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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
FEBRUARY 5, 1998
AMERICAN HOMEPATIENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-19532 62-1474680
(STATE OF OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION
INCORPORATION) NUMBER)
5200 MARYLAND WAY, SUITE 400 BRENTWOOD, TENNESSEE 37027
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(615) 221-8884
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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EXHIBIT INDEX ON PAGE 4
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Registrant reports the following acquisition to inform its security
holders:
Pursuant to a Stock Purchase Agreement, the Registrant's wholly owned
subsidiary, American HomePatient, Inc., a Tennessee corporation (the
"Subsidiary"), consummated on February 5, 1998, through arm's-length
negotiations, the acquisition of the stock of National Medical Systems, Inc.
("NMS"), an Arkansas corporation. The stock was sold by James G. Mosley, his
sons James S. Mosley and William Kent Mosley, and certain affiliated limited
partnerships and trusts. The acquisition will be accounted for as a purchase.
The purchase price was approximately $35,350,000.00 consisting of $1,000,000.00
by promissory note, approximately $17,785,000.00 by satisfaction or assumption
of outstanding debt obligations, and the remainder in cash. The cash portion of
the purchase price was funded through an existing credit facility with a
consortium of financial institutions headed by Bankers Trust Company.
NMS had operated a home health care business in Arkansas, Oklahoma and
Texas, and the Registrant, through its subsidiary, intends to use the acquired
assets to continue to operate the home health business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) FINANCIAL STATEMENTS. It is impracticable to
provide the required financial statements of the acquired business described in
Item 2 and pro forma financial information at this time. Such information will
be filed within the prescribed time frame.
(c) EXHIBITS. The exhibits filed as part of this Report are
listed in the Index to Exhibits immediately following the signature page.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN HOMEPATIENT, INC.
By: /s/ Mary Ellen Rodgers
----------------------------------------
Name: Mary Ellen Rodgers
Title: Principal Financial and Chief Accounting
Officer, Senior Vice President
Date: February 17, 1998
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EXHIBIT INDEX
EXHIBIT NO.
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2.1 Stock Purchase Agreement dated December 23, 1997 among
National Medical Systems, Inc., its stockholders named
therein, and American HomePatient, Inc.
2.2 Amendment to Stock Purchase Agreement dated February 5,
1998 among National Medical Systems, Inc., its stockholders
named therein, and American HomePatient, Inc.
</TABLE>
A Copy of the exhibit index to the Stock Purchase Agreement has been included.
The exhibits themselves have been omitted, but Registrant shall furnish
supplementally a copy of any omitted exhibit to the Commission upon request.
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<TABLE>
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Exhibit Document
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A Type of services and products provided by the Company
1.2 Allocation of Purchase Price to Sellers
1.2(1) Cash Purchase Price
1.2(2) Form of Purchase Price Note
1.2(3) Creditors to be paid as part of Purchase Price
1.4 Excluded Payables and Receivables
2.1 Adjustments to reflect distribution of income and liabilities
3.1 Qualification to do business in Texas, Oklahoma and Missouri
3.4 Financial Statements
3.5 Exceptions to Operations
3.6 Litigation
3.7(1) Licenses and Permits; Licensure Surveys; Deficiency Reports;
Plans of Correction; List of Regulatory Bodies
3.7(4) JCAHO Accreditation
3.8(2) Notice of offsets, appeals, decertification; loss of waiver of
liability; etc.
3.9(1)A Leasehold Estates
3.9(1)B Equipment and Furnishings, including vehicles
3.9(1)C Bank Accounts
3.9(1)D Excluded Contracts and Leasehold Rights
3.(9)7 Intellectual Property
3.10 List and Copies/Summaries of Leases and Contracts, including
summaries of oral contracts
3.11 Exceptions to environmental representations
3.12 Exceptions to no special assessments
3.13 Employee Information
3.13(3) Form of Key Employee Agreement
3.14 Employee Benefit Plans
3.15 Insurance; Summary of Coverage; Pending Claims
3.16 Conflicts of Interest
5.14 Reserve Adjustments
8.3 Form of Opinion of Counsel for the Company and Shareholders
9.4 Form of Opinion of Counsel for Buyer
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STOCK PURCHASE AGREEMENT
AMONG
NATIONAL MEDICAL SYSTEMS, INC.
THE COMPANY,
THE SELLERS NAMED HEREIN,
AND
AMERICAN HOMEPATIENT, INC.
