, state or local government or other governmental department
or agency, including, without limitation, Environmental Laws, Health Care Laws,
energy, motor vehicle safety, public entity, zoning, building and health codes,
occupational safety and health laws and laws respecting employment practices,
employee documentation, or terms and conditions of employment and wages and
hours.
"REPRESENTATIVE" shall mean any officer, director, principal, partner,
attorney, agent, employee or other representative.
"REPRESENTED CONDITION" shall mean the condition of the Business and
the Assets as represented and warranted on the date hereof by Seller in Article
IV of this Agreement and in the Disclosure Schedule.
"STOCK" shall mean capital stock, securities exchangeable for or
convertible into shares of capital stock and options, warrants, preemptive
rights, rights of first refusal and all other rights to acquire shares of
capital stock of or securities exchangeable for or convertible into shares of
capital stock.
"SUBSIDIARY" shall mean with respect to any entity, (a) any
corporation in which such entity then owns stock possessing 50% or more of the
total combined voting power of all classes of stock, (b) any partnership in
which such entity is a general partner, (c) any partnership in which such entity
possesses a 50% or greater interest in the total capital or total income of such
partnership or (d) any Subsidiary of any Subsidiary.
"TAX" shall mean any federal, state, local, foreign or other tax,
levy, impost, fee, assessment or other government charge, including, without
limitation, income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including, without
limitation, interest, penalties and additions, in connection therewith.
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"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.
1.2 OTHER DEFINED TERMS. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
Acceptance 6.2(d)
Assumed Liabilities 2.2
Assumption Document 3.2(b)
Benefit Arrangement 4.18(a)
Buyer Preamble
Buyer Transaction Documents 5.2
Bulk Sales Act 10.6
Claim 10.4(d)
Claim Notice 10.4(d)
Closing 3.1
Commission 2.4(c)
Competing Offer 6.2(d)
Complaint 4.27(f)
Compliance Report Position 8.3(b)
Coram Preamble
Damages 10.4(a)
DOJ 6.3(a)
Employee Plans 4.19(a)
Environmental Conditions 4.26(a)
Environmental Laws 4.26(a)
ERISA 4.19(a)
ERISA Affiliate 4.19(a)
Exchange Act 2.4(f)(iv)
Excluded Liabilities 2.3
Hazardous Substance 4.26(a)
IHS Preamble
Judgement 4.27(f)
Multiemployer Plan 4.19(a)
NYSE 2.4(b)
OIG 6.3(a)
Pension Benefit Guaranty Corporation 4.19(a)
Pension Plan 4.19(a)
Purchase Price 2.4(a)
Securities Act 2.4(c)
Seller Transaction Documents 4.3
Settlement Agreement 4.27(f)
Shelf Registration Statement 2.4(c)
Tax Entities 4.20(a)
Termination Date 11.1(a)
Welfare Plan 4.19(a)
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ARTICLE II: PURCHASE AND SALE OF ASSETS
---------------------------------------
2.1 TRANSFER OF ASSETS. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire from Seller, the Assets, free and clear
of all Encumbrances other than Permitted Encumbrances. Notwithstanding anything
to the contrary contained herein, in no event is Buyer acquiring, nor is Seller
selling or transferring, any of the Excluded Assets.
2.2 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume all Liabilities
of Seller to be performed after the Closing (whether accrued prior to or
subsequent to the Closing) under the Main Agreements and other Contracts under
which Contract Rights of Seller are included in the Assets assigned to Buyer
pursuant to Section 2.1 hereof, but not including any Liability for any Default
under any Main Agreement or other Contract occurring on or prior to the Closing
Date, and, in no event, will Buyer assume any Liability referred to in clauses
(i) through (xi) inclusive, of Section 2.3 hereof (the Liabilities so assumed at
the Closing being referred to herein as the "ASSUMED LIABILITIES").
2.3 EXCLUDED LIABILITIES. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, either directly or
through its ownership interest in the Partnership, any Liabilities of Seller or
any other person, partnership or entity, whether liquidated or unliquidated, or
known or unknown, and whether arising out of occurrences prior to, at or after
the date hereof ("EXCLUDED LIABILITIES"), which Excluded Liabilities include,
without limitation, (i) all Liabilities of Seller resulting from entering into,
performing its obligations in or consummation of the transactions contemplated
by, this Agreement, (ii) all Liabilities of Seller in respect of any Tax to the
extent such Tax relates to Seller's ownership of the Assets and conduct of the
Business, (iii) all Liabilities arising under or related to the Settlement
Agreement, (iv) all Liabilities arising under or related to the Judgment, (v)
all Liabilities arising under or related to Employee Plans other than Employee
Plans of the Partnership, (vi) any Liabilities with respect to any distributions
that any partner of the Partnership claims should have made on or prior to
Closing, (viii) all Liabilities of Seller and the Partnership arising out of or
related to the failure of the Seller or the Partnership to have been duly
organized, validly existing or in good standing, (ix) all Liabilities in respect
of the employment or termination of employment of any employee of the Seller,
(x) any Liability noted in the Disclosure Schedule to be an Excluded Liability,
(xi) all Liabilities of Seller and the Partnership (y) for or arising out of or
related to the violation by Seller or the Partnership of any Health Care Law
prior to the Closing and (z) for or arising out or related to any action taken
or omission occurring prior to the Closing which, with notice, passage of time
or both (whether before or after the Closing) would result in a violation by
Seller or the Partnership of any Health Care Law, (xiii) all Liabilities of the
Seller to any employee of the Seller conditioned upon consummation of the
transactions contemplated hereby, (xii) all liabilities of the Seller and the
Partnership under any Contract that, but for this provision, would be assumed by
Buyer pursuant hereto that was entered into other than in the ordinary course of
the Business, that is material to the Business, that is required to be disclosed
hereunder on the Disclosure Schedule and that is not so disclosed, (xiv) any
Intercompany Debt owed by the Partnership, (xv) any Liability arising out of the
Indemnification Agreement, or (xvi) the accident that was the subject of Douglas
Watts v. South Georgia Lithotripsy.
2.4 DETERMINATION AND PAYMENT OF PURCHASE PRICE.
(A) AMOUNT OF PURCHASE PRICE. The aggregate purchase price (the
"PURCHASE PRICE") for all of the Assets shall be ONE MILLION DOLLARS
($1,000,000), which shall be payable at the Closing by the delivery to Seller of
newly issued shares of the Common Stock, par value $.001, of IHS ("IHS STOCK"),
registered in the name of Seller and valued using the Closing Date as the date
of
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determination in accordance with the procedure provided in subsection (b) below.
All shares of IHS Stock shall be delivered with all related rights and
privileges thereto, including voting and dividend rights.
(B) SHARE VALUE; ADJUSTMENT.
(I) Whenever shares of IHS Stock are to be delivered pursuant
to this Agreement, the number of shares of IHS Stock shall be valued
as of the applicable date of determination by using the average
closing New York Stock Exchange ("NYSE") price of IHS Stock for the
five (5) trading day period ending on the date which is two (2)
trading days prior to the applicable date of determination.
(II) For purposes hereof, the "SHARE VALUE AMOUNT" shall mean
$1,000,000; provided that the Share Value Amount shall increase by an
amount equal to the amount of the interest that would have accrued
thereon at an annual rate (compounded daily) of ten percent (10%)
during the period commencing on June 2, 1998 and ending on the Share
Adjustment Date. For purposes hereof, the "SHARE ADJUSTMENT DATE"
shall mean the date on which the Shelf Registration Statement is
declared effective by the Commission and IHS advises Coram of such in
writing. The number of shares of IHS Stock deliverable as the Purchase
Price shall be re-calculated (the "ADJUSTED SHARE COUNT") to the
extent necessary so that such shares will have an aggregate value (the
"RECALCULATED VALUE") equal to the Share Value Amount based upon the
average closing NYSE price for IHS Stock for the five (5) trading day
period ending two (2) days preceding the Share Adjustment Date. If the
Adjusted Share Count exceeds the number of shares of IHS Stock issued
as of the Closing Date (the "CLOSING DATE SHARE COUNT"), IHS promptly
shall deliver over to the Seller an additional number of shares of IHS
Stock as shall have a value equal to the amount of such excess (using
the Recalculated Value for determining the number of such shares of
IHS Stock to be delivered), and such additional shares shall be
included in the aforementioned Shelf Registration Statement. If the
Closing Date Share Count exceeds the Adjusted Share Count, Seller
shall promptly return to IHS the number of shares of IHS Stock having
a value equal to the amount by which the Closing Date Share Count
exceeds the Adjusted Share Count (using the Recalculated Value for
determining the number of shares of IHS Stock to be so delivered). If
any shares of IHS Stock are transferred by Seller prior to the Share
Adjustment Date, appropriate adjustments shall be made to exclude the
amount of the Share Value Amount allocable to such transferred shares
from the adjustments required by this subsection (c).
(III) IHS shall notify Seller promptly of the status of the
registration process, including, without limitation, the date and time
when a Shelf Registration Statement and each post-effective amendment
thereto has become effective, if and when a supplement to any
prospectus forming a part of such Shelf Registration Statement has
been filed, or if any request by the Commission for the amendment or
supplement of a Shelf Registration Statement or prospectus or request
for additional information has been received.
(IV) IHS shall use its best efforts to cause the Share
Adjustment Date to occur by the day that is one-hundred and twenty
(120) days after the ACTUAL date of the closing, and if the Share
Adjustment Date does not occur by the day that is one-hundred and
forty (140) days after June 29, 1998, then IHS shall purchase, free
and clear of all Liens, all of the shares issued by it to Seller
pursuant to this Agreement for an aggregate purchase price equal to
$1,000,000 plus the amount of interest that would have accrued thereon
at an annual rate (compounded daily) of ten
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<PAGE>
percent (10%) during the period commencing on June 2, 1998 and ending
on the date of such purchase.
(C) REGISTRATION RIGHTS. IHS will use its best efforts to cause to
be prepared, filed and declared effective by the Securities and Exchange
Commission (the "COMMISSION"), within one hundred and twenty (120) days
following the Closing Date, a registration statement (a "SHELF REGISTRATION
STATEMENT") for the registration of the IHS Stock issued or to be issued to
Seller hereunder, under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and shall use its best efforts to cause such registration statement to
become effective as expeditiously as practicable, and IHS shall maintain the
effectiveness of such registration statement for a period of one (1) year
following the Closing Date, or until Seller shall no longer own any of the IHS
Stock issued pursuant to this Agreement, whichever shall occur first, in each
case except to the extent that an exemption from registration for resale of such
shares by Seller to the public may be available.
(D) REGISTRATION EXPENSES. Seller shall not be responsible for,
and IHS shall bear, all of the fees, costs and expenses of the Buyer and IHS
related to such registration and sale including, without limitation, the fees
and expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Stock and the costs and
expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Stock under the Blue Sky laws of
various jurisdictions. Buyer, however, shall not be required to pay or incur
underwriter's or brokerage discounts, commissions or expenses, or to pay or
incur any costs and expenses in excess in the aggregate of $40,000 for Blue Sky
qualifications of Seller's IHS Stock, or to pay or incur any costs or expenses
arising out of Seller's failure to comply with its obligations under this
Section 2.4, or to pay or incur any costs or expenses arising out of the
inclusion of any transferee of Seller in the Shelf Registration Statement.
(E) SELLING EXPENSES. IHS agrees that if Coram shall resell the
shares to be issued pursuant hereto through Salomon Smith Barney, Inc. (or such
other broker as IHS may from time to time designate to Coram in writing), IHS
shall pay to such broker all costs and expenses of such resale (including
without limitation any discounts, commissions or fees thereof or of similar
professional relating to such resale) and reimburse Coram for all out-of-pocket
costs and expenses reasonably incurred thereby relating to such resale, to the
extent that all of the foregoing exceed $3,000 in the aggregate with respect to
all such shares.
(F) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Seller with respect to the IHS Stock as
provided in this Section 2.4, IHS covenants and agrees as follows:
(I) At IHS's expense, IHS will keep the registration and
qualification under this Section 2.4 effective (and in compliance with
the Securities Act) by such action as may be necessary or appropriate
for a period of one (1) year after the Closing Date, or until Seller
shall no longer own any of the IHS Stock issued pursuant to this
Agreement, whichever shall occur first, in each case except to the
extent that IHS shall, at its expense, provide Seller and Coram with
an opinion of counsel reasonably acceptable to Coram stating that an
exemption from registration for the resale thereby of the IHS Stock
may be available to the public on the New York Stock Exchange.
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IHS will promptly notify the Seller, at any time when a prospectus
relating to the Shelf Registration Statement is required to be
delivered under the Securities Act, of the happening of any event
known to IHS as a result of which the prospectus included in the Shelf
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
(II) At IHS's expense, IHS shall furnish the Seller with such
number of prospectuses as shall reasonably be requested by Seller in
connection with any actual or contemplated resales.
(III) Subject to the ultimate sentence in Section 2.4(d)
above, at IHS's expense, IHS shall take all necessary action which may
be required in qualifying or registering IHS Stock included in a Shelf
Registration Statement for offering and resale under the securities or
Blue Sky laws of each applicable state, provided that IHS shall not be
obligated to qualify as a foreign corporation or dealer to do business
under the laws of any such jurisdiction.
(IV) At IHS's expense, IHS shall prepare and promptly file
with the Commission such amendments or supplements to a Shelf
Registration Statement or prospectus as may be necessary to correct
any statements or omissions in the Shelf Registration Statement or
prospectus, and IHS will notify Seller if, at any time when a
prospectus relating to such securities is required to be delivered
under the Securities Act, any event has occurred the result of which
will cause any such prospectus or any other prospectus as then in
effect to include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(V) IHS shall advise Seller promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of a Shelf Registration
Statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should
be issued.
