SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 -K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 9, 1998
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BIO-REFERENCE LABORATORIES, INC.
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(Exact name of Registrant as specified in charter)
New Jersey 0-15266 22-2405059
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
481 Edward H. Ross Drive
Elmwood, New Jersey 07407
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 791-2600
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
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On April 9, 1998, Bio-Reference Laboratories, Inc. ("BRLI") purchased all
of the outstanding stock of Medilabs, Inc. ("MLI") from LTC Services and
Holdings Inc. ("Holdings"), a New Hampshire corporation and a wholly-owned
subsidiary of Long-Term Care Services, Inc. ("LTC") pursuant to a Stock Purchase
Agreement of said date. MLI is a regional testing laboratory servicing the New
York metropolitan region from its principal facility in Valley Cottage (Rockland
County), New York.
The purchase price was $5,500,000 consisting of cash payments of $4,000,000
delivered by BRLI at the closing (including $50,000 of payments for non-
competition agreements with LTC, Holdings, two affiliated corporations and an
employee of LTC and $200,000 of payments for access and use through April 8,
1999 of a laboratory hardware and software system of significant importance to
the MLI business) and delivery by BRLI of its $1,500,000 promissory note payable
without interest in three semi-annual installments commencing one year after the
closing. In addition, BRLI paid an MLI obligation of $122,366 at the closing to
an MLI affiliated entity for MLI's use through the closing date of a piece of
analytical equipment which will continue to be used by MLI after the closing.
The Stock Purchase Agreement also provides for a maximum of $1,500,000 in
additional payments to be made by BRLI if certain revenues are realized by MLI
after the closing. LTC and Holdings represented that MLI achieved revenues of
approximately $14,700,000 in calendar year 1997 on which it realized a loss
before taxes, depreciation and amortization of approximately $275,000.
BRLI financed the purchase with a $4,000,000 loan from its principal
lender, PNC Bank, N.A.
Item 7. Financial Statements and Exhibits.
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(a) and (b) Financial Statements and Pro Forma Financial Statements.
BRLI intends to file an amendment to this current report on Form 8-K
within 60 days from the date this report was first required to be filed,
containing appropriate historical financial statements of MLI and pro forma
financial information.
(c) Exhibits.
10.18 Stock Purchase Agreement dated April 9, 1998 for the
purchase by BRLI of all of the outstanding capital stock of MLI.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 22, 1998 BIO-REFERENCE LABORATORIES, INC.
By: /S/ Marc D. Grodman
_____________________________
Marc D. Grodman
President and Chief Executive Officer
STOCK PURCHASE AGREEMENT
AGREEMENT executed on April 9, 1998 between Long-Term Care Services, Inc.,
a Delaware corporation ("LTC") with a principal place of business c/o Path Lab,
Inc., 195 Hanover Street, Portsmouth, New Hampshire 03801, LTC Services and
Holdings Inc., a New Hampshire corporation ("Holdings") with a principal place
of business c/o Path Lab, Inc., 195 Hanover Street, Portsmouth, New Hampshire
03801, (LTC and Holdings being collectively referred to herein as "LTCS") and
Bio-Reference Laboratories, Inc., a New Jersey corporation with a principal
place of business at 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407
("BRLI").
W I T N E S S E T H :
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WHEREAS LTC owns all of the outstanding capital stock of Holdings, which
owns all of the outstanding capital stock of Medilabs, Inc., a New York
corporation with a principal place of business at 140 Route 303, Valley Cottage,
New York 10989 ("MLI") which is engaged in performing clinical laboratory
testing at its Valley Cottage, New York facility and in providing clinical
laboratory testing services for patients of various health care providers
including, without limitation, physicians, nursing facilities, hospitals,
clinics, and prisons located in Connecticut, New Jersey and New York; and
WHEREAS BRLI operates a clinical laboratory in Elmwood Park, New Jersey
where it performs clinical laboratory testing services for patients of various
health care providers including, without limitation, physicians, nursing
facilities, hospitals, clinics and dialysis centers located in Connecticut,
Florida, Maryland, New Jersey, New York, Pennsylvania and Virginia; and
WHEREAS LTCS desires that Holdings sell to BRLI and BRLI desires to
purchase from Holdings, an aggregate 100 shares of MLI common stock, $.01 par
value (the "MLI Stock") being all of the issued and outstanding capital stock of
MLI, and to succeed to the business of MLI, all on the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt
whereof and sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:
1. Sale and Purchase of the MLI Stock
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Based upon the representations and warranties herein contained and subject
to the terms and conditions herein set forth;
(A) LTCS shall sell and deliver to BRLI and BRLI shall purchase from LTCS,
all of the MLI Stock.
(B) The purchase price for the MLI Stock (the "Purchase Price") shall be
Five Million Five Hundred Thousand ($5,500,000) Dollars, reduced by an aggregate
Fifty Thousand ($50,000) Dollars of non-competition payments (the "Non-
Competition Payments") to Glen Kassan and the LTCS Affiliates, as hereinafter
defined, and by a Two Hundred Thousand ($200,000) Dollar payment (the "ANTRIM
Use Payment") to Path Lab, Inc. ("Path") in reimbursement for all costs
incurred, paid or accrued with respect to MLI and the LTCS Affiliates' use of
the ANTRIM Laboratory Computer System (MLI Version) (software and hardware)
through April 9, 1998 and in full payment for BRLI and MLI's access to and use
of the System from April 9, 1998 through April 8, 1999. The sum of Four Million
($4,000,000) Dollars, reduced by the $50,000 of Non-Competition Payments and the
$200,000 ANTRIM Use Payment shall be paid at the closing (hereinafter defined)
by BRLI to Holdings. Said net $3,750,000 amount is at times referred to herein
as the "Downpayment." The One Million Five Hundred Thousand ($1,500,000) Dollar
balance shall be paid by BRLI to Holdings without interest in three equal semi-
annual payments commencing one year after the said closing in accordance with
the terms of the Note described in Section 2(F) herein. The parties agree that
the Non-Competition Payments will be paid at the closing by BRLI to Glen Kassan
and the LTCS Affiliates hereinafter defined, and that the ANTRIM Use Payment
will be paid at the Closing by BRLI to Path.
(C) The Purchase Price shall be subject to adjustment through adjustment
of the Down Payment as follows. Within thirty (30) days following the Closing,
BRLI shall conduct a post-closing audit and submit an MLI balance sheet to LTCS
as of the Closing Date ("Final Balance Sheet"), prepared without adjustment for
any of the payments made or to be made by BRLI hereunder other than $91,000 of
the ANTRIM Use Payment and that portion of the Downpayment which is paid
directly by BRLI pursuant to Holdings' wire instructions to First Union Bank of
North Carolina ("First Union"). The Final Balance Sheet shall be prepared on a
basis consistent with the MLI January 31, 1998 pro forma balance sheet
hereinafter described and using the same aging by invoice date methodology as
was used to determine the net accounts receivable as set forth in an addendum to
such pro forma balance sheet. On the Final Balance Sheet, MLI's intangible
assets shall be eliminated (in the same manner as Note A to the January 31, 1998
pro forma balance sheet). Current and long term liabilities shall also be
eliminated to the extent that, upon preparation of the Final Balance Sheet, (a)
all intercompany payables between MLI and the LTCS Affiliates referenced in Note
B to the January 31, 1998 pro forma balance sheet have either been paid in full
or otherwise forgiven or satisfied by one of the LTCS Affiliates through a
capital contribution confirmed in writing, made to MLI; (ii) First Union has
provided the First Union Release and corresponding UCC-3's addressing Note D;
(iii) as to Note C, LTC has made the outstanding payment to LILA; and (iv) also
as to Note C, it continues to be the case that no event, liability or condition
is known that requires the maintenance of the reserves reflected in Note C. To
the extent that any such liability arises subsequent to the Closing Date, it
shall be covered by the indemnification provisions set forth in Section 8. LTCS
shall then have twenty (20) days in which to review the Final Balance Sheet and
if LTCS gives notice to BRLI within such period that it disputes such Final
Balance Sheet, the parties shall have twenty (20) days following notice to BRLI
of such dispute to negotiate a resolution. If the parties are unable to
independently reach agreement on the Final Balance Sheet, they shall submit the
dispute to binding arbitration conducted by a National accounting firm other
than Arthur Andersen L.L.P. or BRLI's auditors. The arbitrator shall be selected
by mutual agreement of the Parties, provided that if the Parties are unable to
agree, the arbitrator shall be selected in accordance with the rules of the
American Arbitration Association. The costs of the arbitrator shall be borne by
the Parties in proportion to the arbitrator's final determination. To the extent
that MLI's Total Stockholder Equity (i.e. "Adjusted Book Value") at Closing
according to the Final Balance Sheet (as agreed by the parties or determined by
arbitration) is less than Two Million Six Hundred Seventy-Two Thousand Five
Hundred and Four ($2,672,504) Dollars, the Purchase Price, through adjustment of
the Downpayment shall be adjusted downward "dollar for dollar" and LTCS shall
pay BRLI an amount equal to such reduction. To the extent that MLI's Adjusted
Book Value at Closing according to the Final Balance Sheet (as agreed by the
parties or determined by arbitration) is greater than Two Million Six Hundred
Seventy-Two Thousand Five Hundred and Four ($2,672,504) Dollars, the Downpayment
shall be adjusted upward "dollar for dollar" and BRLI shall pay Holdings an
amount equal to such increase (the "Final Adjustment"). Any such payment, by
Holdings to BRLI or by BRLI to Holdings shall be made within thirty (30) days
after such agreement or determination, as the case may be. LTCS and BRLI jointly
agree to file a timely election pursuant to 338(h)(10) of the Internal Revenue
Code of 1986, as amended (the "Code") so that the contemplated transaction shall
be treated for federal income tax purposes as a sale of MLI's assets and not as
a sale of MLI's capital stock.
