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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
September 30, 1997
CAPSTONE PHARMACY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-20606 11-2310352
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(State or other (Commission (Employer
jurisdiction of File Number) Identification
incorporation) Number)
9901 East Valley Ranch Parkway Suite 3001, Irving, TX 75063
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(Address of principal executive offices)
(972) 401-1541
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(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The Registrant reports the following acquisition to inform its security
holders:
Pursuant to an Asset Purchase Agreement dated August 8, 1997, the
Registrant acquired an institutional pharmacy services business in the
Pennsylvania area, Med-Tec Pharmaceutical Services, Inc., a Pennsylvania
corporation, through arm's-length negotiations with the acquired companies'
shareholders, Harry Tractman and the Trust for the benefit of Elisa Tractman.
The purchase price was approximately $14,900,000.00, payable in cash
and an additional $1,400,000.00 payable in a promissory note. The cash utilized
in this acquisition was obtained from the Registrant's credit facility with
Bankers Trust Company.
Closing of the acquisition occurred September 30, 1997. The Registrant
intends to continue the acquired operations through a subsidiary.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) and (b) It is impracticable to provide the required financial
statements of the acquired businesses described in Item 2 and pro forma
financial information at this time. This information will be filed within 60
days.
(c) Exhibits. The exhibits filed as a part of this Report are listed in
the Index to Exhibits immediately following the signature page.
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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.
CAPSTONE PHARMACY SERVICES, INC.
By: /s/ James D. Shelton
-------------------------
James D. Shelton
Chief Financial Officer
Date: October 14, 1997
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Exhibit Index
Exhibit No.
2* Asset Purchase Agreement dated August 8, 1997 by and between
Registrant and Med-Tec Pharmaceutical Services, Inc., Harry Tractman
and the Trust for the benefit of Elisa Tractman.
* A copy of the exhibit list to the Asset Purchase Agreement has been
included. The exhibits have been omitted but the Registrant shall furnish
supplementally a copy of any omitted exhibit to the Commission upon request.
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
between
MED-TEC PHARMACEUTICAL SERVICES, INC.
the Seller
HARRY TRACTMAN
and
THE TRUST FOR THE BENEFIT OF ELISA TRACTMAN,
the Shareholders
and
CAPSTONE PHARMACY SERVICES, INC.
the Buyer
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I. PURCHASE AND SALE.....................................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Excluded Assets.................................................................................3
1.3 Assumed Contracts, Leases and Liabilities.......................................................3
ARTICLE II. RECEIVABLES..........................................................................................4
2.1 Collection of Receivables..............................................................4
ARTICLE III. PURCHASE PRICE......................................................................................4
3.1 Purchase Price..................................................................................4
3.2 Allocation of Purchase Price....................................................................4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDERS.........................................................................................5
4.1 Organization, Qualification and Authority.......................................................5
4.2 Absence of Default..............................................................................6
4.3 Financial Statements............................................................................6
4.4 Operations Since June 30, 1997..................................................................6
4.5 Absence of Certain Liabilities..................................................................7
4.6 Employment Discrimination.......................................................................8
4.7 Licenses and Permits............................................................................8
4.8 Medicare, Medicaid and Other Third-Party Payors.................................................8
4.9 Compliance with Zoning, Land Use and Other Laws; Easements......................................9
4.10 Title to Assets.................................................................................9
4.11 Leases and Contracts............................................................................9
4.12 Environmental Matters..........................................................................10
4.13 [Intentionally omitted]........................................................................11
4.14 Litigation.....................................................................................11
4.15 Seller's Employees.............................................................................11
4.16 Labor Relations................................................................................11
4.17 Insurance......................................................................................12
4.18 Broker's or Finder's Fee.......................................................................12
4.19 Conflicts of Interest..........................................................................12
4.20 Intellectual Property..........................................................................12
4.21 Inventories....................................................................................12
4.22 Motor Vehicles.................................................................................13
4.23 Employee Benefit Plans.........................................................................13
4.24 Compliance with Healthcare Laws and Other Laws.................................................13
4.25 Condition of Assets............................................................................14
4.26 Tax Returns; Taxes.............................................................................14
4.27 Operational Results............................................................................15
4.28 No Omissions or Misstatements..................................................................15
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................15
</TABLE>
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<TABLE>
<S> <C>
5.1 Organization, Qualification and Authority......................................................15
5.2 Absence of Default.............................................................................16
5.3 Broker's or Finder's Fee.......................................................................16
5.4 Full Opportunity to Review.....................................................................16
5.5 Regulatory Approvals...........................................................................16
ARTICLE VI. COVENANTS OF PARTIES.................................................................................16
6.1 Preservation of Business and Assets............................................................16
6.2 Absence of Material Change.....................................................................17
6.3 Ownership of Intellectual Property.............................................................17
6.4 Access to Books and Records....................................................................17
6.5 Preserve Accuracy of Representations and Warranties............................................18
6.6 Maintain Books and Accounting Practices........................................................18
6.7 Indebtedness; Liens............................................................................18
6.8 Compliance with Laws and Regulatory Consents...................................................19
6.9 Maintain Insurance Coverage....................................................................19
6.10 Medicare and Medicaid Reporting................................................................19
6.11 Current Return Filing..........................................................................19
6.12 WARN Act.......................................................................................19
6.13 No Sale, Merger or Consolidation...............................................................19
6.14 Condemnation...................................................................................20
6.15 Hart-Scott-Rodino Filing.......................................................................20
6.16 Offsets and Adjustments........................................................................20
ARTICLE VII. CLOSING............................................................................................20
7.1 Closing........................................................................................20
ARTICLE VIII. SELLER'S AND SHAREHOLDERS' CONDITIONS TO CLOSE....................................................21
8.1 Representations and Warranties True at Closing;
Compliance with Agreement......................................................................21
8.2 No Action/Proceeding...........................................................................21
8.3 Order Prohibiting Transaction..................................................................21
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE.........................................................................21
9.1 Representations and Warranties True at Closing;
Compliance with Agreement; No Material Adverse Change..........................................21
9.2 Regulatory Approvals...........................................................................22
9.3 No Action/Proceeding...........................................................................22
9.4 Inspection of Assets; UCC Searches, etc........................................................22
9.5 Order Prohibiting Transaction..................................................................22
9.6 Employment Agreement...........................................................................22
9.7 Lease Agreement................................................................................22
9.8 Third-Party Consents...........................................................................23
9.9 Preferred Provider Agreement...................................................................23
9.10 Exhibits.......................................................................................23
ARTICLE X. OBLIGATIONS OF SELLER AND SHAREHOLDERS AT CLOSING....................................................23
</TABLE>
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<TABLE>
<S> <C> <C> <C>
10.1 Documents Relating to Title....................................................................23
10.2 Possession.....................................................................................23
10.3 Opinion of Counsel.............................................................................23
10.4 Corporate Good Standing and Corporate Resolutions..............................................24
10.5 Third-Party Consents...........................................................................24
10.6 Taxes and Other Payments.......................................................................24
10.7 Insurance......................................................................................24
10.8 Employment and Lease Agreements................................................................24
10.9 Additionally Requested Documents; Post Closing Assistance......................................24
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING.....................................................................25
11.1 Purchase Price.................................................................................25
11.2 Assumption of Liabilities......................................................................25
11.3 Opinion of Counsel.............................................................................25
11.4 Corporate Good Standing and Board Resolutions..................................................25
11.5 Additionally Requested Documents; Post Closing Assistance......................................25
ARTICLE XII. OPINION OF BUYER'S COUNSEL.........................................................................25
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION........................................................26
13.1 Survival.......................................................................................26
13.2 Indemnification by Seller and Shareholders.....................................................26
13.3 Indemnification by Buyer.......................................................................26
13.4 Rules Regarding Indemnification................................................................27
13.5 Limitation of Indemnity........................................................................28
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS.............................................................................29
14.1 Covenant Not to Compete........................................................................29
14.2 Enforceability.................................................................................29
ARTICLE XV. MISCELLANEOUS.......................................................................................30
15.1 Assignment.....................................................................................30
15.2 Other Expenses.................................................................................30
15.3 Notices........................................................................................30
15.4 Confidentiality; Prohibition on Trading........................................................31
15.5 Controlling Law................................................................................31
15.6 Headings.......................................................................................31
15.7 Benefit........................................................................................31
15.8 Partial Invalidity.............................................................................31
15.9 Waiver.........................................................................................31
15.10 Counterparts...................................................................................32
15.11 Interpretation; Knowledge......................................................................32
15.12 Entire Agreement...............................................................................32
15.13 Legal Fees and Costs...........................................................................32
</TABLE>
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), is made on August 8,
1997, by and among Med-Tec Pharmaceutical Services, Inc., a Pennsylvania
corporation (the "Seller"), Harry Tractman and The Trust for the Benefit of
Elisa Tractman (collectively the "Shareholders"), and Capstone Pharmacy
Services, Inc., a Delaware corporation (the "Buyer").