(VI) The information included or incorporated by reference in
the Shelf Registration Statement will not, at the time such Shelf
Registration Statement becomes effective, contain any untrue statement
of a material fact, or omit to state any material fact required to be
stated therein as necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading or as necessary to correct any statement in any earlier
filing of such Shelf Registration Statement or any amendments thereto.
The Shelf Registration Statement will comply in all material respects
with the provisions of the Securities Act and the rules and
regulations thereunder. IHS shall indemnify and hold harmless the
Seller and Coram and their respective officers, directors, employees,
agents, representatives and Affiliates and each person, if any, who
controls any of them within the meaning of ss.15 of the Securities Act
or ss.20(a) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever, and including
reasonable costs and expenses of counsel) to which any of them may
become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising out of or based upon any
untrue statement or alleged
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<PAGE>
untrue statement of a material fact contained in such Shelf
Registration Statement executed by IHS, or omission or alleged
omission therefrom required to be stated therein as necessary to make
the statements therein not misleading or as necessary to correct any
statement in any earlier filing of such Shelf Registration Statement,
or based upon written information furnished by IHS filed in any
jurisdiction in order to qualify IHS Stock under the securities laws
thereof or filed with the Commission, any state securities commission
or agency, NYSE or any securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements contained therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to IHS by Coram or
Seller for use in such Shelf Registration Statement (it being
understood that IHS may rely on the representations and warranties of
the Seller made pursuant to this Agreement in preparing the Shelf
Registration Statement), any amendment or supplement thereto or any
application, as the case may be. If any action is brought against the
Seller or Coram or any other person indemnified hereunder in respect
of which indemnity may be sought against IHS pursuant to this
subsection 2.4(f)(vi), such person shall within thirty (30) days after
the receipt thereby of a summons or complaint, notify IHS in writing
of the institution of such action and IHS shall assume the defense of
such action, including the employment and payment of reasonable fees
and expenses of counsel (reasonably satisfactory to the Seller or such
controlling person). IHS shall not settle any such action as to
Seller, Coram or any such other person without Coram's written
consent, which shall not be unreasonably withheld. Seller, Coram or
any such other person shall have the right to employ her, his, its or
their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of Seller or such controlling person
unless (A) the employment of such counsel shall have been authorized
in writing by IHS in connection with the defense of such action, or
(B) IHS shall not have employed counsel to have charge of the defense
of such action within ten (10) days of the request therefor, or (C)
such indemnified party or parties shall have reasonably concluded and
notified IHS that there may be defenses available to her, him, it or
them which are different from or additional to those available to IHS
(in which case, IHS shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of
which events the fees and expenses of not more than one additional
firm of attorneys for the Seller and/or such controlling persons shall
be borne by IHS. Any delay of any person indemnified hereunder to give
the foregoing notice shall not relieve IHS of its indemnification
obligations hereunder except to the extent IHS is actually prejudiced
by such delay.
(VII) The Seller, and its successors and assigns, shall
indemnify IHS and Buyer their respective officers, directors,
employees, agents, representatives and Affiliates and each person, if
any, who controls any of them within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Exchange Act against all loss,
claim, damage, expense and liability (including all expenses
reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under
the Securities Act, the Exchange Act or any other statute, common law
or otherwise (Federal, State, local or otherwise), arising from
information furnished (or required to be furnished in accordance with
this Agreement) by or on behalf of Seller or Coram, or any of their
respective successors or assigns for inclusion in the Shelf
Registration Statement, any Exchange Act filing or any State Blue Sky
Law filing.
(G) NOTICE OF SALE. Coram and Seller shall not resell or otherwise
transfer any interest in any of the shares of IHS Stock issued to Seller
pursuant to this Agreement except in compliance with this Agreement and, in the
case of any sales that are not to be made in accordance with the Shelf
Registration Statement, unless Seller shall have given prior notice to IHS
describing in reasonable detail Seller's intention to effect the transfer and
the manner of the proposed transfer. If the transfer is to be pursuant to an
effective Shelf Registration Statement as provided herein, Seller will resell
only in compliance
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with the disclosure therein and discontinue any offers and sales thereunder upon
notice from IHS to the Seller that the Shelf Registration Statement relating to
the IHS Stock being transferred is not "current" until IHS gives further notice
that offers and sales may be recommenced. In the event of any such notice from
IHS, IHS agrees to file expeditiously such amendments to such Shelf Registration
Statement as may be necessary to bring it current during the period specified in
this Section 2.4 and to give prompt notice to Seller when the Shelf Registration
Statement has again become current. If Seller delivers to IHS an opinion of
counsel reasonably acceptable to IHS and its counsel in form and substance
reasonably acceptable to them and to the effect that the proposed transfer of
shares of IHS Stock may be made without registration under the Securities Act
and all applicable state securities laws, Seller will be entitled to transfer
said shares of IHS Stock in accordance with the terms set forth in the opinion
of their counsel.
(H) CONDITIONS. Upon receipt of a reasonable request, Seller shall
furnish to IHS such information regarding itself, the shares of IHS Stock held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of its shares of IHS Stock or as otherwise
shall reasonably be requested by IHS. In that connection, Seller shall be
required to represent and warrant to the IHS that all such information which is
given is both complete and accurate in all material respects. Coram and Seller
shall be entitled to receive a copy of any information included in the Shelf
Registration Statement that relates to Coram or Seller prior to filing such
Shelf Registration Statement and they shall be entitled to review and comment on
all such information included in such Shelf Registration Statement relating to
Coram or Seller. Seller will, severally, promptly notify IHS at any time when a
prospectus relating to a Shelf Registration Statement covering Seller's shares
under this Section 2.4 is required to be delivered under the Securities Act, of
the happening of any event known to Seller as a result of which the prospectus
included in such Shelf Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which such statements are made.
(I) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of IHS. Seller represents and
warrants to IHS that the IHS Stock being issued hereunder is being acquired by
the Seller for investment for its own account and not with a view to or for sale
in connection with any distribution thereof within the meaning of the Securities
Act or any applicable state securities law; Seller acknowledges that the shares
of IHS Stock issued to it pursuant to this Agreement constitute restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and may have to be held indefinitely, and the Seller agrees that
no shares of IHS Stock issued to it pursuant to this Agreement may be sold,
transferred, assigned, pledged or otherwise disposed of except pursuant to an
effective registration statement or an exemption from registration under the
Securities Act, the rules and regulations thereunder, and under all applicable
state securities laws. Seller represents and warrants that it has the knowledge
and experience in financial and business matters, is capable of evaluating the
merits and risks of the investment, is able to bear the economic risk of such
investment, and is an accredited investor within the meaning of Regulation D
promulgated pursuant to the Securities Act. The Seller represents and warrants
that it has had the opportunity to make inquiries of and obtain from
representatives and employees of IHS such other information about IHS as he, she
or it deems necessary in connection with such investment.
(J) LEGEND. It is understood that, prior to resale of any shares
of IHS Stock pursuant to an effective Shelf Registration Statement pursuant to
subsection (f) above, the certificates evidencing such shares of IHS Stock shall
bear the following (or a similar) legend (in addition to any legends which may
be required in the opinion of IHS's counsel by the applicable securities laws of
any state), and upon resale of such shares pursuant to such an effective
registration, new certificates shall be issued for the shares sold without such
legends except as otherwise required by law:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
(K) CERTAIN TRANSFEREES. Except in the case of any transfer of any
shares of IHS Stock issued pursuant to this Agreement to a person in an open
market transaction subsequent to the effective date of, and pursuant to, the
Shelf Registration Statement covering such shares of IHS Stock, Seller shall not
transfer any such shares of IHS Stock to any person or entity unless such
transfer shall be made in accordance with all applicable Federal and state
securities laws as set forth in subsection (h) above and otherwise in accordance
with this Section 2.4.
2.5 CLOSING COSTS; TRANSFER TAXES AND FEES. Seller shall be
responsible for any documentary and transfer taxes and any sales, use or other
taxes imposed by reason of the transfers of purchased Assets hereunder and any
deficiency, interest or penalty asserted with respect thereto. Seller shall pay
the fees and costs of recording or filing all applicable conveyancing
instruments. Seller shall pay for all costs of obtaining the transfer of
existing Permits which may be lawfully transferred. Buyer shall pay all costs of
applying for new Permits on and after the Closing Date.
2.6 TAX CLEARANCE CERTIFICATE. Seller shall provide Buyer with a
clearance certificate or similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price. Notwithstanding anything herein to the contrary,
in the event Buyer shall be legally obligated to withhold any portion of the
Purchase Price pursuant to the requirements of any state taxing authority, it
shall not be a breach of this Agreement for Buyer to withhold that portion of
the Purchase Price it is so required to withhold, and only such portion thereof.
ARTICLE III: CLOSING
--------------------
3.1 CLOSING. The Closing of the transactions contemplated herein (the
"CLOSING") is being held concurrently with the execution and delivery of this
Agreement by mail through escrow arrangements satisfactory to the parties
hereto.
3.2 CONVEYANCE AT CLOSING AND OTHER CLOSING DOCUMENTS.
(A) INSTRUMENTS AND POSSESSION. To effect the sale and transfer
referred to in Section 2.1 hereof, concurrently herewith Coram and Seller are
executing and delivering to Buyer:
(I) one or more bills of sale, conveying in the aggregate all
of Seller's personal property included in the Assets;
(II) subject to Section 9.1, one or more Assignments of
Contract Rights, with respect to the Contract Rights;
(III) one or more assignments of Proprietary Rights to the
extent necessary to assign such rights,
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(IV) such other instruments as shall be reasonably requested
by Buyer to vest in Buyer title in and to the Assets in accordance with
the provisions hereof;
(V) an opinion of Paul, Hastings, Janofsky & Walker LLP,
counsel to Seller and Coram, dated as of the Closing Date; and
(VI) such certificates (including resolutions) of their
respective officers and others as has been reasonably requested by
Buyer.
(B) ASSUMPTION DOCUMENT. Upon the terms and subject to the
conditions contained herein, concurrently herewith:
(I) Buyer is delivering to Seller an instrument of
assumption, evidencing Buyer's assumption, pursuant to Section 2.2, of
the Assumed Liabilities;
(II) Buyer is delivering to Seller an opinion of Blass &
Driggs, counsel to Buyer, dated as of the Closing Date; and
(III) Buyer and IHS are furnishing to Coram such certificates
(including resolutions) of their respective officers and others as have
been reasonably requested by Coram.
(C) FORM OF INSTRUMENTS. To the extent that a form of any document
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner
reasonably satisfactory to Buyer and Coram.
(D) CONSENTS. Subject to Section 9.1, concurrently herewith Seller
is delivering to Buyer all Permits and any other third party consents and
releases of liens, including consents and releases of liens from banks and other
lenders to the Seller, required for the transfer of the Assets as contemplated
by this Agreement.
(E) NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY
AGREEMENT. Concurrently herewith the parties hereto are executing and delivering
an Amendment to the Non- Competition, Non-Solicitation and Confidentiality
Agreement, dated as of September 30, 1997, among the parties hereto and certain
other parties.
(F) INSURANCE. Concurrently herewith Coram is delivering to Buyer
evidence confirming that Coram has obtained extended reporting endorsements
satisfactory to Buyer and covering the two-year period following the Closing to
all of its existing liability insurance policies that are not "OCCURRENCE BASED"
policies covering any portion of the Business. Coram and Buyer shall share
equally the premiums paid for obtaining the endorsements.
3.3 CERTAIN BRING-DOWNS.
(A) All of the representations and warranties made by Seller
pursuant to this Agreement shall be remade by Seller and shall be true and
correct in all material respects as of June 29, 1998 (except to the extent that
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct on and
as of such earlier date)), as if the Closing
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were held on such date; and Seller shall so certify to Buyer on such date and
for the purposes of Section 10.4 of this Agreement (including without
limitation, Section 10.4(f)), IHS and Buyer shall be deemed to have relied on
such certification in consummating the transactions contemplated by this
Agreement to occur at the Closing.
(B) Seller shall indemnify and hold harmless Buyer, IHS and their
respective Affiliates from and against any and all Damages arising out of any
act or omission by Seller during the period commencing immediately after the
Closing Date and ending on June 29, 1998 that would have constituted a breach by
Seller if the Closing had not yet occurred.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------------------
Seller hereby represents and warrants to Buyer and IHS as follows, except
as otherwise set forth on the Disclosure Schedule:
4.1 ORGANIZATION OF CORAM, SELLER AND THE PARTNERSHIP; ORGANIZATIONAL
DOCUMENTS.
(A) ORGANIZATION. Each of Coram and the Seller is duly organized,
validly existing and in good standing under the laws of its State of
incorporation, with full power and authority to own and lease its properties and
assets. The Partnership is validly formed and in good standing under the laws of
its State of formation, with the full power and authority to own and lease its
properties and assets. Each of Coram, the Seller and the Partnership is duly
qualified to do business as a foreign corporation, partnership or limited
liability company and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make
such qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the Business. Schedule 4.1 contains a true,
correct and complete list of all jurisdictions in which the Partnership is
qualified to do business as a foreign partnership.
(B) ORGANIZATIONAL DOCUMENTS AND ENTITIES. Copies of all of the
Organizational Documents of Seller and the Partnership have heretofore been
delivered or made available to Buyer, and as so delivered or made available are
accurate and complete.
4.2 SUBSIDIARIES. The Partnership has no subsidiaries. None of Coram,
Seller or any of their respective Affiliates owns any Stock or other interest
(whether controlling or not) in any corporation, association, partnership, joint
venture or other entity engaged in the Business other than the Partnership.