(D) In addition to the Purchase Price, at the Closing, BRLI shall pay the
sum of One Hundred Twenty Two Thousand Three Hundred Sixty Six ($122,366)
Dollars (the "HITACHI Use Payment") to Path in full payment of all rentals and
other required payments for MLI's use of the Hitachi chemistry analyzer located
at MLI's facility in Valley Cottage, New York and all reagents received or
ordered and maintenance and repair services rendered in connection with such use
through the date of the Closing.
2. Closing
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(A) The closing of such sale and purchase (the "Closing") shall take place
at the offices of BRLI at 481 Edward H. Ross Drive, Elmwood Park, New Jersey
07407 at 9:00 o'clock, A.M. (EDT) on Thursday, April 9, 1998 or at such date and
time thereafter as the parties hereto shall mutually agree, in a writing
executed by BRLI on the one hand and by LTCS on the other. The date of the
closing is hereinafter referred to as the "Closing Date."
(B) At the Closing, LTCS will cause Holdings to deliver and Holdings will
deliver to BRLI, free and clear of all liens and encumbrances, certificates for
the MLI Stock with the reverse side thereof or with attached stock powers duly
endorsed for transfer to BRLI, and accompanied by all required documentary tax
stamps (if any).
(C) At, or prior to the Closing, BRLI on the one hand and each of the
following LTCS and/or MLI employees on the other hand, will execute and deliver
to each other, an Employment Agreement substantially in the form of Exhibit A
attached hereto.
Employee
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John Jacobi
Warren Erdmann
Nick Papazicos
(D) At the Closing, BRLI on the one hand and LTC, Holdings, Path, Burt
Medical Laboratory, Inc. ("Burt") on behalf of themselves and the LTCS
Affiliates, and each of the following LTCS and/or MLI employees on the other
hand will execute and deliver to each other, Non-Competition Agreements
substantially in the form of Exhibits B-1 and B-2 attached hereto.
Glen Kassan
For purposes of this Agreement, "LTCS Affiliates" shall mean LTC, Holdings,
Path, Burt, and any other clinical laboratory owned or controlled directly or
indirectly by LTC. "Control" shall mean having a greater than 50% voting
interest in, or 50% or greater interest in the profits of, or otherwise having
the power to cause the direction of management and policies of such laboratory.
(E) At the Closing, BRLI shall pay the Downpayment to Holdings by wire
transfer of immediately available funds into an account designated by Holdings.
(F) At the Closing, BRLI shall deliver to LTCS the Promissory Note payable
to Holdings in the amount of one million five hundred thousand dollars
($1,500,000) substantially in the form of Exhibit C attached hereto.
(G) At the Closing, BRLI shall pay the total amount of the Non-Competition
Payments in equal portions to each of the LTCS Affiliates, and to each of the
LTCS and/or MLI employees identified in subparagraph (D) of this Section 2 by
delivery to LTCS as agent for each such party of checks in said amounts payable
to LTC, to Holdings, to Path, to Burt, to any other LTCS Affiliate and to each
such individual as the case may be.
(H) At the Closing, BRLI shall pay the ANTRIM Use Payment to Path by
delivery to LTCS as agent for Path of a check in said amount payable to Path.
(I) At the Closing, BRLI shall pay the HITACHI Use Payment to Path by
delivery to LTCS as agent for Path of a check in said amount payable to Path.
(J) At the Closing, MLI shall deliver a release, duly executed by First
Union of all obligations under the Amended and Restated Credit Agreement, dated
as of May 14, 1996, as amended, by and among LTCS and certain other borrowers
and lenders with First Union, as agent (collectively "First Union"), of MLI (the
"First Union Release"), which First Union Release shall be delivered to BRLI
upon payment of the Downpayment in accordance with Holdings' wire instructions
to BRLI. In addition, LTCS will deliver UCC Termination Statements duly executed
by First Union, to BRLI, suitable for filing, terminating each and every lien
filed by First Union with respect to MLI.
(K) At the Closing, MLI shall deliver the executed resignations of each
MLI officer and director to BRLI, effective at the time of the Closing.
3. LTCS' Representations and Warranties
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Subject to the foregoing, each of LTC and Holdings hereby jointly and
severally agrees, warrants and represents to BRLI as follows:
(A) MLI is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has the power to own all
its properties and assets and to carry on its business as now being conducted.
The nature of its business and its ownership of property do not require its
qualification as a foreign corporation in any other jurisdiction except New
Jersey and it is presently qualified as a foreign corporation in such
jurisdiction.
(B) The authorized capital stock of MLI consists of 1,000 shares of common
stock, $.01 par value, of which 100 shares are now issued and outstanding and
are fully paid for and non-assessable. Holdings is the record and beneficial
owner of all of such outstanding shares, free and clear of any and all claims,
security interests, liens, encumbrances, restrictions, agreements, voting
trusts, rights of third parties and burdens of any nature and its title to said
shares is good, valid and indefeasible. MLI does not have outstanding any
subscriptions, options or warrants to purchase, or contracts to issue or any
other rights entitling anyone to acquire shares of, or outstanding securities
convertible into shares of its capital stock.
(C) MLI has no subsidiary nor does it own or control any capital stock of
or have any proprietary interest in any other corporation, firm, association or
business organization.
(D) The directors and officers of MLI are as set forth in Exhibit D
attached hereto and by this reference made a part hereof.
(E) Attached hereto as Exhibit E and by this reference made a part hereof
is (i) a Balance Sheet of MLI as of December 31, 1997, (ii) a Statement of
Operations of MLI for the twelve months ended December 31, 1997, (iii) a Balance
Sheet of MLI as of January 31, 1998, (iv) a Statement of Operations of MLI for
the month ended January 31, 1998 (collectively, the "MLI Financial Statements"),
and (v) a pro forma adjusted balance sheet of MLI at January 31, 1998 indicating
a Total Stockholders' Equity of $2,672,504 (the "Pro Forma January 31, 1998
Balance Sheet"). Said MLI Financial Statements are materially complete, true and
correct and present fairly as of their respective dates and for their respective
periods, the financial condition and results of operations of MLI, subject to
footnotes, and with respect to December 31, 1997 and the twelve months then
ended, normal year end adjustments. The Pro Forma January 31, 1998 Balance Sheet
presents fairly as of said date, the financial condition of MLI as modified by
the pro forma adjustments fully described on such balance sheet or in the notes
thereto using the same aging by invoice date methodology for valuing the net
amount of the accounts receivable reflected in an attachment thereto.
(F) Except as and to the extent set forth on, reserved against or
reflected in the detailed lists attached hereto as Exhibit F, of accounts
payable, accrued payroll and related taxes, notes payable, capital lease
obligations, accrued employee vacation and severance benefits, accrued expenses,
other long-term liabilities and intercompany payables, at January 31, 1998, MLI
had no debts, liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, material in
amount, whether individually or in the aggregate.