R E C I T A L S:
WHEREAS, Seller owns and operates an institutional pharmacy services
business in the Commonwealth of Pennsylvania, all as more particularly described
on the attached Exhibit A describing the type of services and products provided
by Seller at each of its locations (the "Business"); and
WHEREAS, Shareholders own all of the issued and outstanding securities
of Seller; and
WHEREAS, except for the Excluded Assets (as such term is defined
herein), Seller and Shareholders desire to sell and transfer the Assets (as such
term is defined herein) of the Business to Buyer, and Buyer desires to purchase
the same from Seller, subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale. Seller agrees to sell, transfer, assign, convey
and deliver to Buyer, and Buyer agrees to purchase from Seller, all right, title
and interest in all assets (except the Excluded Assets) of Seller of every kind
and type, tangible or intangible, real and personal, that are necessary or
reasonably desirable to operate the Business and that are shown on Exhibit 1.1
(collectively, the "Assets"), free and clear of all encumbrances, mortgages,
pledges, liens, security interests, obligations and liabilities other than the
Assumed Liabilities (as defined in Section 1.3), which Assets include, without
limitation, the following:
(1) All right, title and interest of Seller in and to all of
the land and real estate owned or leased by Seller and used in connection with
the Business as listed in Exhibit 1.1(1) attached hereto and in and to all
structures, improvements, fixed assets and fixtures including fixed machinery
and fixed equipment situated thereon or forming a part thereof and all
appurtenances, easements and rights-of-way related thereto (collectively, the
"Real Estate");
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(2) The tangible personal property, medical and other
equipment, machinery, data processing hardware and software (to the extent
transferable), furniture, furnishings, appliances, vehicles, and other tangible
personal property of every description and kind and all replacement parts
therefor used in connection with the Business including, without limitation, the
items listed on Exhibit 1.1(2) attached hereto (collectively, the "Equipment and
Furnishings");
(3) All inventory of goods and supplies used or maintained in
connection with the Business (collectively, the "Inventory");
(4) All accounts and notes receivable of the Business (the
"Receivables");
(5) The cash, bank accounts (as listed by name and address of
banking institution, account name and account and routing numbers on Exhibit
1.1(5) attached hereto), certificates of deposit and other investments of Seller
(the "Cash and Cash Equivalents");
(6) All patient, medical, personnel and other records related
to the Business (including both hard and microfiche copies), and all manuals,
books and records used in operating the Business, including, without limitation,
personnel policies and files and manuals, accounting records, and computer
software;
(7) To the full extent transferable, all licenses, permits,
registrations, certificates, consents, accreditations, approvals and franchises
necessary to operate and conduct the Business, together with assignments
thereof, if required, and all waivers which Seller currently has, if any, of any
requirements pertaining to such licenses, permits, registrations, certificates,
consents, accreditations, approvals and franchises;
(8) All goodwill, and, to the extent assignable by Seller,
all warranties (express or implied) and rights and claims related to the Assets
or the operation of the Business;
(9) All prepaid expenses of the Business;
(10) All contract and leasehold rights and interests pursuant
to contracts for purchase or lease of personal property, contracts for purchase,
sale or lease of pharmaceuticals, supplies, equipment, goods or services
(including those provided to long-term care facilities) currently furnished or
to be furnished in connection with the Business and that are Assumed Liabilities
(as such term is defined in paragraph 1.3(1));
(11) All intangible or intellectual property owned, leased,
licensed or possessed by either Seller or any Shareholder and utilized in
connection with the Business, including without limitation, the names "Med-Tec
Pharmaceutical Services, Inc.," and derivatives thereof; and
(12) All Seller's right, title and interest in any
partnerships, joint ventures or similar arrangements, subject to Buyer's
approval.
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1.2 Excluded Assets. Seller is not selling and Buyer is not
purchasing or assuming obligations with respect to the following (collectively,
the "Excluded Assets"):
(1) Seller's corporate and fiscal records and other
records that Seller is required by law to retain in its possession; and
(2) Those items described on Exhibit 1.2 attached hereto.
The parties acknowledge and agree that Seller is not conveying to Buyer any of
the Excluded Assets and that, following Closing (as defined in Section 7.1
hereof), Buyer will not have any right, title, interest or obligation with
respect to the Excluded Assets.
1.3 Assumed Contracts, Leases and Liabilities.
(1) At Closing, Buyer will assume and agree to pay or perform,
as the case may be, only (a) those obligations consisting of current trade
accounts payable and accrued expenses which constitute current working capital
liabilities incurred in the ordinary course of business, exclusive of long-term
and interest bearing debt, that Buyer expressly elects to assume as specifically
set forth on Exhibit 1.3 attached hereto, and (b) those obligations arising
after Closing under those Leases and Contracts (as such term is defined in
paragraph 4.11) which Buyer expressly elects to assume (collectively, the
"Assumed Liabilities").
(2) Except for the Assumed Liabilities, it is expressly agreed
and understood by each of the parties to this Agreement that Buyer does not
assume, and shall not be liable for, any debt, liability or obligation of Seller
or any Shareholder, of any type or description whatsoever, whether related or
unrelated to the Assets, the Business or the transactions contemplated within
this Agreement and that Seller and/or any Shareholder shall remain liable and
responsible for the payment or performance, as the case may be, of all debts,
liabilities, obligations, contracts, leases, notes payable, accounts payable,
commitments, agreements, suits, claims, indemnities, mortgages, taxes,
contingent liabilities and other obligations of Seller and/or any Shareholder
including, without limitation, any and all investment tax credit recapture,
depreciation recapture, recapture or prior period adjustments under Medicare,
Medicaid and Blue Cross, all impositions of income tax and other taxes,
including, without limitation, payroll related taxes; all employee wages,
salaries and benefits including, without limitation, COBRA and WARN obligations,
sick pay and accrued vacation not expressly assumed by Buyer pursuant to this
paragraph, and other accrued employee benefits including rights of Seller's
retirees to participate in Seller's medical plans. Seller and Shareholders
agree, jointly and severally, to indemnify and hold Buyer harmless, from and
against any and all claims of Seller's employees relating to their employment by
Seller through Closing and such termination, whenever made. Notwithstanding any
statement contained in this Agreement or otherwise seemingly to the contrary,
Buyer shall not be obligated to assume liabilities in excess of, in the
aggregate, an amount equal to One Million Four Hundred Seventy Seven Thousand
Dollars ($1,477,000.00) (the "Assumed Liabilities Cap").
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ARTICLE II. RECEIVABLES
2.1 Collection of Receivables. At Closing, Seller and
Shareholders will take all appropriate action necessary to vest in Buyer all
right, title and interest in the Receivables, and Buyer will proceed to collect
the Receivables following Closing. In the event that any Receivable cannot be
transferred to Buyer, then Seller and Shareholders shall collect the Receivable
in compliance with all applicable laws, as Buyer's agents for the limited
purpose of such collection, and shall immediately deliver to Buyer the gross
proceeds of such collection. Seller and Shareholders shall each also provide
such additional assistance in the collection process as Buyer may reasonably
request. If, within 210 days following Closing, Buyer has collected less than
the amount of the Receivables as reflected on the Financial Statements (as such
term is defined in paragraph 4.3(1)) in excess of the reserves also therein set
forth, Seller and/or any Shareholder shall pay to Buyer the amount of the
shortfall in excess of such reserves.
ARTICLE III. PURCHASE PRICE
3.1 Purchase Price. The purchase price (the "Purchase Price") payable
by Buyer to Seller for the Assets and in consideration for the agreements
contained herein, including the agreements contained in Article XIV hereof,
shall be payable as follows: (a) Fourteen Million and Nine Hundred Thousand
Dollars ($14,900,000.00) in immediately available funds at Closing; and (b) An
additional One Million Four Hundred Thousand Dollars ($1,400,000.00) payable in
equal installments of Three Hundred Fifty Thousand Dollars ($350,000.00) in
immediately available funds on each of the 30th, 60th, 90th and 120th day
following the Closing Date.
3.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in the manner set forth in Exhibit 3.2 attached hereto (the
"Allocation"). The parties to this Agreement expressly agree that the Allocation
shall be used by them for all purposes including tax, reimbursement and other
purposes. Each party to this Agreement agrees that it will report the
transaction completed pursuant to this Agreement in accordance with the
Allocation, including any report made under Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that no such party will take a
position inconsistent with the Allocation except with the prior written consent
of the other parties hereto.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDERS
Seller and the Shareholders, jointly and severally, make the following
representations and warranties to Purchaser, each of which is true and correct
on the date hereof, and shall be true and correct as of the Closing Date. The
representations and warranties contained in this Article IV are subject to and
qualified by any fact or facts disclosed in the corresponding section of the
separate exhibits (the "Exhibits") which have been prepared and identified by
Seller and the Shareholders and delivered to Purchaser contemporaneously with
the execution and delivery of this Agreement. The representations and warranties
of Seller and each of the Shareholders shall survive the Closing and the
transactions contemplated hereby for the periods set forth in Section 13.1
hereof:
4.1 Organization, Qualification and Authority. Seller is a corporation
duly organized, validly existing and in good standing in the Commonwealth of
Pennsylvania and is in good standing and qualified to do business as a foreign
corporation in the State of New Jersey. Since the date of its organization and
incorporation, Seller has observed and operated within the corporate formalities
of the jurisdictions in which it is incorporated, and has observed and complied
with the general corporation law of such jurisdiction. Seller has full power and
authority to own, lease and operate its facilities and assets as presently
owned, leased and operated; to carry on its business as it is now being
conducted; and is duly qualified to do business and is in good standing in each
of the jurisdictions where the Business is conducted. Except for Shareholders,
no other person or entity owns or holds, has any interest in, whether legal,
equitable or beneficial, or has the right to purchase, any capital stock or
other security of Seller. Seller owns no capital stock, security, interest or
other right, or any option or warrant convertible into the same, of any
corporation, partnership, joint venture or other business enterprise. Seller has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all documents and agreements necessary to give effect to
the provisions of this Agreement and to consummate the transactions contemplated
on the part of Seller hereby. Shareholders have the full right, power and
authority to execute, deliver and carry out the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions of this
Agreement; to consummate the transactions contemplated on the part of
Shareholders hereby; and to take all actions necessary, in its capacity as the
sole stockholder of Seller, to permit or approve the actions of Seller taken in
connection with this Agreement. The execution, delivery and consummation of this
Agreement, and all other agreements and documents executed in connection
herewith by Seller, have been duly authorized by all necessary action on the
part of Shareholders. No other action, consent or approval on the part of
Seller, Shareholders or any other person or entity is necessary to authorize
Seller's due and valid execution, delivery and consummation of this Agreement
and all other agreements and documents executed in connection hereto. This
Agreement and all other agreements and documents executed in connection herewith
by Seller or any Shareholder, upon due execution and delivery thereof, shall
constitute the valid and binding obligations of each of Seller and Shareholders,
enforceable in accordance with their respective terms, except as enforcement may
be limited by
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bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general principles of equity.
4.2 Absence of Default. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by Seller or any Shareholder will not constitute a violation of, or be
in conflict with, will not, with or without the giving of notice or the passage
of time, or both, result in a breach of, constitute a default under, create (or
cause the acceleration of the maturity of) any debt, indenture, obligation or
liability affecting the Assets or the Business pursuant to, result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets, or otherwise adversely affect Buyer, Seller
or Business under: (a) any term or provision of the Charter or Bylaws of Seller;
(b) any contract, lease, purchase order, agreement, document, instrument,
indenture, mortgage, pledge, assignment, permit, license, approval or other
commitment to which Seller or any Shareholder is a party or by which Seller,
Shareholders, or the Assets are bound; (c) any judgment, decree, order,
regulation or rule of any court or regulatory authority applicable to Seller and
the Shareholders; or (d) any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority or
arbitration tribunal to which Seller, Shareholders, or the Assets are subject.
4.3 Financial Statements.
(1) Attached hereto as Exhibit 4.3 are true and correct copies
of Seller's unaudited balance sheets and income statement of Seller for the
twelve (12) month period ended June 30, 1997 (the "Financial Statements"). The
Financial Statements are based on the books and records of Seller and present
fairly and in compliance with generally accepted accounting principles the
financial position of Seller as of, and the results of its operations for, the
periods specified.
