SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): February 1, 1999
ALLION HEALTHCARE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-17821 11-2962027
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
33 WALT WHITMAN ROAD, SUITE 200A, HUNTINGTON STATION, N.Y. 11746
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 516-547-6520
Former name or former address: THE CARE GROUP, INC.
<PAGE>
Item 1. Changes in Control of Registrant
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In connection with the Registrant's reorganization described
under Item 3 below (the "Reorganization"), the Registrant will experience a
change in its equity ownership that may constitute a change of control. See Item
3 for a discussion of the relevant cancellations and issuances of equity
interests of the Registrant.
Item 2. Acquisition or Disposition of Assets
------------------------------------
Effective as of June 26, 1999, The Care Group of Texas, Inc.
and Care Line of Houston, Inc., wholly owned subsidiaries of the Registrant
(collectively, the "Sellers"), consummated the sale of substantially all of
their operating assets to Osher Investments, Ltd. (the "Buyer") pursuant to the
Assets Purchase Agreement, dated as of June 25, 1999, between the Sellers and
Buyer, a copy of which is attached hereto as Exhibit 10.1
The Buyer paid the Sellers $2,820,505, consisting of
$2,420,505 in cash and a non-interest bearing promissory note in the amount of
$400,000. The Buyer also assumed certain obligations of the Sellers, including
the obligations under the assumed contracts and the remaining liability to
Metamed Software after the payment by the Registrant of $15,000 to Metamed
Software.
The Sellers agreed not to compete with the Buyer in Houston
for a period of 36 months following the closing date, nor will the Sellers
solicit any of the employees of Buyer within the City of Houston to leave the
employment of the Buyer.
Item 3. Bankruptcy or Receivership; Confirmation of Plan of
Reorganization
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(1) & (2) Identity of Court and Date of Order
On September 15, 1998, The Care Group, Inc. ("Care Group") and
its 19 wholly-owned subsidiaries (collectively, the "Company") filed voluntary
petitions under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Western District of Texas, Austin Division (the
"Bankruptcy Court"), Case No. 98-13247FM.
On January 4, 1999, the Company filed its Second Amended Plan
of Reorganization (the "Plan"), which was confirmed by the Bankruptcy Court
pursuant to an order dated February 1, 1999 (the "Order"). The Order is attached
hereto as Exhibit 2.1. Descriptions of the Plan herein are qualified in their
entirety by reference to the Plan, which is attached hereto as Exhibit 2.2.
(3) Summary of Plan
The following are the material features of the Plan:
a. The name of the reorganized Company is Allion Healthcare, Inc. ("Allion"),
which will have three divisions located in Houston, Texas; Austin Texas; and
Long Island, New York. The Restated Certificate of Incorporation of the
Registrant is attached hereto as Exhibit 3.1 and the Amended and Restated
By-laws of the Registrant are attached hereto as Exhibit 3.2. Each of the
Restated Certificate of Incorporation and the Amended and Restated By-laws was
approved by the Bankruptcy Court.
b. The following subsidiaries of Care Group survive bankruptcy and become
wholly-owned subsidiaries of Allion: Mail Order Meds, Inc., CareLine of New York
d/b/a Mail Order Meds of New York, Inc., The Care Group of Texas, Inc. and
CareLine of Houston, Inc. Please see Item 2 above for a discussion of the sale
of substantially all of the assets of The Care Group of Texas, Inc. and Care
Line of Houston, Inc.
c. Commonwealth Certified Home Care, Inc. ("Commonwealth") also survives
bankruptcy and becomes a wholly-owned subsidiary of Allion, but does so subject
to an agreement with Visiting Nurse Services of New York Home Care to purchase
certain assets of Commonwealth. Please see Item 5 below for a discussion of the
agreement with Visiting Nurse Services of New York Home Care
d. The following remaining 14 wholly-owned subsidiaries of the Registrant will
be dissolved: The Care Group of New York, Inc., Windsor Wholesale, Inc., The
Care Group of Georgia, Inc., CareLine of Georgia, Inc., Advanced Care
Associates, Therafusion, Inc., The Care Group of Los Angeles, Inc., CareLine of
Dallas, The Care Group of Florida, Inc., CareLine Laboratories of Maryland,
Inc., Millwo Management, Inc., CareLine of Louisiana, Inc., CareLine Acquisition
Co., Inc., and The Care Group, L.L.C.
e. John Pappajohn, Dr. Derace Schaffer and Michael P. Moran are appointed as the
initial directors of Allion.
f. General Description of Treatment of Claims and Interests.
Administrative Claims. Administrative Claims are claims for any cost or
expense of the Chapter 11 cases allowed under Sections 503(b) and 507(a)(1) of
the United States Bankruptcy Code, including all actual and necessary costs and
expenses relating to the preservation of the Company's estate or the operation
of the Company's businesses (including tort claims arising from the postpetition
conduct of the Company), all allowances of compensation or reimbursement of
expenses to the extent allowed by the Bankruptcy Code, and all claims for cure
payments arising from the assumption of executory contracts pursuant to Section
365(b)(1) of the Bankruptcy Code. To become entitled to payment under the Plan,
the holder of an Administrative Claim against the Company must comply with the
requirements of the Plan, including specifically the requirement that a proper
notice of the claim be filed within 30 days after the Confirmation Date (unless
the claim is a Fee Claim (as defined in the Plan), a liability incurred in the
ordinary course of business of the Company or an Allowed Administrative Claim
(as defined in the Plan)). The Administrative Claims are estimated to be between
$100,000 and $200,000.
Under the Plan, Allowed Administrative Claims against the Company will
be (i) paid in one cash payment on the Distribution Date, or (ii) accorded such
other treatment as may be agreed upon in writing by the Company and such holder
provided that an Administrative Claim representing a liability incurred in the
ordinary course of business of the Company may be paid in the ordinary course of
business by the Company and provided that Allowed Administrative Claims for cure
payments arising from the assumption under the Plan of executory contracts and
leases may be made in one or more cash payments over a period of time as the
Bankruptcy Court determines to be appropriate.
Priority Tax Claims. Priority Tax Claims are claims against the debtors
that are entitled to priority in accordance with Section 507(a)(7) of the United
States Bankruptcy Code. These claims consist of certain unsecured claims of
governmental units for taxes. Each holder of an Allowed Priority Tax Claim
against the Company will receive in full satisfaction of such holder's Allowed
Priority Tax Claim, at the sole option and in full satisfaction of the Allowed
Priority Tax Claim of such holder, (i) the amount of such Allowed Priority Tax
Claim with Post-Confirmation Interest, in equal annual cash payments on each
anniversary of the Distribution Date, until the sixth anniversary of the date of
assessment of such Allowed Priority Tax Claim, or (ii) such other treatment as
may otherwise be acceptable to Allion and the holder of such claim. In the case
of Allowed Priority Tax Claims against the Care Group, Post-Confirmation
Interest on deferred payments will be payable at 6% per annum or such other rate
as the Bankruptcy Court determines is appropriate.
Secured Claims. Allion reaffirms all indebtedness owing to HCFP
Funding, Inc. ("HCFP") on the effective date of the Plan, acknowledges the
priority and validity of HCFP's liens and security interests, and the absence of
any defenses, setoff or counterclaims to the Company's obligations to HCFP.
Allion releases HCFP from any and all claims which it holds or which are
assigned pursuant to the Plan. Allion will execute a new Note, Loan and Security
Agreement with HCFP to secure Allion's indebtedness under a post-Confirmation
revolving line of credit.
For the balance of HCFP's claim (i.e., the difference between its total
claim as of the Effective Date of the Plan minus the amount of HCFP's claim that
is allocated to the line of credit, as provided for above), Allion will execute
a three-year Note, in form and substance acceptable to HCFP, which shall be
repaid annually, with quarterly interest payments, at a rate of prime plus 4%.
In addition to being secured by Allion's accounts receivable, the Note will be
secured by a first and senior lien and security interest covering all inventory,
equipment, furniture and fixtures of Allion, and all proceeds of any of the
foregoing (unless the continued priority of any existing lien on such assets of
Allion is required for confirmation of the Plan). On the effective date, Allion
will issue to HCFP warrants to purchase 750,000 shares of common stock of Allion
as set forth in Section (4) below.
Unsecured Claims. On the Distribution Date, each holder of an Allowed
Unsecured Claim shall receive, in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Unsecured Claim, such holder's Pro
Rata Share of (a) 500,000 shares of Allion's common stock issued on the
Effective Date pursuant to the Plan and (b) 50% of the net Distributable Third
Party Recoveries (as defined in the Plan).
Convenience Claims. Convenience claims are those claims against the
Company that would otherwise by an Allowed Unsecured Claim (a) for $1,000 or
less, or (b) for more than $1,000 if the holder of such claim has elected, on
the ballot providing for voting on the Plan within the time fixed by the
Bankruptcy Court for completing and returning such ballot, to accept $250 in
cash in full satisfaction, discharge and release of such claim. On the Effective
Date, or as soon thereafter as practicable, each holder of a Convenience Claim
shall receive, in full satisfaction, settlement, release and discharge of an in
exchange for the Convenience Claim a cash payment equal to 25% of the amount of
the claim, up to a maximum of $250.
Equity Interests. Equity interests in Care Group will receive no
distributions under the Plan and, on the Effective Date, the interests shall be
cancelled.
g. Allion succeeds to causes of action held by Care Group. Funds recovered from
such actions will be distributed in accordance with the Plan. In addition,
Allion, in its discretion, may utilize any recovered funds in order to finance
the prosecution of such claims.
(4) Number of Shares Issued and Outstanding
Prior to the Reorganization, there were 14,237,539 shares outstanding.
Prior to the Reorganization, approximately (i) 20.6% of the equity interests in
Care Group were beneficially held by John Pappajohn, (ii) 2.9% of the equity
interests in Care Group were beneficially held by Derace Schaffer, M.D., (iii)
19.3% of the equity interests in Care Group were beneficially held by Edgewater
Private Equity Fund II, L.P., and (iv) 11.1% of the equity interests in Care
Group were beneficially held by Ann Mittasch. As part of the Company's
restructuring, all outstanding shares and equity interests of Care Group become
void. Under the Plan, Allion will issue 5,000,000 shares of common stock (the
"Common Stock"), par value $0.01. It is anticipated that these shares will be
issued as follows:
a. 2,500,000 shares will be issued to an investor group led by John Pappajohn, a
current member of the Allion board of directors, through a private placement.
The Pappajohn group will pay $1 million cash and assign to Allion all causes of
action it may have against Deloitte & Touche LLP ("Deloitte"), the Company's
former accountant, the Company's prior management team, and any other claims it
may have, including any claims against the Company's insurers. This will
represent approximately 83.3% of the outstanding common stock of Allion
following the Reorganization (50% on a fully diluted basis)
b. 500,000 shares will be distributed to holders of Allowed Unsecured Claims -
approximately 200 creditors - the precise allocation of which is currently being
finalized.
c. Up to 1,250,000 fully diluted shares will be reserved for issuance to
officers and key employees of Allion pursuant to a stock option plan.
d. Warrants to purchase 750,000 shares of Allion common stock will be issued to
HCFP in exchange for its provision of post-Reorganization financing to Allion.
The warrants will be exercisable at $0.134 per share.
e. Pursuant to Section 1145 of Title 11 of the United States Code, the issuance
of the Common Stock will be exempt from registration under the Securities Act of
1933.
f. As of the date of the order confirming the Plan, the Company had both assets
and liabilities equal to $5,844,482 and a liquidation value of approximately
$5.2 million. At such date the Company had a bank note secured by all of the
Company's assets in the amount of $5.15 million. No other financial information
was provided to the Bankruptcy Court on such date.
Item 4. Changes in Registrant's Certifying Accountant
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During the course of its Chapter 11 proceeding, the Company
rejected its contract with its principal accountant, Deloitte. Following the
confirmation of the Plan, the Company received a letter from Deloitte, dated
February 2, 1999, confirming the termination of the parties' client-auditor
relationship.
As stated in the Order, given the state of the Company's
records and the acts and omissions of the Company's former Chief Financial
Officer and management group (which were publicly disclosed in a press release
issued by the Company on April 14, 1998), the Company was unable to complete its
financial statements for fiscal years 1997 and 1998, and no opinion was issued
with respect thereto.
In November 1998, the Company engaged the services of Holtz
Rubinstein & Company, LLP ("HR") as an outside accounting firm, which engagement
was approved by order of the Bankruptcy Court. HR has not, as of the date of
this report, been approved as Allion's outside auditor, however, Allion expects
to have a shareholders' vote regarding this issue as soon as practical.
Item 5. Other Events
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In connection with the Reorganization, Care Group and
Commonwealth entered into an agreement, dated November 1, 1998, with Visiting
Nurse Service of New York Home Care ("VNS"), pursuant to which VNS acquired all
of the records, specified contracts and licenses, operating certificates and
permits of Commonwealth relating to the operation of a certified home health
agency in exchange for $302,000. The sale was consummated in August 1999, after
receipt of required approvals from the State of New York. A copy of the
agreement with VNS is attached hereto as Exhibit 10.2.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
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Exhibit 2.1 Confirmation Order dated February 1,1999.
2.2 First Amended Plan of Reorganization of The
Care Group, Inc., et al dated January 2,
1998.
3.1 Restated Certificate of Incorporation of the
Registrant, filed with the Secretary of
State of the State of Delaware on October 7,
1999.
3.2 Amended and Restated By-laws of the
Registrant.
10.1 Asset Purchase Agreement, dated as of June
25, 1999, by and between The Care Group of
Texas, Inc., Care Line of Houston, Inc. and
Osher Investments, Ltd.
10.2 Agreement, dated as of November 1, 1999,
among The Care Group, Inc., Commonwealth
Certified Home Care, Inc. and Visiting Nurse
Service of New York Home Care.
<PAGE>
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 hereunto duly authorized.
Allion Healthcare, Inc.
(the Registrant)
Dated: October 8, 1999 By: /s/ Michael P. Moran
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Michael P. Moran
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
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2.1 Confirmation Order dated February 1,1999.
2.2 First Amended Plan of Reorganization of The Care Group, Inc.,
et al dated January 2, 1998.
3.1 Restated Certificate of Incorporation of the Registrant, filed
with the Secretary of State of the State of Delaware on
October 7, 1999.
3.2 Amended and Restated By-laws of the Registrant.
10.1 Asset Purchase Agreement, dated as of June 25, 1999, by and
between The Care Group of Texas, Inc., Care Line of Houston,
Inc. and Osher Investments, Ltd.
10.2 Agreement, dated as of November 1, 1999, among The Care Group,
Inc., Commonwealth Certified Home Care, Inc. and Visiting
Nurse Service of New York Home Care.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
In re: ss. Chapter 11
ss.
THE CARE GROUP, INC., ET AL ss. Case No. 98-13247FM
ss.
Debtors ss. Substantively Consolidated
ORDER CONFIRMING PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
FOR THE CARE GROUP, INC. AND ITS AFFILIATED DEBTORS
CAME ON FOR CONSIDERATION on February 1, 1999, the Debtor's Second
Amended Plan of Reorganization filed on January 4, 1999 (the "Plan"). The
Bankruptcy Court has also made findings of fact and conclusions of law as
reflected in the Findings of Fact and Conclusions of Law Regarding Confirmation
of the Debtor's First Amended Plan of Reorganization ("Findings and
Conclusions"). Unless stated otherwise, all capitalized terms used in this Order
shall have the same meaning that they are defined to have in the Plan. Based on
the Findings and Conclusions, which are incorporated herein by reference, and
other good cause having been shown, it is therefore
ORDERED that the Plan shall be and hereby is CONFIRMED pursuant to
section 1129 of title 11 of the United States Code (the "Bankruptcy Code"); it
is further
ORDERED that upon the entry of this, all conditions precedent set forth
in the Plan shall have been satisfied; it is further
ORDERED that to the extent any objections to confirmation of the Plan
have not been withdrawn before the date hereof or are not cured by the relief
granted herein, such objections to confirmation of the Plan shall be and hereby
are overruled; and all withdrawn objections shall be and hereby are deemed
withdrawn with prejudice; it is further
ORDERED that the Debtors and their directors, officers, agents,
attorneys and representatives are authorized and empowered to carry out all of
the provisions of the Plan and to execute all documents certificates, reports or
instruments as are necessary, useful or appropriate to effectuate, implement or
consummate fully the Plan or this Order, and that the Debtors directors,
officers, agents, attorneys and representatives are authorized to deliver, file
and record such documents, certificates, reports or instruments with the
appropriate federal, state, commonwealth, local, foreign or other governmental
authorities and with other entities as are necessary, useful or appropriate to
effectuate, implement or consummate the Plan or this order; it is further
ORDERED that each and every federal, state, commonwealth, local,
foreign or other governmental agency or department is hereby directed to accept
any and all documents and instruments necessary, useful or appropriate to
effectuate, implement or consummate the transactions contemplated by the Plan or
this Order; it is further
ORDERED that given the state of the Debtor's records and the acts and
omissions of the former CFO and management group, the Reorganized Debtor will be
unable to file audited financial statements for fiscal years 1997 and 1998. Even
if the Reorganized Debtor undertook the great expense of trying to recreate
accurate financial records, the Reorganized Debtor would be unable to guarantee
the accuracy of the records during this period and would be unable to obtain an
independent auditor to verify the audit. Therefore, Reorganized Debtor will
establish a "fresh start" accounting statement as of the Effective Date and will
remain current on all financial reporting from that date forward ; it is further
ORDERED that current officers and directors will not be held criminally
or civilly liable for good faith statements, representations, or filings made,
including tax returns and Medicaid or Medicare Cost Reports, based on the
inclusion of data, information, or figures from the Debtor's financial records
prior to the Effective Date; it is further
ORDERED that current officers and directors will not be held criminally
or civilly liable for missing or lost documents and records prior to the
Effective Date; it is further . ORDERED that the name of the Reorganized Debtor,
The Care Group, Inc., is hereby changed to Allion Healthcare, Inc. ("Allion");
it is further
ORDERED that the Surviving Debtor Subsidiaries, including: Mail Order
Meds, Inc., CareLine of New York d/b/a Mail Order Meds of New York, Inc., The
Care Group of Texas, Inc., and CareLine of Houston, Inc. shall survive
bankruptcy and shall be the wholly owned subsidiaries of Allion Healthcare,
Inc.; it is further
ORDERED that Commonwealth Certified Home Care, Inc. shall also survive
bankruptcy and shall also be a wholly owned subsidiary of Allion Healthcare,
Inc., but subject to the agreement with Visiting Nurse Service of New York Home
Care to purchase specific assets of Commonwealth Certified Home Care, Inc.; it
is further
ORDERED that the remaining fourteen (14) wholly owned subsidiaries of
The Care Group, Inc., including The Care Group of New York, Inc., Windsor
Wholesale, Inc., The Care Group of Georgia, Inc., CareLine of Georgia, Inc.,
Advanced Care Associates, Therafusion, Inc., The Care Group of Los Angeles,
Inc., CareLine of Dallas, The Care Group of Florida, Inc., CareLine Laboratories
of Maryland, Inc., Millwo Management, Inc., CareLine of Louisiana, Inc.,
CareLine Acquisition Co., Inc., and The Care Group, L.L.C. are dissolved as of
the Effective Date (The "Dissolved Subsidiaries"); it is further
ORDERED that, pursuant to section 1145(a) of the Bankruptcy Code, the
issuance to holders of Allowed Claims and the Pappajohn Group of Allion
Healthcare, Inc. stock and the issuance of Allion Healthcare, Inc.
Warrants,(collectively, the "Plan Securities") pursuant to this Plan, and the
subsequent exercise of Allion Healthcare, Inc. Warrants by such holders or
transferees to purchase the securities issuable thereunder, shall be exempt from
registration under the Securities Act of 1933, as amended, and any state or
local law requiring registration for offer or sale of a security or registration
or licensing of an issuer or underwriter of, or broker or dealer in, a security.
All such securities to be issued shall be freely transferable by the initial
recipients thereof (i) except for any such securities received by an underwriter
within the meaning of section 1145(b) of the Bankruptcy Code, and (ii) subject
to any restriction contained in the terms of such securities themselves, in the
Plan, or in the Plan Documents; it is further
ORDERED that, Allion Healthcare, Inc. and HCFP Funding, Inc. may amend
the Stock Purchase Warrant and Registration Rights Agreement post-confirmation
to change the price paid to exercise the warrants and to modify the dilution
provisions.