THE BUYER
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TABLE OF CONTENTS
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Page
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ARTICLE I. PURCHASE AND SALE.................................................. 2
1.1 Purchase and Sale.................................................. 2
1.2 Purchase Price..................................................... 2
1.3 Interest on Purchase Price......................................... 2
1.4 Excluded Items..................................................... 3
ARTICLE II. CLOSING............................................................ 3
2.1 Closing. .......................................................... 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...................... 4
3.1 Organization, Qualification and Authority.......................... 4
3.2 Capitalization and Shares Ownership................................ 4
3.3 Absence of Default................................................. 5
3.4 Financial Statements............................................... 5
3.5 Operations Since August 31, 1997................................... 6
3.6 Litigation......................................................... 7
3.7 Licenses........................................................... 8
3.8 Medicare, Medicaid and Other Third-Party Payors.................... 9
3.9 Title to and Condition of Assets................................... 9
3.10 Contracts......................................................... 11
3.11 Environmental Matters............................................. 12
3.12 Miscellaneous Representations Relating to Real Estate............. 14
3.13 Company Employees. .............................................. 14
3.14 Employee Benefit Plans............................................ 15
3.15 Insurance......................................................... 16
3.16 Conflicts of Interest............................................. 16
3.17 Compliance with Healthcare and Other Laws......................... 16
3.18 WARN Act.......................................................... 17
3.19 Tax Returns; Taxes................................................ 17
3.20 No Omissions or Misstatements..................................... 17
3.21 Representations and Warranties of the Trust Shareholders.......... 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER........................... 19
4.1 Organization, Qualification and Authority......................... 19
4.2 Absence of Default................................................ 20
4.3 SEC Reports....................................................... 20
ARTICLE V. COVENANTS OF PARTIES.............................................. 21
5.1 Preservation of Business and Assets............................... 21
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5.2 Books and Records.................................................. 21
5.3 Preserve Accuracy of Representations and Warranties................ 23
5.4 Broker's or Finder's Fee........................................... 23
5.5 Indebtedness; Liens................................................ 23
5.6 Compliance with Laws and Regulatory Consents....................... 23
5.7 Maintain Insurance Coverage........................................ 24
5.8 Medicare and Medicaid Reporting.................................... 24
5.9 Current Return Filing.............................................. 24
5.10 Financial Analysis................................................. 25
5.11 Hart-Scott-Rodino Filing........................................... 25
5.12 Termination of Participation in Benefit Plans; Buyer
Responsibility Post-Closing........................................ 25
5.13 Regulatory Approvals............................................... 26
5.14 Reserves........................................................... 26
5.15 Litigation......................................................... 26
ARTICLE VI. COMPANY'S AND SELLERS' CONDITIONS TO CLOSE......................... 26
6.1 Representations and Warranties True at Closing; Compliance
with Agreement..................................................... 26
6.2 No Action/Proceeding............................................... 26
6.3 Order Prohibiting Transaction...................................... 27
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE........................................ 27
7.1 Representations and Warranties True at Closing; Compliance
with Agreement..................................................... 27
7.2 No Action/Proceeding............................................... 27
7.3 No Material Adverse Change; U.C.C. Searches; etc................... 27
7.4 Order Prohibiting Transaction..................................... 28
7.5 Lease Amendments................................................... 28
ARTICLE VIII. OBLIGATIONS OF COMPANY AND SELLERS AT CLOSING..................... 28
8.1 Documents Relating to Title........................................ 28
8.2 Possession......................................................... 28
8.3 Opinion of Counsel................................................. 28
8.4 Corporate Good Standing and Corporate Resolution................... 29
8.5 Closing Certificate................................................ 29
8.6 Third Party Consents............................................... 29
8.7 Confidentiality and Employment Agreements.......................... 29
8.8 Closing Statement.................................................. 29
8.9 Additionally Requested Documents; Post-Closing Assistance.......... 29
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ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING.................................... 30
9.1 Purchase Price..................................................... 30
9.2 Corporate Good Standing and Certified Board Resolutions............ 30
9.3 Closing Certificate................................................ 30
9.4 Opinion of Buyer's Counsel......................................... 30
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION......................... 30
10.1 Survival........................................................... 30
10.2 Indemnification by Shareholders.................................... 30
10.3 Indemnification by Buyer........................................... 31
10.4 Rules Regarding Indemnification.................................... 31
ARTICLE XI. PRESERVATION OF BUSINESS AND NONCOMPETE RESTRICTIONS............... 33
11.1 Covenant Not to Compete............................................ 33
11.2 Enforceability..................................................... 34
ARTICLE XII. MISCELLANEOUS...................................................... 34
12.1 Assignment......................................................... 34
12.2 Other Expenses..................................................... 34
12.3 Notices............................................................ 35
12.4 Confidentiality; Prohibition on Trading............................ 36
12.5 Partial Invalidity; Waiver......................................... 36
12.6 Interpretation; Knowledge.......................................... 37
12.7 Entire Agreement; Counterparts..................................... 37
12.8 Legal Fees and Costs............................................... 37
12.9 Controlling Law.................................................... 37
12.10 Guaranty........................................................... 37
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into on December 23, 1997 by
and among NATIONAL MEDICAL SYSTEMS, INC., an Arkansas corporation, (the
"Company"), JAMES G. MOSLEY ("JGM"), JAMES S. MOSLEY ("JSM"), and WM. KENT
MOSLEY ("WKM"), residents of the State of Arkansas, and JSM INVESTMENTS, LIMITED
PARTNERSHIP, JGM INVESTMENTS, LIMITED PARTNERSHIP, and WKM INVESTMENTS, LIMITED
PARTNERSHIP, each an Arkansas limited partnership (each of the foregoing limited
partnerships are collectively referred to herein as, the "Partnership
Shareholders"), and NATIONAL MEDICAL SYSTEMS, INC. EMPLOYEE STOCK OWNERSHIP
TRUST, JULIE ANNE MOSLEY TRUST, UTA 8-12-97, WILLIAM ZACHARY MOSLEY TRUST, UTA
8-12-97, ASHLEY MARIE MOSLEY TRUST, CRYSTAL BROOKE MOSLEY TRUST, and STEVEN
AUSTIN MOSLEY TRUST (the foregoing trusts are collectively referred to herein as
the "Trust Shareholders" and, together with the Partnership Shareholders,
collectively as the "Sellers"), AMERICAN HOMEPATIENT, INC., a Tennessee
corporation ("Buyer") and AMERICAN HOMEPATIENT, INC., a Delaware corporation
("Parent").
R E C I T A L S:
WHEREAS, the Company and its Subsidiaries (as hereinafter defined) own
and operate a home health care and infusion therapy business operating in
Arkansas, Texas and Oklahoma, all as more particularly described on Exhibit A
hereto, which Exhibit sets forth the type of services and products provided by
the Company (collectively, the "Business");
WHEREAS, Sellers own all of the issued and outstanding common stock
(the "Shares") of the Company, the precise number of Shares owned by each Seller
being set forth on the signature page hereof opposite the signature of such
Seller;
WHEREAS, Sellers desire to sell and transfer the Shares to Buyer, and
Buyer desires to purchase the same from Sellers, subject to the terms and
conditions set forth in this Agreement; and
WHEREAS, JGM, JSM and WKM have agreed to enter into this Agreement
individually, in order to unconditionally guarantee jointly and severally the
performance by the Sellers of their obligations and undertakings set forth
herein;
WHEREAS, Parent has agreed to enter into this Agreement in order to
unconditionally guarantee the performance by Buyer of its obligations and
undertakings set forth herein;
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NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale. Sellers agree to sell, transfer, assign, convey
and deliver to Buyer, and Buyer agrees to purchase from Sellers, all right,
title and interest in and to the Shares, which consists of all of the issued and
outstanding common stock of the Company. Sellers will deliver to Buyer at
Closing (as hereinafter defined) all certificates representing the Shares, duly
endorsed for transfer or accompanied by duly executed stock powers. The Shares
will be conveyed to Buyer fully paid and nonassessable with good and valid
title, free and clear of all liens, charges, claims, liabilities, encumbrances,
security interests, restrictive agreements, options, rights of others and
imperfections of title of any nature whatsoever, including all amounts due and
payable for federal, state and local transfer taxes.