(G) From January 31, 1998 through the April 9, 1998 Closing, except as set
forth on Exhibit G hereto, there has not been:
(i) Any change in the condition (financial or other), properties,
assets or business of MLI which have been in any one case or in the aggregate
materially adverse.
(ii) Any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties, assets or Business of
MLI.
(iii) Any declaration, setting aside or payment of any dividend or
any other distribution on or in respect of shares of the capital stock of MLI,
or any direct or indirect redemption, retirement, purchase or other acquisition
by MLI of any such shares.
(iv) Any issuance of shares of capital stock of MLI or any
issuance of warrants, rights, options or commitments issued, granted or entered
into by MLI relating to the authorized shares (whether issued or unissued) of
capital stock of MLI.
(v) Any cancellation or termination of any contract, agreement or
other instrument material to MLI's Business or any material cancellation by any
supplier, customer or contractor of MLI which is materially adverse to MLI's
Business.
(vi) Any increase in compensation or in the rate of compensation
or rate of commissions payable or to become payable by MLI to any director,
officer, salaried or hourly employee, salesman, distributor or agent, or any
payment of any bonus, profit-sharing, severance or other extraordinary
compensation to any such individual.
(vii) Any addition to or modification or amendment of any MLI
Employee Benefit Plan (hereinafter defined) other than the extension of coverage
to MLI employees who became eligible after January 31, 1998.
(viii) Any sale, assignment or transfer of any assets of MLI that
are material, singly or in the aggregate, to MLI.
(ix) Any debt, obligation or liability (whether accrued,
absolute, contingent or other and whether due or to become due) incurred or
entered into by MLI other than short-term indebtedness to trade creditors
incurred in the ordinary course of MLI's Business.
(x) Any capital expenditure or the execution of any lease providing
for annual payments with respect to any aspect of MLI's Business or any
incurring of liability therefor in the aggregate in excess of $10,000.
(xi) Any mortgage, pledge or subjection to any encumbrance of any of
MLI's assets, except the lien of taxes not yet due and payable or mechanics
liens or other liens of which LTCS has no knowledge, imposed by operation of
law.
(xii) Any failure to conduct MLI's Business in the ordinary course
of MLI's Business which failure has a material adverse effect on MLI's Business.
(xiii) Any lending of any money by MLI in amounts in excess of
$5,000 in the aggregate, or, except in the ordinary course of MLI's Business,
otherwise pledging the credit of MLI in amounts in excess of $50,000 in the
aggregate.
(xiv) To LTCS' knowledge, any occurrence or event which adversely
affects the business of MLI in a material manner or, to LTCS' knowledge, any
governmental investigations or inquiries other than those set forth on Exhibits
hereto, which are likely to result in a judgment or settlement against MLI which
would have a material adverse effect on any of the material properties, assets,
or Business of MLI, other than an effect which is caused solely as a result of a
change in any law, rule or regulation applicable to the clinical laboratory
industry generally.
(H) Except as set forth on Exhibit H, MLI has properly prepared and duly
and timely filed all tax returns and tax information forms required to be filed
by it for all years through and including the fiscal year ended December 31,
1997 and for all periods subsequent thereto for which returns are due as of the
Closing Date, and, except as set forth on Exhibit H hereto, has paid all taxes
shown to be due and payable on said returns, all assessments, notice of which
have been received by it and all such other taxes, deposits, governmental
charges, penalties, interest and fines due and payable on or before the date
hereof. Except as set forth on Exhibit H, there are no agreements, waivers or
other arrangements providing for an extension of time with respect to the filing
of any tax return by, or the payment of any tax, governmental charge or
deficiency by, or the assessment of any tax, governmental charge or deficiency
against MLI. There are no actions, suits, proceedings or claims, or to LTCS'
knowledge, investigations now pending against MLI in respect of taxes,
governmental charges or assessments, or any matters under discussion with any
governmental authority relating to taxes, governmental charges or assessments
asserted by any such authority which, if resolved against MLI, would have a
material adverse effect upon MLI's properties or assets in the aggregate or upon
MLI's Business. Except as set forth on Exhibit H, the indebtedness for taxes
stated on Exhibit E as of January 31, 1998 represents all unpaid taxes payable
by MLI attributable to all periods ended on or before January 31, 1998 and all
penalties and interest thereon (if any) as well as penalties for failure to file
tax information forms through said date.
(I) Attached hereto as Exhibit I is a schedule of all leases to which MLI
is a party which would require payments on an annualized basis of at least
$3,500, even if cancelable sooner, including leases for real property. Except as
set forth on Exhibit I, all of such leases are in full force and effect with all
rentals due thereunder paid and the acquisition by BRLI of the issued and
outstanding capital stock of MLI will not constitute a default under or require
a consent pursuant to any such lease. All personal property owned or used by MLI
is in good operating condition and repair for the purpose for which it is being
used, and is adequate and sufficient for all of its operations by MLI. MLI has
the right to use its real properties which it is currently utilizing in Valley
Cottage, New York and Syosset, New York for the operations presently conducted
by it and such use is not in material violation (either individually or in the
aggregate), of any building, zoning or other ordinance, code, rule or
regulation. MLI has good and marketable title to all property which it purports
to own including, but not limited to, that reflected in the Financial Statements
as of January 31, 1998 (except as disposed of since January 31, 1998 in the
ordinary course of business) free and clear of all security interests, liens,
encumbrances, charges, agreements, assessments, covenants, restrictions,
reservations, commitments, obligations, liabilities and other burdens of any
nature except for liens described in, held by the firms listed in, and to secure
the amounts of indebtedness set forth in Exhibit J attached hereto.
(J) Listed in Exhibit K attached hereto are all material contracts,
agreements and commitments (i.e., contracts, agreements and commitments which
would require payments on an annualized basis of at least $5,000, even if
cancelable sooner), to which MLI is a party. All of said contracts, agreements
and commitments are legally valid and binding and in full force and effect, MLI
is not in default thereunder, and, to LTCS' knowledge, no other party thereto is
in material default under any provisions thereof.
(K) Except as set forth on Exhibit L hereto, there are no suits, actions
or claims by any administrative agency or governmental body, or legal,
administrative or arbitration proceedings pending or to LTCS's knowledge
threatened against or affecting MLI or any of its properties, assets or Business
or to which MLI is or might become a party nor to LTCS' knowledge, are there any
investigations or inquiries by any such agency or governmental body, pending or
threatened against MLI or any of its properties, assets or Business or to which
MLI is or might become a party.
(L) MLI has obtained and holds all required governmental licenses and
permits necessary to conduct its Business and to operate its properties and
assets, and such licenses and permits are in full force and effect. No
violations have been recorded in respect of any governmental licenses or permits
to MLI and no proceedings are pending or, to their knowledge, threatened,
seeking the revocation or limitation of any such licenses or permits. To LTCS'
knowledge, MLI has complied with all laws, rules, regulations, ordinances,
codes, orders, licenses and permits applicable to its business.
(M) (i) For purposes of this Agreement, "Employee Benefit Plans" shall
mean all pension, annuity, retirement, stock option, stock purchase, savings,
profit sharing, severance or deferred compensation plans, or agreements, and any
consultant, bonus, group insurance, welfare, health and disability plan, fringe
benefit or other incentive or benefit contract, plan, arrangement or commitment
applicable to MLI personnel for which MLI has any liability, whether formal or
informal. Except as set forth on Exhibit M attached hereto MLI does not
maintain, is not required to contribute to and has no liabilities due and owing
with respect to any Employee Benefit Plan and no MLI personnel or dependent
thereof is entitled to any benefits except as provided for by the provisions of
such Employee Benefit Plans. Except as set forth on Exhibit M, no individual is
a party to an Employment Contract, Consulting Contract or similar agreement with
MLI that will be effective on the Closing Date and MLI has no liability under
any such contract or agreement which was terminated prior to or at the Closing
Date. Each Employee Benefit Plan which is an "employee pension benefit plan" as
that term is defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") has been identified as such on Exhibit M.
(ii) LTCS has provided BRLI with (x) copies of all of MLI's Employee
Benefit Plans or in the case of an unwritten plan, a written description
thereof, (y) copies of the latest annual, financial or actuarial reports and
Internal Revenue Service ("IRS") determination letters relating to such
Employee Benefit Plans, and (z) copies of all current summary plan descriptions
(whether or not required to be furnished under ERISA) and, to LTCS' knowledge,
all material written employee communications relating to such Employee Benefit
Plans distributed to MLI personnel, in each case under this subsection (M)(ii),
existing or in effect at any time since September 1994.