ORDERED that, pursuant to section 1146 of the Bankruptcy Code, the
issuance, distribution, transfer or exchange of the Plan Securities, and the
creation, modification, consolidation, recording, making or delivery of any
instrument of transfer (including deeds, mortgages, deeds of trust, security
agreements, financing statements and other instruments of transfer) or the
making, assignment or recording of any lease or sublease required in order to
implement the corporate reorganization transactions set forth in the Plan or the
provisions respecting the vesting of assets set forth in the Plan or otherwise
required in order to effectuate, implement or consummate the Plan or this Order,
shall not be subject to any tax under any law imposing a document recording tax,
conveyance fee, intangibles or other similar tax, mortgage tax, real estate
transfer tax, mortgage recording tax, stamp tax or similar tax or governmental
assessment, and the appropriate governmental officials or agents shall be, and
hereby are, directed to forego the collection of any such tax or governmental
assessments and to accept for filing and recordation any of the foregoing
instruments without the payment of any such tax or assessment; it is further
ORDERED that the automatic stay imposed by section 362 of the
Bankruptcy Code is hereby modified as necessary to allow the execution,
delivery, filing and recordation of the Plan Documents and any other documents,
certificates, reports, UCC financing or termination statements or instruments as
are necessary, useful or appropriate to effectuate, implement and consummate the
Plan; it is further
ORDERED that the Bankruptcy Court shall retain jurisdiction over the
Chapter 11 Cases as and to the extent provided in Article XIV of the Plan; it is
further
ORDERED that, pursuant to section 1123(b)(3)(B) of the Bankruptcy Code,
Allion Healthcare, Inc. shall pursue any potential cause of action that the
Debtors find to exist to the extent that any such potential cause of action
vests in or is assigned to Reorganized Care Group (or its designee) in
accordance with the terms of the Plan; notwithstanding the foregoing, any
potential cause of action that is assigned to Reorganized Care Group or its
designee shall be subject to such rights of setoff or other defenses as existed
immediately prior to such assignment except as otherwise provided in this Order
or the Plan; it is further
ORDERED that John Pappajohn, Dr. Derace Schaffer, and Michael P. Moran
(collectively, the "Care Group Directors") are hereby appointed as the initial
directors of Allion Healthcare, Inc. from and after 8:00 a.m., C.S.T. on the
date five (5) Business Days prior to the Effective Date or such other date on or
prior to the Effective Date as may be designated by the Debtors (the
"Commencement Time"). Without further action by any person, the Care Group
Directors shall commence their status as directors of Reorganized Care Group as
of the Commencement Time. Such appointments shall be deemed ratified
retroactively by the initial holders of any reorganized Care Group Common Stock
on the Effective Date. Nothing set forth herein shall prevent any of the Care
Group Directors from resigning as a director of Allion Healthcare, Inc. at any
time without further order of this Bankruptcy Court. If a vacancy in the Allion
Healthcare, Inc. Board of Directors occurs for any reason, such vacancy shall be
filled in accordance with the Allion Healthcare, Inc. Certificate of
Incorporation and the Allion Healthcare, Inc. Bylaws; it is further
ORDERED that the Debtors' assumptions, assignments and rejections of
executory contracts and unexpired leases, specifically including but not limited
to those entered into post-petition in the ordinary course of business, as
provided in the Plan shall be and hereby are APPROVED; it is further
ORDERED that, in accordance with section 303 of the Delaware General
corporation Law, the officers of Allion Healthcare, Inc. are hereby authorized
to make, execute and file with the Secretary Of State of the State of Delaware a
restated certificate of incorporation in substantially the respective form
thereof filed with the Bankruptcy Court as Plan Documents, to become effective
on the Effective Date; it is further
ORDERED that the bylaws of Allion Healthcare, Inc. shall be amended and
restated, as of the Effective Date, to be in substantially the respective form
thereof filed with the Bankruptcy Court as Plan Documents; it is further
ORDERED that, except as provided in the Plan and to the extent
permitted by the Bankruptcy Code, including section 1141(d) thereof, upon the
Effective Date, the Debtors shall be and hereby are deemed discharged and
released from any and all Claims, including but not limited to demands and
liabilities that arose before the Effective Date and all debts of the kind
specified in section 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or
not (i) a proof of claim based upon such debt is filed or deemed filed under
section 501 of the Bankruptcy Code; (ii) a Claim based upon such debt is allowed
under section 502 of the Bankruptcy Code; or (iii) the holder of a Claim based
upon such debt has accepted the Plan. As provided in section 524 of the
Bankruptcy Code, such discharge shall void any judgment against the Debtors at
any time obtained to the extent it relates to a Claim discharged and operates as
an injunction against the commencement, continuation or prosecution of any
action, the employment of process or any act to collect, recover or offset the
Claims against the Debtors or the property of any of them. Allion Healthcare,
Inc. shall not be liable for any obligation, liability or Claim, whether reduced
to judgment, matured, unmatured, liquidated, unliquidated, fixed contingent,
secured or unsecured, legal or equitable of any affiliated Debtor, existing
prior to, subsequent to, or related to implementation of the Plan, except as
otherwise expressly provided herein or in the Plan. The confirmation of the Plan
will nonetheless "discharge," except as provided in the Plan, Allion Healthcare,
Inc. and its subsidiaires under section 1141(d)(1) of the Bankruptcy Code; it is
further
ORDERED that, in accordance with section 303 of the Delaware General
Corporation Law, the officers of Allion Healthcare, Inc. are hereby authorized
to make, execute and file with the appropriate Secretary of State, the
certificates of dissolution effecting the dissolution of the Dissolved
Subsidiaries; it is further
ORDERED that from and after the Effective Date, and as set forth in
subsection (d) below, all Persons who have held, hold or may hold Claims, with
respect to any such Claim arising prior to the Effective Date, and except as
expressly set forth in the Plan or the Plan Documents (including any exhibits
thereto), are permanently enjoined from taking the following action in
connection with such Claim against or affecting (i) the Debtors, (ii) Allion
Healthcare, Inc. and its subsidiaries (iii) any direct or indirect successor in
interest to the foregoing parties, (iv) any of their property or (v) any direct
or indirect transferee of any of such property:
(a) commencing, conducting or continuing in any
manner, directly or indirectly, any suit,
action or other proceeding of any kind
(including, without limitation, any thereof
in a judicial, arbitral, administrative or
other forum);
(b) enforcing, levying, attaching (including,
without limitation, any prejudgment
attachment), collecting or otherwise
recovering by any manner or means, whether
directly or indirectly, any judgment, award,
decree or order;
(c) creating, perfecting or otherwise enforcing
in any manner, directly or indirectly, any
encumbrance of any kind;
(d) asserting any setoff, right of subrogation
or recoupment of any kind, directly or
indirectly; and
(e) acting or proceeding in any manner, in any
place whatsoever, that does not conform to
or comply with the provisions of the Plan;
and it is further
ORDERED that any judgment at any time obtained, to the extent that such
judgment is a determination of liability of any of the Debtors with respect to
any claim or Equity Interest discharged or canceled hereunder, is null and void;
it is further
ORDERED that all injunctions or stays: (a) ordered or imposed in the
Chapter 11 Cases pursuant to sections 105(a) or 362(a) of the Bankruptcy Code or
otherwise; and (b) extant on the Confirmation Date, shall, except as otherwise
provided in this Order, remain in full force and effect until the Effective
Date; it is further
ORDERED that on the Effective Date, except as provided in the Plan,
title to all property of the Estate, including, without limitation, all
contracts of the Estate with federal, state, commonwealth, local and foreign
governmental bodies or authorities, all contracts with quasi-governmental bodies
or authorities, all contracts with private parties, and all permits, licenses,
bonds, certifications, approvals, agreements, arrangements, understandings,
codes, policies (insurance and otherwise), bids or proposals relating to any
aspect of the business to be conducted by Allion Healthcare, Inc. and its
subsidiaries after the Effective Date, except any contracts or unexpired leases
rejected pursuant to the Plan or prior orders of the Court, shall vest in and be
transferred, assigned, conveyed and delivered to Allion Healthcare, Inc., free
and clear of all liens, Claims, Equity Interests and encumbrances, in accordance
with Section 1141 of the Bankruptcy Code, except as specifically provided in the
Plan and excluding the liens securing HCFP Funding, Inc. To the extent that any
contracts, permits, licenses, bonds, certificates, approvals, agreements,
arrangements understandings, bids, or proposals, mortgages, deeds of trust or
leases contain or are otherwise encumbered with any clause, condition or
covenant which in any way prohibits any transfer, assignment or conveyance
contemplated or required hereby, such clause, condition or covenant shall be
null and void and of no force or effect; it is further
ORDERED that the Allion Healthcare, Inc. Stock Option Plan is hereby
approved as provided in the Plan; it is further
ORDERED that the Allion Healthcare, Inc. is a "successor" to the
Debtors within the meaning of, and Allion Healthcare, Inc. stock is issued
pursuant to, section 1145(a) (1) of the Bankruptcy Code; it is further
ORDERED that Allion Healthcare, Inc. shall succeed to all rights and
obligations of Reorganized Care Group with respect to the Designated Claims and
shall be bound by all agreements with respect to the Designated Claims entered
into by Reorganized Care Group to the same extent as Reorganized Care Group; it
is further
ORDERED that the rate of 6 % per annum, except as provided in the Plan,
is hereby determined to be the appropriate rate for post-Confirmation Interest;
it is further
ORDERED that within ten (10) business days after the date of entry of
this Order, the Debtors shall mail to all parties in interest in these cases
notice of entry of this Order, together with notice of the last day of filing
administrative claims, claims arising from the rejection of executory contracts
and applications for allowances of compensation and/or reimbursement of expenses
pursuant to the Plan; it is further
ORDERED that reports evidencing the distribution and closing of the
cases as set forth by Bankruptcy Rules 3021 and 3022 shall be filed by the
Debtors within sixty (60) days after the Effective Date. Such reports shall
contain information concerning actions taken by the Debtors and progress made in
the consummation of the Plan; it is further
ORDERED that any business that is conducted by any of the Debtors
(other than the surviving Debtor Subsidiaries) on the Effective Date shall be
deemed to have been conducted by Allion Healthcare, Inc.; it is further
ORDERED that, notwithstanding the discharge of any pre-Effective Date
Claim as elsewhere contemplated by this Order, the claims of HCFP Funding, Inc.
shall not be discharged or otherwise impaired; it is further
ORDERED that neither the Debtors, nor any of their respective members,
officers, directors, employees, agents, attorneys or other professionals shall
have or incur any liability to any holder of a Claim or Equity Interest or any
other Person or entity for any act, event, or omission in connection with, or
arising out of, the Chapter 11 Cases, or in connection with the confirmation of
the Plan, the motions to approve third party settlements pursuant to Bankruptcy
Rule 9019(a), the consummation of the Plan, or the administration of the Plan or
the property to be distributed under the Plan, except for willful misconduct or
gross negligence.
SIGNED this 1st day of February, 1999.
/s/ Frank R. Monroe
-----------------------------
HONORABLE FRANK R. MONROE
After execution, please return a copy to:
Hazen & Terrill, P.C.
111 Congress, Suite 800
Austin, Texas 78701
(512) 477-9997
(512) 457-9898 (fax)
Attorneys for Debtor
The Care Group, Inc., et al
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
In re: ss. Chapter 11
ss.
THE CARE GROUP, INC., ET AL ss. Case No. 98-13247FM
ss.
Debtors ss. Substantively Consolidated
DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION
---------------------------------------------
The Care Group, Inc. et al (the "Debtor"), debtor and debtor in
possession, filed its Petition for Relief under Chapter 11 of the Bankruptcy
Code on September 15, 1998. The first amended plan of reorganization ("Plan") is
the Debtor's proposal to its creditors to resolve all claims against it on the
date of the filing of the Petition and through the Effective Date of the Plan,
as defined herein. It does not undertake to pay all claims in full, but the
Debtor believes it will produce more for the general unsecured creditors than
they would receive if the Debtor were to liquidate.
Creditors and equity interest holders are reminded that the Debtor has
prepared and filed a Disclosure Statement that provides information about the
Debtor and its operations.
ARTICLE I.
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings specified below. Any term used in the Plan that is not defined herein,
but that is defined in the Code or the Bankruptcy Rules shall have the meaning
assigned to that term in the Bankruptcy Code or the Bankruptcy Rules.
1.1 "Administrative Claim" means any cost or expense of administration of the
case under ss. 503(b) and 507(a)(1) of the Bankruptcy Code, including, but not
limited to any expenses of operating the Debtor's business, claims for
compensation of professionals made pursuant to section 330 of the Code, and any
fees charged or assessed against the Debtor's estates under Chapter 123 of Title
28, United States Code.
1.2 "Allowed," when used with respect to any Claim, except for a Claim that is
an Administrative Claim, shall mean (1) such Claim to the extent it is not a
Contested Claim; (2) such Claim to the extent it may be set forth pursuant to
any stipulation or agreement that has been approved by Final Order; or (3) a
Contested Claim, proof of which was filed timely with the Bankruptcy Court, and
(A) as to which no objection was filed; or (B) as to which an objection was
filed, to the extent allowed by a Final Order.
1.3 "Allowed Administrative Claim" means an Administrative Claim that is an
Allowed Claim.
1.4 "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended, and
codified at title 11 of the United States Code.
1.5 "Bankruptcy Court" means the Bankruptcy Court unit of the United States
District Court for the Western District of Texas, Austin Division.
1.6 "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure as
amended.
1.7 "Bar Date" means January 18, 1999, the last day for filing proofs of claim
against the Debtor as fixed by order of the Court.
1.8 "Case" means the chapter 11 bankruptcy reorganization cases of the twenty
affiliated debtors, jointly administered, substantively consolidated and
designated as Case Number 98-13247FM, pending before the Bankruptcy Court.
1.9 "Claim" means any right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, as defined in
section 101(5) of the Code.
1.10 "Claimant" means the holder of a Claim against the Debtor or the Estate.
1.11 "Confirmation" means the entry of an order by the Court confirming the Plan
at or after hearing pursuant to section 1129 of the Bankruptcy Code.
1.12 "Confirmation Date" means the date of entry of an order of the Court
confirming the Plan.
1.13 "Consummation" means completion of all Distributions to be made under the
Plan.
1.14 "Contested," when used with respect to a Claim, shall mean a Claim against
any of the Debtors (1) that is listed in the Debtor's Schedules as disputed,
contingent, or unliquidated; (2) to the extent that a proof of claim exceeds the
scheduled amount; (3) that is not listed in the Debtor's Schedules, but as to
which a proof of claim has been filed with the Bankruptcy Court; or (4) as to
which an objection has been filed.
1.15 "Court" means the United States Bankruptcy Court for the Western District
of Texas, Austin Division, before which the Case is pending or, in the event
such court ceases to exercise jurisdiction over the Case, such court or adjunct
or unit thereof that exercises jurisdiction over the Case in lieu of the United
States Bankruptcy Court for the Western District of Texas.
1.16 "Convenience Claims" means all Allowed Claims which are $1,000 or less, or
which are more than $1,000 and which are timely reduced by written election to
$1,000 by the holders thereof in accordance with the terms of the Plan.
1.17 "Creditors" means all entities with Claims against the Debtor or the
Estate.
1.18 "Debt" means liability on a Claim.
1.19 "Debtor" means The Care Group, Inc. and its nineteen (19) wholly owned
subsidiaries, including Mail Order Meds, Inc., The Care Group of New York, Inc.,
CareLine of New York, Inc., Windsor Wholesale, Inc., The Care Group of Georgia,
Inc., CareLine of Georgia, Inc., The Care Group of Texas, Inc., CareLine of
Houston, Inc., Advanced Care Associates, Therafusion, Inc., The Care Group of
Los Angeles, Inc., CareLine of Dallas, Commonwealth Certified Home Care, Inc.,
The Care Group of Florida, Inc., CareLine Laboratories of Maryland, Inc., Millwo
Management, Inc., CareLine of Louisiana, Inc., CareLine Acquisition Co., Inc.,
and The Care Group, L.L.C., collectively, as debtors and debtors in possession.
1.20 "Designated Claims" means any right or cause of action to which Reorganized
Debtor has succeeded by virtue of vesting or by virtue of assignment on the
Effective Date.
1.21 "Disallowed," when used with respect to a Claim, shall mean a Claim that
has been disallowed by Final Order.
1.22 "Disclosure Statement" means the Debtor's Disclosure Statement as approved
by order of the Court pursuant to section 1125 of the Bankruptcy Code.
1.23 "Distributable Third Party Recoveries" means any cash recoveries actually
received from third parties by any of the Debtors, based on causes of action
owned by the Debtor prior to the Effective Date or assigned to the Debtor
pursuant to the Plan.
1.24 "Distribution(s)" means the property (including payments) required by the
Plan to be provided to the holders of Allowed Claims.
1.25 "Distribution Date" means, with respect to Reorganized Debtor Stock, for
any Claim that is an Allowed Claim on the Effective Date, the later of the
Effective Date or 30 days after the bar date, and for any Contested Claim, as
soon as practicable, but within 90 days after the date upon which such Claim
becomes an Allowed Claim. With respect to Distributable Third Party Recoveries,
to the extent available, distributions will be made on the Distribution Date,
and then so often as warranted, at least on an annual basis, but not more often
than every 90 days, until the Reorganized Debtor in good faith determines that
the Distributable Third Party Recoveries have been maximized. At that point, a
final distribution will be made.
1.26 "Effective Date" means the first business day which is ten (10) days after
the Confirmation Date on which (i) the Confirmation Order is not stayed and (ii)
all conditions to the effectiveness of the Plan have been satisfied or waived as
provided in the Plan.
1.27 "Estate" means the bankruptcy estate created upon commencement of the Case
pursuant to section 541(a) of the Code.
1.28 "Final Order" means an order of the Court that has been entered and either:
a) The time for appeal from such entered order has expired with
no appeal having been filed timely; or
b) Any appeal that had been filed timely has been dismissed or
otherwise finally determined.
1.29 "Impaired" shall have the meaning provided in section 1124 of the Code.
1.30 "Interests" means the equity security interests in the Debtor as of the
Petition Date.
1.31 "Lien" has the meaning provided by section 101(37) of the Code.
1.32 "Order of Confirmation" means the order of the Court confirming the Plan
pursuant to section 1129 of the Code.
1.33 "Penalty Claims" means Claims for penalties or punitive damages.
1.34 "Person" means an individual, corporation, partnership, joint venture,
trust, estate, unincorporated association, unincorporated organization,
governmental entity, or political subdivision thereof, or any other entity.
1.35 "Petition Date" means the date on which the Debtor filed its chapter 11
petition with the Clerk of the Court, September 15, 1998.
1.36 "Plan" means this Debtor's Plan of Reorganization in its present form or as
it may be amended, modified or supplemented.
1.37 "Post-Conformation Interest" means simple interest at the rate of 6% per
annum or such other rate as the Bankruptcy Court may determine at the
Confirmation Hearing is appropriate.
1.38 "Priority Claim" means any claim entitled to priority treatment pursuant to
section 507 of the Code, except for Administrative Claims and Tax Claims.
1.39 "Professional Person" means a Person retained or to be compensated pursuant
to section 327, 328, 330, 503(b), or 1103 of the Bankruptcy Code.
1.40 "Property of the Estate" has the meaning provided by section 541 of the
Code.
1.41 "Pro Rata" means proportionately so that the ratio of the amount of the
Distribution made on account of a particular Allowed Claim to the Distributions
made on account of all Allowed Claims of the Class in which the particular
Allowed Claim is included is the same as the ratio of the amount of such
particular Allowed Claim to the total amount of Allowed Claims of the Class of
which such particular Allowed Claim is included.
1.42 "Reorganized Debtor" means the Debtor, as reorganized, on and after the
Effective Date.
1.43 "Reorganized Debtor Stock" means the new common stock to be issued by the
Reorganized Debtor pursuant to the Plan on the Effective Date.
1.44 "Reorganized Debtor Stock Option Plan" means the Reorganized Debtor Stock
Option Plan described in the Plan pursuant to which stock options with respect
to Reorganized Debtor Stock will be offered, in the discretion of the board of
directors of Reorganized Debtor, to certain officers and key employees of
Reorganized Debtor and its subsidiaries as of the Effective Date.
1.45 "Schedules" means the schedules of assets and liabilities and the statement
of financial affairs filed by the Debtor, as such schedules have been or may be
supplemented.
1.46 "Securities Laws Claims" means a Claim (1) arising from rescission of a
purchase or sale of a security of a Debtor; (2) for damages arising from the
purchase or sale of such a security; or (3) for reimbursement, indemnification,
or contribution allowed under section 502 of the Bankruptcy Code on account of a
Claim for damages or rescission arising out of a purchase or sale of a security
of a Debtor.
1.47 "Surviving Debtor Subsidiaries" means the wholly owned subsidiaries of The
Care Group, Inc. that will survive bankruptcy, including: Mail Order Meds, Inc.,
CareLine of New York d/b/a Mail Order Meds, The Care Group of Texas, Inc., and
CareLine of Houston, Inc.
1.48 "Tax Claim" means a Claim entitled to priority treatment pursuant to
section 507(a)(8) of the Code.
1.49 "Unclaimed Property" means any Distributions which are unclaimed thirty
(30) days following the date of distribution. Unclaimed Property shall include,
without limitation: (a) checks (and the funds represented thereby) or
Reorganized Debtor Stock which have been returned as undeliverable without a
proper forwarding address, (b) funds for checks which have not been paid, (c)
checks (and the funds represented thereby) which were not mailed or delivered
because of the absence of a proper address with which to mail or deliver such
property, and (d) interest on cash constituting Unclaimed Property.
1.50 "Unsecured Claim" means a Claim that is not secured by any Lien on Property
of the Debtor or Property of the Estate, including undersecured Claims or lease
rejection claims.
1.51 "Voting Deadline" means the date set by the Bankruptcy Court by which
ballots for accepting or rejecting the Plan must be received by the Debtor.
1.52 Construction
Where not inconsistent or in conflict with the provisions of the Plan,
the words and phrases used in the Plan shall have the meanings provided in the
Code or the Bankruptcy Rules. Section captions used in the Plan are for
convenience only, and shall not affect the construction of the Plan.
The first letters of terms defined in the Plan are capitalized.
ARTICLE II.
CERTAIN GENERAL TERMS AND CONDITIONS
The following general terms and conditions apply to this Plan:
2.1 Pursuant to section 1123 of the Code, the Plan designates five (5) classes
of Claims and Interests. As set forth below, Administrative Claims and Tax
Claims of the kind specified in sections 507(a)(l) and 507(a)(8) of the Code,
respectively, have not been classified and are excluded from the classes set
forth in the Plan, in accordance with section 1123(a)(l) of the Code. A Claim
shall be deemed classified in a particular Class only to the extent that the
Claim qualifies within the description of that Class and shall be deemed
classified in a different Class to the extent that any remainder of the Claim
qualifies within the description of such different Class. A Claim is in a
particular Class only to the extent that the Claim is an Allowed Claim or an
Allowed Secured Claim in that Class. Multiple proofs of claim filed by a
Creditor which qualify for inclusion within the same Class shall be aggregated
and, if allowed, shall constitute a single Allowed Claim.