4.3 AUTHORIZATION. Coram and Seller have all requisite power and
authority, and have taken all corporate action necessary, to execute and deliver
this Agreement and each instrument, certificate, agreement and document to be
executed or delivered by it as provided in this Agreement ("SELLER TRANSACTION
DOCUMENTS"), to consummate the transactions contemplated hereby and thereby and
to perform their obligations hereunder and thereunder. The execution and
delivery of this Agreement and each Seller Transaction Document by Coram or
Seller, as the case may be, and the consummation by Coram and Seller of the
transactions contemplated hereby and thereby have been duly approved by the
boards of directors and, to the extent required, by the shareholders of Coram
and Seller. No other corporate proceedings on the part of Coram or Seller are
necessary to authorize the execution, delivery and performance of this Agreement
and each Seller Transaction Document by Coram or Seller, as the case may be, and
the consummation of the transactions contemplated hereby and thereby. This
Agreement and each Seller Transaction Document has
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been duly executed and delivered by Coram or Seller, as the case may be, and is
the legal, valid and binding obligation of Coram and Seller, as the case may be,
enforceable against it in accordance with its terms.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, except as set forth on Schedule 4.4, there has not been any:
(A) material adverse change in the Business;
(B) change in accounting methods, principles or practices
affecting in any material respect the Assets, the Assumed Liabilities or the
Business;
(C) damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the Assets or the Business;
(D) cancellation of any indebtedness or waiver or release of any
right or claim of the Seller or the Partnership which had or will have a
material adverse effect on the Assets or the Business;
(E) declaration, setting aside, or payment of dividends or
distributions by the Seller or the Partnership except consistent with past
practices, or any redemption, purchase or other acquisition of any securities of
or any partnership or membership interest in the Seller or the Partnership;
(F) increase in the rate of compensation payable or to become
payable to any director, officer or other employee of the Partnership or any
consultant, Representative or agent of any of the Partnership (other than
compensation increases for non-officer employees of the Partnership made in the
ordinary course of business and consistent with past practices or compensation
increases required under contracts existing on the date of this Agreement that
have been disclosed on Schedule 4.6 hereto) including, without limitation, the
making of any loan (except travel advances, if any, made in reasonable amounts
and in the ordinary course of business consistent with past practice of the
Partnership) to, or the payment, grant or accrual of any bonus, incentive
compensation, service award or other similar benefit to, any such person, or the
addition to, modification of, or contribution to any Employee Plan, arrangement,
or practice described in the Disclosure Schedule.
(G) material adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the productivity, the
financial condition, results of operations or Business of the Partnership or the
relationships between the employees of the Partnership and the management of the
Partnership;
(H) amendment, cancellation or termination of any material
Contract, commitment, agreement, Lease, transaction or Permit relating to the
Business and included in the Assets or entry by the Partnership or Seller into
any Contract, commitment, agreement, Lease or transaction which is not in the
ordinary course of business, including without limitation, any employment or
consulting agreements, that will be included in the Assets;
(I) mortgage, pledge or other encumbrance of any of the Assets or
any assets of the Partnership other than Permitted Encumbrances;
(J) sale, assignment or transfer of any of the Assets or any
assets of the Partnership other than in the ordinary course of business;
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(K) incurrence of indebtedness by the Partnership or, to the
extent such indebtedness would constitute an Assumed Liability, by the Seller,
for borrowed money or commitment to borrow money entered into by the
Partnership, or to the extent such commitment would constitute an Assumed
Liability, by the Seller, or loans made or agreed to be made by the Partnership
or, to the extent such loan would constitute an Assumed Liability, by the
Seller, or indebtedness guaranteed by the Partnership or, to the extent such
guarantee would constitute an Assumed Liability, by the Seller, in each case
other than in the ordinary course of business consistent with past practice;
(L) incurrence by the Partnership of any Liabilities or, to the
extent such Liabilities would constitute Assumed Liabilities, by the Seller
(except, in each case, Excluded Liabilities and Liabilities incurred in the
ordinary course of Business), or change in any assumptions underlying or methods
of calculating any doubtful account contingency or other reserves of the
Partnership;
(M) payment, discharge or satisfaction of any Liabilities of the
Partnership other than the payment, discharge or satisfaction in the ordinary
course of business of Liabilities set forth or reserved for on the Financial
Statements or incurred in the ordinary course of business;
(N) capital expenditure by the Partnership in excess of $25,000 in
the aggregate, or the incurring of any obligation by the Partnership or, to the
extent such obligation would constitute an Assumed Liability, by the Seller, to
make any capital expenditure in excess of $25,000;
(O) failure to pay or satisfy when due or other default in respect
of any Liability of the Partnership or, to the extent such Liability would
constitute an Assumed Liability, by the Seller;
(P) failure of the Partnership or the Seller to use their
respective commercially reasonable efforts to carry on diligently the Business
in the ordinary course so as to keep available to Buyer the services of the
employees of the Partnership, and to preserve for Buyer the Business and the
goodwill of the suppliers and customers of the Partnership and other having
business relations with it;
(Q) disposition of any Proprietary Rights which are material to
the Business;
(R) existence of any other event or condition which in the
aggregate has or would reasonably be expected to have a material adverse effect
on the Partnership or on the Business, taken as a whole; or
(S) agreement by the Seller or the Partnership to do any of the
things described in the preceding clauses (a) through (r) other than as
expressly provided for herein.
4.5 ASSETS. Seller has and will transfer good and marketable title to
the Assets including, without limitation, the Partnership Interest, Seller's
rights under the Main Agreements and the Partnership Rights, and upon the
consummation of the transactions contemplated hereby, Buyer will acquire good
and marketable title to all of the Assets, free and clear of any Encumbrances,
except for Permitted Encumbrances. The Assets, together with the assets of the
Partnership, include, without limitation, substantially all assets used in the
conduct of the Business in the ordinary course, including substantially all
assets held or used by the Seller and the Partnership in the conduct of the
Business as presently conducted, other than inventory or supplies disposed of or
used in the ordinary course of Business. All tangible assets and properties
which are part of the Assets and all tangible assets and properties of the
Partnership are in
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good operating condition and repair and are usable in the ordinary course of
business in a manner consistent with past practice and conform to all applicable
Regulations (including Environmental Laws) relating to their construction, use
and operation, except where the failure to so conform would not have a material
adverse effect on the Business. The state of organization of the Partnership is
Georgia. The percentage economic interest of Seller in the Partnership is
69.03%. Except as set forth in the Main Agreements, there are no rights or
rights of first refusal with respect to any outstanding interests in the
Partnership.
4.6 CONTRACTS AND COMMITMENTS.
(A) CONTRACTS. Schedule 4.6 sets forth a complete and accurate
list of all Contracts of the following categories to which the Seller is a party
and which relates primarily to the Business, or to which the Partnership is a
party:
(I) Contracts not made in the ordinary course of business;
(II) Employment contracts and severance agreements;
(III) Labor or union contracts;
(IV) Material distribution, franchise, license, technical
assistance sales, commission, consulting, agency or advertising
contracts which are not cancelable on thirty (30) calendar days notice;
(V) Options with respect to any property, real or personal,
whether the Partnership is the grantor or grantee thereunder;
(VI) Contracts involving future annual expenditures or
Liabilities, actual or potential, in excess of $25,000 or otherwise
material to the Business of the Partnership;
(VII) Contracts or commitments relating to commission
arrangements with others;
(VIII) Promissory notes, loans, indentures, evidences of
indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money in excess of $25,000, whether
the Partnership is the borrower, lender or grantor thereunder;
(IX) Contracts containing covenants limiting the freedom of
the Partnership or any shareholder, officer, director, partner or
employee of the Partnership or the Other Partner's GP to engage in any
line of business or compete with any person;
(X) Any Contract with the United States, or any state or
local government or any agency or department thereof;
(XI) Leases of real property;
(XII) Leases of personal property not cancelable (without
Liability) within 30 calendar days or which have aggregate annual lease
payments in excess of $20,000; and
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(XIII) Contracts entered into in settlement of any Action or
threatened Action.
Coram has delivered or made available to Buyer true, correct and complete
copies of all of the Contracts listed on Schedule 4.6, including all amendments
and supplements thereto.
(B) AGREEMENTS. Coram has delivered to Buyer true and complete
copies of all of the Main Agreements, including all amendments and supplements
thereto.
(C) ABSENCE OF DEFAULT. All of the Contracts to which the
Partnership or the Seller is a party or by which the Partnership or the Seller
or any of the Assets is bound or affected, and all of the Main Agreements are
valid, binding and enforceable in accordance with their terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting the
rights of creditors generally, and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefore may be brought. The Partnership has fulfilled, or taken all action
necessary to enable it to fulfill when due, all of its obligations under the
Contracts, except where a failure to do so would not constitute a material
breach under the Contract, and Seller has fulfilled, or taken all action
necessary to enable it to fulfill when due, all of its obligations under each
Main Agreement and Contract to which it is a party. Each of the Partnership and
Seller has, and, to the best knowledge of Seller, the other parties to the
Contracts have, complied with the provisions thereof; neither the Partnership
nor the Seller is, and, to the best knowledge of Seller and Coram, no other
party is, in Default thereunder and no notice of any claim of Default has been
given to the Seller.
(D) HOSPITAL CONTRACTS. Schedule 4.6 contains a complete and
accurate list of (i) each existing agreement between the Partnership and a
hospital for the use of the Partnership's lithotripsy services, (ii) the dates
on which such agreements were entered into, (iii) the term of each such
agreement and (iv) the fees payable under each such agreement.
4.7 PERMITS; CONSENTS AND APPROVALS.
(A) Schedule 4.7 sets forth a complete list of all Permits
material to the operation of the Business. The Partnership has, and at all times
has had, all Permits required under any Regulation (including Environmental
Laws) in connection with the operations related to the Business except where the
failure to have any such Permit would not have a material adverse effect on the
Business or the Assets. The Seller has, and at all times has had, all Permits
required under any Regulation (including Environmental Laws) in connection with
the operations related primarily to the Business except where the failure to
have any such Permit would not have a material adverse effect on the Business or
the Assets. Neither the Partnership nor, with respect to the Business, the
Seller, is in Default, nor has either of them received any notice of any claim
of Default, with respect to any such Permit. Except as set forth on Schedule
4.7, no such Permit which is material to the operation of the Business will be
adversely affected by the completion of the transactions contemplated by this
Agreement. No present or former shareholder, director, officer or employee of
Seller or the Partnership or any Affiliates thereof, or any other person, firm,
corporation or other entity, owns or has any proprietary, financial or other
interest (direct or indirect) in any Permit which the Partnership owns,
possesses or uses or which Seller owns, possesses or uses primarily in
connection with the Business.
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(B) Except as disclosed on Schedule 4.7 hereto, no notice to,
declaration, filing or registration with, or Permit or consent from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, including, without limitation, any party to any Main Agreement
or Contract, is required to be made or obtained by the Seller or the Partnership
in connection with the execution, delivery or performance of this Agreement and
the consummation of the transactions contemplated hereby.
4.8 NO CONFLICT OR VIOLATION. Except as disclosed in Schedule 4.8,
neither the execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by Seller
with any of the provisions hereof, will (a) violate or conflict with any
provision of the certificate or articles of incorporation or bylaws, partnership
or limited liability company agreement or limited partnership certificate of the
Seller or Partnership, (b) violate, conflict with, or result in or constitute a
Default under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any Encumbrance (other than a Permitted Encumbrance)
upon any of the assets of the Business under any of the terms, conditions or
provisions of any material Contract (including the T(2) Settlement Agreement and
any other Contract entered into in settlement or resolution of any Action or
threatened or anticipated Action), Main Agreement or material Permit (i) to
which the Seller or the Partnership is a party or (ii) by which any of the
Assets are bound or affected, (c) violate any Regulation or Court Order, or (d)
impose any Encumbrance (other than a Permitted Encumbrance) on any of the assets
of the Business.
4.9 FINANCIAL STATEMENTS. A true and complete copy of the Financial
Statements is attached hereto as Schedule 4.9. The Financial Statements (a) are
derived from the books and records of the Partnership and the Seller, (b) have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and (c) fairly
present in all material respects the financial position of the Partnership
described therein as of the respective dates thereof and the results of
operations for the periods covered thereby, except to the extent the Financial
Statements do not reflect the liabilities described on Schedule 4.13. At the
respective dates of the Financial Statements, there were no Liabilities of the
Business which, in accordance with generally accepted accounting principles,
should have been set forth on or reserved for in the Financial Statements or the
notes thereto, which are not set forth or reserved for in the Financial
Statements or the notes thereto, which are not set forth or reserved for in the
Financial Statements or the notes thereto, except to the extent the Financial
Statements do not reflect the liabilities described on Schedule 4.13.
4.10 BOOKS AND RECORDS. Seller has made and kept (and given Buyer
access to) the Books and Records and accounts of the Business, which, in
reasonable detail, accurately reflect in all material respects the activities of
the Partnership and the conduct of the Business. The Partnership and, with
respect to the Business, the Seller have not engaged in any material
transaction, maintained any bank account or used any material funds except for
transactions, bank accounts and funds that have been and are reflected in the
Books and Records.
4.11 LITIGATION. Except as set forth on Schedule 4.11, as of the date
hereof, there is no Action pending, or to the best knowledge of Seller and
Coram, threatened or anticipated against, related to or affecting the
Partnership or Seller that relate to or affect the Business, or against, related
to or affecting the Business or the Assets (including with respect to
Environmental Laws) or that seek to delay, limit or enjoin the transactions
contemplated by this Agreement. Neither Seller nor the Partnership is subject to
any Court Order (other than the Court Order(s) listed on Schedule 4.11) or is in
Default with respect to any Court Order that relates to the Business, the Assets
or the assets of the Business and there are no unsatisfied
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judgments against the Seller relating to the Business, the Assets or the assets
of the Business or against the Partnership. As of the date hereof, there are no
Court Orders or agreements with, or liens by, any governmental authority or
quasi-governmental authority relating to any Environmental Law which regulate,
obligate, bind or in any way affect the Partnership, the Business, the Assets or
the assets of the Business.