(iii) Except as set forth in Section 9(B) regarding the
distribution of Profit Sharing Plan Accounts, the transactions contemplated by
this Agreement (either alone or together with any other transaction) will not
(w) entitle any MLI personnel to severance pay or other similar payments under
any Employee Benefit Plan or law, (x) accelerate the time of payment or vesting
or increase the amount of benefits due under any Employee Benefit Plan or
compensation to any MLI personnel, (y) result in any payments (including
parachute payments) under any Employee Benefit Plan, law or other agreement to
which MLI is subject or is a party, becoming due to any MLI personnel, or (z)
terminate or modify or give a third party a right to terminate or modify the
provisions or terms of any Employee Benefit Plan.
(iv) Except as disclosed in Exhibit M, each Employee Benefit Plan has
been operated in all material respects in accordance with its terms and
applicable laws, including the Code and ERISA. The Long Term Care Services, Inc.
Profit Sharing & Retirement Plan (the "LTC Plan") is designed to be qualified
under Sections 401(a) and 401(k) of the Code, the related trust is designed to
be exempt from tax under Section 501(a) of the Code, both have been operated in
material compliance with such Sections and all MLI employees required to be
covered thereunder have been covered. The LTC Plan has received a favorable
determination letter from the IRS stating that the plan is so qualified, and
nothing has occurred since the date of such letter to cause the LTC Plan to be
disqualified. All contributions due with respect to the periods ending on or
before the Closing Date to the LTC Plan have been or will be timely made, and a
pro rata portion of the contributions (including matching contributions) for the
plan year in which the Closing Date occurs have been made on or before the
Closing Date. MLI has made all required contributions and has paid all
applicable premiums to or with respect to the Employee Benefit Plans as and when
due.
(v) MLI has not suffered a "plant closing" or "mass layoff" within
the meaning of the Worker Adjustment and Retraining Notification Act ("WARN"),
determined without regard to any actions taken by BRLI or BRLI's nominees for
directors at or after the Closing, and LTCS will provide BRLI, upon reasonable
request, with such information as shall be necessary for BRLI to determine its
potential WARN liability.
(vi) MLI has never maintained or sponsored, with respect to MLI
personnel, any plan or arrangement providing for post-employment health or life
insurance coverage and has no absolute or contingent obligation or liability
with respect thereto, except as required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA").
(vii) MLI does not have nor shall it have after the Closing, any
liability or obligation accrued prior to the Closing with respect to any
Controlled Group Benefit Plans. For purposes of this Agreement, "Controlled
Group Benefit Plans" means any and all pension, annuity, retirement (including,
without limitation, any multi employer pension plan), stock option, stock
purchase, savings profit sharing or deferred compensation plans or agreements,
and any consultant, bonus, group insurance, welfare, health, disability plan,
fringe benefit or other incentive or benefit contract, plan arrangement or
commitment which is or has been maintained by, or with respect to which
contributions are or have been made by, any person or entity which could be
aggregated with MLI under Section 414(b), (c), (m) or (o) of the Code.
(N) Except as set forth on Exhibit N, in connection with the operation of
its Business,
(i) MLI is in compliance in all material respects with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice.
(ii) Neither LTCS nor MLI has been notified of any unfair labor
practice charge or complaint against MLI and to the knowledge of LTCS, no such
charge or complaint is threatened before the National Labor Relations Board, any
state labor relations board or any court or tribunal.
(iii) MLI has not been notified of any charge or claim filed at or
with the Equal Employment Opportunity Commission, any state agency having
similar jurisdiction or any court or tribunal, actually pending and, to the
knowledge of LTCS, no such charge or claim is threatened against MLI in
connection with the operation of its Business.
(iv) There is no labor strike, dispute, slowdown or stoppage actually
pending against or affecting MLI and, to the knowledge of LTCS, none is or has
been threatened and no efforts to organize labor are underway by the Employees
of MLI nor to the knowledge of LTCS has there been a request made by any MLI
Employee for representation.
(v) MLI has not been notified of any employee grievance which might
have a material adverse effect on the conduct of the operations of its Business.
(vi) MLI has no collective bargaining agreements with respect to
any Employees.
(O) Neither MLI nor, to the knowledge of LTCS, the lessors ("Lessors") of
the MLI facilities at 140 Route 303, Valley Cottage, New York 10989 and at 40
Underhill Boulevard, Syosset, New York (the "Premises"), is in material
violation of any environmental, health or safety laws or regulations, including
any and all Federal, state and local laws, regulations and ordinances, including
without limitation any laws relating to air and water pollution and handling and
disposal of chemical and hazardous materials (hereinafter the "Environmental
Laws"). Each of MLI and, to the knowledge of LTCS, Lessors possess all of the
authorizations, permits and approvals required to be obtained by applicable
Environmental Laws; none of LTCS or MLI and, to the knowledge of LTCS, none of
the Lessors have received any notice from any governmental authority nor has any
knowledge of any governmental inquiry, with respect to any actual or alleged
violation of any applicable Environmental Law; there is no termination
proceeding or other claim, suit or proceeding by any governmental agency against
or involving LTCS or MLI concerning the Premises, or to LTCS' knowledge, any
investigation by any governmental agency with respect to Environmental Law
matters against or involving LTCS or MLI concerning the Premises, or to the
knowledge of LTCS, any investigation by any governmental agency, termination
proceeding or other claim, suit or proceeding against or involving either of the
Lessors concerning the Premises, and, there are no facts with respect to the
period of MLI's occupancy of the Premises or, to LTCS' knowledge, prior thereto
that could give rise to any liability in the event of any such investigation,
claim, suit or proceeding; and, with respect to the period of MLI's occupancy,
and to LTCS' knowledge for prior periods, all hazardous waste or chemical waste
materials have been picked up by appropriately licensed carriers at authorized
disposal facilities. During the period MLI has occupied the Premises, there have
been no spills, dumping, discharge or clean up of hazardous waste or chemical
materials on or at the Premises, and, to LTCS' knowledge, no such spills,
dumping. discharge or clean up occurred at the Premises prior thereto.
(P) MLI is included as an insured under the insurance policies maintained
by LTCS, which policies are in full force and effect and cover MLI's Business.
Such policies are described in Exhibit O. Copies of the insurance policies
covering the Business of MLI have been provided to BRLI.
(Q) For purposes of this Agreement, "Intellectual Properties" shall mean
all patents and pending applications therefor, all registrations of trademarks
and of other marks, all registrations of trade names, assumed names, service
marks, logos, labels or other trade rights, all pending applications for any
such registrations, all copyright registrations and pending applications
therefor, all other copyrights, trademarks and other marks, trade names, assumed
names, service marks, logos, program rights, non-governmental licenses, computer
programs, and all other inventions and designs, whether or not patentable, all
to the extent that the foregoing items are owned in whole or in part by LTCS or
MLI and used in the MLI Business as of the date of this Agreement. The
Intellectual Properties listed on Exhibit P are all those used or being
developed for use in the business of MLI or necessary for the conduct of a
material portion of the business of MLI. Other than the computer software used
by MLI pursuant to an understanding with Path, as disclosed in Exhibit P, MLI
owns all Intellectual Properties listed on Exhibit P hereto. Except as indicated
on Exhibit P, neither LTCS nor MLI have sent or otherwise communicated to any
other person any notice, charge, claim or assertion of, or has any knowledge of,
any present, impending or threatened infringement by such other person of any
Intellectual Properties, by such other person.
(R) Exhibit Q contains a complete and correct identification of all
confidentiality agreements to which MLI is a party as of the date of this
Agreement.
(S) Exhibit R sets forth the current name, job description, work location,
title, date of employment, annual salaries, bonuses (and any changes in salaries
or bonuses since January 1, 1997) of each MLI employee and, if applicable, the
commissions earned and paid since January 1, 1997 to such employee. Exhibit R
also sets forth the termination date of employment with respect to each MLI
employee whose employment was terminated during the approximately fifteen-month
period beginning January 1, 1997 through the April 9, 1998 Closing Date. Except
as described on Exhibit R, no MLI employee is a party to a confidentiality
agreement or non-competition agreement with LTCS, MLI or any of their respective
affiliates. Except as set forth on Exhibit R, neither LTCS nor MLI has knowledge
or has received notice of any plan of any MLI employee to terminate his or her
employment with MLI prior to the Closing Date.