1.2 Purchase Price. The purchase price payable by Buyer to Sellers for
the Shares and in consideration for the agreements contained herein, including
the agreements contained in Article XI, will be Thirty-Five Million Three
Hundred Fifty Thousand and No/100 Dollars ($35,350,000.00) (the "Purchase
Price"). The Purchase Price shall be allocated among the Sellers in the
respective amounts and proportions set forth in Exhibit 1.2 attached hereto. The
Purchase Price will be subject to adjustment as set forth in this Agreement and
will be payable at Closing in the following manner:
(1) The amount stipulated in Exhibit 1.2(1) attached hereto in
immediately available funds by wire transfer at Closing;
(2) One Million and No/100 Dollars ($1,000,000.00) by a
purchase price note (the "Purchase Price Note"), the form of which is attached
as Exhibit 1.2(2) which Purchase Price Note is to be payable to Individual
Shareholders in the respective percentages set forth in the Purchase Price Note;
and
(3) Payment to fully satisfy certain indebtedness of the
Company, including accrued interest thereon, as of the Effective Date, in the
amounts and to the parties stipulated in Exhibit 1.2(3) attached hereto.
1.3 Interest on Purchase Price. In addition to the Purchase Price
described in Section 1.2, Buyer will deliver to Sellers, in immediately
available funds by wire transfer at Closing, interest on those portions of the
Purchase Price described in clauses (1) and (2)
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of Section 1.2 at the rate of seven percent (7.0%) per annum from the Effective
Date until Closing.
1.4 Excluded Items. Immediately prior to conveyance of the Shares,
Company will transfer to the order of JGM, JSM and WKM, respectively, in
consideration for the book value of the same, cash in hand paid to the Company,
all insurance policies on the lives of such individuals held by the Company and
those two automobiles used personally by JSM and WKM, respectively
(collectively, the "Excluded Items"). The parties acknowledge and agree that
Company is not retaining any of the Excluded Items or intercompany or Seller
payables or receivables as reflected on Exhibit 1.4 attached hereto and that,
following Closing, neither Company nor Buyer will have any right, title,
interest, claim or obligation with respect to such Excluded Items or
intercompany or Seller payables or receivables reflected on Exhibit 1.4.
ARTICLE II. CLOSING
2.1 Closing. Subject to satisfaction or waiver of all of the conditions
to Closing set forth in Articles VI and VII hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place on
or before January 31, 1998 at the offices of Giroir, Gregory, Holmes & Hoover,
PLC, 111 Center Street, Suite 1900, Little Rock Arkansas 72201 or at such other
time and place as the parties may mutually agree (the "Closing"). Upon
consummation, the Closing will be deemed to be effective and the transfer of the
Shares will be deemed to have occurred, as of 12:01 a.m. C.S.T. on December 1,
1997 (the "Effective Date"). Accordingly, all income generated from operation of
the Business on and after the Effective Date will remain with the Company and,
indirectly, be for the benefit of Buyer, and adjustments to reflect the
distribution of income and liabilities with respect to the Business as
contemplated under this Agreement will be made in accordance with the procedures
outlined in Exhibit 2.1 attached hereto. Sellers hereby acknowledge that for the
period from the Effective Date until the Closing when the physical transfer of
certificates evidencing the Shares will actually take place, Sellers will hold
such certificates for the benefit of Buyer and such certificates will be deemed
delivered as of the Effective Date, subject to the other provisions of this
Agreement. If Closing has not occurred by February 16, 1998, then any party not
in default hereunder may terminate this Agreement by written notice to the other
parties, with or without cause, without further obligation.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereunder, JGM, JSM, WKM and the
Partnership Shareholders hereby jointly and severally represent and warrant to
Buyer, which representations and warranties will be true and correct on the date
of Closing, as follows:
3.1 Organization, Qualification and Authority. Company and each of its
subsidiaries The National Medical Rentals, Inc. and National I.V., Inc.
(collectively, the "Subsidiaries") is a corporation duly organized and validly
existing in the State of Arkansas and is in good standing and duly qualified to
do business as a foreign corporation in the jurisdictions listed in Exhibit 3.1
attached hereto, which are all of the jurisdictions where the Business is
conducted. Company and Subsidiaries have observed and complied with the general
corporation law of all jurisdictions in which they do Business, except where the
failure to do so would not materially adversely affect the Company, Subsidiaries
or their operations. Company and Subsidiaries have full power and authority to
own, lease and operate their facilities and Assets (as hereinafter defined) as
presently owned, leased and operated and to carry on their business as it is now
being conducted. Company owns no capital stock, security, interest or other
right, or any option or warrant convertible into the same, of any corporation,
partnership, joint venture or other business enterprise other than the
Subsidiaries. The Company and the Sellers have the full right, power and
authority to execute, deliver and carry out the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions of this
Agreement, to consummate the transactions contemplated on the part of each such
party hereby, and to take all actions necessary, in their respective capacities,
to permit or approve the actions of Company and the Sellers taken in connection
with this Agreement. The execution, delivery and consummation of this Agreement,
and all other agreements and documents executed in connection herewith by
Company and the Sellers, have been duly authorized by all necessary action on
the part of such parties. No other action, consent or approval on the part of
Company, the Sellers or any other person or entity is necessary to authorize due
and valid execution, delivery and consummation of this Agreement and all other
agreements and documents executed in connection herewith. This Agreement and all
other agreements and documents executed in connection herewith by Company and/or
the Sellers, upon due execution and delivery thereof, will constitute the valid
and binding obligations of Company and/or the Sellers, as the case may be,
enforceable in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
3.2 Capitalization and Shares Ownership. Except for Sellers, no other
person or entity owns or holds, has any interest in, whether legal, equitable or
beneficial, or has the right to purchase, any capital Shares or other security
of Company. The Shares, being
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1,371,600 shares, $.01 par value, of common stock constitute all issued and
outstanding securities of Company, are duly authorized, validly issued, fully
paid and nonassessable, and are owned free and clear of any liens, charges,
encumbrances, security interests, pledges or any other restrictions whatsoever.