ARTICLE III.
ADMINISTRATIVE EXPENSES AND UNCLASSIFIED CLAIMS
As provided in section 1123(a)(1) of the Bankruptcy Code,
Administrative and Priority Tax Claims against the Debtor shall not be
classified for purposes of voting or receiving distributions under the Plan.
Rather, all such Claims shall be treated as follows:
3.1 Holders of Allowed Tax Claims, if any, entitled to priority under section
507(a)(8) of the Code will be paid on account of such Claims, in equal quarterly
installments over a period not exceeding six years after the date of assessment
of such Claims. Payment of Allowed Tax Claims shall include payment of interest
at the rate applicable under nonbankruptcy law to such Claims. The Reorganized
Debtor may elect, in its sole discretion, to prepay any such claim with any
penalty for prepayment.
3.2 Administrative claims against the Debtor shall be treated as follows:
(a) Time for Filing Administrative Claims - The holder of an
Administrative Claim, other than (1) a fee claim, (2) a liability incurred and
paid in the ordinary course of business by the Debtors, or (3) an Allowed
Administrative Claim, must file with the Bankruptcy Court and serve on Debtor's
counsel, notice of such Administrative Claim within thirty days after the
Confirmation Date. Such notice must include at a minimum (1) the Debtor that is
liable for the Claim, (2) the name of the holder of the Claim, (3) the amount of
the Claim, and (4) the basis of the Claim. Failure to file this notice timely
and properly shall result in the Administrative Claim being forever barred and
discharged.
(b) Time for Filing Fee Claims - Each Professional Person or other
entity that holds or asserts an Administrative Claim that is a fee claim
incurred before the Effective Date shall be required to file with the Bankruptcy
Court, and serve on all parties required to receive notice, a fee application
within thirty days after the Effective Date. The failure to file the fee
application timely shall result in the fee claim being forever barred and
discharged. To the extent necessary, entry of the Confirmation Order shall amend
and supersede any previously entered order of the Bankruptcy Court regarding
procedures for the payment of fee claims.
(c) Allowance of Administrative Claims - An Administrative Claim with
respect to which notice has been properly filed pursuant to the Plan shall
become an Allowed Administrative Claim if no objection is filed within thirty
days after the filing and service of notice of such Administrative Claim. If an
objection is filed within such thirty day period, the Administrative Claim shall
become an Allowed Administrative Claim only to the extent allowed by Final
Order. An Administrative Claim that is a fee claim and with respect to which a
fee application has been properly filed pursuant to the Plan, shall become an
Allowed Administrative Claim only to the extent allowed by Final Order.
(d) Payment of Allowed Administrative Claims - Each holder of an
Allowed Administrative Claim against a Debtor shall receive on the Distribution
Date (1) the amount of such holder's Allowed Claim in one Cash payment on the
Distribution Date, or (2) such other treatment as may be agreed upon in writing
by the Debtor and such holder; provided, however, that an Administrative Claim
representing a liability incurred in the ordinary course of business of the
Debtor may be paid in the ordinary course of business by the Debtor.
ARTICLE IV.
DIVISION OF CREDITORS AND EQUITY HOLDERS INTO CLASSES
The creditors and equity interest holders of the Debtor are divided
into the following classes:
Class 1: Priority Non-Tax Claims
Class 2: HCFP Funding, Inc. - holds an allowed fully secured claim
pursuant to 11 U.S.C.ss. 506(b).
Class 3: Unsecured Claims - Claims that are not a secured claim or
administrative claim and includes undersecured and lease
rejection claims.
Class 4: Convenience Claims. - Claims against the Debtor that would
otherwise be a Class 3 Allowed Unsecured Claim (a) for $1,000
or less, or (b) for more than $1,000 if the holder of such
Claim has elected, on the Ballot provided for voting on the
Plan within the time fixed by the Bankruptcy Court for
completing and returning such ballot, to accept $250 in cash
in full satisfaction, discharge and release of such claim.
Class 5: Interests - the rights of any current or former holder or
owner of any shares of Old Common Stock or any other equity
security of the Debtors issued prior to the Confirmation Date.
ARTICLE V.
TREATMENT OF CLAIMS
The Claims against and Equity Interests in the Debtor shall be treated
under the Plan as follows:
Class 1: Priority Non-Tax Claims
Each holder of an Allowed Priority Non-tax Claims against the Debtor
shall receive on the Distribution Date on account of its Allowed
Priority Non-Tax Claim (1) the amount of such holder's Allowed Priority
Non-Tax Claim in one cash payment, or (2) such other treatment as may
be agreed upon in writing by the Debtor and such holder. Each such
agreement shall be presented to the Bankruptcy court for approval at or
prior to the Effective Date.
Class 2: HCFP Funding, Inc.
Reorganized Debtor will reaffirm all indebtedness owing to HCFP on the
effective date of the Plan, acknowledge the validity and first priority
of HCFP's liens and security interests, and the absence of any
defenses, setoff or counterclaims to Debtor's Obligations to HCFP. The
Reorganized Debtor will release HCFP from any and all claims which it
holds or which are assigned pursuant to the Plan.
Reorganized Debtor will execute a new Note, Loan and Security Agreement
with HCFP to secure the Reorganized Debtor's indebtedness under a
post-confirmation revolving line of credit ("line of credit"). The line
of credit will become operative on the later of the effective date of
the Plan, or when the Order confirming the Plan is final beyond appeal.
The line of credit shall be in the maximum amount of $4 million, but
shall not exceed 85% of Qualified Accounts, as defined in the Amended
and Restated Loan and Security Agreement attached to the Bankruptcy
Court's Order granting the Debtor's motion for interim debtor in
possession financing. When it becomes operative, the portion of HCFP's
post-petition claim that equals 85% of the Debtor's Qualified
Receivables on that date will be allocated to the line of credit and
treated as the Reorganized Debtor's initial indebtedness under the line
of credit. The line of credit will be secured by a first and senior
lien on all accounts, contract rights, general intangibles, licenses,
and the proceeds of any of the foregoing. Except as changes are
necessary or appropriate, all remaining terms of the line of credit
will be identical or similar in effect to those set forth in the
Amended and Restated Loan and Security Agreement attached to the
Bankruptcy Court's Order granting the Debtor's motion for interim
debtor in possession financing.
For the balance of HCFP's claim (i.e., the difference between its total
claim as of the Effective Date of the Plan minus the amount of HCFP's
claim that is allocated to the line of credit, as provided for above)
Reorganized Debtor will execute a three (3) year Note, in form and
substance acceptable to HCFP, which shall be repaid annually, with
quarterly interest payments, at a rate of prime plus 4%. In addition to
being secured by the Reorganized Debtor's accounts receivable, the Term
Note will be secured by a first and senior lien and security interest
covering all inventory, equipment, furniture and fixtures of Debtor,
and all proceeds of any of the foregoing (unless the continued priority
of any existing lien on such assets of Debtor is required for
confirmation of the Plan. On the effective date, as set forth in the
Term Sheet provided to the Bankruptcy Court at the hearing on the DIP
financing, HCFP will receive warrants for 750,000 shares of Reorganized
Debtor Stock, pursuant to a private placement, in return for HCFP
providing the Reorganized Debtor with exit financing.
All of the terms and conditions of the Bankruptcy Court's Order
granting the Debtor's motion for final debtor in possession financing,
signed by the Court on September 29, 1998, shall remain in effect from
the Confirmation Date through the Effective Date of the Plan.
Class 3: Unsecured Claims
On the Distribution Date, each holder of an Allowed Unsecured Claim
shall receive, in full satisfaction, settlement, release and discharge
of an in exchange for such Allowed Unsecured Claim, such holder's Pro
Rata Share of (a) 500,000 shares of Reorganized Debtor Stock issued on
the Effective Date pursuant to the Plan and (b) 50% of the net
Distributable Third Party Recoveries.
Class 4: Convenience Claims
On the Effective Date, or as soon thereafter as practicable, each
holder of a Class 4 Convenience Claim shall receive, in full
satisfaction, settlement, release and discharge of and in exchange for
the Class 4 Convenience Claim a cash payment equal to 25% of the amount
of the Claim, up to a maximum of $250.
Class 5: Interests
The holders of Interests will not receive any distribution of property
under the Plan on account of their Interests and, on the Effective
Date, the Interests shall be canceled.
ARTICLE VI.
PROVISIONS OF REORGANIZED DEBTOR
COMMON STOCK AND WARRANTS
ISSUED PURSUANT TO THE PLAN
---------------------------
6.1. Reorganized Debtor Common Stock
-------------------------------
The provisions of the Reorganized Debtor Common Stock to be issued
pursuant to the Plan are summarized as follows:
(a) New Equity Offering. On the Effective Date, the charter of
Reorganized Debtor shall authorize the issuance of 5,000,000 shares of
Reorganized Debtor Common Stock. Of such authorized shares, it is anticipated
that 2,500,000 shares shall be issued and sold, on the Effective Date, through a
private placement, to an investor group lead by John Pappajohn ("Pappajohn
Group"), a former major shareholder and a current member of the Board of
Directors. The Pappajohn Group will pay $1 million cash and assign to
Reorganized Debtor all causes of action they may have that in any way relate to
the Debtor, the Debtor's prior officers or directors, the issuance or purchase
of the Debtor's stock, or the Pappajohn Group's dealings with the Debtor.
(b) Unsecured Creditor Distributions. An additional 500,000 shares
shall be issued on the Effective Date to make the distributions contemplated by
the Plan to holders of Allowed Claims. Precise share allocation to a particular
Creditor under the Plan will be determined by the amount of Claims that will
ultimately become Allowed Claims.
(c) Stock Option Plan. In addition to the shares of Reorganized Debtor
Stock to be issued and distributed on the Distribution Date, up to 1,250,000
shares of the fully diluted share of Reorganized Debtor Stock will be reserved
for issuance to officers and key employees of Reorganized Debtor pursuant to
stock options as authorized by the terms of the Reorganized Debtor Stock Option
Plan (the "Stock Option Plan"). The precise number of share of Reorganized
Debtor Stock to be reserved for issuance to employees and the terms and
conditions of the options related to such shares shall be determined by the
Reorganized Debtor.
(d) Par Value. The Reorganized Debtor Common Stock shall have par value
of $0.01 per share.
(e) Listing of Reorganized Debtor Stock. In the Plan, Reorganized
Debtor commits itself to use its best efforts to cause the Reorganized Debtor
Stock to be listed for quotation by the National Association of Securities
Dealers Automated Quotation (" NASDAQ") National Market System. The Debtor,
however, cannot provide any assurance that Reorganized Debtor will be able to
effect the listing of the Reorganized Debtor Stock or that there will be a
public trading market for the Reorganized Debtor Stock whether or not it is
listed.
(f) Approval of Reorganized Debtor Stock Option Plan. The Plan and the
Disclosure Statement shall be deemed a solicitation to the prospective holders
of Reorganized Debtor Common Stock for approval of the Reorganized Debtor Stock
Option Plan, and the Confirmation Order shall constitute approval of the
Reorganized Debtor Stock Option Plan for purposes of Rule 16b-3 (a) under the
Securities Exchange Act of 1934.
6.2 Reorganized Debtor Warrants
---------------------------
The Reorganized Debtor Warrants will be exercisable for one share of
Reorganized Debtor Stock per warrant. 750,000 Reorganized Debtor Warrants will
be issued to HCFP under the Plan in return for providing exit financing to the
Reorganized Debtor. The terms of the Reorganized Debtor Warrants will include
the following:
(a) Payment of Exercise Price. Payment of the aggregate purchase price
for shares of Reorganized Debtor Stock to be acquired upon exercise of
Reorganized Debtor Warrants may be made in cash, by certified or official bank
check or bank wire transfer, or by any combination of the foregoing, exercisable
at $.075 per share.
(b) Fractional Interests. Reorganized Debtor may, but will not be
required to, issue fractional shares of Reorganized Debtor Stock on the exercise
of Reorganized Debtor Warrants. At its option, Reorganized Debtor may, but will
not be required to, pay an amount in cash calculated by it to be equal to the
then current market price per share of Reorganized Debtor Common Stock
multiplied by such fraction, computed to the nearest whole cent.
(c) Securities Exchange Listing. Reorganized Debtor shall use its best
efforts to cause the Reorganized Debtor Warrants to be listed for quotation on
NASDAQ National Market System. The Debtor, however, cannot provide any assurance
that Reorganized Debtor will be able to effect the listing of the Reorganized
Debtor Warrants or that there will be a public trading market for the
Reorganized Debtor Warrants whether or not they are listed.
(d) Expiration. The Reorganized Debtor Warrants shall expire five years
from the date issued.
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN
EFFECT OF REJECTION BY ONE OR MORE
CLASSES OR CLAIMS OR EQUITY INTERESTS
-------------------------------------
7.1. Classes Entitled to Vote.
Each impaired class of Claims shall be entitled to vote separately to
accept or reject the Plan as provided in the order entered by the Bankruptcy
Court governing the voting and balloting procedure. applicable to the Plan. Any
unimpaired class of Claims shall be deemed to have accepted the Plan. Any class
of Claims or Equity Interests that will not receive or retain any property on
account of such Claims or Equity Interests shall be deemed to have rejected the
Plan.
7.2. Class Acceptance Requirement.
A class of Claims shall have accepted the Plan if it is accepted by at
least two-thirds (2/3) in amount and more than one-half (1/2) in number of the
Allowed Claims in such class that have voted on the Plan.
7.3. Cramdown
If any class of Claims shall fail to accept the Plan in accordance with
section 1126(c) of the Bankruptcy Code, at the request of the Debtor, the
Bankruptcy Court may confirm the Plan in accordance with section 1129(b) of the
Bankruptcy Code. In the event that confirmation is requested under section
1129(b) of the Bankruptcy Code, the Debtor reserves the right to amend or
otherwise modify the Plan to eliminate distributions to holders of any Claims
junior to any class of Claims that is impaired under, and has not accepted, the
Plan in accordance with section 1129(b)(2) of the Bankruptcy Code.
ARTICLE VIII.
MEANS FOR IMPLEMENTATION OF THE PLAN
------------------------------------
8.1. Substantive Consolidation.
On the Effective Date: (1) all intercompany Claims, if any, by and
among the twenty (20) affiliated debtors constituting the Debtor will be
eliminated; (2) all obligations and guaranties executed by any of the Debtor
entities will be deemed to be one obligation of Reorganized Debtor; (3) any
Claim or Claims filed or to be filed against any of Debtor entities will be
deemed one Claim against Reorganized Debtor; (4) for purposes of determining the
availability of the right of offset under section 553 of the Bankruptcy Code,
the Debtor entities shall be treated as one entity so that, subject to the other
provisions of section 553 of the Bankruptcy Code, debts due to any of the Debtor
entities may be offset against the debts of any of the Debtor entities. On the
Effective Date, and in accordance with the terms of the Plan and the Substantive
Consolidation Order, all Claims based upon guaranties of collection, payment, or
performance made by one Debtor entity, as to the obligations of any other Debtor
entity, shall be discharged, released, and without further force and effect.
8.2. Boards of Directors.
The initial board of directors of Reorganized Debtor shall consist of
three directors, which will consist of Derace Schaffer, M.D., John Pappajohn,
and Michael P. Moran, the President and Chief Executive Officer. Such initial
board of directors shall be appointed pursuant to the Confirmation Order, such
appointment shall be deemed ratified by the initial holders of Reorganized
Debtor Common Stock, and the board of directors shall be authorized to take such
actions as may be necessary to fully consummate the Plan. The initial board of
directors of Reorganized Debtor shall also serve as the initial directors of the
Surviving Debtor Subsidiaries after the Effective Date.
8.3. Officers.
The current corporate officers of the Debtor shall serve as the initial
officers of Reorganized Debtor and the Surviving Debtor Subsidiaries on the
Effective Date.
8.4. Cancellation of Stock.
On the Effective Date, all existing Equity Interests shall, without any
further action, be canceled, annulled and extinguished and any certificates
representing such Equity Interests shall become void.
8.5. Vesting of Assets.
Except as specifically provided in the Plan, on the Effective Date, (1)
the property of the Debtor, including but not limited to any rights or causes of
action, whether under the Bankruptcy Code or other applicable law, shall vest in
Reorganized Debtor and (2) the property of the estates of each of the Surviving
Debtor Subsidiaries, shall vest in such respective surviving Debtor Subsidiary.
On and after the Effective Date, Reorganized Debtor and the Surviving Debtor
Subsidiaries may operate their businesses and may use, acquire, and dispose of
property free of any restrictions of the Bankruptcy Code. As of the Effective
Date, all property of Reorganized Debtor and the Surviving Debtor Subsidiaries,
shall be free and clear of all Claims and Equity Interests, except as
specifically provided in the Plan.
8.6. Assumption of Liabilities.
The liability for and obligations set forth in the Plan will be assumed
by Reorganized Debtor, which shall have the liability for, and obligation to
make, all distributions of notes, stock, warrants, or other instruments to be
issued by Reorganized Debtor under the Plan. The Cash payments to be made under
the Plan shall be made by Reorganized Debtor, except as otherwise provided in
the Plan. Reorganized Debtor shall also assume all liability and obligation to
pay any expenses of the Debtors in consummating the Plan.
8.7. Post Confirmation Operations
The Debtor shall operate post confirmation through the Surviving Debtor
Subsidiaries. All other entities shall cease operating and shall be dissolved
without the necessity of filing formal documentation in any jurisdiction of
incorporation.
The Debtor believes that it can return to profitability and provide a
meaningful return to its general unsecured creditors through limiting its
operations to the Surviving Debtor Subsidiaries. These subsidiaries are
currently generating annual revenues of approximately $18 million. It is the
Debtor's plan to continue streamlining the operations of the subsidiaries for
maximum efficiency, keep overhead low through limited executive management and
consolidation, and take advantage of growth opportunities in the mail order and
Internet medication business.
In order to operate the Surviving Debtor Subsidiaries post
confirmation, Debtor will need at least $1 million in cash to be utilized for
general operations. It is anticipated that this infusion of cash will be in
exchange for the receipt of 2,500,000 shares of Reorganized Debtor Stock. This
infusion of cash is necessary to the operations of the Reorganized Debtor.
Without the investment of capital, the Debtor may not be able to reorganize.
8.8. Assignment of Causes of Action.
(a) On the Effective Date, the Debtor shall be deemed to have assigned
to Reorganized Debtor any causes of action such the Debtor may hold on its own
behalf, against any Persons, including, but not limited to, the Debtor's former
directors, officers, and third party professionals.
(b) On the Effective Date, pursuant to the new equity private
placement, the Pappajohn Group will assign to Reorganized Debtor all causes of
action they may have that in any way relate to the Debtor, the Debtor's prior
officers or directors, the issuance or purchase of the Debtor's stock, or the
Pappajohn Group's dealings with the Debtor.
8.9. Prosecution of Designated Claims
The Reorganized Debtor shall prosecute all Designated Claims to
generate the Distributable Third Party Recoveries which will be distributed
pursuant to the Plan. The Reorganized Debtor will fund the initial expenses of
prosecuting the Designated Claims. Distributable Third Party Recoveries may be
used, in the Reorganized Debtor's discretion, to finance the prosecution of
Designated Claims.
8.10. Securities Law Matters.
It is an integral and essential element of this Plan that the issuance
to holders of Allowed Claims of Reorganized Debtor Common Stock and Warrants
pursuant to this Plan, and the subsequent exercise of Reorganized Debtor
Warrants by such holders or transferees to purchase the securities issuable
thereunder, shall be exempt from registration under the Securities Act of 1933,
as amended, pursuant to section 1145 of the Bankruptcy Code. Any such securities
issued to an "affiliate" of Reorganized Debtor within the meaning of the
Securities Act of 1933 or any Person Reorganized Debtor reasonably determines to
be an "underwriter," and which does not agree to resell such securities only in
"ordinary trading transactions," within the meaning of section 1145(b)(l) of the
Bankruptcy Code shall be subject to such transfer restrictions and bear such
legends as shall be appropriate to ensure compliance with the Securities Act of
1933. It is an integral and essential element of the Plan that Rule 144 under
the Securities Act of 1933 be available to any such "affiliate" that is not
otherwise such an "underwriter" for purposes of permitting resales of such
securities.
ARTICLE IX.
PROVISIONS GOVERNING DISTRIBUTIONS
9.1. Date of Distributions.
With respect to Reorganized Debtor Stock, for any Claim that is an
Allowed Claim on the Effective Date, distributions will be made the later of the
Effective Date or 30 days after the bar date, and for any Contested Claim, as
soon as practicable, but within 90 days after the date upon which such Claim
becomes an Allowed Claim. With respect to Distributable Third Party Recoveries,
to the extent available, distributions will be made on the Distribution Date,
and then so often as warranted, at least on an annual basis, but not more often
than every 90 days, until the Reorganized Debtor in good faith determines that
the Distributable Third Party Recoveries have been maximized. At that point, a
final distribution will be made.
9.2. Means of Cash Payment.
Cash payments made pursuant to the Plan shall be in U.S. funds, by
check drawn on a domestic bank, or, at Debtor's option, by wire transfer from a
domestic bank, except that payments made to foreign trade creditors holding
Allowed Unsecured Claims shall be in such funds and by such means as are
customary or as may be necessary in a particular foreign jurisdiction.