4.12 LABOR MATTERS. Neither the Partnership nor the Seller is a party
to any labor agreement with respect to its employees with any labor
organization, union, group or association and there are no employee unions (nor
any other similar labor or employee organizations) under local statutes, custom
or practice relating to or affecting the Business, the Assets or the assets of
the Business. Neither the Partnership nor the Seller has experienced any attempt
by organized labor or its representatives to make the Partnership conform to
demands of organized labor that would cover its employees. There is no labor
strike or labor disturbance pending or, to the best knowledge of Seller and
Coram, threatened against the Partnership, or, to the extent it relates
primarily to the Business, Seller, nor is any grievance currently being
asserted, and neither the Partnership nor to the extent is relates primarily to
the Business, Seller, has experienced a work stoppage or other labor difficulty,
and is not and has not engaged in any unfair labor practice. Without limiting
the foregoing, the Partnership and, to the extent it relates primarily to the
Business, the Seller, are in material compliance with the Immigration Reform and
Control Act of 1986 and maintain a current Form I-9, as required by that Act, in
the personnel file of each employee hired after November 9, 1986. Schedule 4.12
sets forth the names and current annual salary rates or current hourly wages of
all present employees of the Partnership whose annual cash compensation for the
fiscal year ending December 31, 1998 is expected to exceed $35,000 per year.
4.13 LIABILITIES. Except as disclosed on Schedule 4.13, neither the
Seller nor the Partnership has any Liabilities relating to the Business or
affecting the Assets and due or to become due, except (a) Liabilities which are
set forth or reserved for on the Balance Sheet, which have not been paid or
discharged since the Balance Sheet Date, (b) Liabilities incurred since the
Balance Sheet Date in the ordinary course of Business and in accordance with
this Agreement which are not in Default and none of which, individually or in
the aggregate, has or would have a material adverse effect on the Business and
(c) Excluded Liabilities.
4.14 COMPLIANCE WITH LAW. Seller and the Partnership and the conduct
of the Business have not violated in any material respect and are in material
compliance with all applicable Regulations (other than Health Care Laws) and
Court Orders relating to the Assets or the Business. Except as described on
Schedule 4.14, neither the Partnership nor the Seller has received any written
notice, or, to its knowledge, any oral notice to the effect that, or otherwise
been advised that, it is not in compliance with any such Regulations or Court
Orders, and Seller and Coram have no reason to anticipate that any existing
circumstances are likely to result in material violations of any of the
foregoing.
4.15 NO BROKERS. Neither the Seller nor any of its offices, directors,
employees, shareholders, partners or Affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer or any of its Affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.
4.16 NO OTHER AGREEMENT TO SELL THE ASSETS. Except as set forth in the
Partnership Agreement or on Schedule 4.16, neither the Seller nor the
Partnership nor any of their respective officers, directors, shareholders or
Affiliates has any commitment or legal obligations, absolute or contingent, to
any
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other person or firm other than the Buyer to sell, assign, transfer or effect a
sale of any of the Assets (other than inventory in the ordinary course of
business) or any portion of the Business, to effect any merger, consolidation,
liquidation, dissolution or other reorganization, or to enter into any agreement
or cause the entering into of an agreement with respect to any of the foregoing.
4.17 PROPRIETARY RIGHTS.
(A) PROPRIETARY RIGHTS. Schedule 4.17 lists all of the material
Proprietary Rights. Schedule 4.17 also sets forth: (i) for each Patent, the
number, normal expiration date and subject matter for each country in which the
Patent has been issued, or, if applicable, the application number, date of
filing and subject matter for each country, (ii) for each Trademark, the
application serial number or registration number, the class of goods covered and
the expiration date for each country in which a Trademark has been registered,
and (iii) for each Copyright, the number and date of filing for each country in
which a Copyright has been filed. The Proprietary Rights listed in the
Disclosure Schedule are all those used by the Seller and the Partnership in
connection with the Business. True and correct copies of all Patents (including
all pending applications) owned, controlled, created or used by or on behalf of
the Seller (limited, to those used or useful in connection with the conduct of
the Business) or Partnership or in which the Seller (limited to those used or
useful in connection with the conduct of the Business) or the Partnership has
any interest whatsoever have been provided to Buyer.
(B) ROYALTIES AND LICENSES. Neither the Seller nor the
Partnership has any obligation to compensate any person for the use of any such
Propertiery Rights nor has Seller or the Partnership granted to any person any
license, option or other rights to use in any manner any of its Proprietary
Rights, whether requiring the payment of royalties or not.
(C) OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. The Seller
and the Partnership own or have a valid right to use the Proprietary Rights, and
the Proprietary Rights will not cause to be valid rights of Seller and the
Partnership by reasons of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, except to
the extent transferred to Buyer pursuant hereto in which event they shall become
valid rights of Buyer. All of the pending Patent applications have been duly
filed. Neither the Partnership nor Seller has received any notice of invalidity
or infringement of any rights of others with respect to the Proprietary Rights.
Seller and the Partnership have taken all reasonable and prudent steps to
protect the Proprietary Rights from infringement by any other person. No other
person (i) has notified Seller or the Partnership that it is claiming any
ownership of or right to use any Proprietary Rights, or (ii) is infringing upon
any Proprietary Rights in any way. The use by Seller and the Partnership of the
Proprietary Rights does not and will not conflict with, infringe upon or
otherwise violate the valid rights of any third party in or to the Proprietary
Rights, and no Action has been instituted against or notices received by the
Seller or the Partnership that are presently outstanding alleging that the use
of the Proprietary Rights by the Seller or Partnership infringes upon or
otherwise violates any rights of a third party in or to the Proprietary Rights.
4.18 EMPLOYEE BENEFIT PLANS.
(A) DEFINITIONS. The following terms, when used in this Section
4.18, shall have the following meanings. Any of these terms may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference.
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(I) BENEFIT ARRANGEMENT. "BENEFIT ARRANGEMENT" shall mean any
employment, consulting, severance or other similar contract,
arrangement or policy and each plan, arrangement (written or oral),
program, agreement or commitment providing for insurance coverage
(including, without limitation, any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirements benefits, life, health,
disability or accident benefits (including, without limitation, any
"voluntary employees' beneficiary association" as defined in Section
501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
which
(A) is not a Welfare Plan, Pension Plan or Multiemployer
Plan, (B) i s entered into, maintained, contributed to or required to
be contributed to, as the case may be, by the Partnership or any ERISA
Affiliate or under which the Partnership or any ERISA Affiliate may
incur any Liability, and (C) covers any employee or former employee of
the Partnership or any ERISA Affiliate (with respect to their
relationship with the Partnership).
(II) CODE. "CODE" shall mean the Internal Revenue Code of
1986, as amended.
(III) EMPLOYEE PLANS. "EMPLOYEE PLANS" shall mean all Benefit
Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.
(IV) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(V) ERISA AFFILIATE. "ERISA AFFILIATE" shall mean any Entity
which is (or at any relevant time was) a member of a "controlled group
of corporations" with, under "common control" with, or a member of an
"affiliated service group" with, the Partnership as defined in Section
414(b), (c), (m) or (o) of the Code.
(VI) MULTIEMPLOYER PLAN. "MULTIEMPLOYER PLAN" shall mean any
"Multiemployer plan," as defined in Section 4001(a)(3) of ERISA, (A)
which the Partnership or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, after September 25,
1980, maintained, administered, contributed to or was required to
contribute to, or under which the Partnership or any ERISA Affiliate
may incur any Liability and (B) which covers any employee or former
employee of the Partnership or any ERISA Affiliate (with respect to
their relationship with the Partnership).
(VII) PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
(VIII) PENSION PLAN. "PENSION PLAN" shall mean any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which the Partnership or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to,
or, within five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under
which the Partnership or any ERISA Affiliate may incur
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any Liability, and (B) which covers any employee or former employee of
the Partnership or any ERISA Affiliate (with respect to their
relationship with the Partnership).
(IX) WELFARE PLAN. "WELFARE PLAN" shall mean
(A) any "employee welfare benefit plan" as defined in
Section 3(l) of ERISA, (A) which the Partnership or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to,
or under which the Partnership or any ERISA Affiliate may incur any
Liability and (B) which covers any employee or former employee of the
Partnership or any ERISA Affiliate (with respect to their relationship
with the Partnership).
(B) DISCLOSURE, DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. Schedule 4.18 contains a complete list of Employee Plans which
cover employees of the Partnership (with respect to their relationship with the
Partnership). Coram has delivered or made available to Buyer true and complete
copies of each of the following documents: (i) each Employee Plan (and, if
applicable, related trust agreement) which covers employees of the Partnership
(with respect to their relationship with the Partnership), and all amendments
thereto, including all annuity contract or other funding instruments, (ii) a
complete description of any Employee Plan which is not in writing, (iii) the
most recent determination or opinion letter issued by the Internal Revenue
Service with respect to each Pension Plan and each Welfare Plan (other than a
"Multiemployer plan" as defined in Section 3(37) of ERISA) which covers or has
covered employees of the Partnership (with respect to its relationship with the
Partnership), (iv) for the three most recent plan years, Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Pension
Plan which covers employees of the Partnership (with respect to its relationship
with the Partnership), and (v) a description setting forth the amount of any
Liability of the Partnership for payments more than thirty (30) calendar days
past due with respect to each Welfare Plan which covers employees of the
Partnership; provided, however, that the foregoing subparagraphs (i) - (v) are
limited to those Employee Plans with respect to which Buyer or the Partnership
has or potentially has a Liability.
(C) REPRESENTATIONS. Notwithstanding the provisions of this
Section 4.18(c), the representations in subparagraphs (i) - (xiv) of this
Section 4.18(c) apply only to Employee Plans for which Buyer or the Partnership
has or potentially has a Liability. Except as set forth in Schedule 4.14, Seller
represents and warrants as follows:
(I) PENSION PLANS.
(A) The funding method used in connection with each
Pension Plan which is subject to the minimum funding requirements of
ERISA is acceptable and the actuarial assumptions used in connection
with funding each such plan are reasonable. As of the last day of the
last plan year of each Pension Plan and as of the Closing Date, the
"amount of unfunded benefit liabilities" as defined in Section
4001(a)(18) of ERISA (but excluding from the definition of "current
value" of "assets" of such Pension Plan, accrued but unpaid
contributions) did not and will not exceed zero. No "accumulated
funding deficiency" (for which an excise tax is due or would be due in
the absence of a waiver) as defined in Section 412 of the Code or as
defined in Section 302(a)(2) of ERISA, whichever may apply, has been
incurred with respect to any Pension Plan with respect to any plan
year, whether or not waived. Nether the Partnership nor any ERISA
Affiliate has failed to pay when due any "required installment", within
the meaning of Section 412(m) of the
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Code and Section 302(c) of ERISA, whichever may apply, with respect to
any Pension Plan. Neither the Partnership nor any ERISA Affiliate is
subject to any lien imposed under Section 412(n) of the Code or Section
302(f) of ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Partnership nor any ERISA Affiliate has any Liability for
unpaid contributions with respect to any Pension Plan.
(B) Neither the Partnership nor any ERISA Affiliate
is required to provide security to a Pension Plan which covers or has
covered employees or former employees of Seller under Section
401(a)(29) of the Code.
(C) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument which covers or
has covered employees or former employees of the Partnership (with
respect to their relationship with the Partnership) is qualified and
tax-exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) and has been so qualified during the period
from its adoption to date.
(D) Each Pension Plan, each related trust
agreement, annuity contract or other funding instrument which covers or
has covered employees or former employees of the Partnership (with
respect to their relationship with the Partnership) presently complies
and has been maintained in substantial compliance with its terms and,
both as to form and in operation, with the requirements prescribed by
any and all Regulations and Court Orders which are applicable to such
plans, including, without limitation, ERISA and the Code.
(E) The Partnership has paid all premiums (and
interest charges and penalties for late payment, if applicable) due the
PBGC with respect to each Pension Plan for each plan year thereof for
which such premiums are required. Neither the Partnership nor any ERISA
Affiliate has engaged in, or is a successor or parent to an entity that
has engaged in, a transaction described in Section 4069 of ERISA. There
has been no "reportable event" (as defined in Section 4043(b) of ERISA
and the PBGC regulations under such Section) with respect to any
Pension Plan. No filing has been made by the Partnership or any ERISA
Affiliate with the PBGC, and no proceeding has been commenced by the
PBGC, to terminate any Pension Plan. No condition exists and no event
has occurred that could constitute grounds for the termination of any
Pension Plan by the PBGC. Neither the Partnership nor any ERISA
Affiliate has, at any time, (1) ceased operations at a facility so as
to become subject to the provisions of Section 4062(e) of ERISA, (2)
withdrawn as a substantial employer so as to become subject to the
provisions of Section 4063 of ERISA, or (3) ceased making contributions
on or before the Closing Date to any Pension Plan subject to Section
4064(a) of ERISA to which the Partnership or any ERISA Affiliate made
contributions during the six years prior to the Closing Date.
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(II) MULTIEMPLOYER PLANS.
(A) Neither the Partnership nor any ERISA Affiliate
has, at any time, withdrawn from a Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205 and 4205 of ERISA, respectively, so as to result in a Liability,
contingent or otherwise (including, without limitation, the obligations
pursuant to an agreement entered into in accordance with Section 4204
of ERISA), of the Partnership or any ERISA Affiliate. Neither the
Partnership nor any ERISA Affiliate has engaged in, or is a successor
or parent corporation to an entity that has engaged in, a transaction
described in Section 4212(c) of ERISA.
(B) All contributions required to be made by the
Partnership or any ERISA Affiliate to each Multiemployer Plan have been
made when due.