Company has no outstanding subscriptions, options, warrants, calls, contracts,
convertible securities or other instruments, agreements or arrangements of any
nature whatsoever under which Company is or may be obligated or compelled to
issue any capital stock, security or interest of any kind, or to transfer or
modify any right with respect to any capital stock, security or other interest
and no person has, nor at the Closing will any person have any preemptive
rights, right of first refusal or similar rights with respect to the Shares or
any equity interest in Company. At Closing the Company shall be subject to no
obligations or liabilities with respect to the preferred stock. Neither Company
nor Sellers are parties to any, and there exist no, voting trusts, stockholder
agreements, pledge agreements or other agreements relating to or restricting the
transferability of any capital stock or equity interests of Company. The Shares
have been issued in accordance with all applicable federal and state securities
laws. The Company owns all of the outstanding capital stock of the Subsidiaries.
The capital stock of the Subsidiaries is duly authorized, validly existing,
fully paid and nonassessable and is owned by Company free and clear of any
liens, charges, encumbrances, security interests, pledges or any other
restrictions whatsoever. There are no outstanding obligations to issue capital
stock of the Subsidiaries.
3.3 Absence of Default. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by Company and Sellers will not constitute a violation of, or be in
conflict with, will not, with or without the giving of notice or the passage of
time, or both, result in a breach of, constitute a default under, create (or
cause the acceleration of the maturity of) any debt, indenture, obligation or
liability affecting Company, Subsidiaries or the Business or rights in the
Shares or capital stock of the Subsidiaries, result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of the Shares or capital stock of the Subsidiaries, or otherwise adversely
affect Buyer, Company, Subsidiaries or the Business under: (a) any term or
provision of the Charter or Bylaws of Company or Subsidiaries; (b) any contract,
lease, purchase order, agreement, document, instrument, indenture, mortgage,
pledge, assignment, permit, license, approval or other commitment to which
Company, Subsidiaries and/or any Seller is a party or by which Company,
Subsidiaries any Seller, the Shares or the Assets are bound; (c) any judgment,
decree, order, regulation or rule of any court or regulatory authority; (d) any
law, statute, rule, regulation, order, writ, injunction, judgment or decree of
any court or governmental authority or arbitration tribunal to which Company,
Subsidiaries any Seller, the Shares and/or the Assets are subject; or (e) any of
Sellers' constituent or governing documents.
3.4 Financial Statements. Attached hereto as Exhibit 3.4 are true and
correct copies of Company's consolidated unaudited balance sheet as of August
31, 1997, and its consolidated unaudited income statement for the year then
ended (the "Fiscal Year
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Financial Statements"), and, at least ten (10) days prior to Closing, Company
will deliver to Buyer for inclusion on Exhibit 3.4 an audited version of the
Fiscal Year Financial Statements and the interim consolidated unaudited balance
sheet and income statement of the Company for the three (3) month period ended
November 30, 1997 (the "Interim Financial Statements" which, with the Fiscal
Year Financial Statements, will be referred to as the "Financial Statements").
The Financial Statements are based on the books and records of Company and
present fairly, in conformity with generally accepted accounting principles, the
financial position of Company on a consolidated basis as of, and the results of
its operations for, the periods specified, except that the Interim Financial
Statements do not contain all footnotes and adjustments (consisting of normal
recurring accruals) required by generally accepted accounting principles. Except
as set forth or reflected in the Financial Statements or notes thereto, Company
and Subsidiaries have, and as of the Closing will have, no liabilities or
obligations that singly or in the aggregate are material.
3.5 Operations Since August 31, 1997. Since August 31, 1997, other than
the cost reduction measures and other items outlined in Exhibit 3.5 attached
hereto, there has been no:
(1) change in the condition of the Company or Subsidiaries,
financial or otherwise, which has, or could reasonably be expected to have, a
material adverse effect on any of the Assets, the Business or future prospects
of the Business, or results of the operations of the Company or Subsidiaries;
(2) loss, damage or destruction of or to any material Asset,
whether or not covered by insurance;
(3) sale, lease, transfer or other disposition by Company or
Subsidiaries of, or mortgages or pledges of or the imposition of any lien,
charge or encumbrance on, any portion of the Assets, except in the ordinary
course of business consistent with past practice;
(4) increase in the compensation payable by Company or
Subsidiaries to JGM, JSM, WKM and the Partnership Shareholders or, except in the
ordinary course of business consistent with past practice, any employees,
directors, independent contractors or agents, or increase in, or institution of,
any bonus, insurance, pension, profit-sharing or other employee benefit plan or
arrangements made to, for or with the employees, directors, independent
contractors or agents of Company or Subsidiaries;
(5) cumulative net operating loss incurred in the operation of
the Business;
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(6) issuance or sale by Company or Subsidiaries, or contract
or other commitment entered into by Company or Subsidiaries or Shareholders for
the issuance or sale, of any shares of capital stock or securities convertible
into or exchangeable for capital stock of Company or Subsidiaries;
(7) merger, consolidation or similar transaction;
(8) security interest, guarantee or other encumbrance, or,
other than in the ordinary course of business, obligation or liability, in each
case whether absolute, accrued, contingent or otherwise, or whether due or to
become due, incurred or paid by Company or Subsidiaries to any person or entity;
or the making by Company or Subsidiaries of any loan or advance to, or an
investment in, any person or entity;
(9) state or local statute, rule, regulation, order or case
adopted, promulgated or decided which, to the best knowledge of Company and
Individual Shareholders, materially and adversely affects Company, Subsidiaries
, the Shares, the Business or the Assets;
(10) strike, work stoppage or other labor dispute adversely
affecting the Business; or
(11) termination, waiver or cancellation of any material
rights or claims of Company, or Subsidiaries under contract or otherwise.