9.3. Calculation of Distribution Amounts of Securities
No fractional shares of Reorganized Debtor Common Stock or Debtor
Warrants shall be issued. Fractional shares or warrants shall be rounded to the
next greater or next lower number of shares or warrants as follows: (a)
fractions of 0.5 or greater shall be rounded to the next greater whole number,
and (b) fractions of less than 0.5 shall be rounded to the next lesser whole
number.
9.4. Delivery of Distributions.
Subject to Bankruptcy Rule 9010, distributions to holders of Allowed
Claims shall be made at the address of each such holder as set forth on the
proofs of Claim filed by such holders (or at the last known addresses of such a
holder if no proof of Claim is filed or if the Debtors have been notified in
writing of a change of address). If any holder's distribution is returned as
undeliverable, no further distributions to such holder shall be made unless and
until is notified of such holder's then current address, at which time all
missed distributions shall be made to such holder without interest. All Claims
for undeliverable distributions shall be made on or before the later of six (6)
months after the Distribution Date or ninety (90) days after such Claim is
Allowed. After such date, all unclaimed property shall revert to Debtor or its
successor and the Claim of any holder with respect to such property shall be
discharged and forever barred.
9.5. Time Bar to Cash Payments.
Checks issued by Debtor in respect of Allowed Claims shall be null and
void if not negotiated within six (6) months after the date of issuance thereof.
Requests for reissuance of any check shall be made directly to Debtor by the
holder of the Allowed Claim with respect to which such check originally was
issued. Any claim in respect of such a voided check shall be made on or before
the later of (1) the anniversary of the Effective Date or (2) ninety (90) days
after the date of issuance of such check. After such date, all claims in respect
of void checks shall be discharged and forever barred.
ARTICLE X.
PROCEDURES FOR RESOLVING AND TREATING CONTESTED AND
DISPUTED CLAIMS UNDER THE PLAN
------------------------------
10.1. Prosecution of Objections.
On and after the Effective Date, except as the Bankruptcy Court may
otherwise order, the filing, litigation, settlement, or withdrawal of all
objections shall be the responsibility of Reorganized Debtor.
10.2. No Distributions Pending Allowance.
Notwithstanding any other provision of the Plan, no payment or
distribution shall be made with respect to any Claim until such Contested Claim
becomes an Allowed Claim.
10.3. Distributions After Allowance.
Payments and distributions to each holder of a Contested Claim, to the
extent that such Claim ultimately becomes an Allowed Claim, shall be made in
accordance with the provisions of the Plan governing the class of Claims to
which the respective holder belongs. With respect to any Claim that is a
Contested Claim on the Effective Date, as soon as practicable after the date
that the order or judgment of the Bankruptcy Court allowing any Contested Claim
becomes a Final Order or a Contested Claim otherwise becomes an Allowed Claim,
the Reorganized Debtor shall distribute to the holders of such Claim any payment
or property, without interest, that would have been distributed to such holder
if the Claim had been Allowed on the Effective Date.
ARTICLE XII.
PROVISIONS GOVERNING EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN
-------------------------------
12.1. General Treatment: Rejected If Not Assumed
The Plan constitutes and incorporates a motion by the Debtors to
reject, as of the Confirmation Date, all prepetition executory contracts and
unexpired leases to which any of such Debtors are parties, except for an
executory contract or unexpired lease that (a) has been assumed or rejected
pursuant to Final Order of the Bankruptcy Court; (b) has been designated on a
schedule filed by the Debtor on or before the Confirmation Date as an executory
contract or unexpired lease to be assumed; or (c) is the subject of a separate
motion filed pursuant to section 365 of the Bankruptcy Code by the Debtors prior
to the Confirmation Date.
12.2. Bar to Rejection Damages.
If the rejection of an executory contract or unexpired lease by any of
the Debtors results in damages to the other party or parties to such contract or
lease, a Claim for such damages, if not heretofore evidenced by a filed proof of
Claim, shall be forever barred and shall not be enforceable against the Debtors,
or their respective properties or agents, successors, or assigns, unless a proof
of Claim is filed with the Bankruptcy Court and served upon counsel for the
Debtor on or before thirty (30) days after the earlier to occur of (a) the
filing by the Debtors of the schedule of executory contracts and unexpired
leases to be assumed or (b) the entry of an order by the Bankruptcy Court
authorizing rejection of a particular executory contract or lease.
ARTICLE XIII.
CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVE DATE
-------------------------------
13.1. Conditions Precedent to Confirmation of the Plan.
Confirmation of the Plan will not occur unless all the following
conditions precedent have been satisfied or have been waived by the Debtor:
(a) The entry of the Confirmation Order, in form and substance
acceptable to the Debtor;
(b) Debtor shall have obtained post-Effective Date financing as set
forth in this Plan and the Disclosure Statement.
13.2. Conditions Precedent to Effective Date of the Plan.
Unless waived by the Debtor, the occurrence of the Effective Date of
the Plan is subject to satisfaction of the following conditions precedent:
(a) All Plan Documents shall have been executed and delivered by the
parties thereto, and all conditions to the effectiveness of the Plan
Documents shall have been satisfied or waived as provided therein;
(b) All conditions to the making of advances under the post-Effective
Date financing referred to in section 13.1 of the Plan shall have been
satisfied or waived as provided in the documentation for such
financing.
ARTICLE XIV.
RETENTION OF JURISDICTION
-------------------------
14.1. Scope of Jurisdiction.
Pursuant to sections 1334 and 157 of title 28 of the United States
Code, the Bankruptcy Court shall retain and have jurisdiction of all matters
arising in, arising under, and related to the Chapter 11 Cases and the Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:
(a) To hear and determine pending applications for the assumption
or rejection of executory contracts or unexpired leases and
the allowance of Claims resulting therefrom;
(b) To hear and determine any and all adversary proceedings,
applications, and contested matters, including any remands of
appeals;
(c) To ensure that distributions to holders of Allowed Claims are
accomplished as provided herein;
(d) To hear and determine any timely objections to or applications
concerning Clams or the allowance, classification, priority,
compromise, estimation, or payment of any Administrative
Claim;
(e) To enter and implement such orders as nay be appropriate in
the event the Confirmation Order is for any reason stayed,
revoked, modified, reversed, or vacated;
(f) To enter and implement such orders as nay be necessary or
appropriate to execute, interpret, implement, consummate, or
enforce the Plan and the transactions contemplated thereunder;
(g) To consider any modification of the Plan pursuant to section
1127 of the Bankruptcy Code, to cure any defect or omission,
or reconcile any inconsistency in any order of the Bankruptcy
Court, including, without limitation the Confirmation Order;
(h) To hear and determine all Fee Applications and Fee Claims;
(i) To hear and determine disputes arising in connection with the
execution, interpretation, implementation, consummation, or
enforcement of the Plan;
(j) To enter and implement orders or take such other actions as
may be necessary or appropriate to restrain interference by
any entity with the consummation or implementation of the
Plan, including, without limitation, to issue, administer, and
enforce injunctions, releases, assignments, or indemnity or
guaranty obligations contained in the Plan and the
Confirmation Order;
(k) To hear and determine motions seeking a compromise,
settlement, release, or abandonment of any Contested Claim or
Designated Claim or any claim or cause of action arising on or
before the Effective Date by or against the Debtor, the
Surviving Debtor Subsidiaries, or any of the Debtors;
(1) To recover all assets of the Debtors and property of the
estates, wherever located;
(m) To hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146
of the Bankruptcy Code;
(n) To hear and determine any other matter not inconsistent with
the Bankruptcy Code and title 28 of the United States Code
that nay arise in connection with or related to the Plan; and
(o) To enter a final decree closing the Chapter 11 Cases.
14.2. Failure of the Bankruptcy Court to Exercise Jurisdiction.
If the Bankruptcy Court abstains from exercising, or declines to
exercise, jurisdiction or is otherwise without jurisdiction over any matter
arising in, arising under, or related to the Chapter 11 Cases, including the
matters set forth in this section 14.1 of the Plan, this Article XIV shall have
no effect upon and shall not control, prohibit, or limit the exercise of
jurisdiction by any other court having jurisdiction with respect to such matter.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
------------------------
15.1. Setoff Rights.
In the event that the Debtors have a claim of any nature whatsoever
against the holder of a Claim, the Debtors may, but are not required to, setoff
against the Claim (and any payments or other distributions to be made in respect
of such Claim hereunder) their claim against the holder, unless any such claim
is or will be released under the Plan, subject to the provisions of section 553
of the Bankruptcy Code. Neither the failure to set off nor the allowance of any
Claim under the Plan shall constitute a waiver or release by the Debtors of any
claim that the Debtors have against the holder of a Claim.
15.2. Compliance with Tax Requirements.
In connection with the Plan, the Debtor and the Surviving Debtor
Subsidiaries, as the case may be, shall comply with all withholding and
reporting requirements imposed by federal, state, local, and foreign taxing
authorities and all distributions hereunder shall be subject to such withholding
and reporting requirements.
15.3. Recognition of Guaranty Rights.
The classification of and manner of satisfying all Claims under the
Plan take into consideration (1) the existence of guaranties by the Debtors of
obligations of other Persons, and (2) the fact that the Debtors may be joint
obligors with each other or other Persons with respect to an obligation. All
Claims against any of the Debtors based upon any such guaranties or joint
obligations shall be discharged in the manner provided in the Plan; provided,
however, that no creditor shall be entitled to receive more than one recovery
with respect to any of its Allowed Claims.
15.4. Satisfaction of Contractual Subordination Rights.
Except as otherwise provided in the Plan, all Claims based upon any
claimed contractual subordination rights pursuant to any provision of the
Bankruptcy Code or other applicable law, shall be deemed satisfied by the
distributions under the Plan to holders of Allowed Claims having any such
contractual subordination rights. The distributions to the various classes of
Claims hereunder shall not be subject to levy, garnishment, attachment, or like
legal process by any holder of a Claim or Equity Interest by reason of any
claimed contractual subordination rights or otherwise of the holder of a Claim
or Equity Interest against the holder of another Claim or Equity Interest,
except as otherwise provided herein. On the Effective Date, all holders of
Claims shall be deemed to have waived any and all contractual subordination
rights that they may have with respect to such distributions, and the Bankruptcy
Court shall permanently enjoin, effective as of the Effective Date, all such
holders from enforcing or attempting to enforce any such rights with respect to
such distributions.
15.5. Discharge of Claims.
Except as otherwise provided herein or in the Confirmation Order, the
rights afforded in the Plan and the payments and distributions to be made
hereunder shall discharge all existing debts and Claims of any kind, nature, or
description whatsoever against the Debtors or any of their assets or properties
to the extent permitted by section 1141 of the Bankruptcy Code; upon the
Effective Date, all existing Claims against the Debtors shall be, and shall be
deemed to be discharged; and all holders of Claims shall be precluded from
asserting against the Debtors, or any of their assets or properties, any other
or further Claim based upon any act or omission, transaction, or other activity
of any kind or nature that occurred prior to the Effective Date, whether or not
such holder filed a proof of Claim.
15.6. Discharge of Debtors.
Any consideration distributed under the Plan shall be in exchange for
and in complete satisfaction, discharge, and release of all Claims of any nature
whatsoever against the Debtors or any of their assets or properties; and, except
as otherwise provided herein, upon the Effective Date, the Debtors shall be
deemed discharged and released to the extent permitted by section 1141 of the
Bankruptcy Code from any and all Claims, including but not limited to demands
and liabilities that arose before the Effective Date, and all debts of the kind
specified in section 502(g), 502(h), or 502(I) of the Bankruptcy Code, whether
or not (a) a proof of Claim based upon such debt is filed or deemed filed under
section 501 of the Bankruptcy Code; (b) a Claim based upon such debt is allowed
under section 502 of the Bankruptcy Code; or (c) the holder of a Claim based
upon such debt has accepted the Plan. Except as provided herein, the
Confirmation Order shall be a judicial determination of discharge of all
liabilities of the Debtors. As provided in section 524 of the Bankruptcy Code,
such discharge shall void any judgment against the Debtors at any time obtained
to the extent it relates to a Claim discharged, and operates as an injunction
against the prosecution of any action against the Debtors, or the property of
any of them, to the extent it relates to a Claim discharged.
15.7. Exculpations.
Neither the Debtors, nor any of their respective members, officers,
directors, employees, agents, or professionals shall have or incur any liability
to any holder of a Claim or Equity Interest for any act, event, or omission in
connection with, or arising out of, the Chapter 11 Cases, the confirmation of
the Plan, the consummation of the Plan, or the administration of the Plan or the
property to be distributed under the Plan, except for willful misconduct or
gross negligence. This provision in no way alters the result under ss. 524(e) of
the Bankruptcy Code.
15.8. De Minimus Distributions.
No distribution of less than twenty-five dollars ($25) or fewer than
five (5) shares of Debtor Common Stock shall be made to any holder of an Allowed
Claim. Such undistributed amount will be retained by Debtor.
15.9. Payment of Statutory Fees.
All fees payable pursuant to section 1930 of title 28 of the United
States Code, as determined by the Bankruptcy Court at the Confirmation Hearing,
shall be paid on or before the Effective Date.
15.10. Designated Claims.
All Designated Claim shall be assigned to the Debtor, which may pursue
such Designated Claim as appropriate. The Debtor shall have the power to settle
or otherwise litigate any such Designated Claim for the benefit of the Debtor
and the holders of Allowed Class 3 Claims.
15.11. Post-Effective Date Fees and Expenses of Professional Persons.
After the Effective Date, Debtor shall, in the ordinary course of
business and without the necessity for any approval by the Bankruptcy Court, pay
the reasonable fees and expenses of the Professional Persons employed by the
Debtor related to implementation and consummation of the Plan provided, however,
that no such fees and expenses shall be paid except upon receipt by Debtor of a
written invoice, which invoice shall also be served upon counsel for the Debtor,
counsel for HCFP and the United States Trustee, from the Professional Person
seeking fee and expense reimbursement and provided, further, however, that
Debtor or counsel for HCFP may, within ten (10) days after receipt of an invoice
for fees and expenses, request that the Bankruptcy Court determine any such
request. Service to counsel for HCFP is to be made to : Preston Towber, Goforth,
Lewis & Williams, L.L.P., 1111 Bagby Street, 22nd Floor, Houston, TX 77002.
15.12. Binding Effect.
The Plan shall be binding upon the Debtors, the holders of Claims,
the holders of Equity Interests, and their respective successors and assigns;
provided, however, that if the Plan is not confirmed, the Plan shall be deemed
null and void and nothing contained herein shall be deemed (I) to constitute a
waiver or release of any Claim by the Debtor or any other Person, (ii) to
prejudice in any manner the rights of the Debtors or any other Person, or (iii)
to constitute any admission by the Debtors or any other Person.
15.13. Service on Debtor
Whenever service on the Debtor is required in the Plan, such service
shall be made upon the following so as to be received by 5:00 p.m. C.S.T. on or
before the date required:
Hazen & Terrill, P.C.
111 Congress, Suite 800
Austin, TX 78701
(512) 477-9997
(512) 457-9898 (fax)
15.14. Governing Law.
Unless a rule of law or procedure is supplied by federal law (including
the Bankruptcy Code and Bankruptcy Rules) or the Delaware General Corporation
Law or the law of the jurisdiction of organization of any entity, the internal
laws of the State of Texas shall govern the construction and implementation of
the Plan and any agreements, documents, and instruments executed in connection
with the Plan or the Chapter 11 Cases, including the Plan Documents, except as
may otherwise be provided in such agreements, documents, instruments, and Plan
Documents.
15.15. Modification of Plan.
Modifications of the Plan may be proposed in writing by the Debtors at
any time before the Confirmation Date, provided that (a) the Plan, as modified,
meets the requirements of sections 1122 and 1123 of the Bankruptcy Code, and (b)
the Debtor shall have complied with section 1125 of the Bankruptcy Code. The
Plan may be modified at any time after the Confirmation Date and before
substantial consummation by the Debtors provided that (I) the Plan, as modified,
meets the requirements of sections 1122 and 1123 of the Bankruptcy Code; (ii)
the Bankruptcy Court, after notice and a hearing, confirms the Plan as modified,
under section 1129 of the Bankruptcy Code; and (iii) the circumstances warrant
such modifications. A holder of a Claim that has accepted or rejected the Plan
shall be deemed to have accepted or rejected, as the case may be, such plan as
modified, unless, within the time fixed by the Bankruptcy Court, such holder
changes its previous acceptance or rejection.
15.16. Severability.
-------------
SHOULD THE BANKRUPTCY COURT DETERMINE THAT ANY PROVISION OF THE PLAN IS
UNENFORCEABLE EITHER ON ITS FACE OR AS APPLIED TO ANY CLAIM OR EQUITY INTEREST
OR TRANSACTION, THE DEBTOR MAY MODIFY THE PLAN IN ACCORDANCE WITH ARTICLE 15 OF
THE PLAN SO THAT SUCH PROVISION SHALL NOT BE APPLICABLE TO THE HOLDER OF ANY
CLAIM OR EQUITY INTEREST. SUCH A DETERMINATION OF ENFORCEABILITY SHALL NOT (1)
LIMIT OR AFFECT THE ENFORCEABILITY AND OPERATIVE EFFECT OF ANY OTHER PROVISION
OF THE PLAN OR (2) REQUIRE THE RESOLICITATION OF ANY ACCEPTANCE OR REJECTION OF
THE PLAN.
Dated: Austin, Texas
January 2, 1998
RESTATED CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
Pursuant to Sections 242, 245 and 303 of the
General Corporation Law of the State of Delaware
The Care Group, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
1. The name of the corporation is The Care Group, Inc., and
the date of filing its original Certificate of Incorporation with the Secretary
of State was February 3, 1989.
2. This Restated Certificate of Incorporation restates and
amends the previous Certificate of Incorporation, as amended, in accordance with
the provisions of Sections 242, 245 and 303 of the General Corporation Law of
the State of Delaware.
3. This Restated Certificate of Incorporation is being filed
pursuant to and in accordance with the Order Confirming Plan of Reorganization
under Chapter 11 of the Bankruptcy Code for The Care Group, Inc. and its
Affiliated Debtors filed on February 1, 1999 in the United States Bankruptcy
Court for the Western Division of Texas, Austin Division.
4. The text of the Restated Certificate of Incorporation of
The Care Group, Inc. is amended to read in its entirety as set forth below:
RESTATED CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
FIRST: The name of the corporation shall be Allion Healthcare,
Inc. (the "Corporation").
THIRD: The address of the registered agent of the Corporation
in the State of Delaware is 1013 Centre Road, Wilmington, New Castle County,
Delaware 19805. The name of the registered agent of the Corporation at such
address is Corporation Services Company.
FOURTH: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FIFTH: The total number of shares of stock which the
Corporation shall have authority to issue is five million (5,000,000) shares of
Common Stock, par value $.001 per share.
SIXTH: The name and the mailing address of the incorporator
are as follows:
Michael Moran
c/o Allion Healthcare, Inc.
33 Walt Whitman Road
Suite 200A
Huntington Station, New York 11746
SEVENTH: The Board of Directors, which shall initially consist
of three (3) members, is expressly authorized to adopt, amend or repeal By-Laws,
subject to the reserved power of the stockholders to amend and repeal any
By-Laws adopted by the Board of Directors.
EIGHTH: The Corporation will not issue nonvoting equity
securities to the extent that such issuance is prohibited by Section 1123 of the
Bankruptcy Code as in effect on the effective date of the Plan, provided,
however, that this section Eighth (a) shall have no further force and effect
beyond that required under Section 1123 of the Bankruptcy Code, (b) will have
such force and effect, if any, only for as long as such section is in effect and
applicable to the Corporation, and (c) in all events, may be amended or
eliminated in accordance with applicable law as from time to time in effect.
NINTH: No action required or permitted to be taken at any
annual or special meeting of stockholders of the Corporation may be taken by
written consent of less than all the stockholders without a meeting of such
stockholders.
TENTH: Unless and except to the extent that the By-Laws shall
so require, the election of directors of the Corporation need not be by written
ballot.
ELEVENTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this corporation
under Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
corporation under Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
TWELFTH: No person who is or was a director of the Corporation
shall be personally liable to the Corporation for monetary damages for breach of
fiduciary duty as a director unless, and only to the extent that, such director
is liable (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. No amendment to,
repeal or adoption of any provision of the certificate of incorporation
inconsistent with this article shall apply to or have any effect on the
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision.
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by Michael P. Moran, its President, as of this 29thday
of September, 1999.
By: /s/ Michael P. Moran
Michael Moran
President
AMENDED AND RESTATED
BY-LAWS
OF
ALLION HEALTHCARE, INC.
October 7, 1999
ARTICLE I
Offices
-------
Section 1. Registered Office. The registered office of Allion
Healthcare, Inc. (the "Corporation") shall be located at 1013 Centre Road,
Wilmington, Delaware 19805.
Section 2. Other Offices. The Corporation may also have offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meetings. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and time, within or
without the State of Delaware, as the Board of Directors shall determine.
Section 2. Special Meeting. Special meetings of the stockholders for
the transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors, the Executive Committee or by
stockholders holding together at least a majority of all the shares of the
Corporation entitled to vote at the meeting, and shall be held at such date and
time, within or without the State of Delaware, as may be specified by such
order.
Section 3. Notice. Written notice of all meetings of stockholders shall
be given to each stockholder of record who is entitled to vote at such meetings,
stating the place, date, and time of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Except as
otherwise provided by law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than ten (10) days nor more than sixty (60) days
before the date of the meeting, and directed to each stockholder of record at
such stockholder's record address. Notice by mail shall be deemed to be given
when deposited, with postage thereon prepaid, in the United States mails. If a
meeting is adjourned to another time, not more than thirty (30) days thereafter,
and/or to another place, and if an announcement of the adjourned time and/or
place is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless, after adjournment, a new record date is fixed for the
adjourned meeting.