(C) If, as of the Closing Date, the Partnership
(and all ERISA Affiliates) were to withdraw from all Multiemployer
Plans to which they (or any of them) has contributed or been obligated
to contribute, it (and they) would incur no Liabilities to such plans
under Title IV of ERISA.
(D) With respect to each Multiemployer Plan: (1) no
such Multiemployer Plan has been terminated or has been in
reorganization under ERISA so as to result, directly or indirectly, in
any Liability, contingent or otherwise, of any Entity or any ERISA
Affiliate under Title IV of ERISA; (2) no proceeding has been initiated
by any person (including the PBGC) to terminate any Multi- employer
Plan; (3) Seller, the Partnership and the ERISA Affiliates have no
reason to believe that any Multiemployer Plan will be terminated or
will be reorganized under ERISA; and ( 4) the Partnership and the ERISA
Affiliates do not expect to withdraw from any Multiemployer Plan.
(III) WELFARE PLANS
(A) Each Welfare Plan which covers or has covered
employees or former employees of the Partnership (with respect to their
relationship with the Partnership) has been maintained in substantial
compliance with its terms and, both as to form and operation, with the
requirements prescribed by any and all Regulations and Court Orders
which are applicable to such Welfare Plan, including, without
limitation, ERISA and the Code.
(B) None of the Partnership, any ERISA Affiliate or
any Welfare Plan has any present or future obligation to make any
payment to, or with respect to, any retiree medical benefit plan, or
other retiree Welfare Plan, and no condition exists which would prevent
the Partnership from amending or terminating any such benefit plan or
Welfare Plan.
(C) Each Welfare Plan which covers or has covered
employees or former employees of the Partnership and which is a "group
health plan,' as defined in Section 607(1) of ERISA, has been operated
in compliance with provisions of Part 6 of Title 1, Subtitle B of ERISA
and Sections 162(k) and 4980B of the Code at all times.
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(D) Neither the Partnership nor any ERISA Affiliate
has incurred any Liability with respect to any Welfare Plan that is a
"Multiemployer plan," as defined in Section 3(37) of ERISA, under the
terms of such Welfare Plan, any collective bargaining agreement or
otherwise resulting from any cessation of contributions, cessation of
obligation to make contributions or other form of withdrawal from such
Welfare Plan.
(E) If, as of the Closing Date, the Partnership
(and all ERISA Affiliates) were to have a cessation of contributions,
cessation of obligations to make contribution or other form of
withdrawal from all Welfare Plans that are "multiemployer plans", as
defined in Section 3(37) of ERISA, they would incur no Liabilities with
respect to any such Welfare Plans under the terms of such Welfare
Plans, any collective bargaining agreement or otherwise.
(IV) BENEFIT ARRANGEMENTS. Each Benefit Arrangement
which covers or has covered employees or former employees of the
Partnership (with respect to their relationship with the Partnership)
has been maintained in compliance with its terms and with the
requirements prescribed by any and all Regulations and Court Orders
which are applicable to such Benefit Arrangement, including, without
limitation, the Code. Except as set forth in the Disclosure Schedule,
and except as provided by law, the employment of all persons presently
employed or retained by the Partnership is terminable at will.
(V) UNRELATED BUSINESS TAXABLE INCOME. No Employee Plan
(or trust or other funding vehicle pursuant thereto) is subject to any
tax under Code Section 511.
(VI) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any employee or former employee
of the Partnership (with respect to its relationship with the
Partnership) that, individually or collectively, provides for the
payment by the Partnership of any amount (i) that is not deductible
under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(VII) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS.
Neither the Partnership nor any plan fiduciary of any Welfare Plan or
Pension Plan which covers or has covered employees or former employees
of the Partnership or any ERISA Affiliate, has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(2) of the Code,
for which no exemption exists under Section 408 of ERISA or Section
4975(c)(2) or (d) of the Code, or has otherwise violated the provisions
of Part 4 of Title 1, Subtitle B of ERISA. The Partnership has not
knowingly participated in a violation of Part 4 of Title 1, Subtitle B
of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan and
has not been assessed any civil penalty under Section 502(1) of ERISA.
(VIII) VALIDITY AND ENFORCEABILITY. Each Welfare Plan,
Pension Plan, related trust agreement, annuity contract or other
funding instrument and Benefit Arrangement which covers or has covered
employees or former employees of the Partnership (with respect to their
relationship with the Partnership) is legally valid and binding and in
full force and effect.
(IX) LITIGATION. There is no Action or Court Order
outstanding, relating to or seeking benefits under any Employee Plan
that is pending, threatened or anticipated against the Partnership, any
ERISA Affiliate or any Employee Plan.
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(X) NO AMENDMENTS. Neither the Partnership nor any ERISA
Affiliate has any announced plan or legally binding commitment to
create any additional Employee Plans which are intended to cover
employees or former employees of the Partnership (with respect to their
relationship with the Partnership) or to amend or modify any existing
Employee Plan which covers or has covered employees or former employees
of the Partnership (with respect to their relationship with the
Partnership).
(XI) NO OTHER MATERIAL LIABILITY. No event has occurred
in connection with which the Partnership or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
Liability (A) under any Regulation or Court Order relating to any
Employee Plans or (B) pursuant to any obligation of the Partnership to
indemnify any person against Liability incurred under any such
Regulation or Court Order as they relate to the Employee Plans.
(XII) UNPAID CONTRIBUTIONS. Neither the Partnership nor
any ERISA Affiliate has any Liability for unpaid contributions under
Section 515 with respect to any Pension Plan, Multiemployer Plan or
Welfare Plan.
(XII) INSURANCE CONTRACTS. Neither the Partnership nor
any Employee Plan (other than a "MULTIEMPLOYER PLAN", as defined in
Section 3(37) of ERISA) holds as an asset of any Employee Plan any
interest in any Partnership contract, guaranteed investment contract or
any other investment or insurance contract issued by any insurance
company that is the subject of bankruptcy, conservatorship or
rehabilitation proceedings.
(XIV) NO ACCELERATION OR CREATION OF RIGHTS. Neither the
execution and delivery of this Agreement or any other related
agreements by Seller nor the consummation of the transactions
contemplated hereby will result in the acceleration or creation of any
rights of any person to benefits with respect to any Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of
any restricted stock, the acceleration of the accrual or vesting of any
benefits under any Pension Plan or the acceleration or creation of any
rights under any severance, parachute or change in control agreement).
4.19 TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth in
Schedule 4.19, no officer, director or employee of the Partnership or employee
of Seller dedicated primarily to the Business nor, to the knowledge of Seller
and Coram, any member of any such person's immediate family or any person or
entity controlled by such person or in which such person has a substantial
beneficial interest, is presently, or within the prior two years has been, a
party to any transaction with the Partnership or Seller relating to the Business
(other than for services as officers, directors or employees of the
Partnership), including, without limitation, any contract, agreement or other
arrangement (a) providing for the furnishing of services by, (b) providing for
the rental of real or personal property from, or (c) otherwise requiring
payments to any such person or corporation, partnership, trust or other entity
in which any such person has an interest as a shareholder, officer, director,
trustee or partner.
4.20 TAX MATTERS.
(A) FILING OF TAX RETURN. The Partnership (and any affiliated
group of which it is now or has been a member) (the "TAX ENTITIES") has timely
filed (including filings made during any extension period granted by any taxing
authority) with the appropriate taxing authorities all returns, except as shown
on Schedule 4.20 (including, without limitation, information returns and other
material information) in respect of Taxes required to be filed through the date
hereof and will timely file any such
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returns required to be filed on or prior to the Closing Date. The returns and
other information filed are complete and accurate in all material respects.
Seller has delivered or made available to Buyer complete and accurate copies of
the Partnership's federal, state and local tax returns for the 1995, 1996 & 1997
full fiscal year.
(B) PAYMENT OF TAXES. All Taxes, in respect of periods beginning
before the Closing Date owed by the Tax Entities, have been timely paid, or will
be timely paid, when due, by the Tax Entities.
(C) AUDITS, INVESTIGATIONS OR CLAIMS. Except as set forth in
Schedule 4.20, there are no pending or, to the knowledge of Seller and Coram,
threatened audits, investigations or claims for or relating to any additional
Liability of any Tax Entity in respect of Taxes, and there are no matters under
discussion with any governmental authorities with respect to Taxes that in the
reasonable judgement of any Tax Entity, or its counsel, is likely to result in a
material additional Liability of any Tax Entity for Taxes. Audits of federal,
state, and local returns of the Tax Entities for Taxes by the relevant taxing
authorities have been completed for each period as set forth in Schedule 4.20
and, except as set forth in Schedule 4.20, no Tax Entity has been notified that
any taxing authority intends to audit a return for any period. Except as set
forth in Schedule 4.20, no extension of a statute of limitations relating to
Taxes is in effect with respect to any Tax Entity.
(D) LIEN. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(E) SAFE HARBOR LEASE PROPERTY. None of the Assets is property
that is required to be treated as being owned by any other person pursuant to
the so-called safe harbor lease provisions of former Section 168(f)(8) of the
Code.
(F) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the Assets
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(G) TAX-EXEMPT USE PROPERTY. None of the Assets is "TAX EXEMPT USE
PROPERTY" within the meaning of Section 168(h) of the Code.
(H) FOREIGN PERSON. Neither Seller nor the Partnership is a person
other than a United States person within the meaning of the Code.
(I) NO WITHHOLDING. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Subchapter 3 of the Code or of any other provision of law.
4.21 INSURANCE. Schedule 4.21 contains a complete and accurate list of
all policies or binders of fire, liability, title, worker's compensation,
product liability and other forms of insurance (showing as to each policy or
binder the carrier policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided, and, during
the periods the Seller held any interest in the Partnership, the loss experience
history of the Business by line of coverage) held or maintained by Seller or by
the Partnership on the Business, the Assets or the employees of the Partnership.
All such insurance is in full force and effect, insures the Seller and the
Partnership in the amounts described therein against the risks described therein
and provides coverage as is required by applicable Regulation and by any and all
Contracts to which the Seller or the Partnership is a party. There is no Default
under any such
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coverage nor has there been any failure to give notice or present any claim
under such coverage in a due and timely fashion. There are no outstanding unpaid
premiums except in the ordinary course of business, and no notice of
cancellation or nonrental of any such coverage has been received by the Seller
or the Partnership. There are no outstanding performance bonds covering or
issued for the benefit of the Partnership. No insurer has advised Seller or the
Partnership that it intends to reduce coverage, increase premiums or fail to
renew any existing policy or binder relating to the Business.
4.22 ACCOUNTS RECEIVABLE. The accounts receivable set forth on the
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
in respect of the Business represent bona fide claims of the Partnership against
debtors for sales, services performed or other charges arising on or before the
date hereof, and all the goods delivered and services performed which gave rise
to said accounts were delivered or performed in material compliance with the
applicable orders, Contracts or customer requirements. Said accounts receivable
are subject to no defenses, counterclaims or rights of set-off and are fully
collectible in the ordinary course of business, except in the aggregate to the
extent of the appropriate reserves for doubtful accounts receivable as set forth
on the Balance Sheet and, in the case of accounts receivable arising since the
Balance Sheet Date, in the aggregate to the extent of a reasonable reserve rate
for doubtful accounts receivable which is not greater than the rate reflected by
the reserve for doubtful accounts on the Balance Sheet.
4.23 INVENTORY. Except for inventory that is excess, damaged or
obsolete, for which in the aggregate an adequate reserve has been established in
the Balance Sheet in accordance with generally accounting principles,
consistently applied, the inventory reflected in the Balance Sheet and not
disposed of or reserved since such date is of good and merchantable quality, of
a quantity and quality saleable in the ordinary course of business of the
Business in accordance with past practices, and is adequate as of the date
hereof for the Business as conducted as of such date.
4.24 PAYMENTS. Neither the Seller nor the Partnership nor, to their
knowledge, any of their respective officers, directors, members, shareholders,
employees or agents, has, directly or indirectly, paid, delivered, offered or
agreed to deliver any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, client, customer, supplier,
governmental official or other party, in the United States or any other country,
which is in any manner related to the Business, which was, at the time made or
given, illegal under any federal, state or local laws of the United States
(including, without limitation, the U.S. Foreign Corrupt Practices' Act) or any
other country having jurisdiction; and neither the Seller nor the Partnership
has participated, directly or indirectly, in any boycotts or other similar
practices affecting any of its actual or potential customers.
4.25 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Except as set forth on
Schedule 4.25 hereto, neither Coram nor Seller has received any written
communication from any of the five largest hospital customers of the Partnership
(other than Seller) of any intention to terminate or materially reduce purchases
from the Partnership, nor to the knowledge of Seller and Coram, any other
communication to such effect.
4.26 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(A) DEFINITIONS. The following terms, when used in this Section
4.26, shall have the following meanings. Any of these terms may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference.
(I) "ENTITY" For purposes of this Section, the term "Entity"
shall include (i) all Affiliate of the Partnership, (ii) all
partnerships, joint ventures and other entities or organizations in
which the Partnership was at any time or is a partner, joint venturer,
member or
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participant and (iii) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets or obligations of which have been
acquired or assumed by the Partnership or to which the Partnership has
succeeded.
(II) "RELEASE" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment or the workplace of
any Hazardous Substance.
(III) "HAZARDOUS SUBSTANCE" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical
compound or hazardous substance, material or waster, whether solid,
liquid or gas, including, without limitation, any quantity of asbestos
in any form, urea formaldehyde, PCB's, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives, radioactive substance or material,
pesticide waste waters, sludge, slag and any other substance, material
or waste that is subject to regulation, control or remediation under
any Environmental Laws.