(2) Seller and Shareholders shall fully and readily cooperate
with Buyer in Buyer's attempt to perform an audit of Seller for any period prior
to Closing.
4.4 Operations Since June 30, 1997. Since June 30, 1997, there
has been no:
(a) material change, financial or otherwise, which has, or
could reasonably be expected to have, an adverse effect on any of the Assets,
the Business or in the results of the operations of Seller;
(b) loss, damage or destruction of or to any of the Assets,
not covered by Seller's insurance;
(c) sale, lease, transfer or other disposition by Seller of,
or mortgages or pledges of or the imposition of any lien, charge or encumbrance
on, any portion of the Assets, other than those made in the ordinary course of
business;
(d) except as set forth on Exhibit 4.4, increase in the
compensation payable by Seller to Shareholders, any of Seller's employees,
directors, independent
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contractors or agents, or any increase in, or institution of, any bonus,
insurance, pension, profit-sharing or other employee benefit plan or
arrangements made to, for or with the employees, directors or Shareholders of
Seller;
(e) cumulative net operating loss incurred in the
operation of the Business;
(f) except as set forth on Exhibit 4.4, adjustment or
write-off of Receivables or reduction in reserves for Receivables;
(g) change in the accounting methods or practices
employed by Seller or change in depreciation or amortization policies;
(h) issuance or sale by Seller or any Shareholder, or
contract or other commitment entered into by Seller or any Shareholder, for the
issuance or sale of any shares of capital stock or securities convertible into
or exchangeable for capital stock of Seller;
(i) except as set forth on Exhibit 4.4, payment by Seller
of any dividend, distribution or extraordinary or unusual disbursement or
expenditure or intercompany payable;
(j) sale, transfer, pledge, mortgage or other disposition
of any of the Assets (except inventory and equipment held for rent other than in
the ordinary course of business);
(k) merger, consolidation or similar transaction (or
solicitations therefor);
(l) strike, work stoppage or other labor dispute
materially adversely affecting the Business; or
(m) termination, waiver or cancellation of any rights or
claims of Seller, under contract or otherwise.
Further, since June 30, 1997, except as set forth on Exhibit 4.4,
neither the Shareholders nor their affiliates has received any compensation,
benefits or distributions from Company, whether as salary, bonus, fees,
dividends or any other form of compensation.
4.5 Absence of Certain Liabilities. Except as set forth in the
Financial Statements, Seller has, and as of the Closing will have, no contingent
liabilities or obligations, except as incurred in the ordinary course of
business since the date of the Financial Statements and which shall not exceed
$50,000 in the aggregate.
4.6 Employment Discrimination. Except as disclosed in Exhibit 4.6
attached hereto, neither Seller nor any Shareholder has received notice of, any
claim for any action or proceeding, against Seller (or any officer, director,
employee, agent or any Shareholder
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of Seller) arising out of any statute, ordinance or regulation relating to
wages, collective bargaining, discrimination in employment or employment
practices or occupational safety and health standards (including, without
limitation, the Fair Labor Standards Act, Title VII of the Civil Rights Act of
1964, as amended, the Occupational Safety and Health Act, the Age Discrimination
in Employment Act of 1967, the Americans With Disabilities Act or the Family and
Medical Leave Act). The claims disclosed in Exhibit 4.6 will not result in any
liability to or obligation of Buyer, and will not cause or lead to any lien or
encumbrance being placed, created, or filed against or upon any of the Assets.
4.7 Licenses and Permits.
(1) Seller has all local, state and federal licenses, permits,
registrations, certificates, contracts, consents, accreditations and approvals
(collectively, the "Licenses and Permits") necessary for Seller to occupy,
operate and conduct the Business, and there do not exist any waivers or
exemptions relating thereto. There is no default on the part of Seller or, to
the best of Seller's and Shareholders' knowledge, any other party under any of
the Licenses and Permits. Seller has not received notice regarding revocation,
suspension or limitation of any of the Licenses or Permits. Copies of each of
the Licenses and Permits are attached to and listed on the attached Exhibit 4.7.
The most recent licensure surveys and deficiency reports related to each of
these items have also been included in Exhibit 4.7. Seller is, and at the time
of Closing will be, licensed by the regulatory bodies listed on Exhibit 4.7. No
notices have been received by Seller or any Shareholder with respect to any
threatened, pending, or possible revocation, termination, suspension or
limitation of the Licenses and Permits.
(2) To the best of Seller's and Shareholders' knowledge, each
employee of Seller has all Licenses and Permits required for each such employee
to perform such employees' designated functions and duties for Seller in
connection with conducting the Business, and there exists no waivers or
exemptions relating thereto. There is no default under, nor to the best of
Seller's and Shareholders' knowledge does there exist any grounds for
revocation, suspension or limitation of, any such Licenses and Permits.
4.8 Medicare, Medicaid and Other Third-Party Payors.
(1) Seller participates in the Medicare and Medicaid Programs
(the "Programs"). A list of and copies of its existing Medicare and Medicaid
contracts or, if such contracts do not exist, other documentation evidencing
such participation (collectively, the "Program Agreements") are included in
Exhibit 4.11 attached hereto. Seller is, and will be at the time of Closing, in
compliance with all of the terms, conditions and provisions of the Program
Agreements.
(2) No notice of any offsets against future reimbursements
under or pursuant to the Programs has been received by either Seller or any
Shareholder, to the best knowledge of Seller and each Shareholder, is there any
basis therefor. There are no pending appeals, adjustments, challenges, audits,
litigation, notices of intent to recoup past or present reimbursements with
respect to the Programs as they relate to Seller. Seller has not been subject to
or nor to the best of Seller's and Shareholders' knowledge
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threatened with loss of waiver of liability for utilization review denials with
respect to the Programs during the past twelve (12) months, nor have either
Seller or any Shareholder received notice of any pending, threatened or possible
decertification or other loss of participation in, any of the Programs.
(3) Seller currently has contractual arrangements with Blue
Cross and other third party payors. A list of and copies of its existing Blue
Cross contracts and other third party payor contract(s) are included in Exhibit
4.11 attached hereto. Seller is, and will be at the time of Closing, in
compliance with all of the material terms, conditions and provisions of such
contracts.
(4) All liabilities and contractual adjustments of Seller
under any third party payor or reimbursement programs have been reflected and
reserved for in the Financial Statements.
4.9 Compliance with Zoning, Land Use and Other Laws; Easements. None of
the Real Estate is in violation of any zoning (to Seller's and Shareholders'
knowledge), public health, building code or other similar laws applicable
thereto or to the ownership, occupancy and/or operation thereof, nor does there
exist any waivers or exemptions relating to the Real Estate with respect to any
non-conforming use or other zoning or building codes matters. Seller has all
easements and rights necessary to continue operation of the Business, copies of
which are set forth in Exhibit 4.9 attached hereto.
4.10 Title to Assets. Seller is the sole legal and beneficial owner of,
or has the exclusive, unrestricted right and authority to use and transfer to
Buyer, the personal property included in the Assets, free and clear of all
mortgages, security interests, liens, leases, covenants, assessments, easements,
options, rights of refusal, restrictions, reservations, defects in the title,
encroachments, and other encumbrances, except as set forth in the Leases and
Contracts attached hereto. The Assets are all the assets set forth on the
Financial Statements or used in the operation of the Business, other than the
Excluded Assets. Seller owns no real estate.
4.11 Leases and Contracts.
(1) Exhibit 4.11 attached hereto sets forth a complete and
accurate list of all contracts involving an annual expenditure or under which
Seller is obligated in excess of $25,000, including the Program Contracts,
agreements, purchase orders, leases, subleases, options and commitments, and all
assignments, amendments, schedules, exhibits and appendices thereof, affecting
or relating to the Business or any Asset, to which either Seller is a party or
by which Seller, the Assets or the Business is bound or affected, including,
without limitation, service contracts, management agreements, equipment leases
and building leases pertaining to any part of the Real Estate (collectively, the
"Leases and Contracts"). Attached to Exhibit 4.11 are accurate and complete
copies of all Leases and Contracts. There are no oral Leases and Contracts.
Except for the Assumed Liabilities, all Leases and Contracts and all other
obligations and liabilities relating to the Assets and the Business shall be
retained by Seller.
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(2) None of the Leases and Contracts have been modified,
amended, assigned or transferred by Seller, (or, to Seller's and Shareholder's
knowledge, any other party) and each is in full force and effect and is valid,
binding and enforceable in accordance with its respective terms as to Seller
(or, to Seller's and Shareholder's knowledge, any other party), except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
(3) No event or condition has happened or presently exists
which constitutes a default or breach or, after notice or lapse of time or both,
would constitute a default or breach by Seller or, to the best of Seller's and
Shareholders' knowledge, any other party under any of the Leases and Contracts.
There are no counterclaims or offsets under any of the Leases or Contracts.
(4) There does not exist any security interest, lien,
encumbrance or claim of others created or suffered to exist on any interest
created under any of the Leases or Contracts (except for those that result from
or relate to leased Assets).
(5) No purchase commitment by Seller is in excess of Seller's
ordinary business requirements.
(6) Assignment to Buyer of those Leases and Contracts
constituting part of the Assumed Liabilities will not default, alter or
terminate any such Leases and Contracts, and such assignment will confer and
convey all of Seller's rights thereunder to Buyer.
4.12 Environmental Matters. To the best knowledge of Seller and
Shareholders, Seller is in compliance in all material respects with all
environmental laws and regulations applicable to Seller, the Business and the
Assets, Leases, 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, and the Clean Air Act, as
amended, with respect to environmental matters, public or workplace health or
safety, or hazardous, toxic or infectious wastes, materials or substances
(including medical wastes) or petroleum products, materials or wastes or
radioactive substances or wastes (collectively "Environmental Laws"), except to
the extent noncompliance would not have a material adverse effect on the
Business. The foregoing representation and warranty applies to the operation of
the Business and the use 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). To
the best knowledge of Seller and Shareholders, no investigation or review is
pending or threatened by any governmental authority or other party with respect
to any alleged violation by Sellers or the Business of any Environmental Law,
the need for any work, repairs, or demolition by any Seller, on or in connection
with any property in order to comply with any Environmental Law, or any actual
or threatened release (including, but not limited to, any spill, discharge,
leak, emission, ejection, escape or dumping) or inadequate storage of, or
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contamination caused by, any hazardous, toxic or infectious waste, material or
substance (including medical waste) or petroleum product, material or waste or
radioactive substance or waste, or any such constituent which would have a
material adverse effect.
4.13 [Intentionally omitted].