Further, since the Effective Date, neither the Sellers nor any of their
family members or Affiliates has received or will receive any compensation,
benefits or distributions from Company or Subsidiaries, whether as salary,
bonus, fees, dividends, expense reimbursement or any other form of compensation
and if any such payments are made, they shall be credited against the cash
portion of the Purchase Price payable by Buyer at Closing. Notwithstanding the
foregoing, Company may continue to make standard rental payments to MoCo
Investment Partnership under the lease agreements included in Contracts, without
offset or deduction at Closing.
3.6 Litigation. Except as disclosed in Exhibit 3.6 attached hereto, no
person or party (including, without limitation, any governmental agency) has
asserted, or to the best knowledge of the Company or JGM, JSM, WKM or the
Partnership Shareholders, has threatened to assert, any claim for any action or
proceeding, against Company or Subsidiaries (or any officer, director, employee,
agent or shareholder of Company or Subsidiaries) arising out of any statute,
ordinance or regulation relating to wages, collective bargaining, discrimination
in employment or employment practices or occupational safety and health
standards (including, without limitation, the Fair Labor Standards Act, Title
VII of the Civil Rights Act of 1964, as amended, the Occupational Safety and
Health Act, the Age Discrimination in Employment Act of 1967, or the Americans
With Disabilities Act or
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the Family Medical Leave Act of 1993). Neither Company, Subsidiaries nor
Shareholders have received notice of any violation of any law, rule, regulation,
ordinance or order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, legislation and regulations applicable to the
Medicare and Medicaid programs, environmental protection, civil rights, public
health and safety and occupational health). Except as set forth in Exhibit 3.6,
there are no pending lawsuits, proceedings, actions, arbitrations, governmental
investigations or audits, claims, inquiries or proceedings pending or threatened
involving Company, Subsidiaries, JGM, JSM, WKM or the Partnership Shareholders,
Shares, any of the Assets or the Business. Subject to the provisions of Article
X, the claims disclosed in Exhibit 3.6 will not result in any liability to or
obligation of Buyer, directly or through the Company or Subsidiaries and will
not cause or lead to any lien or encumbrance being placed, created or filed
against or upon any of the Shares or Assets.
3.7 Licenses.
(1) Company and Subsidiaries have all material Licenses (as
hereinafter defined) necessary or reasonably advisable for Company and
Subsidiaries to occupy, operate and conduct the Business, the loss of which
could occur without notice and an opportunity to cure, and there exist no
waivers or exemptions relating thereto. There is no default on the part of
Company or Subsidiaries under any of such Licenses and, to the best knowledge of
Company and Individual Shareholders, there exists no grounds for revocation,
suspension or limitation of any of such Licenses. Copies of each of such
Licenses are attached to and listed on Exhibit 3.7(1) attached hereto. The most
recent licensure surveys, deficiency reports and plans of correction related to
each of these items has also been included in Exhibit 3.7(1). Company and
Subsidiaries are, and at the time of Closing will be, licensed by the regulatory
bodies listed on Exhibit 3.7(1). No notices have been received by Company,
Subsidiaries or JGM, JSM, WKM or the Partnership Shareholders with respect to
any threatened, pending, or possible revocation, termination, suspension or
limitation of such Licenses.
(2) Company and Subsidiaries are not required to have any
certificates of need or similar authorizations in order to operate the Business.
(3) Each employee of Company and Subsidiaries has all material
Licenses required for each such employee to perform such employee's designated
functions and duties for Company in connection with conducting the Business, and
there exist no waivers or exemptions relating thereto. To the best knowledge of
Company and Subsidiaries and JGM, JSM, WKM or the Partnership Shareholders,
there is no default under, nor does there exist any grounds for revocation,
suspension or limitation of, any such Licenses.
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(4) Company and Subsidiaries are duly accredited by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") to operate and
conduct the Business. Included in Exhibit 3.7(4) attached hereto are the
certificates of accreditation issued by the JCAHO, and copies of the most recent
JCAHO accreditation survey report, including a list of deficiencies, if any.
3.8 Medicare, Medicaid and Other Third-Party Payors.
(1) Company and Subsidiaries participate in the Medicare and
Medicaid Programs (collectively, the "Programs"). A list of and copies of its
existing Medicare and Medicaid contracts, and other documentation evidencing
such participation, and other third party payor contracts (collectively, the
"Payor Agreements") are included in Exhibit 3.10(2) attached hereto. Company and
Subsidiaries are, and will be at the time of Closing, in full compliance with
all of the material terms, conditions and provisions of the Payor Agreements.
(2) All liabilities and contractual adjustments of Company and
Subsidiaries under the Programs and any Payor Agreements have been properly
reflected and adequately reserved for in the Financial Statements. Except as set
forth in Exhibit 3.8(2) attached hereto: (a) no notice of any offsets against
future reimbursements under or pursuant to the Programs or the Payor Agreements
has been received by either Company, Subsidiaries or JGM, JSM, WKM or the
Partnership Shareholders, nor is there any basis therefor; (b) there are no
pending appeals, adjustments, challenges, audits, litigation, notices of intent
to recoup past or present reimbursements with respect to the Programs or the
Payor Agreements; (c) neither Company nor Subsidiaries have been subject to or
threatened with loss of waiver of liability for utilization review denials with
respect to the Programs during the past twelve (12) months; nor (d) have
Company, Subsidiaries or JGM, JSM, WKM or the Partnership Shareholders received
notice of any pending, threatened or possible decertification or other loss of
participation in, any of the Programs.