(IV) "ENVIRONMENTAL LAWS" shall mean all applicable
Regulations which regulate or relate to the protection or clean-up of
the environment, the use, treatment, storage, transportation,
generation, manufacture, processing, distribution, handling or disposal
of, or emission, discharge or other release or threatened release of,
Hazardous Substances, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of employees. Environmental Laws
shall include, without limitation, the Federal Insecticide, Fungicide,
Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act,
Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and
Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive
Environmental Response, Compensation and Liability Act, Emergency
Planning and Community Right-to-Know Act, Hazardous Materials Transport
Act and all analogous or related federal, state or local laws, each as
amended.
(V) "ENVIRONMENTAL CONDITIONS" means the introduction into
the environment of any pollution, including, without limitation, any
contaminant, irritant or pollutant or other Hazardous Substance
(whether or not such pollution constituted at the time thereof a
violation of any Environmental Law as a result of any Release of any
kind whatsoever of any Hazardous Substance) as a result of which an
Entity has or may become liable to any person or by reason of which any
of the Assets or any properties or assets of any Entity may suffer or
be subjected to any material lien.
(B) FACILITIES. All properties currently owned, leased or operated
by the Partnership or by Seller to the extent used in connection with the
Business (collectively the "FACILITIES") are, and at all times have been, and
all Facilities previously owned, leased or operated by the Entities
(collectively, the "FORMER FACILITIES") were at all times when owned, leased or
operated by the Entities, owned, leased and operated in compliance with all
Environmental Laws and in a manner that will not give rise to any Liability
under any Environmental Laws, where any non-compliance or Liability would have a
material adverse effect upon the Business taken as a whole. Without limiting the
foregoing, (i) there is not and has not been any Hazardous Substance used,
generated, treated, stored, transported, disposed of, handled or otherwise
existing on, under, about or emanating from any Facility or treated,
transported, handled, disposed of, stored or otherwise held on, under or about
any such Facility or any Former Facility, except for
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quantities of any such Hazardous Substances generated, treated, transported,
handled, disposed of, stored or otherwise held on, under or about any such
Facility in material compliance with all Environmental Laws and reasonably
necessary for the operation of the Business, (ii) each Entity has at all times
used, generated, treated, stored, transported, disposed of or otherwise handled
its Hazardous Substances in compliance with all Environmental Laws in a manner
that will not result in Liability of the Partnership under any Environmental
Law, where any non-compliance or Liability would have a material adverse effect
upon the Business taken as whole, (iii) there is not now and has not been any
time in the past any underground or above-ground storage tank or pipeline at any
Facility or Former Facility where the installation, use, maintenance, repair,
testing, closure or removal of such tank or pipeline was not in compliance with
all Environmental Laws and there has been no Release from or rupture of any such
tank or pipeline, including, without limitation, any Release from or in
connection with the filling or emptying of such tank, where any non-compliance
or Release would have a material adverse effect upon the Business taken as a
whole, (iv) the Entities do not manufacture or distribute any product in the
State of California which requires the warning mandated by the California Safe
Drinking Water and Toxic Enforcement Act of 1986 ("PROPOSITION 65"), and (v) no
Entity has made or ever been required to make any filing under the New Jersey
Industrial Sit Recovery Act or any other state law of similar effect.
(C) NOTICE OF VIOLATION. No Entity has received any notice of
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, (i) any Release or threatened Release of any Hazardous Substance at
any location, whether at the Facilities, the Former Facilities or otherwise or
(ii) an alleged violation of or non-compliance with the conditions of any Permit
required under any Environmental Law or the provisions of any Environmental Law,
where any Release, threatened Release, alleged violation, or non-compliance
would have a material adverse effect upon the Business. No Entity has received a
notice of any other claim, demand or Action by any individual or Entity alleging
any actual or threatened injury or damage to any person, property, natural
resource or the environment arising from or relating to any Release or
threatened Release of any Hazardous Substances at, on, under, in, to or from any
Facilities or Former Facilities, or in connection with any operations or
activities of Seller, where any Release or threatened Release or violation of
noncompliance, individually or in the aggregate, would have a material adverse
effect upon the Business.
(D) ENVIRONMENTAL CONDITONS. There are no present or past
Environmental Conditions in any way relating to the Business or at any Facility
or Former Facility.
(E) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and
correct copies of the written reports, and all parts thereof, in the possession
of any of the Seller or the Partnership, of all environmental audits or
assessments which have been conducted at any Facility or Former Facility within
the past five years, either by Seller or the Partnership or any attorney,
environmental consultant or engineer engaged by them for such purpose, have been
delivered to Buyer and a list of all such reports, audits and assessments is
included on Schedule 4.26.
(F) INDEMNIFICATION AGREEMENTS. Except as set forth in Schedule
4.26, no Entity is a party, whether as a direct signatory or as successor,
assign or third party beneficiary, or otherwise bound, to any Lease or other
Contract (excluding insurance policies disclosed on the Disclosure Schedule and
excluding Leases and Contracts not related to the Business) under which the
Entity is obligated by or entitled to the benefits of any representation,
warranty, indemnification, covenant or restriction concerning Environmental
Conditions.
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(G) NOTICES, WARNING AND RECORDS. The Entities have given all
notice and warnings, made all reports, and kept and maintained all records
required by, and in each case in material compliance with all applicable
Environmental Laws.
4.27 COMPLIANCE WITH HEALTH CARE LAWS; SETTLEMENT AGREEMENT.
(A) ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Seller nor
the Partnership, any Affiliate of Seller or the Partnership, any
predecessor-in-interest to Seller or the Partnership of any interest in the
Partnership, nor any person or entity acting on behalf of any of them acting
alone or together ("DESIGNATED PERSONS"), has, in connection with the Business,
(i) received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, physician, governmental employee or other
person or entity with whom or which Seller or the Partnership has done Business
directly or indirectly, or (ii) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, physician, governmental employee or
other person or entity who is or may be in a position to help or hinder the
Business (or assist Seller or the partnership in connection with any actual or
proposed transaction).
(B) FRAUD AND ABUSE. No Designated Person has engaged in
connection with the Business in any activities that are prohibited under federal
Medicare or Medicaid statutes, 42 U.S.C. ss. 1320a-7, 1320a-7a, 1320a-7b and
1395(nn), the federal CHAMPUS statute, the federal False Claims Statute, 31
U.S.C. ss. 3729, or the regulations promulgated pursuant to such statutes or
related state or local statutes or regulations, including, but not limited to,
the following:
(I) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application
for any benefit or payment;
(II) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(III) presenting or causing to be presented a claim for
reimbursement for services under CHAMPUS, Medicare, Medicaid or other
state health care program that is for an item or service that is known
to be either not provided as claimed or false or fraudulent;
(IV) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (a) in
return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment
may be made in whole or in part by CHAMPUS, Medicare or Medicaid, or
other state health care program, or (b) in return for purchasing,
leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which
payment may be made in whole or in party by CHAMPUS, Medicare or
Medicaid or other state health care program; or
(V) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omitting to state a fact required to be stated or
necessary to make the statements made not misleading) of a material
fact with respect to (i) the conditions or operations of a facility in
order that the facility may qualify for CHAMPUS, Medicare, Medicaid or
other state health care program certification, or (ii) information
required to be provided under ss. 1124A of the Social Security Act (42
U.S.C. ss. 1329a-3).
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(C) HEALTH PROFESSIONAL'S FINANCIAL RELATIONSHIP. The operations
of the Seller and the Partnership relating to the Business are in compliance
with and do not otherwise violate the federal Medicare and Medicaid statutes
regarding health professional self-referrals, 42 U.S.C. ss. 1395nn and 42 U.S.C.
ss. 1396b, or the regulations promulgated pursuant to such statute, or similar
state or local statutes or regulations.
(D) CONTROLLED SUBSTANCES. No Designated Person has engaged in any
activities in connection with the Business which are prohibited under the
federal Controlled Substances Act, 21 U.S.C. ss. 801 et seq. or the regulations
promuglated pursuant to such statute or any related or local statutes or
regulations concerning the dispensing and sale of controlled substances.
(E) DISCLOSURE OF CERTAIN FINANCIAL RELATIONSHIPS. Seller has
disclosed to Buyer any and all financial relationships relating to the Business
(whether or not memorialized in a writing) that the Seller or the Partnership
has had with a physician or an immediate family member of a physician since
January 1, 1995 or, to the best knowledge of Seller and Coram, prior thereto.
(F) SETTLEMENT AGREEMENT AND JUDGMENT. Attached as Schedule 4.27
is a true and complete copy of (i) the Complaint in the civil action entitled
Donna Shalala, Secretary of Health and Human Services v. T(2) Medical, Inc.
(Civil Action No. 1-94-CV-2549-GEG) filed in the United States District Court
for the Northern District of Georgia, Atlanta Division, on September 26, 1994
(the "COMPLAINT"), (ii) the Settlement Agreement (the "SETTLEMENT AGREEMENT"),
which provides for the settlement of alleged claims of the U.S. government
against Seller and its officers, directors, subsidiaries and affiliates which
refer or relate to the claims alleged in the Compliant, and (iii) the Final
Judgement of Permanent Injunction and Ancillary Relief (the "JUDGMENT") entered
in the action covered by the Complaint. The Settlement Agreement and the
Judgment remain in full force and effet and have not been amended, supplemented
or modified in any manner. Seller and its present Affiliates subject to or
covered by the Settlement Agreement and the Judgment have complied in all
material respects with the Settlement Agreement and the Judgment to the extent
they relate to the Partnership or the Business. The Business is not currently
conducted, and has not at any time in the past been conducted, in a manner that
would consitute a violation of the terms of the Settlement Agreement or the
Judgment and neither the Seller nor the Partnership has received notice to the
effect that, or otherwise been advised that, it is not in compliance with the
Settlement Agreement or the Judgment and will not be subject to the Settlement
Agreement or the Judgment following acquisition of the Assets and assumption of
the Assumed Liabilities by Buyer pursuant hereto.
(G) EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES. Notwithstanding
anything in this Agreement to the contrary, the representations and warranties
set forth in this Section 4.27 shall be deemed to be the sole and exclusive
representations and warranties made in this Article IV concerning Health Care
Laws.
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER
--------------------------------------------------
Buyer hereby represents and warrants to Seller and Coram as follows:
5.1 ORGANIZATION OF BUYER AND IHS. Each of Buyer and IHS is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
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5.2 AUTHORIZATIONS. Each of Buyer and IHS has all requisite
corporate power and authority, and has taken all corporate action necessary, to
execute and deliver this Agreement and each instrument, certificate, agreement
and document to be executed by it in connection herewith (the "BUYER TRANSACTION
DOCUMENTS") to consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Buyer Transaction Documents by Buyer and IHS and the
consummation by each of them of the transactions contemplated hereby and thereby
have been duly approved by the board of directors of Buyer and IHS. No other
corporate proceedings on the part of Buyer or IHS are necessary to authorize the
consummation of the transactions contemplated hereby. This Agreement and the
Buyer Transaction Documents have been duly executed and delivered by Buyer and
IHS and are the legal, valid and binding obligations of Buyer and IHS,
enforceable against them in accordance with their terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting the
rights of creditors generally, and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
5.3 NO CONFLICT OR VIOLATION. Neither the execution, delivery or
performance of this Agreement and the Buyer Transaction Documents nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
by Buyer or IHS with any of the provisions hereof or thereof, will (a) violate
or conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer or IHS, (b) violate, conflict with, or result in or constitute a Default
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any assets of Buyer or IHS under, any of the
terms, conditions or provisions of any contract, indebtedness, note, bond,
indenture, security or pledge agreement, commitment, license, lease, franchise,
permit, agreement, authorization, concession, or other instrument or obligation
to which Buyer or IHS is a party, (c) violate any Regulation or Court Order,
except, in the case of each of clauses (a), (b) and (c) above, for such
violations, Defaults, terminations, accelerations or creations of Encumbrances
which, in the aggregate, would not have a material adverse effect on the ability
of Buyer or IHS to consummate the transactions contemplated hereby.
5.4 CONSENTS AND APPROVALS. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by Buyer or IHS in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
5.5 NO BROKERS. Neither Buyer nor IHS nor any of their respective
officers, directors, employees, shareholders or Affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in the obligation of the Seller or similar payment in
connection with the transactions contemplated hereby.
5.6 SEC DOCUMENTS. Buyer has furnished the Seller with a correct
and complete copy of its report on Form 10-K for its fiscal year ended December
31, 1997 (the"10-K"), and its report on Form 10-Q for its fiscal quarter ended
March 31, 1998 (the"10-Q"). As of their respective dates, none of the 10-K, the
10-Q and any press releases or other schedules or reports required by the
Company to be publicly disclosed or filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act since January 1, 1998 (all
of the foregoing being the "SEC DOCUMENTS") contained any untrue statements,
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or omitted to make any disclosures, which, in light of the circumstances would
render any of such documents materially misleading, and the SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Exchange Act, and the rules and regulations promulgated by
the Commission thereunder.
5.7 CAPITAL STOCK. IHS has duly authorized and reserved for
issuance the IHS Stock, and, when issued in accordance with the terms of Section
2.4, the IHS Stock will be validly issued, fully paid, and nonassessable and
free of preemptive rights.
ARTICLE VI: COVENANTS OF SELLER AND BUYER
-----------------------------------------
Seller and Buyer each covenant with the other as follows:
6.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, the parties agree, both before and after the Closing, (i) to
use commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
(ii) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder, and (iii) to cooperate with each other in connection
with the foregoing. Without limiting the foregoing, the parties agree to
cooperate with each other and use their respective commercially reasonable
efforts (A) to obtain all necessary waivers, consents and approvals from other
parties to the Contracts and Leases to be assumed by Buyer, (B) to obtain all
necessary Permits as are required to be obtained under any Regulations, (C) to
defend all Actions challenging this Agreement or the consummation of the
transactions contemplated hereby; (D) to lift or rescind any injunction or
restraining order or other Court Order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby, (E) to give all
notices to, and make all registrations and filings with third parties,
including, without limitation, submissions of information requested by
governmental authorities, and (F) to fulfill all conditions to the consummation
of the actions contemplated by this Agreement.