4.14 Litigation. Neither Seller nor any Shareholder has received notice
(other than notice to the Shareholders unrelated to the Business) of any
violation of any law, rule, regulation, ordinance or order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, legislation
and regulations applicable to the Medicare and Medicaid programs, Food and Drug
Administration, Drug Enforcement Administration, state controlled substance
agencies and boards of pharmacy, environmental protection, civil rights, public
health and safety and occupational health). Except as set forth in Exhibit 4.14
attached hereto (for which Buyer assumes no liability), there are no lawsuits,
proceedings, actions, arbitrations, governmental investigations, claims,
inquiries or proceedings pending or, to the best knowledge of Seller and
Shareholders, threatened that involve Seller, Shareholders, any of the Assets or
the Business.
4.15 Seller's Employees. Exhibit 4.15 attached hereto sets forth: (a) a
complete list of all of Seller's employees, and rates of pay; (b) true and
correct copies of any and all fringe benefits and personnel policies; (c) the
employment dates and job titles of each such person; and (d) categorization of
each such person as a full-time or part-time employee of Seller. For purposes of
this paragraph, "part-time employee" means an employee who is employed for an
average of fewer than twenty hours (20) per week or who has been employed for
fewer than six of the twelve (12) months preceding the date on which notice is
required pursuant to the "Worker Adjustment and Retraining Notification Act"
("WARN"), 29 U.S.C. ss.2102 et seq. Except as provided in Exhibit 4.11, Seller
has no employment agreements with its employees and all such employees are
employed on an at "at will" basis. Exhibit 4.15 also lists all ex-employees of
Seller utilizing or eligible to utilize COBRA (health insurance). Other than
Assumed Liabilities, the parties expressly agree that Seller shall retain
responsibility for and fully and timely pay all salaries and wages, related
payroll taxes and all sick leave, holiday, vacation benefits, retirement and
other fringe benefits that have accrued to its employees through the date of
Closing, including related payroll taxes. Seller shall use its best efforts to
retain its employees in their current positions up to Closing.
4.16 Labor Relations. Seller is not a party to any labor contract,
collective bargaining agreement, contract, letter of understanding, or any other
arrangement, formal or informal, with any labor union or organization which
obligates Seller to compensate Seller's employees at prevailing rates or union
scale, nor are any of its employees represented by any labor union or
organization. There is no pending or, to the best knowledge of Seller and
Shareholders, threatened labor dispute, work stoppage, unfair labor practice
complaint, strike, administrative or court proceeding or order between Seller
and any present or former employee(s) of Seller. There is no pending or, to the
best knowledge of Seller and Shareholders, threatened suit, action,
investigation or claim between Seller and any present or former employee(s) of
Seller. There has not been any
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labor union organizing activity at any location of Seller, or elsewhere, with
respect to Seller's employees within the last three years.
4.17 Insurance. Seller has in effect and has continuously maintained
insurance coverage on an "occurrence" basis for all of its operations, personnel
and assets, and for the Assets and the Business. A complete and accurate list of
all such insurance policies is set forth in Exhibit 4.17 attached hereto, which
policies have previously been provided to Buyer. Exhibit 4.17 also sets forth a
summary of Seller's current insurance coverage (listing type, carrier and
limits), and includes a list of any pending insurance claims relating to Seller.
Seller and Shareholders agree, jointly and severally, to indemnify and hold
Buyer harmless from such pending insurance claims. Seller is not in default or
breach with respect to any provision contained in any such insurance policies,
nor has Seller failed to give any notice or to present any claim in a timely
fashion.
4.18 Broker's or Finder's Fee. Neither Seller nor any Shareholder has
employed, or is liable for the payment of any fee to, any finder, broker,
consultant or similar person in connection with the transactions contemplated by
this Agreement.
4.19 Conflicts of Interest. Except as set forth on Exhibit 4.19,
neither Shareholders, nor any director or officer of Seller, nor any entity
under common control with Seller or controlled by or related to Shareholders is
either a supplier of goods or services to Seller, or directly or indirectly
controls or is a director, officer, employee or agent of any corporation, firm,
association, partnership or other business entity that is a supplier of goods or
services to Seller.
4.20 Intellectual Property. All trademarks, service marks, trade names,
patents, inventions, processes, copyrights and applications therefor, whether
registered or at common law (collectively, the "Intellectual Property"), owned
by Seller are listed and described in Exhibit 4.20 attached hereto. No
proceedings have been instituted or are pending or, to the best knowledge of
Seller and Shareholders, threatened that challenge the validity of the ownership
by Seller of any such Intellectual Property. Seller has not licensed anyone to
use any such Intellectual Property, and neither Seller nor any Shareholder has
any knowledge of the use or the infringement of any of such Intellectual
Property by any other person. Seller owns or possesses adequate and enforceable
licenses or other rights to use all Intellectual Property now used in the
conduct of its Business.
4.21 Inventories. The Inventory is, and on Closing will be, of a
quality and quantity presently used by Seller in the ordinary course of business
determined and valued consistent with Seller's past practice. The Inventory is,
and at Closing will be, properly valued at the lower of cost or market value on
a first-in/first-out basis in accordance with generally accepted accounting
principles consistently applied. Since the date of the Financial Statements,
Seller has not decreased or substituted any material items of Inventory other
than in the ordinary course of business. Seller has fairly represented the
nature and extent of the Inventory to its outside auditors and accountants on a
consistent basis and in the exercise of good faith.
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4.22 Motor Vehicles. All motor vehicles used in the Business,
whether owned or leased, are listed on the attached Exhibit 1.1(2) and are
properly licensed and registered in accordance with applicable law.
4.23 Employee Benefit Plans.
(1) Welfare Benefit Plans. The attached Exhibit 4.23(1)
contains a true, accurate and complete list of each "employee welfare benefit
plan" (as defined in Section 3(1) of the Employee Retirement Income Security Act
of 1974 as amended ("ERISA")) maintained by Seller or to which Seller
contributes or is required to contribute (such employee welfare benefit plans
being hereinafter collectively referred to as the "Welfare Benefit Plans").
Copies of all Welfare Benefit Plans have previously been provided to Buyer.
(2) Pension Benefit Plans. The attached Exhibit 4.23(2)
contains a true and complete list of each "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) maintained by Seller, to which Seller
contributes or is required to contribute, or which covered employee of Seller
during the period of their employment with any predecessor of Seller, including
any multi-employer pension plan as defined under Internal Revenue Code of 1986,
Section 414(f) (such employee pension benefit plans being hereinafter
collectively referred to as the "Pension Benefit Plans"). Copies of all Pension
Benefit Plans have previously been provided to Buyer.
(3) Liabilities. To the best of Seller's and Shareholders'
knowledge, all unfunded liabilities under any Welfare Benefits Plans or Pension
Benefit Plans are described on the attached Exhibit 4.23(3). Buyer shall not be
liable and not be responsible for any debt, obligation, responsibility or
liability of Seller under any such plans. Seller shall be liable under its
Welfare Benefit Plans and Pension Benefit Plans for all claims due and unpaid at
Closing and for all claims incurred before Closing, whether they are or are not
paid or presented before Closing.
(4) Termination of Participation. Upon Closing, Seller shall
cease to be a participating employer under all Pension Benefit Plans and Welfare
Benefit Plans maintained by Seller, and any such action by Seller shall in no
way diminish its obligations to Buyer.
4.24 Compliance with Healthcare Laws and Other Laws. Seller has
not made any kickback, bribe or payment to any person or entity, directly or
indirectly, for referring, recommending or arranging business or patients with,
to or for Seller which action could have a material adverse effect on the
Business. No bulk sales or similar statute will adversely affect the
transactions contemplated under this Agreement. None of the Leases and Contracts
and no activity of Seller violates Section 1877 of the Social Security Act or
any similar provision of applicable state law in any material respect. None of
the Leases and Contracts and no activity of Seller violates provisions of
applicable state law relating to the corporate practice of medicine in any
material respect. The Seller is in compliance (without obtaining waivers,
variances or extensions) with, all federal, state and local laws, rules and
regulations which relate to the operations of the Business, except where the
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failure to be in compliance could not have a material adverse effect on the
Business. All healthcare, tax and other returns, reports, plans and filings of
any nature required to be filed by Seller with any federal, state, or local
governmental authorities and any third-party payors have been properly
completed, except where the failure to be so completed or filed could not have a
material adverse effect on the Business and have been timely filed in compliance
with all applicable requirements. Each return, report, plan and filling contains
no materially untrue or misleading statement and does not omit anything that
would cause such statement to be misleading or inaccurate in any material
respect. Seller shall retain and be responsible for any liability incurred by
the Business related to the operation of the Business prior to Closing, and
Seller shall be entitled to receive any refund or other benefit that may result
from the same in connection with any such return, report, plan and filing.
4.25 Condition of Assets. The Equipment and Furnishings are all of the
"Equipment" reflected on the Financial Statements other than Excluded Assets and
those items sold and replaced in the ordinary course of business. The Assets
together with the Excluded Assets are together all of the assets owned by Seller
and all of the assets used in connection with the Business and any related
businesses. All components of all of the Equipment and Furnishings: (a) operate
in accordance with their respective specifications, (b) perform the functions
they are supposed to perform, (c) are free of structural, installation,
engineering, or mechanical defects or problems, and (d) are otherwise in good
working order except for reasonable and ordinary wear and tear. Seller has
received no written recommendation from any insurer to repair or replace any of
the Assets with which Seller has not complied. Since June 30, 1997, the Business
has been operated in conformity with the methods and procedures observed and
utilized during the two year period immediately preceding June 30, 1997, and
since June 30, 1997 and except as required in the ordinary and usual course of
the Business, no assets have been removed, distributed, assigned or paid for by
Seller.
4.26 Tax Returns; Taxes. Seller has filed all federal, state and local
tax returns and tax reports required by all federal, state and local,
authorities to be filed at or prior to Closing. Seller has paid all taxes,
assessments, governmental charges, penalties, interest and fines (including,
without limitation, taxes on properties, income, franchises, licenses, sales and
payrolls) shown to be due on such returns. Additionally, the reserves for taxes
reflected in the Financial Statements are adequate to cover all tax liabilities
accrued, whenever payable. There has not been and is not now pending a tax
examination or audit of, nor any action, suit, investigation or claim asserted
or, to the best knowledge of Seller and Shareholders, threatened against Seller
by any federal, state or local authority, and Seller has not been granted any
extension of the limitation period applicable to any tax claims.