(T) (i) All billing by MLI to third party payors, including but not
limited to the federal Medicare program, state Medicaid programs and private
insurance companies. has been true, fair and correct in all material respects
and in material compliance with all applicable laws, regulations and the
policies of such third party payors other than such non-compliance which would
not be reasonably likely to result, or will not result, in a material adverse
effect on MLI's material properties, assets or Business.
(ii) None of MLI, any director, officer, employee or agent of MLI or
any other person acting on its behalf, has since September 1994, given any
remuneration, gift, keepsake or similar benefit ("Remuneration") to any
governmental employee, patient, referral source, provider, Customer or supplier
which (A) is likely to subject MLI or LTCS to any damage or penalty in any
civil, criminal or governmental litigation or proceeding which would be
reasonably likely to result in, or will result in, a material adverse effect on
their properties, assets or Business, or (B) if not continued by BRLI in the
future, (1) would be reasonably likely to result in, or will result in a
material adverse change in the MLI Business or (2) which is likely to subject
MLI or LTCS to suit or penalty in any private or governmental litigation or
proceeding which would be reasonably likely to result in, or will result in a
material adverse effect on MLI's material properties, assets or Business.
(iii) MLI and, to LTCS' knowledge, all persons and entities
providing professional or other services for MLI or the MLI Business have not
engaged in any activities which are prohibited, or are cause for civil penalties
or mandatory or permissive exclusion from Medicare or Medicaid, under 1320a-7,
1320a-7a, 1320a-7B or 1395nn of Title 42 of the United States Code or the
regulations promulgated thereunder, or related state or local statutes or
regulations, or which are prohibited by applicable statutes, regulations, or
ethical codes governing professional conduct which in any of such instances, if
found to be a violation of applicable law, would be reasonably likely to result
in, or will result in, (x) a material adverse effect or (y) additionally under
the provisions of subsection (D)(1) or (2) below, a material adverse change,
including the following: (A) 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; (B) knowingly or 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; (C) any failure to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on MLI's behalf, with the intent to fraudulently
secure such benefit or payment; (D) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe or rebate) directly or
indirectly, overtly or covertly, in cash or in kind, or offering to pay or
receive such remuneration in return for (1) referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (2)
purchasing, leasing or ordering or arranging for, or recommending, purchasing,
leasing or ordering any good, facility, service or item for which payment may be
made in whole or in part by Medicare or Medicaid; or (E) referring any patients
to a person or entity with which MLI or another member of the MLI Business has a
prohibited financial relationship.
(iv) No notice or claim inconsistent with the representations in this
Section 3(T) has been received by MLI or LTCS.
(U) All obligations incurred by MLI in connection with its purchase of the
assets of Long Island Laboratories and Vilardi Bioanalytical Laboratory and any
payment obligations to the principals of such entities, including but not
limited to payments in connection with the purchase or for services rendered
thereafter or non-competition restrictions in connection therewith, have been
paid in full.
(V) LTCS, through its wholly-owned Path subsidiary has agreed to grant
BRLI access to and use of the ANTRIM Laboratory Computer System (MLI Version)
(software and hardware), the hardware being located at Path's New Hampshire
facilities pursuant to a computer access and services agreement attached hereto
as Exhibit S. In addition, LTCS, through its Path/Burt subsidiary has agreed to
use best efforts to provide MLI with access to and use of the Hitachi chemistry
analyzer located at MLI's facility in Valley Cottage, New York, for the balance
of the existing lease or such longer period as may be required by applicable
federal or state law, at a monthly charge of $5,234.80 plus the cost of reagents
and service purchased from the current supplier.
(W) MLI is not a party to any agreement which contains any express
restrictive or similar covenant which effectively limits or restricts the
conduct of MLI's Business or its solicitation of potential customers during or
after the term of such agreement.
(X) MLI does not have an overdrawn or negative cash position and all
executive bonuses, whether owed or accrued prior to the Closing have been paid.
(Y) MLI does not have any liability or obligation, actual or contingent
for legal and/or accounting fees and disbursements for services rendered and
expenses incurred prior to the Closing or for services committed to be rendered
after the Closing.
(Z) Except for $91,000 owed to Path for providing MLI with access to and
use of the ANTRIM System software and hardware through January 31, 1998 (plus
$7,000 per month for February, March and the first week in April 1998 due in
respect thereto, which LTCS will capitalize at or prior to the Closing) and
$122,366 owed to Path for rentals and all other required payments for MLI's use
of the Hitachi chemistry analyzer through April 9, 1998, MLI does not have any
liability or obligation, actual or contingent to any LTCS Affiliate or to any
entity controlled, directly or indirectly by LTC.
(AA) LTC has assumed any outstanding MLI liability for severance
obligations to Warren Majek. Except for severance obligations to John Jacobi,
Warren Erdmann and Nick Papazicos, MLI does not have any liability for severance
obligations.
(BB) Upon payment of the Downpayment by BRLI by wire transfer to First
Union pursuant to Holdings' instructions and receipt by BRLI of the First Union
Release, MLI shall have no debt, liability or obligation to First Union of any
nature, whether actual or contingent and whether due or to become due.
(CC) The representations and warranties of LTCS contained in this
Agreement and all information contained in any Exhibit (including, but not
limited to, financial statements), schedule, or other document furnished to BRLI
in writing and attached hereto or expressly referenced herein, are, at the date
hereof, true and correct in all material respects, except as affected by the
transactions expressly contemplated by this Agreement; and neither this
Agreement nor any such Exhibit, schedule or other document contains any untrue
statement of a material fact furnished by LTCS or, to LTCS' knowledge, omits to
state any material fact necessary to make any such statement not misleading.
(DD) Attached hereto as Exhibit T is a combined balance sheet at December
31, 1997 of Path and Burt (collectively "Path/Burt"). Said combined balance is
materially complete, true and correct and presents fairly as of such date, the
financial condition on a combined basis of Path/Burt. Since such date through
the date hereof, there has been no material adverse change in the business or
the financial condition of Path/Burt on a combined basis.
(EE) LTC and Holdings each has the corporate power and authority to enter
into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement by LTC and by Holdings,
and all transactions contemplated hereby have been duly authorized by all
necessary corporate actions, and this Agreement constitutes a valid, binding and
enforceable obligation of LTC and Holdings. No consent, approval, authorization
or order of any court or governmental agency or board or of any third party is
required for LTC or Holdings to consummate the same, except for consents already
obtained.
(FF) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) result in the breach of any
of the terms or conditions of, or constitute a default under, the Articles of
Incorporation or By-Laws of LTC, Holdings or MLI, or any material contract,
agreement, commitment, indenture, bond, license or other instrument or
obligation to which LTC, Holdings or MLI is now a party or by which LTC,
Holdings or MLI or any of their properties or assets may be bound or affected or
(ii) violate any order, writ, injunction or decree of any court, administrative
agency or governmental body by which LTC, Holdings or MLI may be bound or
affected.
4. BRLI's Representations and Warranties
-------------------------------------
BRLI hereby agrees, warrants and represents to LTCS as follows:
(A) BRLI is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and has the power to own all
its properties and assets and to carry on its business as now being conducted.
The nature of its business and its ownership of property do not require its
qualification as a foreign corporation in any other jurisdiction except
Connecticut, Florida, Maryland, New York, Pennsylvania and Virginia and it is
presently qualified as a foreign corporation in each such jurisdiction.
(B) BRLI has the corporate power and authority to enter into this
Agreement and to perform all of its obligations hereunder. The execution,
delivery and performance of this Agreement by BRLI, and all transactions
contemplated hereby have been duly authorized by all necessary corporate
actions, and this Agreement constitutes a valid, binding and enforceable
obligation of BRLI. No consent, approval, authorization or order of any court or
governmental agency or board or of any third party is required for BRLI to
consummate the same, except for consents already obtained.
(C) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not (i) result in the breach of any of
the terms or conditions of, or constitute a default under, the Articles of
Incorporation or By-Laws of BRLI, or any material contract, agreement,
commitment, indenture, bond, license or other instrument or obligation to which
BRLI is now a party or by which BRLI or any of its properties or assets may be
bound or affected or (ii) violate any order, writ, injunction or decree of any
court, administrative agency or governmental body by which BRLI may be bound or
affected.