6.2 EMPLOYEE MATTERS. Seller shall be solely responsible for all of
the Employee Plans (as defined in Section 4.18) of Seller and Coram and all
obligations and liabilities thereunder. Buyer shall not assume any of the
Employee Plans of Seller or any obligation or liability thereunder.
6.3 ALLOCATION OF PURCHASE PRICE. Seller and Buyer agree to cooperate
with respect to the allocation of the Purchase Price.
6.4 EMPLOYEE BENEFITS. Coram shall continue to provide the employees
of the Partnership with their current employee benefits (other than salaries,
wages and bonuses) through June 30, 1998, or such earlier date designated by the
Partnership and the Buyer. IHS shall cause the Partnership promptly to reimburse
Coram for the costs associated with furnishing such employee benefits.
ARTICLE VII: [INTENTIONALLY OMITTED]
------------------------------------
ARTICLE VIII: [INTENTIONALLY OMITTED]
-------------------------------------
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ARTICLE IX: CONSENTS TO ASSIGNMENT
----------------------------------
9.1 CONSENTS TO ASSIGNMENT. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, Lease, Permit or any claim or right or any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, without the consent
of a third party thereto, would constitute a Default thereof or in any way
adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, to provide to
Buyer the benefits under any such Contract, Lease, Permit or any claim or right,
including, without limitation, enforcement for the benefit of Buyer of any and
all rights of Seller against a third party thereto arising out of the Default or
cancellation by such third party or otherwise. Nothing in this Section 9.1 shall
affect Buyer's right to indemnification in the event that any consent or
approval to the transfer of any Asset is not obtained.
ARTICLE X: ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
--------------------------------------------------------
10.1 BOOKS AND RECORDS. Each party agrees that it will cooperate with
and make available to the other parties, during normal Business hours, all Books
and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
The party requesting any such Books and Records, information or employees shall
bear all of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such Books and Records,
information or employees. All information received pursuant to this Section
shall be subject to the terms of Section 11.11.
10.2 COOPERATION AND RECORDS RETENTION; PAYMENT OF LIABILITIES. Seller
and Buyer shall (i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the preparation of any
return, audit, or other examination by any taxing authority or judicial or
administrative proceedings relating to Liability for Taxes, (ii) each retain and
provide the other with any records or other information that may be relevant to
such return, audit or examination, proceeding or determination, and (iii) each
provide the other with any final determination of any such audit or examination,
proceeding, or determination that affects any amount required to be shown on any
tax return of the other for any period. Without limiting the generality of the
foregoing, Buyer and Seller shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending on or before the
Closing Date and shall not destroy or otherwise dispose of any such records
without first providing the other party with a reasonable opportunity to review
and copy the same. Following the Closing Date, Seller shall pay promptly when
due all of the debts and Liabilities of Seller arising out of the conduct of the
Business prior to the Closing, including any Liability for Taxes arising out of
the conduct of the Business prior to the Closing, other than Assumed
Liabilities.
10.3 SURVIVAL OF REPRESENTATIONS, ETC. The representations and
warranties of Buyer contained in Sections 5.3, 5.4 and 5.5 of this Agreement and
those of Seller contained in Sections 4.1(a), 4.2, 4.4,4.5 (other than the first
sentence of Section 4.5), 4.6, 4.7, 4.8, 4.9, 4.11, 4.12, 4.13, 4.14, 4.15,
4.16, 4.17(a), 4.17(b), 4.17(c) (other than the first sentence of Section
4.17(c)), 4.19, 4.22, 4.23 and 4.24 of this Agreement shall survive the Closing
for a period of (and claims based upon or arising out of such
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representations, warranties, covenants and agreements may be asserted at any
time on or prior to the date which shall be) one year following the Closing. The
representations and warranties of Seller set forth in Section 4.27 (except for
Section 4.27(f) of this Agreement) shall survive the Closing for a period of
(and claims based upon or arising out of such representations, warranties,
covenants and agreements may be asserted at any time on or prior to the date
which shall be) two years following the Closing. The representations and
warranties of Buyer contained in Section 5.2 and 5.7 of this Agreement and those
of Seller contained in Section 4.3, in the first sentence of Section 4.5, in the
first sentence of Section 4.17(c), and in Section 4.27(f) of this Agreement
shall survive the Closing without limitation, and claims based upon or arising
out of such representations or warranties may be asserted at any time before the
expiration of the applicable statue of limitations (with extensions) applicable
to claims made under this Agreement. The representations and warranties of
Seller set forth in Section 4.18, 4.20 and 4.25 of this Agreement shall survive
until (and claims based upon or arising out of such representations all
warranties may be asserted at any time before) the expiration of the applicable
statue of limitations (with extension) with respect to the matters addressed in
such sections. The representations and warranties of the parties to this
Agreement set forth in Article IV and V of this Agreement which are not
referenced in this Section 10.3 shall expire upon the Closing. Subject to the
foregoing, each of Buyer and the Seller shall be entitled to rely upon the
representations and warranties made by the other as set forth in this Agreement.
The termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein (any notice of a claim made against the Seller
may be delivered to Coram and upon delivery to Coram shall be deemed to have
been delivered to and received by Seller).
10.4 INDEMNIFICATION.
(A) BY SELLER. Subject to the limitations set forth in this
Article 10, from and after the Closing Date, Seller shall indemnify, save and
hold harmless Buyer, IHS, their respective Affiliates and Subsidiaries, and its
and their respective Representatives, from and against any and all costs,
losses, Taxes, Liabilities, obligations, damages, lawsuits, deficiencies,
claims, demands, and expenses (whether or not arising out of third-party
claims), including, without limitation, interest, fines, penalties, costs of
litigation, losses in connection with any Environmental Law (including without
limitation, any clean-up or remedial action), other losses resulting from any
shutdown or curtailment of operations, damages to the environment, attorneys'
fees and all amounts paid in investigation, defense or settlement of any of the
foregoing, including any of the foregoing incurred or suffered by the
Partnership (herein, "DAMAGES" ), incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty
or the inaccuracy of any representation or warranty, made by Seller or Coram in
or pursuant to this Agreement, disregarding for the purpose of this Section
10.4(a) in determining whether there has been a breach by Seller or Coram of any
representation or warranty set forth in this Agreement any materiality standards
or exceptions included in the representation or warranty at issue; (ii) any
breach of any covenant or agreement made by Seller or Coram, in or pursuant to
this Agreement; (iii) any Excluded Liability or (iv) any Liabilities (y) for or
arising out of or related to the violation by Seller or the Partnership of any
Health Care Laws prior to the Closing or (z) for or arising out of or related to
any action taken or omission occurring prior to the Closing which, with notice,
passage of time or both (whether before or after the Closing) would result in a
violation by Seller or the Partnership, or any predecessor-in-interest to Seller
or the Partnership of an interest in the Partnership, of any Health Care Law.
The term "DAMAGES" as used in this Article 10 is not limited to matters
asserted by third parties against Seller, Coram or Buyer or IHS or the
Partnership, but includes Damages incurred or sustained by
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Seller or Buyer or the Partnership, in the absence of third party claims. As
used in this Article 10, the term Damages, shall include, with respect to the
Partnership, only Damages to the extent of the greater of (i) the Damages
incurred by Buyer or any Affiliate thereof as a partner or member of the
Partnership, or (ii) the proportionate interest of the Buyer and its Affiliates
in the Partnership. Payments by Buyer or IHS of amounts for which Buyer or IHS
is indemnified hereunder, and payments by Seller of amounts for which the Seller
is indemnified, shall not be a condition precedent to recovery.
(B) BY BUYER. Subject to the limitations set forth in this Article
10 hereof, from and after the Closing Date, Buyer shall indemnify and save and
hold harmless Seller, Coram, their respective Affiliates and Subsidiaries, and
their respective Representatives from and against any and all Damages incurred
in connection with, arising out of, resulting from or incident to (i) any breach
of any representation or warranty or the inaccuracy of any representation, made
by Buyer or IHS in or pursuant to this Agreement, (ii) any breach of any
covenant or agreement made by Buyer or IHS in or pursuant to this Agreement, or
(ii) any Assumed Liability.
(C) COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
(D) DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to be
made by a party entitled to indemnification hereunder against the indemnifying
party or parties, the party claiming such indemnification shall, subject to
Section 10.3 give written notice (a "CLAIM NOTICE") to the indemnifying party
(which, in the case of a Claim made by Buyer against Seller may be delivered to
Coram and, upon delivery, shall be deemed for all purposes to have been
delivered to and received by Seller) as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification becomes aware of any fact,
condition or event which may give rise to Damages for which indemnification may
be sought under this Section 10.4. If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to the indemnifying party as promptly as practicable (and
in any event within fifteen (15) calendar days after the service of the citation
or summons). The failure of any indemnified party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall acknowledge in
writing to the indemnified party that the indemnifying party shall be obligated
under the terms of its indemnity hereunder in connection with such lawsuit or
action, then the indemnifying party shall be entitled, if it so elects at its
own cost, risk and expense, (i) to employee and engage attorneys of its own
choice to handle and defend the same unless the named parties to such action or
proceeding include both the indemnifying party and the indemnified party, and
the indemnified party has been advised in writing by counsel that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party, in
which event the indemnified party shall be entitled, at the indemnifying party's
cost, risk and expense, to separate counsel of its own choosing, and (iii) to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party or parties, such consent
not to be unreasonably withheld, provided, however, if the remediation or
resolution of any such Claim will occur on or at any property or is reasonably
expected to have a material adverse effect on the Business operations of the
Partnership, then, notwithstanding the foregoing, the indemnified party shall be
entitled to control such remediation or resolution, including, without
limitation, to take control of the defense and investigation of such lawsuit or
action, to employ and engage attorneys of its own choice to handle and defend
the same, at
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the indemnifying parties' cost, risk and expense, and to compromise or settle
such Claim. If the indemnifying party fails to assume the defense of such claim
within fifteen (15) calendar days after receipt of the Claim Notice, the
indemnifying party against which such claim has been asserted will, upon
delivery notice to such effect to the indemnifying party, have the right to
undertake at the indemnifying party's or parties' cost and expense, the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party; provided, however, that such Claim shall not be
compromised or settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event the indemnified
party will keep the indemnifying party assumes the defense of the claim, the
indemnified party will keep the indemnifying party or parties reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party or parties shall be liable for any settlement of any action
effected pursuant to and in accordance with this Section 10.4 and for any final
judgement (subject to any right of appeal), and the indemnifying party or
parties agree to indemnify and hold harmless the indemnified party from and
against any Damages by reason of such settlement or judgement.
(E) BROKERS AND FINDERS. Pursuant to the provisions of this
Section 10.4, Buyer shall indemnify, hold harmless and defend Seller, and Seller
shall jointly and severally hold harmless and defend Buyer, from and against the
payment of any and all broker's and finder's expenses, commissions, fees or
other forms of compensation which may be due or payable from or by the
indemnifying party, or may have been earned by any third party acting on behalf
of the indemnifying party in connection with the negotiation and execution
hereof and the consummation of the transactions contemplated hereby.
(F) LIMITATIONS.
(I) From and after the Closing, neither Buyer nor Seller (and
Coram) shall be liable to the other under this Section 10.4 for any
Damages until the aggregate amount otherwise due the party being
indemnified exceeds an accumulated total of Twenty-Eight Thousand,
Dollars ($28,000) and thereafter shall be liable only to the extent the
aggregate amount exceeds the accumulated total of Twenty-Eight Thousand
Dollars ($28,000). Notwithstanding the foregoing, Seller shall be
liable for any and all Damages incurred in connection with, arising out
of or resulting from or incident to (a) any Excluded Liabilities,
including without limitation all Liabilities of Seller and the
Partnership (y) for or arising out of or related to the violation by
Seller or the Partnership of any Health Care Laws prior to the Closing
and (z) for or arising out of or related to any action taken or
omission occurring prior to the Closing which, with notice, passage of
time or both (whether before or after the Closing) would result in a
violation by Seller or the Partnership of any Health Care Law, (b) any
knowing violation prior to Closing of any Regulation, (c) any conduct
or course of action prior to Closing that a reasonably informed person
engaged in the Business should have known constituted or would likely
constitute a violation of a Regulation, and (d) the knowing breach of
any representation or warranty hereunder; provided, further, that
notwithstanding clause (a) of this sentence, Damages shall not include
costs or expenses of Buyer incurred in connection with any
restructuring or reconstitution of the Partnership to comply with
Health Care Laws undertaken other than pursuant to a third party claim
or Action.
(II) Notwithstanding any provision of this Agreement to the
contrary, the liability of Seller and Coram to Buyer and IHS hereunder,
on the one hand, or of Buyer and IHS to Coram and Seller, on the other
hand, for any and all breaches of any representations or warranties
shall not exceed One Hundred Eight Thousand Dollars ($108,000).
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(G) REPRESENTATIVES. No individual Representative of any party
shall be personally liable for any Damages under the provisions contained in
this Section 10.4. Nothing herein shall relieve any party from any Liability to
make any payment expressly required to be made by such party pursuant to this
Agreement.
(H) BULK SALES. It may not be practicable to comply or attempt to
comply with the procedures of the "Bulk Sales Act" or similar law of any or all
of the states in which the Assets are situated or of any other state which may
be asserted to be applicable to the transactions contemplated hereby.
Accordingly, to induce Buyer to waive any requirements for compliance with any
or all of such laws, hereby agrees that the indemnity provisions of this Section
10.4 hereof shall apply to any Damages of Buyer arising out of or resulting from
the failure of Seller or Buyer to comply with any such laws that are applicable.