4.27 Operational Results. Seller is actively servicing not less than
Four Thousand Eighty Seven (4,087) beds. For the twelve month period ended June
30, 1997, the Seller had income before interest, taxes, and depreciation (after
add-back of unnecessary expenses, as set forth on Exhibit 4.27) of at least One
Million Dollars ($1,000,000).
4.28 No Omissions or Misstatements. None of the information included in
this Agreement and the attached Exhibits, or other documents furnished or to be
furnished by
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Shareholders or Seller, or any of its representatives, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make any of the statements herein or therein not misleading in light of
the circumstances in which they were made. Copies of all documents referred to
in any Exhibit have been delivered or made available to Buyer and constitute
true, correct and complete copies thereof and include all amendments, exhibits,
schedules, appendices, supplements or modifications thereto or waivers
thereunder.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and Shareholders to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer hereby
represents and warrants to Seller and Shareholders, which representations and
warranties shall be true and correct on the date hereof and on the date of
Closing, as follows:
5.1 Organization, Qualification and Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has the full corporate power and corporate authority to
own, lease, and operate its properties and assets as presently owned, leased,
and operated and to carry on its business as it is now being conducted. Buyer
has the full right, power, and authority to execute, deliver and carry out the
terms of this Agreement and all documents and agreements necessary to give
effect to the provisions of this Agreement and to consummate the transactions
contemplated in the Agreement. The execution, delivery, and consummation of this
Agreement and all other agreements and documents executed in connection with
this Agreement by Buyer has been duly authorized by all necessary corporate
action on the part of Buyer. No other action on the part of Buyer or any other
person or entity is necessary to authorize the execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection with this Agreement. This Agreement, and all other agreements and
documents executed in connection herewith by Buyer, upon due execution and
delivery thereof, shall constitute the valid binding obligations of Buyer,
enforceable in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, and by general principles of equity.
5.2 Absence of Default. The execution, delivery, and consummation of
this Agreement and all other agreements and documents executed in connection
with this Agreement by Buyer will not constitute a violation of, be in conflict
with, or, with or without the giving of notice or the passage of time, or both,
result in a breach of, constitute a default under, or create (or cause the
acceleration of the maturity of) any debt, indenture, obligation or liability or
result in the creation or imposition of any security interest, lien, charge or
other encumbrance upon any of the Assets (except in the ordinary course pursuant
to Buyer's existing credit agreement) under: (a) any term or provision of the
Certificate of Incorporation or Bylaws of Buyer; (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval or
other commitment to which Buyer is a party or by which Buyer is bound; (c) any
judgment, decree, order, regulation or rule of any court or regulatory
authority; or (d) any law, statute, rule,
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regulation, order, writ, injunction, judgment or decree of any court or
governmental authority or arbitration tribunal to which Buyer is subject.
5.3 Broker's or Finder's Fee. Except for Adirondack Capital Advisors,
LLC ("Adirondack"), to which Buyer shall be solely responsible for payment,
Buyer has not employed and is not liable for the payment of any fee to any
finder, broker, government official, consultant or similar person in connection
with the transactions contemplated by this Agreement Buyer shall pay, and shall
hold harmless Seller and Shareholders with respect to all fees and expenses of
Adirondack.
5.4 Full Opportunity to Review. Buyer has had a full and complete
opportunity to review all books, records, documents, exhibits, amendments,
schedules, appendices, supplements, modifications, etc. related to the Assets
and the Business of Seller, and has been afforded access to and the opportunity
to discuss the Business of Seller with the principal executives of Seller.
5.5 Regulatory Approvals. Buyer shall use its best efforts to obtain
prior to Closing (a) certification for participation in the Medicaid Programs of
the states where the Business is conducted; (b) certification from the
appropriate agency of the federal government for participation in the federal
Medicare program; and (c) all other comments, licenses, registrations, permits,
approvals and provider contracts necessary for Buyer to acquire and operate the
Assets and Business as contemplated hereunder.
ARTICLE VI. COVENANTS OF PARTIES
6.1 Preservation of Business and Assets. Until the Closing, each of
Seller and Shareholders shall use its best efforts and shall do or cause to be
done all such acts and things as may be necessary to preserve, protect and
maintain intact the operation of the Business and Assets as a going concern
consistent with prior practice and in the ordinary course of business, and to
preserve, protect and maintain for Buyer the goodwill of the suppliers,
employees, clientele, patients and others having business relations with Seller
or the Business. Each of Seller and Shareholders shall use their best efforts to
obtain all documents called for by this Agreement. Buyer, Seller and
Shareholders shall use their best efforts to facilitate the consummation of the
transactions contemplated under this Agreement. Until termination of this
Agreement, Seller and Shareholders agree that they will not sell or transfer, or
negotiate the sale or transfer of, either the Assets or any stock of Seller.
Until the Closing, Seller shall pay no dividend, and shall make no distribution
or extraordinary payment to Shareholders or any third party or pay any
intercompany payable and, other than in the ordinary course of business, Seller
will not sell, discard or dispose of any of the Assets. None of the Leases and
Contracts shall be amended between the date hereof and Closing without the prior
written consent of Buyer. Until the Closing, Seller and any party in possession
of all or any part of the Assets will maintain and keep the Assets in a
sanitary, well-maintained condition and in good order and repair.
6.2 Absence of Material Change. Until Closing, neither Seller nor
Shareholders shall make any change in the Business or in the utilization of the
Assets and shall not enter
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into any other material contract or commitment or any other transaction with
respect to the Business or the Assets without the prior written consent of
Buyer.
6.3 Ownership of Intellectual Property. Seller will provide any and all
assistance and cooperation required by Buyer (including, but not limited to the
execution of all necessary documents and agreements) in order for Buyer to
create, perfect or renew rights in any Intellectual Property (including but not
limited to rights which are created, perfected or renewed subsequent to the
Closing).
6.4 Access to Books and Records.
(1) From the date hereof until the Closing, Seller shall give
to Buyer and to Buyer's counsel, accountants and other representatives, full
access to all of Seller's offices, properties, books, contracts, commitments,
records and affairs relating to the Assets or the Business so that Buyer may
inspect and audit them and shall furnish to Buyer a copy of all documents and
information concerning the properties and affairs of Seller, the Business or the
Assets as Buyer may request. If any such books, records and materials are in the
custody of third parties, Seller shall direct such third parties to promptly
provide them to Buyer. Copies of documents furnished to Buyer by Seller will be
returned by Buyer upon request if the transactions contemplated hereunder are
not consummated. Seller shall provide Buyer promptly with interim financial
statements of Seller and any other management reports, as and when they are
available.
(2) Following the Closing, Buyer shall permit Seller's
representatives (including, without limitation, their counsel and auditors),
during normal business hours, to have reasonable access to, and examine and make
copies of, all books and records of the Business which relate to transactions or
events occurring prior to the Closing. All out-of-pocket costs associated with
the delivery of the requested documents shall be paid by Seller.
(3) Following the Closing, Seller shall permit Buyer and
its representatives (including, without limitation, their counsel and auditors),
to have access to, and examine and make copies of, all books and records of
Seller and its affiliates relating to the Business or Assets, which books and
records are retained by Seller and which relate to transactions or events
occurring prior to the Closing. For a period of five years after the Closing,
Seller agrees that, prior to the destruction or disposition of any such books or
records, Seller shall provide not less than forty-five (45) days', nor more than
ninety (90) days', prior written notice to Buyer of such proposed destruction or
disposal. If Buyer desires to obtain any such documents or records, it may do so
by notifying Seller in writing at any time prior to the date scheduled for such
destruction or disposal. In such event, Seller shall not destroy such documents
or records and the parties shall then promptly arrange for the delivery of such
documents or records to Buyer, its successors or assigns. All out-of-pocket
costs associated with the delivery of the requested documents or records shall
be paid by Buyer.
(4) After Closing, Seller and Shareholders shall make the
books and records of Seller available to Buyer (and, without limitation, to
Buyer's auditors and other
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agents) and shall otherwise cooperate with Buyer in order to permit Buyer to
conduct an audit of Seller's financial statements for any period prior to
Closing not already audited. Seller agrees to cooperate with Buyer in Buyer's
preparation of financial statements relating to such periods and Buyer's filing
in a timely manner of registration statements, private placement memoranda and
periodic reports, if any, pursuant to any applicable federal or state securities
law.
6.5 Preserve Accuracy of Representations and Warranties. Each of Seller
and Shareholders shall refrain from taking any action which would render any
representation and warranty contained in Article IV hereof materially untrue,
inaccurate or misleading as of Closing. Seller and Shareholders will each
promptly notify Buyer of any lawsuit, claim, administrative action or other
proceeding asserted or commenced against Seller, its directors, officers or
Shareholders, that may involve or relate in any way to Seller, the Assets,
Shareholders or the operation of the Business. Seller and Shareholders each
shall promptly notify Buyer of any facts or circumstances that come to either's
attention and that cause, or through the passage of time may cause, any of
Seller's and Shareholders' representations and warranties to be untrue or
misleading at any time from the date hereof to Closing.
6.6 Maintain Books and Accounting Practices. Until the Closing, Seller
shall maintain its books of account in the usual, regular and ordinary manner on
a basis consistent with prior years and shall make no change in its accounting
methods or practices.
6.7 Indebtedness; Liens. Until the Closing, with respect to the Assets,
including the Business and operations conducted with the Assets, Seller shall
not create, incur, assume, guarantee or otherwise become liable or obligated
with respect to any indebtedness for borrowed money, nor make any loan or
advance to, or any investment in, any person or entity, nor create any lien,
security interest, mortgage, right or other encumbrance in any of the Assets,
without Buyer's prior written approval. At Closing the Assets will be free and
clear of all mortgages, security interests, liens, leases, covenants,
assessments, easements, options, rights of first refusal, restrictions,
reservations, defects in title, encroachments or other encumbrances, except as
specifically set forth in those Leases and Contracts which Buyer expressly
elects to assume.
6.8 Compliance with Laws and Regulatory Consents. Until the Closing,
(a) Seller shall comply with all applicable statutes, laws, ordinances and
regulations, (b) Seller shall keep, hold and maintain all certificates,
registrations, accreditations, participations, licenses, and other permits
necessary for the business and operation of the Assets, (c) Seller and
Shareholders shall use their best efforts and shall cooperate fully with Buyer
to obtain all consents, approvals, exemptions and authorizations of third
parties, whether governmental or private, necessary to consummate the
transactions contemplated under this Agreement, and (d) Seller and Shareholders
shall make and cause to be made all filings and give and cause to be given all
notices which may be necessary or desirable under all applicable laws and under
applicable contracts, agreements and commitments in order to consummate the
transactions contemplated under this Agreement.