3.9 Title to and Condition of Assets.
(1) At Closing the Company or Subsidiaries will own or lease,
as specified, all assets, tangible and intangible, real and personal, that
historically have been used to operate the Business (collectively, the
"Assets"), free and clear of all encumbrances, mortgages, pledges, liens,
security interests, obligations and liabilities which Assets will include,
without limitation, the following: (i) all right, title and interest in and to
all of the real property leased by the Company or Subsidiaries as listed in
Exhibit 3.9(1)(A) attached hereto, and in and to all improvements, fixtures and
appurtenances related thereto (collectively, the "Real Estate"); (ii) all
equipment, machinery, data processing hardware and software, furniture,
furnishings, appliances, vehicles and other tangible personal property reflected
on the Financial Statements, including, without limitation, the items listed on
Exhibit 3.9(1)(B) attached hereto, subject to such additions and deletions
thereto and
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replacements thereof as occur in the ordinary course of business (collectively,
the "Equipment and Furnishings"); (iii) all inventory of goods and supplies
reflected on the Financial Statements, subject to such additions and deletions
thereto and replacements thereof as occur in the ordinary course of business
(collectively, the "Inventory"); (iv) all accounts and notes receivables (the
"Receivables"); (v) all cash, cash equivalents, investments and bank accounts
(as listed by name and address of banking institution, account name and account
and routing numbers on Exhibit 3.9(1)(C) attached hereto)(the "Cash and Cash
Equivalents"), and all prepaid expenses; (vi) all patient, medical, personnel,
corporate and other manuals, books and records; (vii) to the full extent
transferable, all federal, state and local licenses, permits, registrations,
certificates, consents, accreditations, approvals and franchises and waivers
thereof necessary or advisable to operate and conduct the Business
(collectively, the "Licenses"); (viii) all goodwill, and, to the extent
assignable by the Company or Subsidiaries, all warranties, rights and claims;
(ix) contract and leasehold rights and interests arising out of or related to
the Business, other than those listed on Exhibit 3.9(1)(D) attached hereto which
will be assumed by JGM, JSM, WKM and, as applicable, the individual employees
listed on such exhibit; (x) all intangible and intellectual property owned,
leased, licensed or utilized in connection with the Business, including without
limitation, the names "National Medical Systems," "NMS," "Right at Home," "The
National Medical Rentals," "National I.V." and derivatives thereof, to the
extent the Company, Subsidiaries or any Shareholder has rights in or to each
such name; and (xi) all equity interests in Company and Subsidiaries and all
corporate, fiscal and other records pertaining to Company, Subsidiaries or the
Business.
(2) Except as noted in the Contracts listed in Exhibit 3.10,
Company or Subsidiaries are the sole legal and beneficial owner or lessee of the
personal property included in the Assets, free and clear of all mortgages,
security interests, liens, leases, covenants, options, rights of refusal,
restrictions, reservations, defects in the title, encroachments, and other
encumbrances. The Assets are all the assets used in the operation of the
Business. The Company and Subsidiaries have received no written recommendation
from any insurer to repair or replace any of the Assets with which the Company
or Subsidiaries have not complied. Seller and Subsidiaries are in possession of
all oxygen cylinders leased from third parties including, but not limited to,
Air Gas, Inc.
(3) Exhibit 3.9(1)(A) attached hereto lists all Real Estate
leased by the Company or Subsidiaries and used in connection with the Business.
The descriptions of the real estate contained in Exhibit 3.9(1)(A) are accurate
and include all real property leased by Company or Subsidiaries and used in
connection with the Business. Company and Subsidiaries own no real property.
Company or Subsidiaries are in lawful possession as tenant of all of the Real
Estate, in each case, except as set forth in leases regarding the Real Estate
listed in Exhibit 3.10, free and clear of all mortgages, liens and other
encumbrances or restrictions that are related to or impair the Assets, Shares or
Business.
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(4) To the best knowledge of Company and Individual
Shareholders, the Equipment and Furnishings perform the functions they are
supposed to perform and are otherwise in good working order, ordinary wear and
tear excepted.
(5) The Inventory is, and on Closing will be, of a quality and
quantity previously used by Company and Subsidiaries in the ordinary course of
business determined and valued consistent with Company's past practice. The
Inventory is properly valued at the lower of cost or market value on a
first-in/first-out basis in accordance with generally accepted accounting
principles consistently applied. Since the date of the Interim Financial
Statements, Company and Subsidiaries have not decreased or substituted items of
Inventory other than in the ordinary course of business.
(6) All motor vehicles used in the Business, whether owned or
leased, are listed in Exhibit 3.9(1)(B) attached hereto, and, to the best
knowledge of the Individual Shareholders, are properly licensed and registered
in accordance with applicable law.
(7) All material trademarks, service marks, trade names,
patents, inventions, processes, copyrights and applications therefor, whether
registered or at common law (collectively, the "Intellectual Property"), owned
by Company or Subsidiaries are listed and described in Exhibit 3.9(7) attached
hereto. No proceedings have been instituted or are pending or, to the best
knowledge of Company and Individual Shareholders, threatened which challenge the
validity of the ownership by Company or Subsidiaries of any such Intellectual
Property. Company and Subsidiaries have not licensed anyone to use any such
Intellectual Property and neither Company, Subsidiaries nor JGM, JSM, WKM or the
Partnership Shareholders have any knowledge of the use or the infringement of
any of such Intellectual Property by any other person. Company and Subsidiaries
own or possess adequate and enforceable licenses or other rights to use all such
Intellectual Property now used in the conduct of the Business.
3.10 Contracts.
(1) Exhibit 3.10 attached hereto sets forth a complete and
accurate list of all contracts, including the Payor Agreements, agreements,
purchase orders, leases, subleases, employment and non-competition agreements,
options and commitments, oral or written, and all assignments, amendments,
schedules, exhibits and appendices thereof, affecting or relating to the
Business, Shares or any Asset or any interest therein, other than Payor
Agreements providing for payments of less than $25,000 per year, and agreements
pertaining to either the lease and/or maintenance of standard office equipment
used in the operation of the Business or cleaning services which agreements are
terminable by the Company or Subsidiaries on not more than sixty (60) days'
notice without penalty (collectively, the "Contracts"). Complete copies of all
written Contracts and written summaries of key terms of all oral Contracts have
been previously provided to Buyer.
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(2) None of the Contracts has been modified, amended, assigned
or transferred and each is in full force and effect. No event or condition has
happened or presently exists which constitutes a default or breach or, after
notice or lapse of time or both, would constitute a default or breach by any
party under any of the Contracts. To the best knowledge of JGM, JSM, WKM or the
Partnership Shareholders there are no counterclaims or offsets under any of the
Contracts.
(3) Except as set forth in Exhibit 3.10 attached hereto, there
does not exist any security interest, lien, encumbrance or claim of others
created or suffered to exist on any interest created under any of the Contracts
(except for those that result from or relate to leased Assets). No purchase
commitment by Company or Subsidiaries is in excess of Company's or Subsidiaries
ordinary business requirements.