Section 4. Stockholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city or other municipality or
community where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place where
the meeting is to be held and during the whole time of the meeting, and may be
inspected by any stockholder who is present.
Section 5. Proxy Representation. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder granting such
proxy or by his attorney-in-fact. No proxy shall be voted or acted upon after
three (3) years from its date unless such proxy provides for a longer period. A
duly executed proxy shall be irrevocable if it states that it is irrevocable
and, if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power.
Section 6. Quorum; Adjournments. Except as otherwise provided by law, a
quorum for the transaction of business at any meeting of stockholders shall
consist of the holders of record of a majority of the shares of the capital
stock of the Corporation, issued and outstanding, entitled to vote at the
meeting, present in person or by proxy. In the absence of a quorum at any
meeting or any adjournment thereof, the holders of record of a majority of the
shares present in person or by proxy and entitled to vote at such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 7. Conduct of Meeting. Meetings of stockholders shall be
presided over by the President, a Vice President, or, if none of the foregoing
is present, by a chairman to be chosen by the stockholders entitled to vote who
are present in person or by proxy at the meeting. The Secretary of the
Corporation shall act as secretary of every meeting, but if the Secretary is not
present, the presiding officer of the meeting shall appoint any person present
to act as secretary of the meeting.
Section 8. Voting. At each meeting of stockholders, each stockholder
entitled to vote any shares on any matter to be voted upon at such meeting shall
be entitled to one vote on such matter for each such share. In the election of
directors, a plurality of the votes cast shall elect. Any other action shall be
authorized by a majority of the votes cast, except as otherwise provided by law.
Voting by ballot shall not be required for the election of directors or any
other corporate action, except as otherwise provided by law.
Section 9. Written Consent of Shareholders Without a Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required to
be taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having no less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Written consent shall bear the date of the signature of each stockholder who
signs the consent and no consent shall be effective to take the corporate action
referred to therein unless written consents sufficient to approve the action are
delivered to the corporation within sixty (60) days of the earliest dated
consent. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Directors
Section 1. Functions and Definition. The business and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors. The use of the phrase "whole Board" herein refers to the total number
of directors which the Corporation would have if there were no vacancies.
Section 2. Qualifications and Number. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the whole Board may be fixed from
time to time by action of the Board of Directors, and until so fixed, shall be
three.
Section 3. Election and Term. The initial Board of Directors shall be
elected by the Incorporator and shall hold office until the first annual meeting
of stockholders or until their successors are elected and qualified or until
their earlier resignation or removal. Thereafter, directors who are elected at
an annual meeting of stockholders, and directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal.
Section 4. Annual Meeting. Following each annual election of directors,
the newly elected Board shall meet for the purpose of the election of officers
and the transaction of such other business as may properly come before the
meeting.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors shall from time
to time by resolution determine.
Section 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the direction of the President or by a majority
of the directors then in office.
Section 7. Place. Meetings of the Board of Directors may be held at any
place within or without the State of Delaware.
Section 8. Notice. A notice of the place, date and time and the purpose
or purposes of each meeting of the Board of Directors shall be given to each
director by mailing the same at least two (2) days before the meeting, or by
sending by facsimile or telephoning the same or by delivering the same
personally not later than the day before the meeting, at the residence address
of each director or at his usual place of business.
Section 9. Quorum. Except as otherwise provided by law, a majority of
the whole Board shall constitute a quorum. A majority of the directors present,
whether or not a quorum is present, may adjourn a meeting from time to time to
another time and place without notice. The vote of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 10. Organization. At all meetings of the Board of Directors,
the President or, in his absence, a chairman chosen by the directors shall
preside. The Secretary of the Corporation shall act as secretary at all meetings
of the Board of Directors when present, and, in his absence, the presiding
officer may appoint any person to act as secretary.
Section 11. Resignation and Removal of Directors. Any director may
resign at any time, and such resignation shall take effect upon receipt thereof
by the President or Secretary, unless otherwise specified in the resignation.
Any or all of the directors may be removed, with or without cause, by the
holders of a majority of the shares of stock outstanding and entitled to vote
for the election of directors.
Section 12. Vacancies. Unless otherwise provided in the Certificate of
Incorporation or in these By-Laws, vacancies among the directors, whether caused
by resignation, death, disqualification, removal, an increase in the authorized
number of directors or otherwise, may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Section 13. Action Without a Meeting. Any action required or permitted
to be taken by the Board of Directors or a committee thereof may be taken
without a meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board or committee shall
be filed with the minutes of the proceedings of the Board or committee.
Section 14. Telephone, etc. Meetings. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such a meeting.
ARTICLE IV
Committees
----------
Section 1. Executive Committee. The Board of Directors, by a resolution
passed by a vote of a majority of the whole Board, may appoint an Executive
Committee of two or more directors which, except as otherwise provided by the
Board of Directors, shall have and exercise all the powers of the Board of
Directors in the management of the property, business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided, however, that the Executive Committee
shall not have any power or authority to declare dividends, issue stock,
recommend to the stockholders any action requiring their approval, change the
membership of any committee at any time, fill vacancies on the Board or on any
committee thereof, discharge any committee either with or without cause at any
time, elect officers or amend or repeal the By-Laws of the Corporation. The
Board of Directors shall appoint the Chairman of the Executive Committee and may
designate one or more directors as alternate members of the Executive Committee,
who may replace any absent or disqualified member at any meeting of the
Executive Committee. Vacancies on the Executive Committee shall be filled by the
Board of Directors in the same manner as original appointments to such
Committee.
Section 2. Other Committees. From time to time the Board of Directors
by a resolution adopted by a majority of the whole Board may appoint any other
committee or committees for any purpose or purposes, to the extent lawful, which
shall have such powers as shall be determined and specified by the Board of
Directors in the resolution of appointment.
Section 3. Procedures Applicable to All Committees. Each committee
shall fix its own rules of procedure, and shall meet where and as provided by
such rules or by resolution of the Board of Directors. The presence of a
majority of the then appointed members of a committee shall constitute a quorum
for the transaction of business by that committee, and in every case where a
quorum is present the affirmative vote of a majority of the members of the
committee present shall be the act of the committee. Each committee shall keep
minutes of its proceedings, and any action taken by a committee shall be
reported to the Board of Directors at its meeting next succeeding such action.
Section 4. Termination of Committee Membership. In the event any person
shall cease to be a director of the Corporation, such person shall
simultaneously therewith cease to be a member of any committee appointed by the
Board of Directors.
ARTICLE V
Officers
--------
Section 1. Executive Officers. The executive officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and a
Secretary, all of whom shall be elected annually by the Board of Directors.
Unless otherwise provided in the resolution of election, each officer shall hold
office until the next annual election of directors and until his successor shall
have been qualified or until his earlier resignation or removal. Any number of
such offices may be held by the same person.
Section 2. Other Officers. The Board of Directors may appoint such
other officers and agents as it may deem necessary or advisable, for such term
as the Board of Directors shall fix in such appointment, who shall have such
authority and perform such duties as may from time to time be prescribed by the
Board.
Section 3. Resignation and Removal. Any officer may resign his office
at any time and such resignation shall take effect upon receipt thereof by the
President or Secretary, unless otherwise specified in the resignation. All
officers, agents and employees of the Corporation shall be subject to removal,
with or without cause, at any time by the affirmative vote of a majority of the
whole Board. The power to remove agents and employees, other than officers or
agents elected or appointed by the Board of Directors, may be delegated as the
Board of Directors shall determine.
Section 4. President. The President shall be the chief executive
officer of the Corporation and shall have the general powers and duties of
supervision and management of the Corporation, subject, however, to the control
of the Board of Directors. The President shall also perform all duties incident
to the office of President and such other duties as may from time to time be
assigned to him by the Board of Directors.
Section 5. Vice Presidents. A Vice President shall perform such duties
and shall have such authority as from time to time may be assigned to him by the
Board of Directors or the President.
Section 6. The Treasurer. Subject to the direction of the Board of
Directors, the Treasurer shall have the general care and custody of all the
funds and securities of the Corporation which may come into his hands and shall
deposit the same to the credit of the Corporation in such bank or banks or
depositories as from time to time may be designated by the Board of Directors,
and shall pay out and dispose of the same under the direction of the Board of
Directors. The Treasurer shall in general perform all duties incident to the
position of Treasurer and such other duties as may be assigned to him by the
Board of Directors or the -President.
Section 7. The Secretary. The Secretary shall keep the minutes of all
proceedings of the Board of Directors and the minutes of all meetings of the
stockholders and also, unless otherwise directed by such committee, the minutes
of each committee, in books provided for that purpose, of which he shall be the
custodian; he shall attend to the giving and serving of all notices for the
Corporation; he shall have charge of the seal of the Corporation, of the stock
certificate books and such other books and papers as the Board of Directors may
direct; and he shall in general perform all the duties incident to the office of
Secretary and such other duties as may be assigned to him by the Board of
Directors or the President.
ARTICLE VI
Stock
-----
Section 1. Form and Execution of Certificates. The certificates of
shares of stock of the Corporation shall be in such form as shall be approved by
the Board of Directors. The certificates shall be signed by the President or a
Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, and shall be sealed with the seal of the Corporation. In
case any officer who has signed such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of its issue.
The Corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
Section 2. Stock Transfers. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, transfers
or registration of transfers of shares of stock of the Corporation shall be made
only on the stock ledger of the Corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation and on surrender of the certificate
or certificates for such shares of stock properly endorsed and the payment of
all taxes due thereon.
Section 3. Record Date for Stockholders. For the purpose of determining
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent or dissent from any corporate
action in writing without a meeting, or for the purpose of determining the
stockholders entitled to receive payment of any dividend or other distribution
or the allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion, or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a date as the record
date for any such determination of stockholders, which shall not be more than
sixty (60) days nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action.
ARTICLE VII
Indemnification
---------------
Section 1. Action, Etc., Other Than By or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contenders or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Section 2. Actions, Etc., By or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Determination of Right of Indemnification. Any
indemnification under Section 7.1 or 7.2 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.1 and 7.2. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Section 4. Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.1 or 7.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 5. Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
Section 6. Other Rights and Remedies. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7. Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 8. Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
Section 9. Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE VIII
Waiver of Notice
----------------
Any person may waive any notice required to be given by law, in the
Certificate of Incorporation or under these By-Laws (i) by attendance in person,
or by proxy if a stockholder, at any meeting, except when such person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened, or (ii) by a writing signed by the person or persons entitled to said
notice, whether before or after the time stated in said notice, which waiver
shall be deemed equivalent to such notice. Neither the business to be transacted
at, nor the purpose of, any regular special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice.
ARTICLE IX
Contracts
---------
The Board of Directors may authorize any officer or officers, agent or
agents, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
ARTICLE X
Corporate Seal
--------------
The seal of the Corporation shall be circular in form and contain the
name of the Corporation, the words "Corporate Seal" and "Allion Healthcare,
Inc." and the year of incorporation of the Corporation, which seal shall be in
charge of the Secretary to be used as directed by the Board of Directors.
ARTICLE XI
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed, and shall be subject
to change, by the Board of Directors. Unless otherwise fixed by the Board of
Directors, the fiscal year of the Corporation shall commence on the first day of
January of each year (except for the Corporation's first fiscal year which shall
commence on the date of incorporation) and shall terminate, in each case, on
December 31.
ARTICLE XII
Amendments
----------
The Board of Directors shall have power to adopt, amend or repeal
By-Laws. By-Laws adopted by the Board of Directors may be repealed or changed,
and new By-Laws made, by the unanimous written consent of the stockholders.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and
entered into as of the 25th day of June 1999, by and between THE CARE GROUP OF
TEXAS, INC. a Texas business corporation, and CARE LINE OF HOUSTON, INC., a
Texas business corporation,, (collectively referred to as "Seller") and OSHER
INVESTMENTS, LTD., a Texas limited partnership ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is a Texas business corporation and Seller
owns and operates an infusion therapy services company, which is located at 9299
Kirby Drive, Houston, Texas 77054, and which has the following two components:
(a) The Care Group of Texas, Employer Identification Number 76-0338055, and (b)
Care Line of Houston, Inc., Employer Identification Number 76-0350720
(collectively referred to herein as the "Business"), both of which are
wholly-owned subsidiaries of Allion Healthcare, Inc.
WHEREAS, Buyer is a Texas limited partnership and provides
home health services;
WHEREAS, Seller desires to sell certain tangible and
intangible assets to Buyer upon the terms and conditions contained herein, and
Buyer desires to purchase such assets from Seller.
NOW, THEREFORE, for and in consideration of the premises, and
the agreements, mutual covenants, representations, and warranties hereinafter
set forth, and other good and valuable consideration, the receipt and adequacy
of which are forever acknowledged and confessed, the parties hereto covenant and
agree as follows:
1. SALE OF ASSETS AND CERTAIN RELATED MATTERS
1.1 SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Seller agrees to sell, convey, transfer, and deliver to Buyer
and Buyer agrees to purchase as of Closing (as defined in Section 3.1) all
tangible and intangible assets (except as set forth in Section 1.2 hereof) owned
by Seller and associated with or employed in the operations of the Business,
including, without limitation, the following items (collectively, the "Assets"):
(A) all major, minor, and other equipment, furniture
and furnishings, machinery, appliances, tools, instruments, and other
tangible personal property, including, without limitation, those items
listed in Schedule l.l(b) hereto;
(B) all supplies, inventory, prepaids and deposits
including, without limitation, all medicines, drugs, medical products
and devices, janitorial and office supplies, including, without
limitation, those items listed in Schedule 1.1(b) hereto;
(C) all equipment records and manuals, operating and
protocol manuals, and computer software owned by Seller and used in the
Business;
(D) all patient, medical, and personnel records
(including, without limitation, medical administrative libraries,
medical records, patient billing records, documents, catalogs, books,
records, and files);
(E) all prepaid expenses, claims for refunds, and
rights of offset, except as listed on Schedule 1.1(e);
(F) all names, trade names, assumed names,
trademarks, and service marks, (or variations thereof), including, but
not limited to, the names "The Care Group of Texas, Inc.," and "Care
Line of Houston, Inc." and any derivations thereof together with all
goodwill associated therewith;
(G) all licenses and permits, including without
limitation, the Medicare and other provider numbers to the extent
assignable, that are held by Seller;
(H) all patents and patent applications;
(I) all phone numbers used in connection with the
Business, including, but not limited to, the numbers listed on Schedule
1.1(i);
(J) all of Seller's interest in any commitments,
contracts, leases, and agreements, including without limitation, those
which Buyer elects to assume in writing pursuant to the terms of the
Assignment and Assumption Agreement (as hereinafter defined) and which
are described on Schedule 4.4 hereto (collectively the "Contracts");
and
(K) all books, records and files, including without
limitation, client information, employee and contractor files, and
financial statements and documents relating to the Business or the
Assets.
Seller shall convey good and marketable title to the Assets
and all parts thereof to Buyer free and clear of all agreements, liabilities,
claims, assessments, security interests, liens, pledges, rights of first
refusal, options, restrictions, and encumbrances, and defects in title except
for the Assumed Liabilities (as hereinafter defined) and any other items
expressly provided herein.
1.2 EXCLUDED ASSETS. T he following items, which are part of
the Business and related to the Assets, are not intended by the parties to be a
part of the sale and purchase contemplated hereunder and are specifically
excluded from the Assets:
(A) cash in Seller's bank accounts,
(B) the accounts receivable of Seller,
(C) any records that by law Seller is required to
retain in its possession, and
(D) those items specifically described in Schedule
1,24(d) hereto.
All other assets of Seller associated with or employed in the
operations of the Business, whether or not scheduled or described herein, are
included in the Assets to be conveyed to Buyer pursuant to this Agreement.
1.3 ASSUMED LIABILITIES. As of Closing, Buyer agrees to assume
the future payment and performance of the following liabilities and obligations
of the Seller (collectively, the "Assumed Liabilities"):
(A) the Contracts listed in Section 4.4 of this
Agreement;
(B) the remaining liability for the Metamed Software
after the `initial payment by Allion Healthcare of $15,000.00;
(C) that one certain professional office lease
executed February 6, 1998, between Lessor A J Partners Limited
Partnership and The Care Group, Inc. (n/k/a Allion Healthcare, Inc.)
and The Care Group of Texas, Inc., both as Lessees, for the rental of
9299 Kirby Drive, Houston, Texas 77054 (the "Office Lease");
(D) such other liabilities of Seller as Buyer
expressly elects to assume in writing.
1.4 EXCLUDED LIABILITIES. Except as expressly provided to the
contrary in StctiQn-L3-above, Buyer is not assuming and under no circumstance
shall Buyer be obligated to pay or assume, and none of the Assets shall be or
become liable for or subject to, any liability of Seller, whether known or
unknown, fixed or contingent, recorded or unrecorded, including, without
limitation, the following (collectively, the "Excluded Liabilities"):
(A) indebtedness and other obligations or guarantees
of Seller, including, without limitation, current liabilities of Seller
and those listed on Schedule 1.4(a);
(B) federal, state, or local tax liabilities or
obligations of Seller including, but not limited to, real property,
personal and ad valorem taxes in respect of periods prior to Closing;
(C) liabilities or obligations arising out of any
breach by Seller at any time of any contract or commitment, whether or
not assumed by Buyer;
(D) any liability arising out of or in connection
with claims for acts or omissions of Seller or Seller's partners,
members, employees, agents, or independent contractors, which allegedly
occurred prior to or as of Closing, including, without limitation, all
malpractice and general liability claims, whether or not same are
pending, threatened, known or unknown;
(E) liability prior to the Closing Date for any and
all claims by or on behalf of Seller's employees, including, without
limitation, liability for any pension, profit sharing, deferred
compensation or any other employee health and welfare benefit plans,
liability for any EEOC claim, OSHA claim, employment discrimination
claim (whether based on sex, age, race, or otherwise), wage and hour
claim, unemployment compensation claim, worker's compensation claim and
the like, and liability for all employee wages and benefits, including,
without limitation, accrued vacation, sick leave and holiday pay and
taxes or other liability related thereto;
(F) liabilities or obligations in respect of
contracts or agreements of Seller which are not described in, Schedule
4.4 and not expressly assumed in writing by Buyer; and
(G) any debt, obligation, expense, or liability of
Seller arising out of or incurred in respect of any transaction of
Seller occurring after Closing or for any violation by Seller of any
law, regulation, or ordinance at any time.
2. FINANCIAL ARRANGEMENTS
2.1 PURCHASE PRICE. Subject to the terms and conditions
hereof, in reliance upon Seller's representations and warranties herein set
forth, and as consideration for the sale and purchase of the Assets as herein
contemplated, Buyer agrees to deliver to Seller as the total purchase price
hereunder an amount equal to Two Million Eight Hundred Twenty Thousand Eight
Hundred and Five Dollars and No Cents ($2,820,805.00) (the "Purchase Price").
2.2 PAYMENTS TO SELLER. At Closing, Buyer shall deliver to
Seller a check payable to the order of Seller (the "Check") in an amount equal
to Two Million Four Hundred Twenty Thousand Eight Hundred and Five Dollars and
No Cents ($2,420,805.00) and a non-interest bearing promissory note in the
amount of Four Hundred Dollars ($400,000.00) in the form attached as Exhibit
2.1-1.
2.3 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated, at Closing, among the Assets. In
connection therewith, Buyer and Seller shall enter into an Allocation Agreement
in a form mutually agreeable to Buyer and Seller, effective as of the Closing
Date (defined in Section 3.1), setting forth the parties' agreement as to the
allocation of the Purchase Price.
Buyer and Seller further agree that the Purchase Price shall
be allocated, for purposes of Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), in accordance with the value of each class of asset set
forth above, and any tax rectums or other tax information they may file or cause
to be filed with any governmental agency shall be prepared and filed
consistently with such agreed upon allocations. In this regard, Buyer and Seller
agree that, to the extent required, they will each properly prepare and file
Form 8594 in accordance with Section 1060 of the Code.
2.4 RETAINED LIABILITIES; PRORATIONS.
(A) Buyer and Seller acknowledge and agree that
except for the Assumed Liabilities, and those items to be prorated at
Closing pursuant to this Section, Seller will retain and pay in a
timely manner all bills, obligations, indebtedness, or other
liabilities due, accrued, incurred, or arising in connection with the
ownership of the Assets or the operation and/or maintenance of the
Assets for the period on and prior to the Closing Date, as defined in
Section 3.1 (collectively the "Retained Liabilities"). basis for
payment, and (ii) invoices that are received by Seller that are the
responsibility of Buyer hereunder will be accumulated and delivered to
Buyer on a weekly basis for payment.
(B) Notwithstanding that the parties intend to make a
final settlement with respect to certain items as of the Closing Date,
(i) all payments for utility services, contract services, ad valorem
and personal property taxes relating to the Assets (which are not
prorated at Closing) shall be prorated between Seller and Buyer as soon
as reasonably practicable as of the Closing Date, and (ii) settlement
of such items shall occur within five (5) business days after receipt
of a request therefor accompanied by evidence that such proration and
payment is required hereunder.