(D) The representations and warranties of BRLI contained in this Agreement
and all information contained in any Exhibit (including, but not limited to,
financial statements), schedule, or other document furnished to LTCS in writing
and attached hereto or expressly referenced herein, are, at the date hereof,
true and correct in all material respects, except as affected by the
transactions expressly contemplated by this Agreement; and neither this
Agreement nor any such Exhibit, schedule or other document contains any untrue
statement of a material fact furnished by BRLI or, to BRLI's knowledge, omits
to state any material fact necessary to make any such statement not misleading.
(E) BRLI presently has, and has no reason to believe it will not have when
required, sufficient funds to make all payments to Holdings in accordance with
the form of Promissory Note attached hereto as Exhibit C.
(F) BRLI, which has not made a complete independent investigation, has no
knowledge that any agreement, representation and warranty of LTCS hereunder is
false or incorrect.
5. Additional Payments to LTCS ("NYS Prison Contract Bonus" and Earn-Up")
----------------------------------------------------------------------
(A) If the New York State Department of Correctional Services awards a
contract to MLI on or before October 9, 1998, Time Being of the Essence, in
accordance with MLI's bid submitted by letter dated January 28, 1998 in response
to the Department's Request for Proposal, which award reasonably assures MLI of
the receipt of revenues over the twelve months following the award of not less
than $4,000,000, BRLI shall pay a NYS Prison Contract Bonus of $250,000 (without
interest) to LTCS on the first business day of the seventh calendar month
following the Closing.
(B) In addition, BRLI will make an additional payment (the "Earn-Up
Payment") to LTCS if net cash collections by MLI, which term shall include any
successor in interest thereto, or any transferee of all or substantially all of
MLI's assets, during the twelve calendar month period (the "Measuring Period")
commencing on the first anniversary of the first day of the first calendar month
immediately following the Closing (i.e. May 1, 1999) from MLI Customers,
excluding "Prison Business"( as hereinafter defined), plus the net sales during
the Measuring Period attributable to the NYS Prison Contract and any renewal
thereof ("Prison Business Net Sales") exceed an aggregate $10,000,000. MLI
"Customers" shall mean (I) any account not related to the Prison Business who
has a customer account number on MLI's books and who submits patient samples to
MLI for testing; (ii) any patient who receives services at one of MLI's patient
service centers; or (iii) any other individual whose specimens have been
delivered to MLI for testing, in each of the three instances, at any time on or
after January 1, 1998 through May 15, 1998. Prison Business Net Sales shall mean
Prison Business billings during the Measuring Period after applying a net
allowance against Prison Business billings during the period based upon the same
percentage of uncollectible amounts against such billings during the initial
post-Closing six months of the NYS Prison Contract (if any). If said cash
collections during the Measuring Period from the MLI Customers and said Prison
Business Net Sales during the Measuring Period aggregate more than $10,000,000,
BRLI shall pay an "Earn-Up Payment" to LTCS equal to 50% of any such excess,
provided that in no event shall the "Earn-Up Payment" exceed $1,250,000 in
total. The "Earn-Up Payment" shall be paid by BRLI to Holdings in three
installments without interest, as follows: 50% of the Earn-Up Payment on the
first day of the 26th calendar month after the Closing, 25% of the Earn-Up
Payment on the first day of the 30th calendar month after the Closing and the
balance of the Earn-Up Payment on the first day of the 36th calendar month after
the Closing.
(C) Unless BRLI determines that it is liable to Holdings for the
$1,250,000 maximum amount of the Earn-Up Payment, within 30 days after the
second anniversary of the Closing, BRLI shall deliver an itemized list to LTCS
with respect to each MLI Customer and the Prison Business setting forth all cash
collections received by BRLI and/or MLI (or any entity into which MLI is merged
or consolidated or to which all or substantially all of the assets of MLI have
been sold or transferred) during the Measuring Period from each such MLI
Customer, which list shall be used to calculate the Earn-Up Payment, if any.
BRLI shall provide LTCS with an officer's certificate which certifies its
calculation of cash collections and upon reasonable notice, during normal
business hours, LTCS shall be permitted to review BRLI's records to verify such
calculations.
(D) Net cash collections during the Measuring Period from "Common
Customers" of MLI and BRLI shall also be included in computing the Earn-Up
Payment to the following extent. Common Customers shall mean MLI Customers as
defined in Section 5(B) herein who also have a customer account number on BRLI's
books and who submit patient samples to BRLI for testing at any time on or after
January 1, 1998 through May 15, 1998. In order to compute the amount of MLI's
net cash collections during the Measuring Period from a Common Customer for
purposes of the Earn-Up Payment calculation, MLI's net cash collections from
such Common Customer during the period April 1, 1997 through March 31, 1998
shall be divided by the total amount of the net cash collections received by MLI
and BRLI from such Common Customer during such April 1, 1997 through March 31,
1998 period. The resulting percentage multiplied by the sum of the net cash
collections received by MLI and BRLI during the Measuring Period from such
Common Customer shall equal the amount of the net cash collections deemed
received by MLI from such Common Customer during the Measuring Period for
purposes of computing the Earn-Up Payment. Anything to the contrary herein
contained notwithstanding, if MLI's net cash collections from a purported
"Common Customer" during the period April 1, 1997 through March 31, 1998 total
less than 10% of the combined net cash collections received by MLI and BRLI
during the period April 1, 1997 through March 31, 1998 from such purported
"Common Customer," such entity shall not constitute a "Common Customer" for
purposes of this Agreement and only the net cash collections of MLI from such
entity during the Measuring Period shall be taken into account in computing the
Earn-Up Payment.
6. Conditions to BRLI's Obligation to Close
----------------------------------------
The obligation of BRLI to consummate this Agreement shall be subject to
each of the following conditions:
(A) Each of the representations and warranties made by LTCS herein shall
be true and accurate as of the date hereof except as affected by the
transactions expressly contemplated by this Agreement.
(B) Each and every covenant, agreement and condition required by this
Agreement to be performed or complied with by LTCS or its affiliates at or prior
to the Closing shall have been performed or complied with at or prior to the
Closing hereunder.
(C) LTCS shall have delivered to BRLI all of the instruments, certificates
and other documents referred to hereinabove required to be delivered by it at or
prior to the Closing.
(D) No suit or action, no investigation or inquiry by any administrative
agency or governmental body, and no legal or administrative proceeding shall
have been instituted or threatened which in any way questions the validity or
legality of this Agreement or the transactions contemplated thereby, at or prior
to the Closing.
(E) The individuals set forth in Section 2(C) herein shall each have
executed an Employment Agreement in the form attached hereto as Exhibit A and
shall deliver same to BRLI at the Closing.
(F) The LTCS Affiliates herein shall each have executed a Non-Competition
Agreement in the form attached hereto as Exhibit B-1 and shall deliver same to
BRLI at the Closing and Glen Kassan shall have executed a Non-Competition
Agreement in the form attached hereto as Exhibit B-2, and shall deliver same to
BRLI at the Closing.
(G) Each and every one of the transactions required herein to occur at the
Closing shall have been completed.
7. Conditions to LTCS' Obligation to Close
---------------------------------------
The obligation of LTCS to consummate this Agreement shall be subject to
each of the following conditions:
(A) Each of the representations and warranties made by BRLI herein shall
be true and accurate as of the date hereof except as affected by the
transactions expressly contemplated by this Agreement.
(B) Each and every covenant, agreement and condition required by this
Agreement to be performed or complied with by BRLI at or prior to the Closing
shall have been performed or complied with at or prior to the Closing hereunder.
(C) BRLI shall have delivered to LTCS all of the instruments, certificates
and other documents referred to hereinabove required to be delivered by it at or
prior to the Closing.
(D) No suit or action, no investigation or inquiry by any administrative
agency or governmental body, and no legal or administrative proceeding shall
have been instituted or threatened which in any way questions the validity or
legality of this Agreement or the transactions contemplated thereby, at or prior
to the Closing.
(E) Payment by BRLI of the Downpayment to LTCS as described in Section
2(E) herein and delivery of the Note as described in Section 2(F) herein.
(F) Execution and delivery by BRLI of the Employment Agreements as
described in Section 2(C) herein.
(G) Execution and delivery by BRLI of the Non-Competition Agreements and
payment by BRLI of the Non-Competition Payments to LTCS (including payments for
the LTCS Affiliates and the employees who are required to execute such Non-
Competition Agreements) as described in Section 2(D) herein.