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6.9 Maintain Insurance Coverage. Until the Closing, Seller shall
maintain and cause to be maintained in full force and effect the existing
insurance on the Assets and the operations of the Business and shall provide at
Closing evidence satisfactory to Buyer that such insurance continues to be in
effect and that all premiums due have been paid.
6.10 Medicare and Medicaid Reporting. Until the Closing, Seller shall
timely file or cause to be filed all reports and claims of every kind, nature or
description, required by law or by written or oral contract to be filed with
respect to the purchase of services by third party payors, including, but not
limited to, Medicare, Medicaid and Blue Cross. Seller has paid or will pay all
liabilities for contracted adjustments, discounts, refunds and other offsets in
connection with the filing of such reports and claims through the date of
Closing.
6.11 Current Return Filing. Seller shall be responsible for (a) the
preparation and filing of the federal, state and local income tax and gross
receipts and use tax returns for all the tax periods of Seller ending on or
before the Closing; and (b) the payment of all such taxes when due.
6.12 WARN Act. Within the period ninety (90) days prior to Closing,
Seller will not temporarily or permanently close or shut down any "single site
of employment" or any "facility" or any "operating unit,"department or service
within a single site of employment, as such terms are used in WARN.
6.13 No Sale, Merger or Consolidation. Until the Closing, Shareholders
shall not sell, pledge or transfer any of his capital stock in Seller, and
Seller shall not sell all or substantially all of its assets, or merge or
consolidate with any other entity; neither party shall solicit any inquiries,
proposals or offers relating to any such transactions; and both parties shall
promptly notify Buyer orally, and confirm in writing, of all relevant details
relating to inquiries, proposals or offers which either may receive relating to
any of the matters referred to in this paragraph.
6.14 Condemnation. Until the Closing, in the event that any portion of
the Assets become subject to or is threatened with any condemnation or eminent
domain proceedings, then Buyer, at its sole option, may elect either (a) to
terminate this Agreement in its entirety, or (b) to terminate this Agreement
with respect only to that portion of the Assets which is condemned or threatened
to be condemned, with a reduction in the cash portion of the Purchase Price
determined as provided in paragraph 6.14.
6.15 Hart-Scott-Rodino Filing. Shareholders and Seller will (with the
assistance of the Buyer if and when required) timely and promptly make, and
Buyer will or if Buyer is not the "ultimate parent" it will cause its "ultimate
parent" (with the assistance of Shareholders and Seller if and when required) to
timely and promptly make, all filings which are required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1987 (the "Antitrust
Improvements Act"). The parties will use their best efforts to obtain the
approval of the United States Federal Trade Commission or the Antitrust Division
of the United States Department of Justice, as the case may be, to the purchase
of the Assets by Buyer or the lapse (or earlier termination) prior to the
Closing Date of the waiting period under the Antitrust Improvements Act without
the commencement of litigation, or threat thereof, by
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the appropriate governmental enforcement agency to restrain the transactions
contemplated by this Agreement.
6.16 Offsets and Adjustments. In the event that, following Closing,
Buyer suffers any offsets against any reimbursement under any third-party payor
or reimbursement programs due to Buyer relating to the Business for periods on
or prior to the Closing, then Seller or any Shareholder shall immediately pay to
Buyer the amounts so offset. In the event that, following Closing, Buyer
receives any favorable adjustment to any reimbursement under any third-party
payor or reimbursement programs due to Buyer relating to the Business for
periods on or prior to Closing, then Buyer shall immediately pay to Seller the
amounts so offset.
ARTICLE VII. CLOSING
7.1 Closing. The Closing shall take place at the offices of Harwell
Howard Hyne Gabbert & Manner, P.C., Nashville, Tennessee, as soon as possible
following satisfaction of all of the conditions to closing as set forth in
Article VIII and IX (the "Closing"). Upon consummation, the Closing shall be
deemed to be effective and the transfer of Assets shall be deemed to have
occurred as of 12:01 a.m. local time on August 1, 1997 (the "Effective Date").
In the event Closing has not occurred by October 31, 1997, then any party not in
default hereunder may terminate this Agreement without further obligation. The
Company, Shareholders, and their affiliates shall not directly or indirectly
invite, encourage, solicit, or entertain any other proposals for the sale of all
or substantially all of the Assets or stock of the Company from the date of this
Agreement to Closing.
ARTICLE VIII. SELLER'S AND SHAREHOLDERS' CONDITIONS TO CLOSE
The obligations of Seller and Shareholders under this Agreement are
subject to the satisfaction on, or prior to, Closing of the following conditions
(which may be waived in writing by Seller or any Shareholder in whole or in
part):
8.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits and attachments hereto) or in any certificate
or document delivered to Seller pursuant hereto, shall be deemed to have been
made again at the Closing and shall then be true in all respects; and Buyer
shall have performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or at
Closing.
8.2 No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity shall have taken any other action or
made any request of Seller or Buyer as a result of which Seller reasonably and
in good faith deems that to proceed with the transactions hereunder may
constitute a violation of law. If applicable, the waiting periods
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specified under the Antitrust Improvements Act with respect to the transactions
contemplated under this Agreement will have lapsed or been terminated.
8.3 Order Prohibiting Transaction. No order shall have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There shall have been no United States federal or state statute,
rule or regulations enacted or promulgated after the date of this Agreement that
would reasonably, directly or indirectly, result in any of the consequences
referred to in this paragraph.
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer in whole or in part):
9.1 Representations and Warranties True at Closing; Compliance with
Agreement; No Material Adverse Change. The representations and warranties of
Seller and Shareholders contained in this Agreement (including the Exhibits and
attachments hereto) or in any certificate or document delivered to Buyer in
connection herewith, shall be deemed to have been made again at the Closing and
shall then be true in all respects; and Seller and Shareholders shall have
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with
by them prior to or at Closing. In addition, there shall have been no material
adverse change in the Seller's Business.
9.2 Regulatory Approvals. Buyer shall have obtained: (a) certification
for participation in the Medicaid Programs of the states where the Business is
conducted, (b) certification from the appropriate agency of the federal
government for participation in the federal Medicare Program, and (c) all other
consents, licenses, registrations, permits, approvals (including HSR approval),
provider contracts, necessary in the judgment of Buyer to acquire and operate
the Assets and Business as contemplated hereunder.
9.3 No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transaction hereunder contemplated, and no governmental
agency or body or other entity shall have taken any other action or made any
request of Seller or Buyer as a result of which Buyer reasonably and in good
faith based upon the written advice of its counsel deems that to proceed with
the transactions hereunder may constitute a violation of law. If applicable, the
waiting periods specified under the Antitrust Improvements Act with respect to
the transactions contemplated under this Agreement shall have lapsed or been
terminated.
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9.4 Inspection of Assets; UCC Searches, etc. Buyer and its
representatives shall have had and continue to have reasonable rights of
inspection of the Assets in connection with Buyer's due diligence review, and
the results of Buyer's inspection and due diligence review shall be acceptable
to it. Seller shall have delivered to Buyer, at Seller's expense, all UCC
financing statements and title searches, local and central, including fixtures,
and federal and state pending litigation, tax lien and judgment searches, with
respect to Seller, the Assets and the Business, including all "DBA's,"
tradenames and fictitious names of Seller, dated no more than ten (10) days
prior to Closing, with results satisfactory to Buyer.
9.5 Order Prohibiting Transaction. No order shall have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
based upon the written advice of its counsel would have the effect of: (a)
making the transactions contemplated under this Agreement illegal, (b) otherwise
preventing consummation of such transactions, or (c) imposing material
limitations on the ability of Buyer effectively to acquire and hold Assets, to
operate the Business, or, in any case, to exercise rights of ownership pursuant
thereto. There shall have been no federal or state statute, rule or regulations
enacted or promulgated after the date of this Agreement that would reasonably
result, directly or indirectly, in any of the consequences referred to in this
paragraph.
9.6 Employment Agreement. Buyer and Victor Manuele shall have
entered into an employment agreement in the form attached hereto as Exhibit 9.6.
9.7 Lease Agreement. Buyer and Shareholders shall have entered into a
lease agreement in the form attached hereto as Exhibit 9.7.
9.8 Third-Party Consents. Seller shall provide to Buyer all consents
and authorizations of governmental agencies and other third parties believed by
Buyer to be necessary or advisable for the legal and proper consummation of all
agreements and transactions contemplated within this Agreement, each in form and
substance acceptable to Buyer.
9.9 Preferred Provider Agreement. Buyer, Seller, and Shareholders
shall have entered into a preferred provider agreement in the form attached
hereto as Exhibit 9.9.
9.10 Exhibits. The exhibits required by this Agreement shall be
provided at Closing in form and substance reasonably satisfactory to Buyer.
ARTICLE X. OBLIGATIONS OF SELLER AND SHAREHOLDERS AT CLOSING
At Closing, Seller and Shareholders shall deliver or cause to be
delivered to Buyer the following in form and substance reasonably satisfactory
to Buyer:
10.1 Documents Relating to Title. Seller shall execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Buyer:
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(a) A Bill of Sale, in form and substance satisfactory to
Buyer, warranting and conveying to Buyer good, valid and marketable title to all
Assets, free and clear of all liens, mortgages, pledges, encumbrances, security
interests, covenants, easements, rights of way, equities, options, rights of
first refusal restrictions, special tax or governmental assessments, defects in
title, encroachments and other burdens, except for the Assumed Liabilities.
(b) Certificates of title to all vehicles that constitute
Assets endorsed by Seller together with completed originals of any forms
required by all applicable states to transfer the same, free and clear of all
liens, except for the Assumed Liabilities.
(c) An effective and enforceable assignment to Buyer of each
Lease and Contract which Buyer has agreed to assume.
10.2 Possession. Seller shall deliver to Buyer full possession and
control of the Business and Assets.
10.3 Opinion of Counsel. Seller and Shareholders shall deliver to Buyer
the favorable opinion of counsel for Seller and Shareholders, dated as of
Closing, in the form attached hereto as Exhibit 10.3.
10.4 Corporate Good Standing and Corporate Resolutions. Seller and
Shareholders shall deliver to Buyer certificates of good standing from the
Secretary of State of its state of organization, and from each jurisdiction in
which Seller is qualified to do business, certified copies of the Bylaws and
Charter of Seller (all dated the most recent practical date prior to Closing),
certified copies of the resolutions of the Board of Directors and Shareholders
of Seller authorizing the execution, delivery and consummation of this Agreement
and the execution, delivery and consummation of all other agreements and
documents executed in connection herewith by them, including all deeds, bills of
sale and other instruments required hereunder, sufficient in form and content to
meet the requirements of the law of the state of Seller's incorporation relevant
to such transactions and certified by officers of Seller to be validly adopted
and in full force and effect and unamended as of Closing.