3. CLOSING
3.1 GENERAL. The consummation of the sale and purchase of the
Assets and the other transactions contemplated by and described in this
Agreement (the "Closing") shall take place at the offices of Jenkens &
Gilchrist, P.C. located at 1100 Louisiana, Suite 1800, Houston, Texas 77002 (or
at such other place as the parties may mutually agree) at 10:00 a.m., local
time, on June 30, 1999, (such date of Closing is referred to herein as the
"Closing Date"), and shall be effective as of 12:01 a.m. on June 26, 1999. If
the parties to this Agreement mutually agree, they may postpone the Closing Date
to a later time and date. If the Closing is postponed, all references to the
Closing Date in this Agreement shall refer to the postponed date.
3.2 Action of Seller at Closing. At the Closing, Seller shall
deliver to Buyer the following:
(A) General Bill of Sale and Assignment, fully
executed by Seller conveying to Buyer good and marketable title to each
of the Assets, free and clear of all liens, security interests, claims,
liabilities, and other encumbrances;
(B) An Assignment and Assumption Agreement fully
executed by Seller, conveying to Buyer Seller's interest in the Assumed
Liabilities;
(C) Evidence satisfactory to Buyer that Seller has
taken all action necessary to authorize the execution, delivery and
performance of this Agreement and the documents described herein and
that the person or persons executing the Closing documents on behalf of
Seller have full right, power, and authority to do so;
(D) The Allocation Agreement described in Section 2.2
above, fully executed by Seller;
(E) A certificate, dated the Closing Date, executed
by the secretary or assistant secretary of Seller, certifying
resolutions of the Board of Directors and of the shareholders of Seller
approving and authorizing the execution, delivery and performance by
Seller of this Agreement and of each of the other documents to which
Seller is a party and the consummation of the transactions contemplated
hereby and thereby.
(F) A copy of the Certificate of Incorporation of
Seller, certified by the Secretary of State of the State of Texas, and
a copy of the Bylaws of Seller;
(G) Articles of Amendment to the Articles of
Incorporation of Seller changing the name of Seller;
(H) Actual or constructive possession of the Assets;
(I) A Certificate of Good Standing from the State of
Texas as of a date within thirty (30) days before the Closing Date;
(J) An assignment of the Office Lease as executed by
Seller and a consent and estoppel certificate for the Office Lease;
(K) Evidence reasonably satisfactory to Buyer that
any liens of record on the date hereof have been removed or released;
(L) A legal opinion of Seller's counsel substantially
in the form as attached hereto as Exhibit 3.2(m); and
(M) Such other instruments and documents, including,
without limitation, third-party consents, releases of liens,
terminations of security interests, and estoppel certificates, as Buyer
reasonably deems necessary to effect the transactions contemplated
hereby and to place Buyer in legal and operational possession of the
Assets.
3.3 ACTION OF BUYER AT CLOSING. At the Closing, Buyer shall
deliver to Seller the following:
(A) The Check in the amount of the Purchase Price,
payable to the order of Seller;
(B) An Assignment and Assumption Agreement, fully
executed by Buyer, pursuant to which Buyer assumes the future payment
and performance of the Assumed Liabilities as herein provided;
(C) The Allocation Agreement described in Section 2.2
above, fully executed by Buyer;
(D) Copies of resolutions duly adopted by Buyer's
General Partner, authorizing and approving Buyer's performance of the
transactions contemplated hereby and the execution and delivery of this
Agreement and the documents described herein, certified as true and of
full force as of Closing by an appropriate officer of Buyer;
(E) The Promissory Note described in Section 2.1
above, fully executed by Buyer;
(F) Proof from the Secretary of State of the State of
Texas that Buyer is a Texas Limited Partnership;
(G) A legal opinion of Buyer's counsel substantially
in the form as attached hereto as Exhibit 3.2(f); and
(H) Such other instruments and documents as Seller
reasonably deems necessary to effect the transactions contemplated
hereby
4. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Closing Date, Seller hereby represents and warrants
to Buyer the following:
4.1 Capacity. Seller is a Texas business corporation, and
Seller has the requisite power and authority to enter into this Agreement, to
perform its obligations hereunder, and to conduct its business as now being
conducted. Seller is duly authorized, qualified, and licensed under all
applicable laws, regulations, ordinances, and orders of governmental authorities
having jurisdiction over the Assets and the Business to own the properties and
conduct the Business in the place and in the manner now conducted. Seller's
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized.
4.2 CONSENTS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
The execution, delivery, and performance of this Agreement by Seller and the
consummation of the transactions contemplated herein by Seller:
(A) do not require any approval, consent of, or
filing with any person or entity not a party hereto;
(B) will neither conflict with nor result in any
breach or contravention of, nor permit the acceleration of the maturity
of, or the creation of any lien under, any indenture, mortgage,
agreement, lease, contract, instrument, or understanding to which
Seller is a party or by which Seller or the Assets are bound, except as
expressly provided herein to the contrary;
(C) will not violate any judgment, decree, order,
writ, or injunction of any court or governmental authority to which
Seller or the Assets may be subject; and
(D) are and will constitute the valid and legally
binding obligation of Seller, enforceable in accordance with the terms
of this Agreement, except as enforceability may be restricted, limited,
or delayed by applicable bankruptcy or other laws affecting creditors'
rights generally and except as enforceability may be subject to general
principles of equity.
4.3 [THIS SECTION INTENTIONALLY LEFT BLANK]
4.4 THE CONTRACTS.
4.4-1 GENERAL. Seller has delivered to Buyer an
accurate list and substantially complete description (Schedule 4.4) of
all of the material commitments, contracts, leases and agreements which
are outstanding in respect of the Assets or the Business and Seller's
obligations thereunder.
Seller warrants and represents that:
(A) The Contracts constitute valid and legally
binding obligations of the Seller and are enforceable in accordance
with their terms;
(B) Each Contract constitutes the entire agreement by
and between the respective parties thereto and has not been amended
except as indicated in Schedule 4.4;
(C) In all material respects, (i) all obligations
required to be performed prior to Closing under the terms of the
Contracts have been performed, (ii) no act or omission has occurred or
failed to occur which, with the giving of notice, the lapse of time, or
both would constitute a default under the Contracts, and (iii) each of
the Contracts is now and will be after the Closing Date in full force
and effect without default on the part of the parties thereto;
(D) Except as expressly set forth in Schedule 4.4,
none of the Contracts require the consent of the other party for the
assignment of such Contracts to Buyer or the assumption of such
Contracts by Buyer (such non-assignable contracts shall be referred to
herein as the "Non-Assignable Contracts");
(E) Except with respect to the Non-Assignable
Contracts, the assignment of the Contracts to and the assumption of the
Contracts by Buyer will not result in any penalty, premium, or
variation of the rights, remedies, benefits, or obligations of any
party thereunder; and
4.4-2 ASSIGNMENT OF CONTRACTS. Seller and Buyer
acknowledge that certain of the Contracts to be assigned to Buyer
require consents from third parties hereto prior to assignment to
Buyer. Seller and Buyer agree that although such Non-Assignable
Contracts may not be assigned as of the Closing Date, such
non-assignment shall not constitute a breach of Seller's obligations
under this Agreement; provided that Seller:
(A) uses its best efforts to obtain any necessary
consents within a reasonable time after the Closing;
(B) upon receipt of all necessary consents to assign
the Non-Assignable Contracts, executes an assignment agreement with
Buyer assigning Seller's rights in and to such Non-Assignable Contracts
to Buyer;
(C) during the period on and from the Closing Date
until the date of assignment of each such Non-Assignable Contract,
Seller, at Buyer's option, shall enter into a lock-box agreement,
satisfactory to Buyer, which shall (i) designate to each payee under
such Non-Assignable Contracts a lock-box address for delivery of all
payments due under such Non-Assignable Contracts, (ii) designate Buyer
as agent for Seller to maintain the lock-box and to collect and deposit
all checks or other payments from the payees under such Non-Assignable
Contracts in accordance with the terms and conditions of the
Non-Assignable Contracts, and (iii) be irrevocable without the mutual
written consent of Buyer and Seller, until all such Non-Assignable
Contracts have been assigned to Buyer; and
(D) cause any and all monies payable to Seller under
any Non-assignable Contract to be delivered to Buyer promptly upon
receipt, hold all Non-Assignable Contracts as agent of Buyer in trust
for the benefit of Buyer, cooperate with Buyer in any lawful
arrangement to provide that Buyer shall receive the benefits under any
Non-Assignable Contract, and enforce and perform for the account of
Buyer any rights of Seller arising from any Non-Assignable Contract.
4.5 EQUIPMENT. Seller has delivered to Buyer an accurate list
and a substantially complete description (Schedule 1.1(a)) of all the equipment
associated with, or constituting any part of, the Assets, designating which of
such equipment is owned and which is leased by Seller. To the best knowledge of
Seller, the equipment to be transferred hereunder to Buyer is adequate in all
material respects to fully equip and operate the Business at its level of
operation as of the Closing Date. To the best knowledge of Seller, substantially
all of such equipment is in good operating condition and fit for the purpose for
which it is intended.
4.6 INVENTORY AND SUPPLIES. Seller has delivered to Buyer an
accurate list of all of the inventory and supplies constituting any part of the
Assets the value of which is calculated at actual cost, to include any discounts
received, and a substantially complete description of all such inventory and
supplies is listed on Schedule 1.l(b). Substantially all of such inventory and
supplies are of a quality and quantity usable and salable in the ordinary course
of the Business.
4.7 TITLE TO TANGIBLE PROPERTY. Seller has and at Closing will
convey to Buyer good and marketable title to all properties and assets, tangible
and intangible, constituting the Assets or any part thereof, subject to no
mortgage, lien, pledge, security interest, conditional sales agreement, right of
first refusal, option, restriction, liability, encumbrance, or charge, except
for those expressly assumed by Buyer hereunder.
4.8 INSURANCE. Seller has delivered to Buyer an accurate
schedule (Schedule 4.8 hereto) disclosing the insurance policies covering the
ownership and operations of the Business and the Assets, which schedule reflects
such policies' numbers, terms, identity of insurers, amounts, and coverage. All
of such policies are in full force and effect on a claims made basis with no
premium arrearages. True and correct copies of all such policies and any
endorsements thereto have been delivered to Buyer prior to Closing. Seller has
given in a timely manner to its insurers all notices required to be given under
its insurance policies with respect to all of the claims and actions covered by
insurance and disclosed on Schedule 4.9, the claims and actions on Schedule 4.8
represent all claims and actions against Seller covered by insurance during the
three-year period ending on the Closing Date and no insurer has denied coverage
of any such claims or actions or reserved its rights in respect of or rejected
any of such claims.
4.9 EMPLOYEE RELATIONS. Seller is in compliance with all
federal and state laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and Seller has not engaged in any
unfair labor practices. Schedule 4.9 sets forth a list of the current names,
titles and cash compensation, including, without limitation, wages, salaries,
bonuses and other cash compensation of all Business employees. Except as set
forth in Schedule 4.9, all present and former Business employees have been paid
in full all wages, salaries, commissions, bonuses, severance and termination
pay, and other direct compensation for all services performed by them that was
accrued by them up to the Closing, payable in accordance with the obligations of
Seller under any employment practices and policies, or any collective bargaining
agreement or other employment agreement to which Seller is a party, or by which
Seller may be bound. All of the employees listed on Schedule 4.9 attached hereto
who work in the United States are lawfully authorized to work in the United
States according to federal immigration laws. Except as disclosed on Schedule
4.9, Seller believes that the relationships of Seller with its employees are
good and there is, and during the past three (3) years there has been, no
material labor strike, dispute, slowdown, work stoppage or other labor
difficulty actually pending or, to the best of Seller's knowledge, threatened
against or involving Seller. None of the employees of Seller is covered by any
collective bargaining agreement, no collective bargaining agreement is currently
being negotiated and, to the best of Seller's knowledge, no attempt is currently
being made or during the past three (3) years has been made to organize any
employees of Seller to form or enter a labor union or similar organization.
4.10 TAX LIABILITIES. All tax returns, including, without
limitation, income tax returns, employee payroll tax returns, employee
unemployment tax returns and franchise tax returns, for periods prior to and
including Closing which are required to be filed by Seller (collectively
"Returns") have been filed or will be filed within the time and in the manner
provided by law (including any valid extensions thereof), and all Returns are
true and correct and accurately reflect the tax liabilities of Seller. There are
no tax liens on any of the Assets.
4.11 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
4. 11 hereto, Seller does not have and has never had any pension, profit
sharing, deferred compensation, or other employee pension or health or welfare
benefit plan or arrangement relating to the Business and the Assets. All
employee pension benefit plans and employee health or welfare benefit plans (as
such terms are defined in the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder ("ERISA"),
collectively "Benefit Plans") have been administered in accordance with ERISA
and the applicable provisions of the Code. There are no "accumulated funding
deficiencies" within the meaning of ERISA or the Code or any federal excise tax
or liability on account of any deficient findings in respect of the Benefit
Plans. Seller has not committed any reportable event(s) (within the meaning of
ERISA) or prohibited transaction(s) (within the meaning of the Code) in respect
of the Benefit Plans. There are no threatened or pending claims by or on behalf
of the Benefit Plans or by any Business employee alleging a breach or breaches
of fiduciary duties or violations of other applicable state or Federal law which
could result in liability on the part of either Seller or the Benefit Plans
under ERISA or any other law, nor is there any basis for such a claim. The
Benefit Plans do not discriminate in operating in favor of employees who are
officers or highly compensated. All returns, reports, disclosure statements, and
premium payments required to be made under ERISA and the Code with respect to
the Benefit Plans have been timely filed or delivered. The Benefit Plans have
not been audited or investigated by either the Internal Revenue Service, the
Department of Labor, or the Pension Benefit Guaranty Corporation within the last
five (5) years, and there are no outstanding issues with respect to the Benefit
Plans pending before said governmental agencies. Seller shall fund all Seller's
obligations under the Benefit Plans, if any, for all periods prior to Closing,
including, without limitation, for the current fiscal year, regardless of
whether the documents controlling such Benefit Plans require Seller to fund its
obligations prior to a fiscal year end.
4.12 LITIGATION OR PROCEEDINGS. Except as set forth in
Schedule 4,12, the Seller has not received notice of any claims, actions, suits,
proceedings or investigations pending against Seller or the Assets, and no
incidents have occurred upon which one could be based or threatened against, or
affecting Seller or the Assets, at law or in equity, or before or by any
federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality wherever located.
4.13 REGULATORY COMPLIANCE. Seller is in compliance with all
applicable rules, regulations, and requirements of all federal, state, and local
commissions, boards, bureaus, and agencies having jurisdiction over the Seller
and its assets and business, including, without limitation, the United States
Department of Health and Human Services and the Texas Department of Health, and
Seller has timely filed all reports, data, and other information required to be
filed with such commissions, boards, bureaus, and agencies.
4.14 NO MATERIAL ADVERSE EFFECTS OR CHANGES. Except as listed
on Schedule 4,14, since February 1, 1999, Seller has not (a) experienced an
event that had a material adverse effect on the Business or the Assets, (b)
increased the compensation of any executive officer of Seller, or (c) taken any
of the following actions:
(i) take any action, or enter into or authorize any
contract or transaction other than in the ordinary course of
business and consistent with past practice;
(ii) sell, transfer, convey, assign or otherwise
dispose of any of Seller's assets other than in the ordinary
course of business;
(iii) make any changes in its accounting system,
policies, principles or practices;
(iv) enter into, adopt, amend or terminate any bonus,
profit-sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit,
pension, retirement, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer or
employee, or increase in any manner the compensation or fringe
benefits of any director, officer or employee, or pay any
benefit not required by any existing plan and arrangement or
enter into any contract, agreement, commitment or arrangement
to do any of the foregoing;
(v) acquire, lease or encumber any assets outside the
ordinary course of business or any assets which are material
to Seller;
(vi) terminate, modify, amend or otherwise alter or
change any of the terms or provisions of any material contract
or arrangement, or breach the terms of any material contract
or arrangement; or
(vii) take any other action that would have a material adverse effect on the
Business or the Assets.
4.15 SOLVENCY AND PAYMENT OF LIABILITIES. Seller will not be
on the Closing Date, either as a result of the transactions contemplated by this
Agreement or otherwise, insolvent, as such term is defined in Title
11-Bankruptcy of the United States Code or any state statute relating to
insolvency; the sum of its debts is not greater than all of its property on the
date hereof nor will it be on the Closing Date either as a result of the
transactions contemplated herein or otherwise; and it is on the date hereof, and
will be after the Closing Date, able to pay its debts as they mature.
4.16 TRADEMARK RIGHTS; PROPRIETARY INFORMATION. Seller is
transferring in Section 1. I many items that may be collectively referred to as
Intellectual Property. Seller represents and warrants that:
(A) all of the Intellectual Property is owned by
Seller free and clear of any liens, and is not subject to any license,
royalty or other agreement;
(B) none of the Intellectual Property has been or is
the subject of any pending or, to the best of Seller's knowledge,
threatened litigation or claim of infringement;
(C) no license or royalty agreement to which Seller
is a party is in material breach or default by Seller or to the best of
Seller's knowledge, any other party thereto or the subject of any
notice of termination received by Seller;
(D) the Assets do not infringe any trademark, trade
name, service mark or name, copyright, trade secret, or confidential or
proprietary rights of another, and Seller has not received any notice
contesting Seller's right to use any Intellectual Property;
(E) Seller has not granted any license or agreed to
pay or receive any royalty in respect of any Intellectual Property; and
(F) Seller owns or possesses, and pursuant to this
Agreement will convey, sell, transfer, assign and deliver to Buyer
adequate rights in perpetuity in and to all Intellectual Property
necessary to conduct the Business as it is currently being conducted.
4.17 MEDICARE COST REPORT. Seller represents and warrants that
the Medicare cost report has been duly filed by Carpenter & Onorato Health Care
Consulting Division of Holtz Rubenstein & Co., L.L.P. as of the Closing Date.
4.18 NO MISSTATEMENTS OR OMISSIONS. No representation or
warranty made in this Agreement or on any Schedule hereto by Seller is false or
misleading as to any material fact, or omits to state a material fact required
to make any of the statements made herein or therein nonmisleading in any
material respect. All of the Schedules hereto applicable to Seller will
constitute representations and warranties by Seller herein.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
As of the Closing Date, Buyer hereby represents and warrants
to Seller the following:
5.1 CORPORATE CAPACITY. Buyer is a Texas limited partnership
validly existing in good standing under the laws of the State of Texas. Buyer
has the requisite power and authority to enter into this Agreement, to perform
its obligations hereunder, and to conduct its businesses as now being conducted.
Buyer is duly authorized, qualified, and licensed under all applicable laws,
regulations, ordinances, and orders of governmental authorities having
Jurisdiction to own its properties and conduct its business in the place and in
the manner now conducted. Buyer's execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized.
5.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS WITH
OTHER AGREEMENTS, ETC. The execution, delivery, and performance of this
Agreement by Buyer and the consummation of the transactions contemplated herein
by Buyer:
(A) are within Buyer's powers and the terms of
Buyer's Partnership Agreement or any amendments thereto, and have been
duly and properly authorized by all appropriate action;
(B) to the best of Buyer's knowledge, will neither
conflict with nor result in any breach or contravention of, nor pen-nit
the acceleration of the maturity of, or the creation of any lien under,
any indenture, mortgage, agreement, lease, contract, instrument, or
understanding to which Buyer is a party or by which Buyer is bound,
except as expressly provided herein to the contrary;
(C) will not violate any judgment, decree, order,
writ, or injunction of any court or governmental authority to which
Buyer may be subject; and
(D) are and will constitute the valid and legally
binding obligations of Buyer, enforceable in accordance with the terms
of this Agreement, except as enforceability may be restricted, limited,
or delayed by applicable bankruptcy or other laws affecting creditors'
rights generally and except as enforceability may be subject to general
principles of equity.
5.3 FINANCING OF TRANSACTION. Buyer is currently able to
finance the transactions contemplated under this Agreement and will deliver to
Seller by twenty-four hours prior to the Closing Date and time described in
Section 3.1 a Letter of Commitment from Buyer's financial institution or lender
that states Buyer has the cash available to fund the cash portion of the
purchase price described in Section 2.1-1 I herein. Receipt of this Letter of
Commitment from Buyer shall be a condition precedent to Seller's obligation to
Close but the ability to obtain financing shall not be a condition precedent to
Buyer's obligation to Close.
5.4 MEDICARE AND MEDICAID PROVIDER NUMBERS. Buyer shall
undertake all paperwork and filings necessary to assign Seller's current
Medicare and Medicaid provider numbers.
6. INDEMNIFICATION
6.1 INDEMNITY BY SELLER. Seller shall indemnify and hold
Buyer, and the Assets harmless from and against any and all liability, loss,
damage, or deficiency (including, without limitation, reasonable attorneys' fees
and associated costs) resulting from any misrepresentation, breach of warranty,
or nonfulfillment of any agreement on the part of Seller under this Agreement or
under any certificate or other instrument furnished or to be furnished by Seller
hereunder, and from the ownership, management, operations, and interests of
Seller in and to the Business and the Assets, and from any act or omission of
Seller or its partners, agents, employees, and independent contractors, and from
any encumbrance upon, or defect in title to, the Assets, and from the Excluded
Liabilities. The indemnification in this Section 6.1 shall be divided into the
following subject matter and shall be for the following periods: (1)
indemnification for Medicare and Medicaid liability of Seller shall be for five
years after the Closing Date; (2) indemnification for federal or state taxes,
ERLSA or environmental liability of Seller shall be for the applicable statutory
period; (3) indemnification for all other liability of Seller shall be for three
years after the Closing Date. To be entitled to such indemnification, Buyer must
give Seller written notice of the assertion by a third party, to which Buyer has
knowledge, of any claim with respect to which Buyer might bring a claim for
indemnification hereunder, and in all events must have supplied such notice to
Seller within the applicable period for defense of such claim by Seller. Upon
Seller's agreement to indemnify Buyer hereunder, Seller shall have the right, at
Seller's own expense, to defend and litigate any such third party claim;
provided, however, that Seller agrees not to settle any controversy that would
have a negative financial impact on Buyer without Buyer's consent.