(H) Completion of each and every one of the transactions required herein
to occur at the Closing.
8. Indemnification
---------------
(A) LTCS, Path and Burt hereby agree, jointly and severally, to indemnify
and hold BRLI and its officers, directors and shareholders harmless from and
against any and all claims, liabilities, losses and damages, together with costs
and expenses, including reasonable legal fees ("Claims"), arising out of or
resulting from (i) any material breach in the representations and warranties
made by LTCS in this Agreement, (ii) any breach in any material respect by LTCS
of any covenant or agreement contained in or arising out of this Agreement, or
(iii) any known or unknown undisclosed liabilities arising out of the operation
of MLI prior to the Closing. Notwithstanding the foregoing, no claim for
indemnification may be brought pursuant to this Section 8(A) until the Claims in
the aggregate exceed $75,000 (the "Indemnification Threshold") and no Claim in
an amount less than $10,000 shall be included in such calculation; provided that
once such calculation equals the Indemnification Threshold, all Claims shall be
included and, except as hereinafter provided, the maximum amount of Claims
recoverable by BRLI shall equal up to $4,000,000, plus any amounts paid by BRLI
pursuant to the Note, the NYS Prison Bonus and the Earn-Up Payment (collectively
the "Maximum BRLI Recoverable Amount"), without any deduction for the amount of
the Indemnification Threshold. Anything to the contrary herein contained
notwithstanding, the "Indemnification Threshold" limitation provided for herein
shall not be applicable to Claims arising out of (i) liability for failure to
file tax information forms and interest thereon (Section 9(A)) and (ii)
liability for violations asserted by the U.S. Occupational Safety and Health
Administration ("OSHA") in connection with the investigation described on
Exhibits H, L and N. Anything to the contrary herein contained notwithstanding,
the limitation of the Maximum BRLI Recoverable Amount shall not apply to Claims
arising out of (a) environmental matters (Section 3(O)), (b) Medicare, Medicaid
and third-party billings and fraud and abuse matters (Section 3(T)), and (c)
breach of the representation of no liability to First Union (Section 3(BB)). No
Claim for indemnification may be brought pursuant to this Section 8(A) more than
two (2) years after the Closing Date except for Claims for breach of
representations and warranties and/or covenants and agreements, regarding the
following: liability for taxes, penalties including penalties for failure to
file tax information forms and interest thereon (Section 3(H)), licensure or
other health care regulatory matters (Section 3(L)), ERISA matters (Section
3(M)), employee claims (Section 3(N)(iii)), environmental matters (Section
3(O)), Medicare, Medicaid and related third-party billings and fraud and abuse
matters (Section 3(T)), and no liability to First Union (Section 3(BB)). If any
Claim arises after the Closing Date for which LTCS, Path or Burt may be liable
under this section, the indenmitee shall notify the indemnitor within a
reasonable time after the indemnitee receives written notice of or determines
the basis for any Claim, and shall give the indemnitor a reasonable opportunity
to settle or defend any such Claim. If an indemnitor wishes to assume the
defense of a Claim, it shall give written notice to the indemnitee within thirty
(30) days after notice from the indemnitee of such Claim, and the indemnitor
shall thereafter defend the Claim.
If the indemnitor does not assume the defense of, or if after so assuming
it fails to defend, any such Claim, the indemnitee may defend it in such manner
as it may reasonably deem appropriate, and the indemnitee may settle such Claim
upon the prior written consent of the indemnitor. The indemnitor shall reimburse
the indemnitee for all reasonable and documented expenses, legal and otherwise,
as incurred by the indemnitee in connection with the defense, appeal and
settlement of such Claim. If no settlement of such a Claim is made, the
indemnitor shall satisfy any judgment rendered with respect to it before the
indenmitee is required to do so.
If a judgment is rendered against the indemnitee on any Claim, or any lien
attaches to any of the assets of the indemnitee, the indenmitor shall pay such
judgment in full or discharge such lien unless, at the expense and direction of
the indemnitor, an appeal is taken under which the execution of the judgment or
satisfaction of the lien is stayed. If and when a final judgment is rendered in
any such action, the indemnitor shall pay such judgment or discharge such lien
before any indemnitee is compelled to do so.
(B) BRLI hereby agrees to indemnify and hold LTCS and its officers,
directors and shareholders harmless from and against any and all Claims arising
out of or resulting from (i) any material breach in the representations or
warranties made by BRLI in this Agreement, (ii) any breach in any material
respect by BRLI of any covenant or agreement contained in or arising out of this
Agreement, or (iii) the Claims of any third party for alleged liabilities or
obligations of LTCS or its Affiliates arising out of MLI's operations or
providing services to MLI customers after the Closing.
(C) If requested by the indemnitor, the indemnitee shall cooperate to the
extent reasonably requested in the defense or prosecution of any suit, action,
Claim, proceeding or investigation for which such indemnitor is being called
upon to indemnify the indemnitee pursuant to this Section 8, and the indenmitee
shall furnish such records, information and testimony and attend all such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith and, if appropriate, the indemnitee
shall make any counterclaim against the party asserting such suit, action,
Claim, proceeding or investigation or any cross-complaint against any person in
connection therewith and the indemnitee further agrees to take such other
actions as reasonably may be requested by an indemnitor to reduce or eliminate
any loss for which the indemnitor would have responsibility, but the indemnitor
will reimburse the indemnitee for any fees or expenses incurred by it in so
cooperating or acting at the request of the indemnitor. Notwithstanding that the
foregoing provision applies to events of indemnification, if there is no
indemnification required under this Section 8, upon reasonable request by LTCS,
BRLI shall furnish such records, information and testimony required by LTCS and
shall otherwise cooperate as reasonably necessary with LTCS to respond to any
investigation, inquiry, suit, action or claim against LTCS or any of its
officers, directors. shareholders, agents or employees in connection with,
arising out of or relating to LTCS and its ownership of MLI prior to the
Closing.
(D) Any lawsuits based upon alleged breaches of this agreement shall be
brought in the United States District Court for the Southern District of New
York and the parties hereby irrevocably consent to the exclusive jurisdiction of
such Court hereunder.
9. Further Covenants and Agreements of LTCS and BRLI
-------------------------------------------------
(A) As soon as is practicable after the Closing, LTCS will take such steps
as are necessary and appropriate in order to correct any late filings or
failures to file IRS Forms 5500 with respect to the welfare plans maintained by
MLI set forth on Exhibit M. In connection therewith, BRLI shall ensure that MLI
will provide all reasonably necessary and appropriate cooperation and assistance
to LTCS in the filing of any Forms 5500 under the Department of Labor Delinquent
Filer Voluntary Compliance Program including the execution of any such Forms
5500 after it has reviewed and approved any such filings.
In the event LTCS has not taken all steps necessary to file all late or
unfiled IRS Forms 5500 within sixty (60) days following the Closing Date, BRLI
and MLI may elect to file such Forms 5500 without further assistance from or
involvement by LTCS.
LTCS, Path and Burt hereby agree, jointly and severally, to pay or in the
absence of such payment, to indemnify and hold BRLI, MLI and their respective
shareholders, directors, officers, employees and agents harmless for any
penalties, liabilities, losses, damages or expenses, including reasonable legal
fees, associated with or arising out of MLI's failure to timely file IRS Forms
5500 for 1994, 1995, 1996 and/or 1997 with respect to its welfare benefit plans.
Such indemnification shall not be subject to the Indemnification Threshold set
forth in Section 8(A) of this Agreement.
(B) LTC shall take all actions necessary (including any required plan
amendments) to cause the trustees of the Long Term Care Services, Inc. Profit
Sharing & Retirement Plan (the "LTC Plan"), as soon as practicable after the
Closing, to distribute the account balance thereunder of each employee, subject
to the consent of such employee and such employee's spouse, if applicable, and
BRLI shall, before or as soon as practicable after the Closing, take all actions
necessary (including any required plan amendments) to cause the trustees of the
Bio-Reference Laboratories, Inc. 401K Profit Sharing Plan (the "BRLI Plan") to
accept a direct rollover of the eligible rollover portion of such account
balance, subject to receipt by the plan administrator of the BRLI Plan of its
standard direct rollover application/certification form from the employee and
the plan administrator of the LTC Plan. If any employee who elects a direct
rollover of his or her account has an outstanding loan under the LTC Plan on the
Closing Date, the BRLI Plan shall accept a direct rollover of such loan and the
promissory note and other documentation with respect thereto, subject to written
authorization by the employee to the transfer of such loan and substitution of
the payee thereunder.