10.5 Third-Party Consents. Seller shall deliver to Buyer, all consents,
estoppels, approvals and authorizations of governmental agencies and other
third-parties that are reasonably necessary or advisable for the legal and
proper execution, delivery and consummation of this Agreement and the
transactions contemplated hereby, including, without limitation, those consents
necessary for the assignment of Leases and Contracts pursuant to paragraph
10.1(d).
10.6 Taxes and Other Payments. Seller shall deliver to Buyer:
(a) A certificate of non-foreign status signed by the
appropriate party and sufficient in form and substance to relieve Buyer of all
withholding obligations under Section 1445 of the Code.
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(b) Executed releases of all mortgages, security interests,
liens, pledges, restrictions or other encumbrances on or applicable to the
Assets.
10.7 Insurance. Seller shall deliver evidence of its current
insurance coverage, as described in Section 4.17.
10.8 Employment and Lease Agreements. Seller and Shareholders
shall deliver to Buyer each of the agreements described in paragraphs 9.6 and
9.7.
10.9 Additionally Requested Documents; Post Closing Assistance. At the
reasonable request of Buyer at Closing or at any time thereafter, Seller and
Shareholders shall cooperate with Buyer to put Buyer in actual possession and
operating control of the Assets and Business, execute and deliver such further
instruments of sale, conveyance, transfer and assignment, as Buyer may
reasonably request in order to effectively sell, convey, transfer and assign the
Assets and Business to Buyer, to execute and deliver such further instruments
and to take such other actions as Buyer may reasonably request to release Buyer
from all obligation and liability with regard to any obligation or liability
retained by Seller and/or any Shareholder and to execute and deliver such
further instruments and to cooperate with Buyer as Buyer may reasonably request
or to enable Buyer to obtain all necessary health care or regulatory
certifications, approvals, registrations, consents and licenses, accreditations
or permits.
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
11.1 Purchase Price. Buyer shall pay to Seller the Purchase Price
upon the terms specified in paragraph 3.1.
11.2 Assumption of Liabilities. Buyer shall covenant to fully perform
and comply with all of the Assumed Liabilities, subject to the provisions of
this Agreement, after Closing.
11.3 Opinion of Counsel. Buyer shall deliver to Seller a favorable
opinion of counsel for Buyer, dated as of Closing, in the form specified in
Article XII hereof.
11.4 Corporate Good Standing and Board Resolutions. Buyer shall deliver
to Seller a certificate of good standing from the Secretary of State of
Delaware, dated the most recent practical date prior to Closing, together with a
certified copy of the resolutions of the Board of Directors of Buyer approving
this Agreement and the consummation of the transactions hereunder contemplated.
11.5 Additionally Requested Documents; Post Closing Assistance. At the
reasonable request of Seller at Closing or at any time thereafter, Buyer shall
execute and deliver such further instruments of sale, conveyance, transfer and
assignment, as Seller
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may reasonably request in order to effectively sell, convey, transfer and assign
the Assets and Business to Buyer, to execute and deliver such further
instruments and to take such other actions as Seller may reasonably request to
release Seller from any Assumed Liability.
ARTICLE XII. OPINION OF BUYER'S COUNSEL
At the Closing, Buyer shall deliver to Seller an opinion of Harwell
Howard Hyne Gabbert & Manner, P.C. dated the date of the Closing and pursuant to
the Legal Opinion Accord of the ABA Section of Business Law (1991), in form and
substance reasonably satisfactory to Seller and its counsel to the effect that:
(a) Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and corporate authority to own, operate, and lease its
properties and assets and to carry on its business as now conducted.
(b) Buyer has the corporate power and corporate authority to
execute, deliver, and carry out the terms of this Agreement and all documents
and agreements delivered by Buyer at Closing; Buyer has taken all action
required by law, and by its Certificate of Incorporation and Bylaws, to
authorize such execution, delivery, and consummation of this Agreement; and this
Agreement, and all other agreements delivered by Buyer at Closing constitute the
valid and binding obligations of Buyer enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, and by general principles of equity.
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
13.1 Survival. The covenants, obligations, representations and
warranties of Buyer, Seller and Shareholders contained in this Agreement, or in
any certificate or document delivered pursuant to this Agreement, shall be
deemed to be material and to have been relied upon by the parties hereto
notwithstanding any investigation prior to the Closing, and shall survive the
date of Closing for the periods set forth in Section 13.5.
13.2 Indemnification by Seller and Shareholders. Subject to provisions
of Paragraphs 13.4 and 13.5, Seller and Shareholders, jointly and severally,
shall promptly indemnify, defend, and hold harmless Buyer, the directors,
officers, shareholders, employees and agents of Buyer, and the Assets against
any and all losses, costs, and expenses (including reasonable cost of
investigation, court costs and legal fees actually incurred) and other damages
resulting from (i) any breach by either Seller or Shareholders of any of the
covenants, obligations, representations or warranties or breach or untruth of
any representation, warranty, fact or conclusion contained in this Agreement or
any certificate or document of Seller and/or any Shareholder delivered pursuant
to this Agreement, (ii) any liability of Seller not expressly assumed by Buyer
pursuant to
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paragraph 1.3, and (iii) any claim (whether or not disclosed herein) that is
brought or asserted by any third party(ies) against Buyer arising out of the
ownership, licensing, operation or conduct of the Business or Assets or the
conduct of any of Seller's employees, agents or independent contractors,
relating to all periods of time through the date of Closing. Any indemnification
payment made pursuant to this Article shall include interest at a floating rate
equal to the prime rate of Bankers Trust Company established from time to time
(the "Rate"), payable for the period measured from the date that the loss, cost,
expense or damage was incurred until the date of payment. The liability created
under this paragraph shall be joint and several between Seller and Shareholders.
13.3 Indemnification by Buyer. Subject to the provisions of paragraph
13.4, Buyer shall promptly indemnify, defend, and hold Seller and Shareholders
harmless against any and all losses, costs, and expenses (including reasonable
cost of investigation, court costs and legal fees actually incurred) and other
damages resulting from (i) any breach by Buyer of any of its covenants,
obligations, representations or warranties or breach or untruth of any
representation, warranty, fact or conclusion contained in this Agreement or any
certificate or document of Buyer delivered pursuant to this Agreement,(ii) any
claim which is brought or asserted by any third party(ies) against Seller or any
Shareholder for failure to pay or perform any of the Assumed Liabilities, and
(iii) any claim that is brought or asserted by any third party(s) against Seller
or any Shareholder arising out of the ownership, licensing, operation or conduct
of the Business or Assets or the conduct of any of Buyer's employees, agents or
independent contractors, relating to all periods of time subsequent to the date
of Closing. Any indemnification payment pursuant to the foregoing shall include
interest at the Rate from the date that the loss, cost, expense or damage was
incurred until the date of payment.
13.4 Rules Regarding Indemnification. The obligations and liabilities
of each party which may be subject to indemnification liability hereunder (the
"indemnifying party") to the other party (the "indemnified party") shall be
subject to the following terms and conditions:
(1) Claims by Non-parties. The indemnified party shall give
written notice within a reasonably prompt period of time to the indemnifying
party of any written claim by a third-party that is likely to give rise to a
claim by the indemnified party against the indemnifying party based on the
indemnity agreements contained in this Article, stating the nature of said claim
and the amount thereof, to the extent known. The indemnified party shall give
notice to the indemnifying party that pursuant to the indemnity, the indemnified
party is asserting against the indemnifying party a claim with respect to a
potential loss from the third party claim, and such notice shall constitute the
assertion of a claim for indemnity by the indemnified party. If, within thirty
(30) days after receiving such notice, the indemnifying party advises the
indemnified party that it will provide indemnification and assume the defense at
its expense, then so long as such defense is being conducted, the indemnified
party shall not settle or admit liability with respect to the claim and shall
afford to the indemnifying party and defending counsel reasonable assistance in
defending against the claim. If the indemnifying party assumes the defense,
counsel shall be selected by such party and if the indemnified party then
retains its own counsel, it shall do so at its own expense. If the indemnified
party does not receive a written objection to the notice from the indemnifying
party within thirty (30) days after the indemnifying party's
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receipt of such notice, the claim for indemnity shall be conclusively presumed
to have been assented to and approved, and in such case the indemnified party
may control the defense of the matter or case and, at its sole discretion,
settle, or admit liability. If within the thirty (30) day period the indemnified
party shall have received written objection to a claim (which written objection
shall briefly describe the basis of the objection to the claim or the amount
thereof, all in good faith), then for a period of ten (10) days after receipt of
such objection the parties shall attempt to settle the dispute as between the
indemnified and indemnifying parties. If they are unable to settle the dispute,
the unresolved issue or issues shall be settled by arbitration in Dallas, Texas
in accordance with the rules and procedures of the American Arbitration
Association.
(2) Claims by a Party. The determination of a claim asserted
by a party hereunder (other than as set forth in subparagraph (1) above)
pursuant to this Article shall be made as follows: The indemnified party shall
give written notice within a reasonably prompt period of time to the
indemnifying party of any claim by the indemnified party which has not been made
pursuant to subparagraph (1) above, stating the nature of such claim and the
amount thereof, to the extent known. The claim shall be deemed to have resulted
in a determination in favor of the indemnified party and to have resulted in a
liability of the indemnifying party in an amount equal to the amount of such
claim estimated pursuant to this paragraph if within forty-five (45) days after
the indemnifying party's receipt of the claim the indemnified party shall not
have received written objection to the claim. In such event, the claim shall be
conclusively presumed to have been assented to and approved. If within the
forty-five (45) day period the indemnified party shall have received written
objection to a claim (which written objection shall briefly describe the basis
of the objection to the claim or the amount thereof, all in good faith), then
for a period of sixty (60) days after receipt of such objection the parties
shall attempt to settle the disputed claim as between the indemnified and
indemnifying parties. If they are unable to settle the disputed claim, the
unresolved issue or issues shall be settled by arbitration in Dallas, Texas in
accordance with the rules and procedures of the American Arbitration
Association.