3.11 Environmental Matters.
(1) Hazardous Substances. As used in this Section 3.11, the
term "Hazardous Substances" means any hazardous or toxic substances, materials
or wastes, including but not limited to those substances, materials, and wastes
defined in Paragraph 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed in the
United States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances pursuant to 40 CFR Part
302, or which are regulated under any other Environmental Law (as such term is
defined herein), and any of the following: hydrocarbons, petroleum and petroleum
products, asbestos, polychlorinated biphenyls, formaldehyde, radioactive
substances (other than naturally occurring materials in place), flammables and
explosives.
(2) Compliance with Laws and Regulations. All operations or
activities on, and any use or occupancy of, the Real Estate by Company, any
Affiliates of Company (wherein the term "Affiliates" will mean any person or
entity controlling, controlled by or under common control at any time with
Company, and the term "control" will mean the power, directly or indirectly to
direct the management or policies of such person or entity), and any agent,
contractor or employee of any agent or contractor of Company or its Affiliates
("Agents"), is and has been in compliance with any and all laws, regulations,
orders, codes, judicial decisions, decrees, licenses, permits and other
applicable requirements of governmental authorities with respect to Hazardous
Substances, pollution or protection of human health and safety (collectively,
"Environmental Laws"), including but not limited to the release, emission,
discharge, storage and removal of Hazardous Substances. The Company, Affiliates
and Agents have kept the Real Estate free of any lien imposed pursuant to
Environmental Laws. To the knowledge of Company and JGM, JSM, WKM and the
Partnership Shareholders, all prior owners, operators and occupants of the Real
Estate complied with Environmental Law. Except as set forth in Exhibit 3.11, and
except for uses and storage or presence of Hazardous Substances reasonably
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necessary or incidental to the customary operation of a business similar to the
Business, as appropriate which, if required, was duly licensed or authorized by
appropriate governmental authorities or otherwise permitted by Environmental
Law, and which complies with Environmental Law:
(a) Neither Company nor its Affiliates or Agents have
allowed the use, generation, treatment, handling, manufacture, voluntary
transmission or storage of any Hazardous Substances on the Real Estate, nor, to
the knowledge of Company or JGM, JSM, WKM and the Partnership Shareholders, has
the Real Estate ever been used for any of the foregoing.
(b) Neither Company nor its Affiliates or Agents have
installed or permitted to be installed, on the Real Estate friable asbestos or
any substance containing asbestos in condition or amount deemed hazardous by
Environmental Law.
(c) Company has not at any time engaged in or
permitted any dumping, discharge, disposal, spillage or leakage (whether legal
or illegal, accidental or intentional) of such Hazardous Substances on the Real
Estate that would subject the Real Estate or Buyer to clean-up obligations
imposed by governmental authorities.
(d) Neither Company nor, to the knowledge of Company
and JGM, JSM, WKM and the Partnership Shareholders, any present owner of the
Real Estate (i) has either received or been issued a notice, demand, request for
information, citations, summons or complaint regarding an alleged failure to
comply with Environmental Law, or (ii) is subject to any existing, pending, or,
to the knowledge of Company or JGM, JSM, WKM and the Partnership Shareholders,
threatened investigation or inquiry by any governmental authority for
noncompliance with, or any remedial obligations under Environmental Law, and
there are no circumstances known to Company or Individual Shareholders which
could serve as a basis therefor. The Company has not assumed any liability of a
third party for clean-up under or noncompliance with Environmental Law.
(e) Neither the Company nor its Affiliates or Agents
have transported or arranged for the transportation of any Hazardous Substances
to any location which is listed or, to the knowledge of Company and Individual
Shareholders, proposed for listing under Environmental Law or is the subject of
any enforcement action, investigation or other inquiry under Environmental Law.
(3) Other Environmental Matters. To the knowledge of Company
and JGM, JSM, WKM and the Partnership Shareholders, there are no underground
storage tanks on any portion of the Real Estate, the Real Estate is free of
dangerous levels of naturally-emitted radon, and no portion of the Real Estate
has ever been used as a landfill. Company has furnished to Buyer a copy of any
environmental audit, study, report or other analysis on the Real Estate which
Company or its Affiliates obtained or was furnished.
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3.12 Miscellaneous Representations Relating to Real Estate.
(1) No part of the Real Estate is currently subject to
condemnation proceedings, and, to the best knowledge of Company and JGM, JSM,
WKM and the Partnership Shareholders, no condemnation or taking is threatened or
contemplated. Except as set forth in Exhibit 3.12 attached hereto, there are no
public improvements which may result in special assessments against or otherwise
affect the Real Estate. There are no facts known to either Company or JGM, JSM,
WKM and the Partnership Shareholders that would materially interfere with the
possession, use or occupancy of the Real Estate.
(2) None of the Real Estate is in violation of any zoning,
public health, building code or other similar laws applicable thereto or to the
ownership, occupancy and/or operation thereof, nor do there exist any waivers or
exemptions relating to the Real Estate with respect to any non-conforming use or
other zoning or building codes matters, except where any such violation or loss
of any such waiver or exemption would not have a material adverse effect on the
Business. Company and Subsidiaries are not required to pay any ad valorem taxes
with respect to the Real Estate. Company and Subsidiaries have all material
easements and rights necessary to continue operation of the Business
(3) All utilities serving the Real Estate are adequate to
operate the Real Estate in the manner it is currently operated and any
associated charges accrued to date have been fully paid or reflected in the
Financial Statements. Except for such as do not have a material adverse effect
on the Business: (a) there are no encroachments upon the Real Estate and no
encroachment of any improvements to the Real Estate onto adjacent property; and
(b) none of the improvements to the Real Estate violate set-back, building or
side lines, nor do they encroach on any easements located on the Real Estate.
3.13 Company Employees.
(1) Exhibit 3.13 attached hereto sets forth: (a) a complete
list of all of the Company's and Subsidiaries' employees, (b) their respective
rates of pay, (c) the employment dates and job titles of each such person, and
(d) categorization of each such person as a full-time or part-time employee of
Company or Subsidiaries. For purposes of this Section, "part-time employee"
means an employee who is employed for an average of fewer than twenty hours per
week or who has been employed for fewer than six (6) of the twelve (12) months
preceding the date on which notice is required pursuant to the "Worker
Adjustment and Retraining Notification Act" ("WARN"), 29 U.S.C. ss.2102 et seq.