6.2 INDEMNITY BY BUYER. Buyer shall indemnify and hold Seller
harmless from and against any and all liability, loss, damage or deficiency
(including, without limitation, reasonable attorneys' fees and associated costs)
resulting from any misrepresentation, breach of warranty, or nonfulfillment
under any agreement on the part of Buyer under this Agreement or under any
certificate or other instrument furnished by Buyer hereunder, and from the
ownership, management operation, and interests of Buyer in and to the Business
and the Assets (excluding, however, any acts of negligence or professional
malpractice by Seller) subsequent to the Closing and from any act or omission of
Buyer or its agents, employees, and independent contractors in respect of
periods subsequent to the Closing. To be entitled to such indemnification,
Seller must give Buyer prompt written notice of the assertion by a third party,
to which Seller has knowledge, of any claim with respect to which Seller might
bring a claim for indemnification hereunder, and in all events must have
provided such notice within the applicable period for defense of such claim by
Buyer. Upon Buyer's agreement to indemnify Seller hereunder, Buyer shall have
the right, at Buyer's own expense, to defend and litigate any such third party
claim; provided, however, that Buyer agrees not to settle any controversy that
would have a negative financial impact on Seller without Seller's consent. In no
event shall Buyer be liable for the acts or omissions of prior owners,
operators, or managers of the Business and the Assets or their agents,
independent contractors, or employees, including, without limitation, any
liability arising out of or in connection with claims which occurred prior to
Closing, except for the Assumed Liabilities.
6.3 CAP ON INDEMNIFICATION. Both parties shall indemnify the
other under this Section 6 only up to a maximum aggregate amount equal to the
cash portion of the Purchase Price.
6.4 DEDUCTIBLES. No claim for indemnification shall be due
unless such claim is over $1,000. In addition, no party shall be obligated to
indemnify the other for the first $l0,000 of such claims over $1,000.00.
7. ADDITIONAL AGREEMENTS
7.1 OFFICE LEASE. As of Closing, Buyer shall assume the
obligations of Seller for amounts owed under the Office Lease.
7.2 EMPLOYMENT OF BUSINESS EMPLOYEE. On the Closing Date,
Buyer shall offer employment to each Business employee set forth on Schedule 4.9
attached hereto. Buyer and Seller agree such employment of Business employees
shall (i) be at will, (ii) initially provide for payment to each Business
employee of a salary equal to such employee's present salary set forth on
Schedule 4.9 attached hereto, and (iii) entitle each such Business employee to
all other normal benefits extended to Buyer's similarly situated employees to
the extent permitted by law.
7.3 TRANSITION. At Buyer's request, Seller shall use its
reasonable best efforts to cause the smooth, efficient, and successful
transition of its business organization, present Business employees, and
relationships with patients and others having business relations with the
Business as of Closing, including providing information to Buyer necessary for
Buyer to assume Seller's Medicare and Medicaid provider numbers.
7.4 NONCOMPETE AND NONSOLICITATION.
(A) Seller understands and agrees that for a period
of thirty-six (36) months following the Closing Date, Seller will not,
directly or indirectly, engage in any enterprise that engages in the
Business within the City of Houston (the "Restricted Area"); provided,
however, that this provision shall in no way prohibit Seller from
engaging in the mail order pharmaceutical business anywhere in the
United States.
(B) Seller further understands and agrees that for a
period of thirty-six (36) months following the Closing Date, Seller
shall not (i) knowingly solicit or induce any then employee of Buyer or
any affiliate of Buyer located within the Restricted Area to leave the
employment of such entity, or (ii) knowingly disrupt relationships of
Buyer or its affiliates with any of their respective agents,
representatives, vendors or customers located within the Restricted
Area.
7.5 SATISFACTION OF LIABILITIES.
(A) Buyer covenants and agree that, on, prior to, or
as soon as practicable after the Closing Date, all outstanding
obligations, liabilities, costs and expenses of Buyer will be paid,
performed or otherwise discharged or provided for by Buyer, including,
without limitation, Buyer's Assumed Liabilities, liabilities and
obligations incurred by Buyer in connection with this Agreement and the
transactions provided for herein or contemplated hereby, fees and
expenses of Buyer's counsel, accountants and other experts, and all
other expenses incurred by Buyer incident to the negotiation,
preparation and execution of this Agreement or any transactions
contemplated hereby, including taxes, if any, payable by Buyer with
respect to and resulting from the transactions contemplated by this
Agreement, except for those liabilities and obligations that are
contested in good faith by Buyer.
(B) Seller covenants and agree that, on, prior to, or
as soon as practicable after the Closing Date, all outstanding
obligations, liabilities, costs and expenses of Seller will be paid,
performed or otherwise discharged or provided for by Seller, including,
without limitation, Seller's Excluded Liabilities, liabilities and
obligations incurred by Seller in connection with this Agreement and
the transactions provided for herein or contemplated hereby, fees and
expenses of Seller's counsel, accountants and other experts, and all
other expenses incurred by Seller incident to the negotiation,
preparation and execution of this Agreement or any transactions
contemplated hereby, including taxes, if any, payable by Seller with
respect to and resulting from the transactions contemplated by this
Agreement, except for those liabilities and obligations that are
contested in good faith by Seller.
7.6 USE OF NAME. Notwithstanding the sale of the names "The
Care Group of Texas, Inc." and "Care Line of Houston, Inc." by Seller to Buyer,
Buyer hereby grants to Seller a non-exclusive license for the use of the names
"The Care Group of Texas," and "CareLine of Houston," for ten months following
the Closing Date for the sole purpose of collecting outstanding accounts
receivable.
8. GENERAL
8.1 SCHEDULES AND EXHIBITS. Each Schedule and Exhibit to this
Agreement shall be incorporated herein and considered a part hereof as if set
forth herein in full.
8.2 ADDITIONAL ASSURANCES. The provisions of this Agreement
shall be self-operative and shall not require further agreement by the parties
except as may be herein specifically provided to the contrary; provided,
however, at the request of a party, the other party shall execute such
additional instruments and take such additional acts as the requesting party may
deem necessary to effectuate this Agreement. In addition and from time to time
after Closing, Seller shall execute and deliver such other instruments of
conveyance and transfer, and take such other actions as Buyer reasonably may
request, to more effectively convey and transfer full right, title and interest
to, vest in, and place Buyer in legal and actual possession of, any and all of
the Assets.
8.3 LEGAL FEES AND COSTS. In the event either party elects to
incur 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 necessary disbursements, in
addition to any other relief to which such party shall be entitled.
8.4 CHOICE OF LAW. The parties agree that this Agreement shall
be governed by and construed in accordance with the laws of the State of Texas,
and that the courts of such State shall be the exclusive courts of jurisdiction
and venue for any litigation, special proceedings, or other proceedings as
between the parties that may be brought, or arise out of, in connection with or
by reason of this Agreement.
8.5 BENEFIT/ASSIGNMENT. Subject to provisions herein to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that no party may assign this Agreement without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; and provided that either party may assign this Agreement
to a successor who buys substantially all of the party's assets. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
8.6 ACCOUNTING DATE. The transactions contemplated hereby
shall be effective for accounting purposes as of 12:01 a.m. on June 25, 1999,
unless otherwise agreed in writing by Seller and Buyer.
8.7 NO BROKERAGE. Seller and Buyer represent to each other
that no broker has in any way been contacted in connection with the transactions
contemplated hereby. Seller and Buyer agree to indemnify the other party from
and against all loss, cost, damage or expense arising out of claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
8.8 COST OF TRANSACTION. Seller will pay the fees, expenses
and disbursements of Seller and its agents, representatives, accountants, and
counsel incurred in connection with the subject matter hereof and any amendments
hereto; and Buyer shall pay the fees, expenses and disbursements of Buyer and
its agents, representatives, accountants and counsel incurred in connection with
the subject matter hereof and any amendments hereto.
8.9 WAIVER OF BREACH. The waiver by either party of a breach
or violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or other
provision hereof.
8.10 NOTICE. Any notice, demand or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered, when received by telegraphic or other electronic
means (including telefax, facsimile, and telex), when received by overnight
courier, or after three (3) days when mailed by prepaid, certified or registered
mail, return receipt requested, addressed as follows:
SELLER: Allion Healthcare, Inc.
Attn: Mike Moran
33 Walt Whitman Road, Suite 200A
Huntington Station, New York 11746
Facsimile Number: (___) ____________
BUYER: Osher Investments, Ltd.
111 Hermann Drive, Apt. 11F
Houston, TX 77004
Attention: Elizabeth E. Osher
Facsimile Number: 713/529-9659
or to such other address, and to the attention of such other persons as either
party may designate, in writing pursuant to this Section 8.10.
8.11 SEVERABILITY. In the event any provision of this
Agreement `s held to be invalid, illegal, or unenforceable for any reason and in
any respect, such invalidity, illegality, or unenforceability shall in no event
affect, prejudice, or disturb the validity of the remainder of this Agreement,
which shall be and remain in fall force and effect, enforceable in accordance
with its terms.
8.12 ENTIRE AGREEMENT/AMENDMENT. This Agreement supersedes all
previous contracts and constitutes the entire agreement of whatsoever kind or
nature existing between or among the parties respecting the within subject
matter, and no party shall be entitled to benefits other than those specified
herein. As between or among the parties, no oral statements or prior written
material not specifically incorporated herein shall be of any force or effect.
The parties specifically acknowledge that in entering into and executing this
Agreement, the parties are relying solely upon the representations and
agreements contained in this Agreement and no others. All prior representations
or agreements, whether written or verbal, not expressly incorporated herein are
superseded and no changes in or additions to this Agreement shall be recognized
unless and until made in writing and signed by all parties hereto. The
representations, warranties, and agreements of the parties set forth herein
shall survive the Closing and remain of full force and effect, and shall survive
the execution and delivery of all other agreements described, referenced, or
contemplated herein, and shall not be merged therewith.
8.13 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each and all of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed in multiple originals by their duly authorized
officers, all as of the day and year first above written.
BUYER: OSHER INVESTMENTS, I.TD.
Osher Management, L.L.C., General Partner
for Osher Investments, Ltd.
By: /s/ Elizabeth E. Osher
Name: Elizabeth E. Osher
Title: Manager
SELLER: THE CARE GROUP OF TEXAS, INC.
By: /s/ Michael P. Moran
Name: Mike Moran
Title: President and CEO
SELLER: CARE LINE OF HOUSTON, INC.
By: /s/ Michael P. Moran
Name: Mike Moran
Title: President and CEO
Guarantor: Allion Healthcare, Inc.
Payment of the obligations of Seller for indemnification pursuant to Section 6.l
of this Agreement shall be guaranteed by Allion Healthcare, Inc. as the parent
of Seller.
By: /s/ Michael P. Moran
Name: Mike Moran
Title: President and CEO
AGREEMENT
---------
THIS AGREEMENT dated as of November 1, 1998, among THE CARE
GROUP, INC. ("Care Group") COMMONWEALTH CERTIFIED HOME CARE, INC.
("Commonwealth"), both of which are corporations organized under the laws of the
State of New York, and VISITING NURSE SERVICE OF NEW YORK HOME CARE, a
not-for-profit corporation organized under the laws of the State of New York
("VNS").
WITNESSETH:
-----------
WHEREAS, Conunonwealth owns and operates a certified home
health agency ("CHHA"); and
WHEREAS, Care Group owns all of the issued and outstanding
stock of Commonnwealth; and
WHEREAS, Care Group and Commonwealth want to ensure the
continuity of the CHHA; and
WHEREAS, Care Group and Commonwealth desire to transfer to a
new corporation to be affiliated with VNS ("Newco"), and VNS desires to
establish Newco to purchase from Care Group certain assets relating to the
operation of the CHHA upon the terms and subject to the conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing and the
promises and covenants hereinafter contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Care Group, Commonwealth and VNS, on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and agreements set forth in
this Agreement,hereby agree as follows:
ARTICLE I
---------
SALE AND PURCHASE OF DESIGNATED ASSETS
--------------------------------------
Section 1.01. SALE AND PURCHASE OF DESIGNATED ASSETS
Care Group shall, or shall cause Commonwealth to, and
Commonwealth shall sell, convey by appropriate bill of sale, set over, deliver,
assign and transfer to Newco, and VNS shall cause Newco to purchase and acquire
from Care Group and Commonwealth at the Closing (as hereafter defined) the
following, all of which in the aggregate are refer-red to herein as the
"Designated Assets":
(a) All of the records relating to the operations and services
provided by Commonwealth which are owned by Care Group and/or Commonwealth and
which are needed for the operation of the CHHA (the "Records");
(b) All rights of Care Group and/or Commonwealth under the
specific contracts relating to the operation of the CHHA (referred to herein as
the "Contracts") identified in the attached Schedulel.01(b).
(c) All licenses, operating certificates, permits, approvals,
variances, waivers and consents relating to the operation of the CHHA
(collectively refeffed to herein as the "Permits") which are assignable to VNS
as designated in the attached Schedule 1.01(c).
Section 1.02. ASSUMED OBLIGATIONS
At the Closing, VNS shall cause Newco to assume the
obligations of Care Group and/or Conunonwealth under tlle Contracts designated
in the attached Schedule 1.01(b) which arise after the Closing Date.
ARTICLE II
----------
PURCHASE PRICE
--------------
Section 2.01. PURCHASE PRICE
The purchase price to be paid by VNS to Care Group for the
Designated Assets (the "Purchase Price") shall be $302,000. VNS shall pay to
Care Group the amount of the Purchase Price by check at the Closing.
ARTICLE III
-----------
TRANSFER OF TITLE TO DESIGNATED ASSETS
--------------------------------------
Section 3.01. BILL OF SALE
At the Closing, defined below, Care Group shall, or shall
cause Commonwealth to, and Commonwealth shall, convey to Newco all of Care
Group's and/or Commonwealth's right and title to, and interest in, the Records
by a bill of sale (the "Bill of Sale") in the form annexed hereto as Schedule
3.01.
Section 3.02. ASSIGNMENT
At the Closing, Care Group shall or shall cause Commonwealth
to, and Conunonwealth shall, convey to Newcd all of Care Group's and/or
commonwealth's right and title to, and interest in, the Permits and the
Contracts pursuant to an assignment (the "Assignment") in the form annexed
hereto as Schedule 3.02.
Section 3.03. ASSUMED LIABILITIES
At the Closing, Newco shall assume by an assumption instrument
in the form annexed hereto as Schedule 3.03 (the "Assumption Instrument"), and
thereafter perform, the obligations of Care Group which arise after the Closing
under the Contracts designated in Schedule 1.01(b).
Section 3.04. CERTAIN ALLOCATIONS AS OF CLOSING
All accounts receivable of Commonwealth as of the Closing Date
(the "Closing Accounts Receivable") shall remain the property of Commonwealth
following the Closing. All accounts receivable relating to the operation of the
CHHA which arise on or after the Closing Date shall be the property of Newco.
ARTICLE IV
----------
CLOSING AND CLOSING COSTS
-------------------------
Section 4.01. TRANSFERS AND DELIVERIES
The transfers and deliveries to be made pursuant to this
Agreement shall, except as otherwise provided herein, take place at 10:00 A.M.
on the date, within 30 days following the satisfaction of the condition set
forth in Section 4.02, as shall be fixed by VNS in a notice to Care Group given
not less than five days prior to such date, at the offices of Cadwalader,
Wickersham & Taft, 100 Maiden Land, New York, New York (the "Closing"). All
transfers and deliveries required to be made hereunder at the Closing shall be
deemed to take place simultaneously and to be effective as of the time on the
date of the Closing (the "Closing Date") that all of such transfers and
deliveries have taken place.
Section 4.02. CONDITION PRIOR TO THE CLOSING
The Closing shall be subject to Newco having obtained
establishment approval to operate the CHHA from the State Hospital Review and
Planning Council, the New York State Public Health Council, and the
Conmiissioner of the New York State Department of Health (the "Establishment
Approval").
Section 4.03. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF VNS AND NEWCO
(a) Each of the agreements of VNS and/or Newco to be performed
at the Closing pursuant to this Agreement shall be subject to the fulfillment of
each of the following conditions, any of which conditions may be waived in
writing by VNS:
(i) Each of the representations and warranties
of Care Group and Commonwealth set forth in
Article VI hereof shall be true and correct
both on the date hereof and on the Closing
Date as if made at that time, except insofar
as changes shall have occurred after the
date hereof which are contemplated by this
Agreement;
(ii) Care Group and Commonwealth shall have
performed and complied with all agreements,
undertakings and obligations which are
required to be performed or complied with by
it at or prior to the Closing, as the case
may be, pursuant to this Agreement;
(iii) Since the date hereof, there shall have been
no material adverse change, or a discovery
of a condition or the occurrence of any
event which might result in any material
adverse change in the CHHA or the Designated
Assets, other than changes in the ordinary
course of business which are permitted by
this Agreement;
(iv) VNS shall have received from counsel for
Care Group and Commonwealth, their opinion,
as of the Closing Date, in substantially the
form attached hereto as Schedule 4.03(a)(iv)
(the "Care Group Legal Opinion");
(v) All consents and approvals of third parties
with respect to the conveyance of any of the
Designated Assets to be conveyed hereunder
shall have been obtained;
(vi) As of the Closing, there shall not be in
effect any injunction, writ, preliminary
restraining order or any order of any nature
issued by a court or other governmental body
or agency directing that the transactions
provided for herein not be consummated as
herein provided, nor shall there be any
litigation or proceeding pending or
threatened in respect of the transactions
contemplated hereby; and
(vii) The delivery by Care Group and Commonwealth
to VNS of a certificate of an executive
officer of Care Group ("Care Group's Closing
Certificate') and Commonwealth
("Conunonwealth's Closing Certificate"),
respectively, that the conditions to VNS
and/or Newco's obligations set forth in
paragraphs (i) through (iii) and (v) above
have been fulfilled or waived by VNS as the
case may be.
Section 4.04. CONDITIONS PRECEDENT TO CARE GROUP'S AND COMMONWEALTH'S
OBLIGATIONS
(a) Each of the agreements of Care Group and/or Commonwealth
to be performed by it at the Closing pursuant to this Agreement shall be subject
to the fulfillment of each of the following conditions, any of which conditions
may be waived in writing by Care Group:
(i) Each of the representations and warranties
of VNS and/or Newco set forth in Article VII
hereof shall be true and correct both on the
date hereof and on the Closing Date as if
made at that time, except insofar as changes
shall have occurred after the date hereof
which are contemplated by this Agreement;
(ii) VNS and/or Newco shall have performed and
complied with all agreements, undertakings
and obligations which are required to be
performed or complied with by it or them at
or prior to the Closing, as the case may be,
pursuant to this Agreement;
(iii) Care Group shall have received from counsel
for VNS, their opinion, as of the Closing
Date, in substantially the form attached
hereto as Schedule 4.04(a)(iii) (the "VNS
Legal Opinion");
(iv) The delivery by VNS to Care Group of a
certificate of an executive officer of VNS
("VNS Closing Certificate") that the
conditions to Care Group's obligations set
forth in paragraphs (i) and (H) above have
been fulfilled or waived by Care Group as
the case may be; and
(v) As of the Closing, there shall not be in
effect any injunction, writ, preliminary
restraining order or any order of any nature
issued by a court or other governmental body
or agency directing that the transactions
provided for herein not be consummated as
herein provided, nor shall there be any
litigation or proceeding pending or
threatened in respect of the transactions
contemplated hereby.
ARTICLE V
---------
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
Section 5.01. DOCUMENTS TO BE DELIVERED BY CARE GROUP AND COMMONWEALTH
In addition to any other documents specifically required to be
delivered pursuant to this Agreement, Care Group and Commonwealth shall deliver
to VNS at the Closing, in form and substance reasonably satisfactory to VNS and
its counsel:
(a) Certified copies of the resolutions of the Board of
Directors of Care Group and Commonwealth, respectively, authorizing and
approving this Agreement and all other transactions and agreements contemplated
hereby;
(b) The Bill of Sale;
(c) The Assignment;
(d) The Care Group Legal Opinion;
(e) Care Group's Closing Certificate;
(f) Commonwealth's Closing Certificate;
(g) The consents of any third party required to effectuate the
transactions contemplated herein; and
(h) Such other deeds, bills of sale, certificates of title,
endorsements, assignments, affidavits and other good and sufficient instruments
of sale, assignment, conveyance and transfer, as shall be required to vest
effectively in Newco all of Care Group's and Commonwealth's right, title and
interest in and to the Designated Assets.
Section 5.02. DOCUMENTS TO BE DELIVERED BY VNS
In addition to any other documents specifically required to be
delivered pursuant to this Agreement, VNS shall deliver to Care Group and
Commonwealth at the Closing, in form and substance reasonably satisfactory to
Care Group and Commonwealth and their counsel:
(a) Certified copies of the resolutions of the Board of
Directors of VNS authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby;
(b) The Assumption Instrument;
(c) The VNS Legal Opinion;
(d) VNS' Closing Certificate; and
(e) A certified or bank check payable to Care Group in the
amount of the Purchase Price.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF CARE GROUP AND
------------------------------------------------
COMMONWEALTH
------------
Care Group and Conunonwealth represent and warrant to VNS as
follows:
Section 6.01. CORPORATE STATUS
Care Group and Commonwealth are both corporations duly
organized, validly existing, and in good standing under the laws of the State of
New York, and together have full corporate power and authority to:
(a) Own the Designated Assets;
(b) Operate the CHHA in Nassau County;
(c) Execute and deliver this Agreement; and
(d) Perform their obligations under this Agreement.