(3) Claims by a Straddle Customer or Patient. Any claim by a
customer or patient relating to professional negligence or similar matters
involving a customer or patient served both on or prior to and subsequent to
Closing will be the responsibility of either Seller and Shareholders, jointly
and severally on the one hand, or Buyer, on the other hand, in accordance with
the following guidelines: (i) if it is a claim in which the incident giving rise
to liability clearly arose on or before the date of Closing, Seller and
Shareholders shall respond to the loss and defense expenses; (ii) if it is a
claim in which the incident giving rise to liability clearly arose subsequent to
the date of Closing, Buyer shall respond to the loss and defense expenses; and
(iii) in the event that the incident giving rise to liability as to time is not
clear, Seller, Shareholders and Buyer will jointly defend the case and each will
fully cooperate with the others in such defense. Once the case is closed, if
Buyer and Seller and Shareholders cannot agree to the allocation of both
indemnity and expenses, then the matter shall be submitted to binding
arbitration in Dallas, Texas in accordance with the rules and procedures of the
American Arbitration Association.
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13.5 Limitation of Indemnity. Notwithstanding any other provision
of this Agreement:
(a) No claim shall first be asserted by Buyer against Seller
or the Shareholders under this Article XIII (i) more than twelve (12) months
from the Closing Date, except that Buyer shall have a continuing right of
indemnification for any breach of a representation or warranty set forth in
Sections 4.7 (with respect to healthcare Licenses and Permits), 4.8, 4.12, 4.24
and 4.26 for the period of the statute of limitations relating to any claim
asserted in respect to the matters set forth therein; and (ii) unless the
aggregate amount of any such claims exceed $175,000 (the "Basket"). Once the
Basket is reached, the indemnifying party shall be liable to Buyer for the full
amount of all such loss, liability, claim, expense or damage; and
(b) The liability of Seller of the Shareholders under this
Article XIII shall not exceed $7,500,000 in the aggregate.
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
14.1 Covenant Not to Compete. Seller and Shareholders hereby, jointly
and severally, covenant and agree with Buyer that, during the "NONCOMPETE
PERIOD" (as such term is defined herein) neither Seller nor any Shareholder
shall directly or indirectly, (a) within the "NONCOMPETE AREA" (as such term if
defined herein), acquire, lease, manage, consult for, serve as agent or
subcontractor for, finance, invest in, own any part of or exercise management
control over any pharmaceutical operation or business which provides any goods
or services competitive with the goods and services provided by the Business as
of the Closing; (b) solicit for employment or employ any person who at Closing
or thereafter became an employee of Buyer or an Affiliate unless such person is
has been terminated by Capstone or is otherwise not so employed for at least six
(6) months; or (c) with respect to any customer, patient, physician, physician
group, or healthcare provider with whom Seller or Buyer or an Affiliate
contracted with or serves in connection with the Business within six (6) months
prior to Closing, either solicit the same in a manner which could adversely
affect Buyer or an Affiliate or make statements to the same which disparage
Buyer, an Affiliate, the Business or their respective operations in anyway. The
"NONCOMPETE PERIOD" shall commence at the Closing and terminate on the third
anniversary thereof. The "NONCOMPETE AREA" shall mean (a) the area within a one
hundred (100) mile radius of each location from, at, or for which Seller
delivers pharmaceuticals as of the Closing and (b) the area within a one hundred
(100) mile radius of each location from which the business of the Business is
operated or conducted as of the Closing. Ownership of less than five percent
(5%) of the stock of a publicly held company shall not be deemed a breach of
this covenant.
14.2 Enforceability. In the event of a breach of paragraph 14.1, Seller
and Shareholders recognize that monetary damages shall be inadequate to
compensate Buyer and Buyer shall be entitled, without the posting of a bond or
similar security, to an injunction restraining such breach, with the costs
(including attorneys fees) of securing
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such injunction to be jointly and severally borne by Seller and Shareholders.
Nothing contained herein shall be construed as prohibiting Buyer from pursuing
any other remedy available to it for such breach or threatened breach.
All parties hereby acknowledge the necessity of protection against the
competition of Seller and Shareholders and that the nature and scope of such
protection has been carefully considered by the parties. The period provided and
the area covered are expressly represented and agreed to be fair, reasonable and
necessary. The consideration provided for herein is deemed to be sufficient and
adequate to compensate Seller and Shareholders for agreeing to the restrictions
contained in paragraph 14.1. If, however, any court determines that the forgoing
restrictions are not reasonable, such restrictions shall be modified, rewritten
or interpreted to include as much of their nature and scope as will render them
enforceable.
ARTICLE XV. MISCELLANEOUS
15.1 Assignment. Following Closing, Buyer may freely assign any or
all of its rights or delegate any or all of its obligations under this Agreement
without the express written consent of Seller or any Shareholder. Neither Seller
nor any Shareholder may assign any rights or delegate any obligations under this
Agreement without the prior written consent of Buyer, and any prohibited
assignment or delegation will be null and void.
15.2 Other Expenses. Except as otherwise provided in this Agreement,
Seller and Shareholders shall pay all of their expenses in connection with the
negotiation, execution, and implementation of the transactions contemplated by
this Agreement and Buyer shall pay all of its expenses in connection with the
negotiation, execution, and implementation of the transactions contemplated by
this Agreement. All state and local sales and use taxes, recording fees and
transfer taxes incurred in connection with the transactions contemplated within
this Agreement shall be borne and timely paid by Seller. All ad valorem taxes
incurred in connection with the transactions contemplated within this Agreement
shall be shared equally by Seller and Buyer and shall be prorated as of Closing.
The Purchase Price shall be reduced, on a dollar-per-dollar basis, to the extent
and in an amount equal to any taxes that are accrued but unpaid by Seller as of
the date of Closing.
15.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five days after
mailing with postage prepaid. Any such notice shall be sent as follows:
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To Seller or Any Shareholder:
Harry Tractman
c/o Accord
2500 Boulevard of the Generals
Norristown, Pennsylvania 19403
with a copy to:
John J. Ehlinger, Jr.
Obermayer Rebmann Maxwell & Hippel LLP
One Penn Center
19th Floor
1617 John F. Kennedy Boulevard
Philadelphia, PA 19103-1895
To Buyer:
Capstone Pharmacy Services, Inc.
9901 E. Valley Ranch Parkway
Suite 3001
Irving, Texas 75063
with a copy to:
Mark Manner
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
Nashville, Tennessee 37238-1800
15.4 Confidentiality; Prohibition on Trading. All parties agree to
maintain the confidentiality of the existence of this Agreement, all information
exchanged by the parties in connection herewith and the transactions
contemplated hereunder, unless disclosure is required by law. Seller,
Shareholders and their Affiliates agree not to trade in the securities of Buyer
or its Affiliates based upon any nonpublic information. In the event that the
Closing does not occur, the duties under this Section 15.4 shall survive, the
parties shall return all confidential information (including copies and
summaries thereof) to the other party and maintain the confidentiality required
hereunder.
15.5 Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
15.6 Headings. Any table of contents and paragraph headings in this
Agreement are for convenience of reference only and shall not be considered or
referred to in resolving questions of interpretation.
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<PAGE> 35
15.7 Benefit. Subject to paragraph 15.1, this Agreement shall be
binding upon and shall inure to the exclusive benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns. This
Agreement is not intended to, nor shall it, create any rights in any other
party.
15.8 Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted. Further, there shall be automatically
substituted for such invalid or unenforceable provision a provision as similar
as possible which is valid and enforceable.
15.9 Waiver. Neither the failure nor any delay on the part of any party
hereto in exercising any rights, power or remedy hereunder shall operate as a
waiver thereof, or of any other right, power or remedy; nor shall any single or
partial exercise of any right, power or remedy preclude any further or other
exercise thereof, or the exercise of any other right, power or remedy. No waiver
of any of the provisions of this Agreement shall be valid unless it is in
writing and signed by the party against which it is sought to be enforced.
15.10 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
15.11 Interpretation; Knowledge. All pronouns and any variation thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or entity, or the context, may require. Further,
it is acknowledged by the parties that this Agreement has undergone several
drafts with the negotiated suggestions of both; and, therefore, no presumptions
shall arise favoring either party by virtue of the authorship of any of its
provisions or the changes made through revisions. Whenever in this Agreement the
term "to the best knowledge of Seller or any Shareholder" or the like is used,
Seller and Shareholders shall each be deemed to have the knowledge of Seller's
Shareholders, officers, directors and key employees, and of its Affiliates; and
Seller and Shareholders shall each be under a duty of due inquiry.
15.12 Entire Agreement. This Agreement, including the Exhibits and
attachments hereto, which are incorporated herein by reference, constitutes the
entire agreement between the parties hereto with regard to the matters contained
herein and it is understood and agreed that all previous undertakings,
negotiations, letters of intent and agreements between the parties are merged
herein. This Agreement may not be modified orally, but only by an agreement in
writing signed by Buyer, Seller and Shareholders.
15.13 Legal Fees and Costs. In the event any party incurs legal
expenses to enforce or interpret any provision of this Agreement, the prevailing
party will be entitled to recover such legal expenses, including, without
limitation, attorney's fees, costs and disbursements, in addition to any other
relief to which such party shall be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
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MED-TEC PHARMACEUTICAL SERVICES, INC.
By:
------------------------------
Title:
--------------------------
----------------------------------
HARRY TRACTMAN
THE TRUST FOR THE BENEFIT OF ELISA
TRACTMAN
By:
------------------------------
Title:
--------------------------
CAPSTONE PHARMACY SERVICES, INC.
By:
------------------------------
Title:
--------------------------
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<TABLE>
<CAPTION>
EXHIBIT LIST
------------
<S> <C>
Exhibit Description
- ------- -----------
A Type of services and products
provided by the Seller at each
location
1.1(1) Real Estate
1.1(2) Equipment and Furnishings;
including vehicles
1.1(5) Cash and Cash Equivalents
1.2 Excluded Assets
1.3 Assumed Liabilities
3.2 Allocation of Purchase Price
4.3 Financial Statements
4.4(a) Terminated Preferred Provider
Agreement
4.4(d) Compensation Increases
4.4(f) Write-off of Receivables
4.4(j) Operations since June 30, 1997
4.6 Employment Discrimination
4.7 Licenses and Permits; Licensure
Surveys; Deficiency Reports; List
of Regulatory Bodies
4.9 Copies of easements and rights
4.11 List and Copies/Summaries of
Leases and Contracts
4.14 Litigation
4.15 Seller's Employees
4.17 Insurance; Summary of Coverage;
Pending Claims
4.19 Conflicts of Interest
4.20 Intellectual Property
4.23(1) Welfare Benefit Plans
4.23(2) Pension Benefit Plans
4.23(3) Unfunded Liabilities
4.27 Operational Results
9.6 Form of Employment Agreement
9.7 Form of Lease Agreement
9.9 Form of Preferred Provider
Agreement
10.3 Form of Opinion of Counsel for
the Seller and Shareholders
</TABLE>
33