(I) SOLE AND EXCLUSIVE REMEDY. Except as set forth in Section 11.1
hereof, the indemnification provisions contained in this Section 10.4 are the
sole and exclusive remedy of the parties for any breach of a representation,
warranty, covenant or agreement contained in this Agreement.
10.5 TAXES. Seller shall pay, or cause to be paid, when due all Taxes
for which Seller is or may be liable or that is or may become payable with
respect to all taxable periods ending on or prior to the Closing Date.
ARTICLE XI: MISCELLANEOUS
-------------------------
11.1 [INTENTIONALLY OMITTED]
11.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent, (i)
assign its rights hereunder (but not its obligations to Seller hereunder) to one
or more direct or indirect wholly owned subsidiaries, it being understood that a
direct or indirect wholly owned subsidiary of Buyer may assume Assumed
Liabilities, and/or assign all such rights to any lender as collateral security
and assign any and all such rights to one or more wholly owned subsidiaries (or
one or more partnerships controlled by Buyer). Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and no other person shall
have any right, benefit or obligation under this Agreement as a third party
beneficiary or otherwise.
11.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method (upon a confirmation of delivery); the business day after it is sent, if
sent for next day delivery to a domestic address by recognized overnight
delivery service (e.g., Federal Express); and upon receipt, if sent by certified
or registered mail, return receipt requested. In each case notice shall be sent
to:
If to Coram or the Seller,
addressed to: Coram Healthcare Corporation
1125 17th Street, Suite 2100
Denver, Colorado 80202
Attention: Chief Financial Officer
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With copies to: Coram Healthcare Corporation
1125 17th Street, Suite 2100
Denver, Colorado 80202
Attention: General Counsel
and Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, Suite 2300
Los Angeles, California 90071
Facsimile: (213) 627-0705
Attention: Craig S. Seligman, Esq.
If to Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Anthony Masso
Marshall Elkins, Esq.
with a copy to: Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Facsimile (212) 447-5428
Attention: Andrew S. Bogen
11.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions of Delaware law).
11.5 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules hereto (including the Disclosure
Schedule), and all agreements entered into contemporaneously herewith or in
furtherance of the transactions contemplated hereby constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersede all prior agreements understandings, negotiations and discussions
whether oral or written, of the parties. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a wavier of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
11.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 EXPENSES. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
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11.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or in enforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9 TITLES; GENDER. The titles, captions or headings of the Articles
and Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict the
meanings or interpretation of this Agreement.
11.10 PUBLIC STATEMENTS AND PRESS RELEASES. The parties hereto
covenant and agree that, except as provided for hereinbelow, each will not from
and after the date hereof make, issue or release any public announcement, press
release, statement or acknowledgment provided for herein, without the prior
written consent of the other party as to the content and time of release of and
the media in which such statement or announcement is to be made, provided,
however, that in the case of announcements, statements, acknowledgments or
revelations which either party is required by law to make, issue or release, the
making, issuing or releasing of any such announcement, statement,
acknowledgments or revelation by the party so required to do so by law shall not
constitute a breach of this Agreement if such party shall have given, to the
extent reasonably possible, not less than two (2) calendar days prior notice to
the other party, and shall have attempted, to the extent reasonably possible, to
clear such announcement, statement, acknowledgment or revelation with the other
party. Each party hereto agrees that it will not unreasonably withhold any such
consent or clearance.
11.11 CONFIDENTIALITY.
(A) Prior to the Closing any party may disclose to the other
certain proprietary, confidential or other non-public information (collectively,
the "INFORMATION") relating to its business.
(B) Buyer and IHS, except as herein set forth, shall not (i)
reveal or make known to any person, firm, corporation or entity, other than its
own management and advisors, including its attorneys, accountants and investment
bankers, or (ii) utilize in their own business or (iii) make any other usage of,
any Information disclosed to them by the other parties in connection with the
transactions contemplated hereby; provided, however, (x) they may disclose any
Information received from the other party to any governmental or regulatory
authority in connection with obtaining approval of the transactions contemplated
hereby or as otherwise may be required by applicable law, and (y) if required,
they may disclose any Information to its lenders in connection with obtaining
their approval of the transactions contemplated hereby. The obligations of IHS
and Buyer with respect to any item of Information shall terminate upon Closing
with respect to all Information included in the Assets, and with respect to all
other Information, if that item of Information becomes disclosed in published
literature or otherwise becomes generally available to the public; provided,
however, that such public disclosure did not result, directly or indirectly,
from any act, omission, or fault of such party with respect to that item of
Information. Further, this subsection (b) shall not apply to any item of
Information which at the time of disclosure was already generally available to
the public or which at the time of disclosure was already in the possession of
IHS or Buyer and was not, to their knowledge, acquired in contravention of a
confidentiality agreement.
(C) Seller and Coram, except as herein set forth, shall not (i)
reveal or make known to any person, firm, corporation or entity, other than its
own management and advisors, including its attorneys, accountants and investment
bankers, or (ii) utilize in their own business or (iii) make any other
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usage of, any Information disclosed to them by the other parties in connection
with the transactions contemplated hereby; provided, however, (x) they may
disclose any Information received from the other party to any governmental or
regulatory authority in connection with obtaining approval of the transactions
contemplated hereby or as otherwise may be required by applicable law, and (y)
if required, they may disclose any Information to its lenders in connection with
obtaining their approval of the transactions contemplated hereby. The
obligations of Seller and Coram with respect to any item of Information shall
terminate, if that item of Information becomes disclosed in published literature
or otherwise becomes generally available to the public; provided, however, that
such public disclosure did not result, directly or indirectly, from any act,
omission, or fault of such party with respect to that item of Information.
Further, this subsection (c) shall not apply to any item of Information which at
the time of disclosure was already generally available to the public or which at
the time of disclosure was already in the possession of Seller and Coram and was
not, to their knowledge, acquired in contravention of a confidentiality
agreement.
11.12 CERTAIN DISTRIBUTIONS. Seller shall be entitled to receive its
Percentage Interest (as such term is defined in the Partnership Agreement) of
any distribution made to partners of the Partnership arising out of any net
profits earned by the Business prior to the first day of June, 1998 in the
ordinary course of business consistent with past practice; it being understood
that distributions during any calendar month ordinarily consist of accounts
receivable collected during such month less any accounts payable paid prior to
such distribution plus any increase or minus any decrease in the reserve of cash
held by the Partnership with respect to liabilities that the manager of the
Partnership reasonably anticipates will become payable prior to the next date of
distribution. Buyer shall use its best efforts to cause the Partnership to make
such distribution. IHS shall cause the Partnership to reimburse Coram and Seller
promptly, and in any event, within thirty (30) days after the Closing, for any
amounts payable to them pursuant to Section 6.4 above and for any other
unreimbursed costs for employee benefits furnished by Coram in prior periods.]
All such amounts shall be deducted from revenues in determining net profits for
purposes of this Section 11.12, and such payments shall not be deemed to be part
of the distribution to Seller for purposes of this Section 11.12.
11.13 CUMULATIVE REMEDIES. Except as provided herein to the contrary,
all rights and remedies of either party hereto are cumulative of each other and
of every other right or recovery such party may otherwise have at law or in
equity, and the exercise of one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other rights and remedies.
11.14 ARBITRATION. Notwithstanding anything herein to the contrary, in
the event that there shall be a dispute among the parties after the Closing
arising out of or relating to this Agreement, including, without limitation, the
indemnities provided in Article X, or the breach thereof, the parties agree that
such dispute shall be resolved by final and binding arbitration in New York, New
York, administered by Endispute, Inc. d/b/a JAMS/Endispute ("JAMS"), in
accordance with JAMS' rules of practice then in effect or such other procedures
as the parties may agree to prior to the Closing. Depositions may be taken and
other discovery may be obtained during such arbitration proceedings to the same
extent as authorized in civil judicial proceedings. Any award issued as a result
of such arbitration shall be final and binding between the parties thereto, and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement is sought. The parties shall cause the arbitrator to reduce its
findings of fact and conclusions of law to writing.
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11.15 JOINT AND SEVERAL.
(A) Seller and Coram shall be jointly and severally liable for all
representations, warranties and obligations, including, without limitation,
indemnification obligations, and covenants made by either of them pursuant to
this Agreement, including, without limitation, any made pursuant to any Seller
Transaction Document.
(B) IHS and Buyer shall be jointly and severally liable for all
representations, warranties and obligations, including, without limitation,
indemnification obligations, and covenants made by either of them pursuant to
this Agreement, including, without limitation, any made pursuant to any Buyer
Transaction Document.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first above written.
INTEGRATED HEALTH SERVICES, INC., T(2) MEDICAL, INC.,
a Delaware corporation a Delaware corporation
By: By:
-------------------------- ------------------------
Name: Name:
-------------------------- ------------------------
Title: Title:
-------------------------- ------------------------
CORAM HEALTHCARE
WEST COAST CAMBRIDGE, INC. CORPORATION,
a Delaware corporation
By: By:
-------------------------- ------------------------
Name: Name:
-------------------------- ------------------------
Title: Title:
-------------------------- ------------------------
46
EXHIBIT 5
July 23, 1998
The Board of Directors
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Dear Sirs:
I refer to the Registration Statement on Form S-3 (the "Registration
Statement") to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), on behalf of Integrated Health
Services, Inc. (the "Company"), relating to 1,396,691 shares of the Company's
Common Stock, $.001 par value (the "Shares"), to be sold by certain Selling
Stockholders named therein.
I am Executive Vice President and General Counsel of the Company. As
counsel for the Company, I have examined such corporate records, documents and
such questions of law as I have considered necessary or appropriate for the
purposes of this opinion and, upon the basis of such examination, advise you
that in my opinion the Shares to be sold by the Selling Stockholders have been
duly and validly authorized and are legally issued, fully paid and
non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading "Legal
Matters" in the Registration Statement. This consent is not to be construed as
an admission that I am a person whose consent is required to be filed with the
Registration Statement under the provisions of the Act.
Very truly yours,
/s/ Marshall A. Elkins
----------------------
Marshall A. Elkins
Executive Vice President and
General Counsel
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Integrated Health Services, Inc.:
We consent to the use of our report dated March 25, 1998 relating to the
consolidated financial statements of Integrated Health Services, Inc. ("IHS")
and subsidiaries, incorporated herein by reference, to the incorporation herein
by reference of our report dated April 14, 1997 relating to the consolidated
financial statements of Community Care of America, Inc. and subsidiaries, which
report appears in Amendment No. 1 to Form 8-K/A of IHS dated September 25, 1997
and filed May 29, 1998, to the incorporation herein by reference of our report
dated October 17, 1996 relating to the consolidated financial statements of
First American Health Care of Georgia, Inc. and subsidiaries, which report
appears in Amendment No. 1 to Form 8-K/A of IHS filed on July 11, 1997, and to
the reference to our firm under the heading "Experts" in the registration
statement.
Our report dated March 25, 1998 refers to changes in accounting methods, in
1995, to adopt Statement of Financial Accounting Standards No. 121 relating to
impairment of long-lived assets and, in 1996, from deferring and amortizing
pre-opening costs of medical specialty units to recording them as expenses when
incurred. Our report dated April 14, 1997 refers to the change in accounting
method in 1996 to adopt Statement of Financial Accounting Standards No. 121
relating to impairment of long-lived assets. Our report dated October 17, 1996
contains an explanatory paragraph regarding the uncertainty with respect to
certain contingent payments which may be payable under a settlement agreement
with the Health Care Financing Administration.
KPMG Peat Marwick LLP
Baltimore, Maryland
July 22, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of Integrated Health Services, Inc. (IHS) of our report dated
September 18, 1997 (October 21, 1997 as to Note 1), appearing in the Annual
Report on Form 10-K of RoTech Medical Corporation for the year ended July 31,
1997, which report appears in the Form 8-K, dated October 21, 1997, as amended,
of IHS, and to the reference to us under the heading "Experts" in the
Registration Statement.
Deloitte & Touche LLP
Orlando, Florida
July 23, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 6, 1998
included in Integrated Health Services, Inc.'s Amendment No. 1 to Current Report
on Form 8-K/A dated December 31, 1997 and to all references to our Firm included
in this registration statement.
Arthur Andersen LLP
Albuquerque, New Mexico
July 23, 1998
EXHIBIT 99
INTEGRATED HEALTH SERVICES, INC.
ASSISTANT SECRETARY'S CERTIFICATE
I, Leslie A. Glew, Assistant Secretary of Integrated Health Services, Inc.,
a Delaware corporation (the "Corporation"), do hereby certify that set forth
below is a true and correct copy of a resolution, duly adopted by the Board of
Directors of the Corporation at meetings duly called and held at which a quorum
was present, or by unanimous written consent, in connection with the
Corporation's Registration Statement on Form S-3 (No. 333- ) (the "Registration
Statement") and any amendment(s) or post-effective amendment(s) thereto,
pertaining to the authorization of the name of officers signing the Registration
Statement or any amendment(s) or post-effective amendment(s) thereto to be
signed pursuant to a power of attorney, and that such resolution has not been
rescinded or modified and is still in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 23rd
day of July, 1998.
/s/ Leslie A. Glew
----------------------------------------
Leslie A. Glew, Assistant Secretary
"RESOLVED, that the officers and directors of the Company who are required
to execute the Registration Statement be, and they hereby are, and each of them
hereby is, authorized to execute and deliver a power-of-attorney appointing
Robert N. Elkins and C. Taylor Pickett to be the attorneys-in-fact and agents
with full power of substitution and resubstitution, for each of such directors
and officers and in their name, place and stead, in any and all capacities, to
sign any amendment(s) to the Registration Statement, including any
post-effective amendment(s), to file the same with the Commission and to perform
all other acts necessary in connection with any matter relating to the
Registration Statement and any amendment(s) or post-effective amendment(s)
thereto."