Section 6.02. APPROVAL
This Agreement and the agreements and transactions
contemplated hereby have been approved and authorized by the Boards of Directors
of Care Group and Conunonwealth, and constitute valid, binding and enforceable
obligations of Care Group and Commonwealth, except to the extent the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, equitable principles or similar laws affecting legal or
equitable rights generally.
Section 6.03. VIOLATION
Neither the execution and delivery of this Agreement by Care
Group and Commonwealth nor the performance of Care Group's or Commonwealth's
obligations hereunder will violate, conflict with, or constitute a default
under, any of the terms of Care Group's or Commonwealth's Certificates of
Incorporation or by-laws, or any provisions thereof, or result in the
acceleration of any obligation under any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement, instrument, order, judgment or decree to which Care Group or
Commonwealth is a party or by which Care Group, Commonwealth, or the Designated
Assets are bound, and will not constitute an event which, after a notice or
lapse of time or both, will result in such violation, conflict, default or
acceleration. The execution and delivery of this Agreement and the performance
by Care Group and/or Commonwealth of the transactions contemplated hereby will
not result in the creation or imposition of any liens in favor of any third
person or entity upon the Designated Assets and will not violate any law,
judgment, decree, order, rule or regulation of any governmental authority
applicable to Care Group, Commonwealth, or the Designated Assets.
Section 6.04. TITLE
Commonwealth has good and marketable title to the Records.
Section 6.05. CONTRACTS
Neither Care Group nor Commonwealth has breached nor
terminated nor are they in default under any of the Contracts, and there exists
no condition or event which, after notice or lapse of time or both, would
constitute any such breach, termination or default. To the best of Care Group's
and Commonwealth's knowledge and belief, no other party to any such Contract has
breached, terminated or is in default thereunder, and there exists no condition
or event which, after notice or lapse of time or both, would constitute any such
breach, termination or default.
Section 6.06. FINANCIAL STATEMENTS
Care Group and Commonwealth have heretofore delivered to VNS
(i) audited financial statements for Commonwealth as of and for the year ending
December 31, 1997, and (ii) unaudited financial statements for Commonwealth as
of and for the five-month period ending May 31, 1998. Said financial statements
fairly present the financial condition of Commonwealth as of the respective
dates and for the periods indicated thereon and they have been prepared in
accordance with generally accepted accounting principles consistently applied.
All of the foregoing financial statements are hereinafter referred to as
"Commonwealth's Financial Statements".
Section 6.07. LIABILITIES
Since May 31, 1998, neither Care Group nor Commonwealth has
incurred or accrued any liabilities or obligations of any nature whatsoever in
respect of the CHHA, whether fixed, absolute, contingent, known, unknown,
direct, indirect, or otherwise, except for those incurred or accrued in the
ordinary and normal course of the CHHA and consistent with the representations,
warranties, covenants, obligations and agreements contained in this Agreement
and all of which shall be properly reflected in Care Group's or Commonwealth's
journals and ledgers.
Section 6.08. LITIGATION
There is no litigation, action, suit, investigation, claim or
proceeding pending or, to the best of Care Group's and Connnonwealth's knowledge
and belief, threatened against or adversely affecting the CHHA or the Designated
Assets, at law or in equity, before any Federal, state or local governmental
entity or municipality or subdivision thereof, or any authority, department,
commission, board, bureau, agency, court or instrumentality (collectively, the
"Governmental Authorities"), that would have a material adverse effect on the
transactions r-onternplated by this Agreement.
Section 6.09. LAWS
Neither Care Group nor Commonwealth has failed to comply with
any law or any other requirement of any Governmental Authority that will prevent
Newco from operating the CHHA following the Closing on substantially the same
terms as it is currently being operated.
Section 6.10. PERMITS
The Permits are in full force and effect and any fees or other
regulatory obligations required in connection therewith have been paid or
satisfied in full. The operating certificate issued to Commonwealth authorizes
the operation of the CHHA in Nassau County.
Section 6.11. LABOR AND EMPLOYMENT MATTERS
To date, there has not been, there is not presently pending or
existing, and to Care Group's or Conunonwealth's knowledge and belief, there is
not threatened with respect to Commonwealth (a) any strike, slowdown, picketing,
work stoppage, or employee job action, (b) any proceeding against or affecting
Care Group or Commonwealth relating to the alleged violation of any legal
requirement pertaining to labor relations or employment matters involving
Conunonwealth, including any charge or complaint filed by an employee or union
with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Authority, any organizational
activity, or any other labor or employment dispute against or affecting Care
Group or Commonwealth involving Commonwealth, or (c) any application for
certification of a collective bargaining agent. There is no lockout of any
Commonwealth employees in effect. Care Group -and Commonwealth have complied in
all material respects with all legal requirements relating to employment, equal
employment opportunity, nondiscrimination, inuiiigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, and occupational safety and health in connection with Commonwealth.
Neither Care Group nor Commonwealth is liable for any compensation, damages,
taxes, fines, penalties, or other amounts, however designated, for failure to
comply with any of the foregoing legal requirements.
Section 6.12. ORDINARY COURSE OF BUSINESS
To date, Care Group and Commonwealth, in respect of the CHHA,
has not, except in the ordinary and normal course of the CHHA:
(a) Sold, transferred or otherwise disposed of any of the
Designated Assets or any other assets dedicated to the CHHA;
(b) Pledged or subjected any of the Designated Assets to any
lien;
(c) Sustained any damage, loss or destruction by reason of
fire, explosion, casualty, requisition or taking of property by any Governmental
Authority, act of God, accident, other calamity or other similar event;
(d) Granted any salary or compensation increase or pemiitted
any advance to any employee, agent or independent contractor (except scheduled
increases consistent with past practice), or entered into any new, or altered or
amended any existing employment or other agreement with any employee, agent or
independent contractor;
(e) Entered into any license or lease; or
(f) Modified, amended, cancelled, or terminated any of the
Contracts or the Permits.
Section 6.13. CONDITION OF CHHA
The staffing and operations of the CHHA satisfy, without
material exception, the applicable requirements of the State of New York.
Section 6.14. COST REPORTS, THIRD PARTY RECEIVABLES AND CONDITIONS OF
PARTICIPATION
The cost reports of Commonwealth for Medicaid and Medicare
payments for the fiscal years through 1997 relating to the CHHA have been
submitted and filed when due to the best of Care Group's and Commonwealth's
knowledge are true and correct. To Care Group's and Commonwealth's knowledge and
belief, there is no dispute between Commonwealth and any Governmental Authority
or the Medicare fiscal intermediary regarding such cost reports. With regard to
Commonwealth's Financial Statements, the patient accounts receivable for
services to Medicare, Medicaid and other patients have been recorded net of
contractual allowances and, without material exception, are accurately recorded.
The CHHA has met and does meet, without material exception, the conditions for
participation in the Medicare and Medicaid programs and, to the best knowledge
and belief of Care Group and Commonwealth, there is not pending or threatened
any proceeding or investigation under such programs involving the CHHA.
Section 6.15. ERISA
Neither Care Group nor Commonwealth has unfunded pension
liabilities with respect to Conunonwealth employees, nor maintains or
contributes to, nor has ever maintained or contributed to any "employee pension
plan", as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any other plan or plans covered
by ERISA, other than those which are set out on Schedule 6.16 hereto, in each
case relating to employees of Commonwealth.
ARTICLE VII
-----------
REPRESENTATIONS AND WARRANTIES OF VNS
-------------------------------------
VNS represents and warrants to Care Group as follows:
Section 7.01. CORPORATE STATUS
VNS is a not-for-profit corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, and has
full corporate power and authority to perform its obligations under this
Agreement.
Section 7.02. APPROVAL
This Agreement and the agreements and transactions
contemplated hereby have been approved and authorized by the Board of Directors
of VNS, and constitute valid, binding and enforceable obligations of VNS, except
to the extent the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, equitable principles or similar laws
affecting legal or equitable rights generally.
Section 7.03. NO VIOLATION
Neither the execution and delivery of this Agreement by VNS
nor the performance of VNS' obligations hereunder will violate, conflict with,
or constitute a default under, any of the terms of VNS' Certificate of
Incorporation or by-laws, or any provisions thereof, or result in the
acceleration of any obligation under any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement, instrument, order, judgment or decree to which VNS is a party or by
which VNS is bound, and will not constitute an event which, after a notice or
lapse of time or both, will result in such violation, conflict, default or
acceleration. The execution and delivery of this Agreement and the performance
by VNS of the transactions contemplated hereby will not violate any law,
judgment, decree, order, rule or regulation of any governmental authority
applicable to VNS.
ARTICLE VIII
------------
AGREEMENTS OF CARE GROUP AND COMMONWEALTH
-----------------------------------------
Section 8.01. BEST EFFORTS
Care Group and Commonwealth each agrees to use their best and
most diligent efforts to cause all its covenants and agreements and all
conditions precedent to the obligation of VNS to close hereunder to be
performed, satisfied, and fulfilled.
Section 8.02. OPERATION OF CHHA UNTIL CLOSING
From the date of this Agreement until the Closing, except to
the extent otherwise contemplated by this. Agreement or applicable New York
State Department of Health regulations, or as otherwise consented to by an
instrument in writing signed by VNS, Care Group and Commonwealth:
(a) Shall exercise their best efforts to maintain the goodwill
and reputation , associated with the CHHA;
(b) Shall ensure that the health and safety of any patients to
which Commonwealth provides service shall at all times be maintained consistent
with all applicable laws and regulations;
(c) Shall provide all cash necessary to maintain the
operations of the CHHA;
(d) Except with respect to Section 9.05 hereof, shall not
enter into any new leases relating to the CHHA;
(e) Shall not assign, transfer or encumber or permit to be
encumbered the Designated Assets; and
(f) Shall not with respect to Commonwealth grant any salary
increase to any employee (except for scheduled salary increases consistent with
past practice) nor enter into any new or amend or alter any existing bonus,
incentive compensation, profit sharing, retirement, pension, group insurance,
death benefit or other fringe benefit plan, trust agreement or other similar or
dissimilar arrangement, or any employment or consultancy agreement.
Section 8.03. EMPLOYEES
Without limiting any other provision of this Agreement, Care
Group and Commonwealth shall remain obligated after the Closing for any
obligations to employees of Commonwealth which arise as of or prior to the
Closing.
ARTICLE IX
----------
AGREEMENTS OF VNS
-----------------
Section 9.01. BEST EFFORTS
VNS agrees to use its best and most diligent efforts to cause
aH its covenants and agreements and all conditions precedent to Care Group's
obligation to close hereunder to be performed, satisfied ahd fulfilled.
Section 9.02. CARE GROUP'S AND COMMONWEALTH'S ACCESS TO MEDICAL RECORDS
To the extent reasonably necessary and permitted by law, Care
Group and Commonwealth shall be entitled, after the Closing, to have access to
and make copies, at its own cost, of the patient records, including the medical
records and medical charts, of any patient served by Commonwealth on or before
the Closing Date. In addition, Care Group and Commonwealth shall be entitled to
remove any such record or chart for purposes of pending litigation or
goverrunent audit as certified in writing prior to removal by an officer of Care
Group or Commonwealth counsel retained by Care Group or Commonwealth in
connection with such litigation. Any record or chart so removed shall be
promptly returned to Newco following its use by Care Group or Commonwealth.
Section 9.03. PRESERVATION OF RECORDS
After the Closing, VNS shall cause Newco to keep and preserve
all Records turned over to Newco pursuant to this Agreement and which are
required to be kept and preserved (i) by any applicable Federal or state law or
regulation, or (H) in connection with any claim or controversy still pending
involving Care Group or Commonwealth. After the Closing, upon reasonable notice
by Care Group or Commonwealth to Newco, Care Group or Commonwealth or their
agents s hall be entitled, during regular business hours, to have access to and
make copies, at its own cost, of all records pertaining to the operation of the
CHHA prior to the Closing for any lawful corporate purpose.
Section 9.04. EMPLOYMENT
Employees of Conunonwealth who are employed by Newco after the
Closing shall be employed on such individual terms as are established by Newco
for such employees, and shall be subject to termination in accordance with the
personnel policies of Newco.
Section 9.05. LEASE
VNS shall lease office space to Con-unonwealth for the CHHA
from the date hereof to the Closing Date or earlier termination of this
Agreement pursuant to a sublease agreement in the form attached hereto as
Schedule 9.05
ARTICLE X
---------
CERTAIN ADDITIONAL COVENANTS
----------------------------
Section 10.01. EXPENSES
Except as expressly set forth herein, each party will bear the
legal, accounting i and ot her expenses incurred by such party in connection
with this Agreement and the other agreements and transactions contemplated
hereby.
Section 10.02. BROKERAGE
Each party represents and warrants to the other that no person
or persons assisted in or brought about the negotiation of this Agreement in the
capacity of broker, fmder, or originator on behalf of it. Each party agrees to
indemnify and hold hannless the other party from any claim asserted against such
other party for a brokerage or finder's or originator's commission or
compensation in respect of the transactions contemplated by this Agreement.
Section 10.03. FURTHER ASSURANCE
From time to time after the Closing, upon reasonable notice
and without further consideration, Care Group and Commonwealth shall execute,
acknowledge and deliver all such other instruments of sale, assignment,
conveyance and transfer and shall take all such other action as may be required
by VNS and/or Newco, in their reasonable discretion, for the consummation of the
transactions contemplated hereby and to more effectively transfer to and vest
in, and to put Newco in possession of, the Designated Assets, free and clear of
any and all liens or encumbrances except as otherwise permitted by this
Agreemem. Care Group and Commonwealth shall use their best efforts to secure and
to assist VNS in securing any consent or waiver from any person, entity or
Governmental Authority, including the Establishment Approval, which may be
reasonably required for the consummation of the transactions contemplated hereby
and for the operation of the CHHA by Newco.
Section 10.04. ESTABLISHMENT APPROVAL
VNS agrees to apply for Establishment Approval as soon as
reasonably possible following the execution and delivery of this Agreement and
to use its best efforts to obtain such approval. Care Group and Commonwealth
agree to participate and assist VNS in any manner reasonably required in the
application for Establishment Approval.
Section 10.05. CONFIDENTIALITY
The partie s agree that they will not, without the prior
written consent of the other party hereto, issue, give or make any press
release, notification or disclosure to any third party or to the public, in each
case relating to this Agreement or any of the terms or conditions hereof or any
of the transactions contemplated hereby, except as required to perform the
obligations of the parties hereunder, including obtaining any consent or
approval required by this Agreement, until the Closing or earlier termination of
this Agreement, or as required by law.
ARTICLE XI
----------
INDEMNIFICATION
---------------
Section 11.01. VNS INDEMNITY
(a) VNS shall and hereby does agree to indemnify and hold Care
Group and Commonwealth harmless from and against any and afl loss, damage and
expense incurred by Care Group or Commonwealth, arising out of, attributable to,
or in connection with:
(i) Any matter in respect of which VNS shall
have made any misrepresentation, breached
any warranty, or failed to fulfill any
covenant or agreement on the part of VNS or
Newco contained in this Agreement, or in any
list or certificate or other document
delivered or to be delivered, by VNS or
Newco to Care Group or Commonwealth in
connection with this Agreement;
(ii) Any and all liabilities relating to the
operation of the CHHA which relate to
services provided or events occurring
subsequent to the Closing Date; and
(iii) Any and all actions, suits, proceedings,
demands, assessments or judgments, costs and
expenses (including reasonable legal and
accounting fees and investigation costs)
incident to the foregoing and the
enforcement thereof.
(b) Subject to the notice of claim provisions set forth in
Section 11.03 of this Agreement, the provisions of Section 11.01(a) shall not be
deemed to be an election of remedies, but shall be in addition to any other
remedy or remedies, at law or in equity, to which Care Group or Commonwealth may
be otherwise entitled.
Section 11.02. INDEMNITY OF CARE GROUP AND COMMONWEALTH
(a) Care Group and Commonwealth shall and hereby do agree to
indemnify and hold VNS and Newco hanriless from and against any and all loss,
damage and expense incurred by VNS and/or Newco, arising out of, attributable
to, or in connection with:
(i) Any matter in respect of which Care Group or
Commonwealth shall have made any
misrepresentation, breached any warranty, or
failed to fulfill any covenant or agreement
on the part of Care Group or Commonwealth
contained in this Agreement, or in any list
or certificate or other document delivered
or to be delivered, by Care Group or
Commonwealth to VNS or Newco in connection
with this Agreement;
(ii) Any and all liabilities of Care Group or
Commonwealth of any nature, and whenever
asserted, relating to the operation of the
CHHA which relate to services provided or
events occurring on or before the Closing
Date; and
(iii) Any and all actions, suits, proceedings,
demands, assessments or judgments, costs and
expenses (including reasonable legal and
accounting fees and investigation costs)
incident to the foregoing and the
enforcement thereof.
(b) Subject to the notice of claim provisions set forth in
Section 11.03 of this Agreement, the provisions of Section 11.02(a) shall not be
deemed to be an election of remedies, but shall be in addition to any other
remedy or remedies, at law or in equity, to which VNS and/or Newco may be
otherwise entitled.
Section 11.03. NOTICE OF CLAIMS
The party seeking indemnification shall give the party from
whom the indemnification is sought notice of any claim of which it has knowledge
and as to which it is entitled to indemnification. The indemnifying party shall
defend any actions or proceedings by counsel of its own choosing and at its own
expense, and in such case the party seeking indemnification shall cooperate in
such defenses to the fullest reasonable extent requested, and shall not settle,
compromise or otherwise adversely affect the interests of the indemnifying party
in respect of the foregoing.
Section 11.04. SURVIVAL
The obligations of the parties under this Article XI shall
survive the Closing or any termination.of this Agreement.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
Section 12.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the parties hereto made
in this Agreement shall survive the Closing, and shall not be affected by any
information furnished to, or any investigation conducted by, either of them or
their representatives in connection with the subject matter of this Agreement.
Section 12.02. AMENDMENT
This Agreement may be amended only by a writing executed by
the parties hereto that refers to this Agreement.
Section 12.03. ENTIRE AGREEMENT
This Agreement and the other agreements expressly referred to
herein contain the entire understanding of the parties hereto and supersede all
prior contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties.
Section 12.04. NOTICE
Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when sent by hand or by certified mail, return receipt requested, postage
prepaid, to the parties at the respective addresses set forth below:
TO CARE GROUP AND
COMMONWEALTH: The Care Group, Inc.
257 Park Avenue South
New York, New York
Attention: Mr. Michael Moran,
President and Chief Executive
Officer
TO VNS: Visiting Nurse Service of New York
107 East 70th Street
New York. New York 10021
Attention: Ms. Carol Raphael,
Administrator
WITH A COPY TO: Visiting Nurse Service of New York
107 E. 70th Street
New York, New York 10021
Attention: Charles F. Blum, Esq.
Vice President for Legal/
Government Affairs
Either party by written notice to the other may change the
address or the person to whom notices or copies thereof shall be directed.
Section 12.05. COUNTERPARTS
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which together will
constitute one and the same instrument.
Section 12.06. BINDING NATURE
This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of each party hereto. No rights,
obligations or liabilities hereunder shall be assignable by any party without
the prior written consent of the other party, except that VNS shall be entitled
to assign its rights and obligations under this A greement to Newco or any other
entity affiliated with VNS without the consent of Care Group or Commonwealth.
Section 12.07. WAIVERS OF BREACH
No waiver by any party of the violation of, breach or a
default under, any provision of this Agreement or any other agreements provided
for herein by the other party shall be construed as or constitute a continuing
waiver of such provision or a waiver of any other violation of, breach or a
default under, any provisions of this Agreement or any other agreements provided
for herein.
Section 12.08. TERMINATION
(a) This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) By mutual consent of Care Group and VNS; or
(ii) By either VNS or Care Group if VNS has not
obtained Establishment Approval by June 30,
1999.
(iii) By VNS in the event that either Care Group
or Commonwealth (A) becomes the subject of a
proceeding under any Federal, State or
foreign bankruptcy, insolvency, receivership
or similar law, consents to the institution
of or fails to contest in a timely and
appropriate manner any such proceeding, (C)
applies for or consents to the appointment
of a receiver, trustee, custodian or similar
official for such corporation or for any
substantial part of its assets, (D) makes a
general assignment for the benefit of the
creditors, or (E) admits in writing its
inability or failure generally to pay its
debts as they become due.
(b) In the event of the termination of this Agreement pursuant
to the provisions of this Section 12.08, this Agreement shall become void and
have no effect, without any obligations on the part of either party to the
other.
Section 12.09. EFFECT OF HEADINGS
The subject headings of the articles and sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of this Agreement.
Section 12.10. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 12.11. NO THIRD PARTY BENEFICIARIES
None of the provisions of this Agreement are or shall be
construed as being for the benefit of, or enforceable by, any creditors of Care
Group, Commonwealth, VNS or by any person not a party to this Agreement.
Section 12.12. BANKRUPTCY OF CARE GROUP
The parties hereto agree that the effective date of this
Agreement is subject to the approval of The Bankruptcy Court in which the
Petition of Care Group and its subsidiaries has been filed.
IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this Agreement as of the day and year first written above.
THE CARE GROUP, INC. COMMONWEALTH CERTIFIED
HOME CARE, INC.
By: /s/ Micahel P. Moran By: /s/ Michael P. Moran
Michael Moran
President and Chief Executive Officer
VISITING NURSE SERVICE
OF NEW YORK HOME CARE
By:/s/ Carol Raphael
Carol Raphael
Administrator