(C) LTCS shall, and shall ensure that each LTCS Affiliate, and/or any
successor in interest thereto, and/or any transferee of all or substantially all
of the assets thereof, shall cooperate with BRLI in the transition of ownership
of MLI from LTCS to BRLI. Such cooperation shall include, among other things:
(i) promptly forwarding all of MLI's business records and documents including
but not limited to those related to billing, taxes and regulatory matters as
well as minute books and stock ledgers, to the extent same are in the possession
of any LTCS Affiliate, their attorneys, accountants or agents, to MLI's Valley
Cottage, New York offices c/o Sam Singer, chief financial officer; (ii)
providing MLI at its Valley Cottage offices c/o Sam Singer in a timely manner
with copies of any tax records and information concerning MLI's tax and tax
information form filings; and (iii) otherwise assisting BRLI following the
Closing to provide for an orderly transition in the ownership of MLI and to
avoid any unnecessary disruption of MLI's Business in connection with this
transaction.
(D) BRLI will promptly pay each installment of the One Million Five
Hundred Thousand ($1,500,000) Dollar balance of the purchase price (the
"Balance") as described in Section 2(B) herein in accordance with the terms of
the Note and any amounts related to the NYS Prison Bonus and the Earn-Up Payment
when due and payable hereunder, to Holdings. Such Balance will be paid without
interest in three equal semi-annual installments commencing one year after the
Closing. If BRLI fails to pay the NYS Prison Bonus or any installment of the
Note or the Earn-Up Payment when due, and fails to pay such overdue installment
within seven (7) business days after its receipt of notice given by LTCS
("Default"), the NYS Prison Bonus or remaining balance of the Note or the Earn-
Up Payment, as the case may be, shall become immediately due and payable to
Holdings and interest shall commence to run on the outstanding balance at the
rate of 12.5% per annum for the first three months, 15% per annum for the next
three months and 17% per annum thereafter. A "Default" in payment of the NYS
Prison Bonus shall trigger a Default under the Note which shall become
immediately due and payable to Holdings as set forth in the preceding sentence.
However, a Default regarding the NYS Prison Bonus and/or the Note shall not
constitute a Default with respect to the Earn-Up Payment.
(E) Upon Default by BRLI, the Non-Competition Agreements as described in
Section 2(D) shall terminate and shall be of no force and effect.
(F) Until the Note, the NYS Prison Bonus and the Earn-Up Payment (if
applicable) are paid in full to Holdings or until BRLI has no further obligation
thereunder, it shall provide Holdings with quarterly and annual financial
statements in form substantially the same as that provided to its principal
lender.
(G) BRLI shall maintain professional and general liability insurance
coverage after the Closing with respect to MLI (for the period after the Closing
and for the period during which LTCS retains liability for MLI's obligations
hereunder) at the same levels as BRLI currently maintains for its own business.
(H) After the Closing, BRLI, MLI and LTCS shall contact Boehringer
Mannheim Corporation and use their best efforts to effectuate the assignment of
the lease and service agreement for the Hitachi equipment to MLI and the
corresponding release of all of Path/Burt's obligations thereunder.
(I) BRLI shall, and shall ensure that MLI, or any successor in interest
thereto, or any transferee of all or substantially all of the assets thereof,
shall cooperate with LTCS in the transition of ownership of MLI from LTCS to
BRLI. Such cooperation shall include, among other things: (i) promptly sending
all Med World records and data currently stored at MLI's Valley Cottage office
to LTCS' office c/o Path Lab, Inc., 195 Hanover Street, Portsmouth, New
Hampshire 03801; (ii) providing, in a timely manner and consistent with past
practices, LTC with all tax return information regarding MLI for all periods
prior to and up to the Closing; (iii) making all MLI records relating to
billings, taxes and other regulatory matters available in a timely and
appropriate manner to LTCS in the event of an audit requiring LTCS' response;
and (iv) otherwise assisting LTCS following the Closing to provide for an
orderly transition in the ownership of MLI and to avoid any unnecessary
disruption of LTCS' business in connection with this transaction.
10. Survival of Representations and Warranties
------------------------------------------
Each statement of fact contained herein or in any statement, certificate,
schedule or other document delivered by or on behalf of LTCS or by BRLI pursuant
to this Agreement or in connection with the transactions contemplated hereby and
attached hereto or expressly referred to herein, shall be deemed a
representation and warranty of LTCS or BRLI hereunder, as the case may be. All
covenants, agreements, representations and warranties made by LTCS or by BRLI
under or in connection with this Agreement shall survive the Closing and remain
effective for two (2) years regardless of any investigation at any time by or on
behalf of LTCS or BRLI or of any information which LTCS or BRLI may have with
respect thereto except that all representations and warranties and covenants and
agreements regarding the following: liability for taxes, penalties including
penalties for failure to file tax information forms and interest thereon
(Section 3(H)), licensure or other health care regulatory matters (Section
3(L)), ERISA matters (Section 3(M)), employee claims (Section 3(N)(iii)),
environmental matters (Section 3(O)), Medicare, Medicaid and related third party
billings and fraud and abuse matters (Section 3(T)), and no liability to First
Union (Section 3(BB)) shall remain in effect for the maximum period permitted
under the applicable statute of limitations.
11. Miscellaneous
-------------
(A) Each party hereto represents and warrants to the other party hereto
that neither it (nor MLI in the case of LTCS) has incurred any obligation or
liability contingent or otherwise, for brokerage or finder's fees or agent's
commissions or other like payment in connection with this Agreement or the
transactions contemplated hereby, and each party agrees to indemnify and hold
the other party hereto harmless against and in respect of any such obligation or
liability based in any way on agreements, arrangements or understandings claimed
to have been made by such party with any third party.
(B) This Agreement including the Exhibits hereto and the documents
expressly referred to herein constitutes the entire agreement between the
parties hereto and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
No representation, promise, inducement or statement of fact has been made by
LTCS, the LTCS Affiliates, or by BRLI which is not embodied in this Agreement or
a written statement, certificate, schedule, Exhibit or other document attached
hereto or expressly referred to herein, and neither LTCS nor BRLI shall be bound
or liable for any alleged representation, promise, inducement or statement of
fact not so set forth.
(C) This Agreement shall inure to the benefit of and be binding upon LTCS,
the LTCS Affiliates, and BRLI and their respective successors and assigns.
(D) All notices, requests, demands and other communications which are
required or may be given under or in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if mailed, certified or
registered mail, postage prepaid:
(i) if to LTCS, and/or to LTC and/or to Holdings and/or to Path
and/or to Burt: c/o Path Lab Incorporated, 195 Hanover Street,
Portsmouth, New Hampshire 03801, Attention: President.
(ii) if to BRLI, addressed to Marc Grodman, President, Bio-
Reference Laboratories, Inc., 481 Edward H. Ross Drive, Elmwood Park,
New Jersey 07407.
Such notices, requests, demands and other communications shall be deemed
given five (5) days after date of deposit thereof with the United States mail in
a postage prepaid envelope by certified or registered mail.
(E) This Agreement shall be interpreted in accordance with the laws of New
York.
(F) The parties agree to take all such additional actions and to execute
and deliver all such additional documents as shall be necessary in order to
effectuate all of the foregoing.
(G) This Agreement may be signed in counterparts.
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement effective the date first hereinabove set forth.
Long-Term Care Services, Inc. Bio-Reference Laboratories, Inc.
By /s/Mark Epply By /s/Marc D. Grodman
---------------------------------- --------------------------------
Mark Epply, Treasurer Marc D. Grodman, President
LTC Services and Holdings Inc.
By /s/Mark Epply
----------------------------------
Mark Epply, Vice President
Solely with respect to Section 2(D)
(Non-Competition), Section 3(C)
(Computer Access and Services
Agreement) and Section 8
(Indemnification)
Path Lab, Inc.
By /s/Mark Epply
----------------------------------
Mark Epply, Vice President
Solely with respect to Section 2(D)
(Non-Competition) and Section 8
(Indemnification)
Burt Medical Laboratory Inc.
By /s/Mark Epply
----------------------------------
Mark Epply, Vice President