Except as provided in Exhibit 3.10, Company and Subsidiaries have no written
employment agreements with their employees and no oral employment agreement
which either will survive the closing or are not terminable on sixty (60) days
notice without penalty, and all such employees are employed on an "at will"
basis. Exhibit 3.13 also (a) lists, and has attached copies or summaries of all
employee fringe benefits and personnel policies, and (b) lists all former
employees of Company or Subsidiaries utilizing or eligible to utilize
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COBRA (health insurance). Subject to the provisions of Article X, JGM, JSM, WKM
and the Partnership Shareholders agree, jointly and severally, to indemnify and
hold Buyer, Company and Subsidiaries harmless from and against any and all
claims of employees, whenever made, relating to their employment by Company or
Subsidiaries prior to the Effective Date and, if caused by the willful
misconduct or gross negligence of any Individual Shareholder, from the Effective
Date through Closing. Company and Subsidiaries have adequately accrued (or will
adequately accrue) all salaries and wages, related payroll taxes and all sick
leave, holiday, vacation benefits, retirement and other fringe benefits that
have accrued to Company and Subsidiaries employees through the date of Closing
including related payroll taxes.
(2) Company or Subsidiaries are not a party to any labor
contract, collective bargaining agreement, contract, letter of understanding, or
any other arrangement, formal or informal, with any labor union or organization
which obligates Company or Subsidiaries to compensate employees at prevailing
rates or union scale, nor are any of their employees represented by any labor
union or organization. There is no pending or, to the best knowledge of Company
and JGM, JSM, WKM and the Partnership Shareholders, threatened labor dispute,
work stoppage, strike, suit, action, proceeding, order, investigation or claim
between or relating to Company or Subsidiaries and any present or former
employee(s) of Company or Subsidiaries. To the best knowledge of Company and
JGM, JSM, WKM and the Partnership Shareholders, there has not been any labor
union organizing activity at any location of Company or Subsidiaries, or
elsewhere, with respect to their employees within the last three (3) years.
(3) Each officer and employee of Company and Subsidiaries at
the level of branch manager or higher has executed an employment agreement
substantially in the form attached hereto as Exhibit 3.13(3).
3.14 Employee Benefit Plans.
(1) Exhibit 3.14 attached hereto contains a true, accurate and
complete list of each (a) "employee welfare benefit plan" (as defined in
Paragraph 3(1) of the Employee Retirement Income Security Act of 1974 as amended
("ERISA")) maintained by Company or Subsidiaries or to which Company or
Subsidiaries contribute or are required to contribute, and (b) "employee pension
benefit plan" (as defined in Paragraph 3(2) of ERISA) maintained by Company or
Subsidiaries, to which Company or Subsidiaries contribute or are required to
contribute, or which covered employees of Company or Subsidiaries during the
period of their employment with any predecessor of Company or Subsidiaries,
including any multi-employer pension plan as defined under Internal Revenue Code
of 1986, Paragraph 414(f) (such employee welfare benefit plans and pension
benefit plans being hereinafter collectively referred to as the "Benefit
Plans"). Copies of all Benefit Plans have previously been provided to Buyer.
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(2) Liabilities. There are no unfunded liabilities under any
Benefit Plan. Neither Buyer, Company nor Subsidiaries will be liable or
responsible for any debt, obligation, responsibility or liability under any such
plans. Subject to the provisions of Article X, JGM, JSM, WKM and the Partnership
Shareholders hereby assume joint and several liability under such plans for all
claims due and unpaid thereunder, whether or not incurred, paid or presented
before Closing.
3.15 Insurance. Company and Subsidiaries have in effect and have for at
least five (5) years continuously maintained insurance coverage for all of their
operations, personnel and assets, and for the Assets and the Business. A
complete and accurate list of all current insurance policies is included in
Exhibit 3.10. Exhibit 3.15 attached hereto sets forth a summary of current
insurance coverage (listing type, carrier and limits), includes a list of any
pending insurance claims relating to Company, Subsidiaries or Business, and
includes a recent three-year claims history relating to Company, Subsidiaries
and the Business as prepared by the applicable insurance carrier(s). Subject to
the provisions of Article X, JGM, JSM, WKM and the Partnership Shareholders
agree, jointly and severally, to indemnify and hold Buyer, Company and
Subsidiaries harmless from and against such pending insurance claims to the
extent such claims are not satisfied by Company's or Subsidiaries' insurance
policies. Company and Subsidiaries are not in default or breach with respect to
any provision contained in any such insurance policies nor have Company or
Subsidiaries failed to give any notice or to present any claim thereunder in due
and timely fashion except where a default, breach or failure to notify or
present would not affect Company's or Subsidiaries' ability to collect under
such policies. Workman's compensation premiums paid or accrued by Company and
Subsidiaries for the last two (2) years are adequate.
3.16 Conflicts of Interest. Except as set forth in Exhibit 3.16
attached hereto, none of the following is either a supplier of goods or services
to Company or Subsidiaries, or directly or indirectly controls or is a director,
officer, employee or agent of any corporation, firm, association, partnership or
other business entity that is a supplier of goods or services to Company or
Subsidiaries: (a) any Seller, (b) any director or officer of Company, or (c) any
entity under common control with Company or controlled by or related to any
Sellers.
3.17 Compliance with Healthcare and Other Laws. Neither Company,
Subsidiaries nor JGM, JSM, WKM or the Partnership Shareholders have made any
kickback, bribe or payment to any person or entity, directly or indirectly, for
referring, recommending or arranging business or patients with, to or for
Company or Subsidiaries which action could have a material adverse effect on the
Business. No bulk sales or similar statute applies to the transactions
contemplated under this Agreement. None of the Contracts and no activity of
Company, Subsidiaries or Individual Shareholders violates Paragraph 1877 of the
Social Security Act or any similar provision of applicable state law in any
material respect. None of the Contracts violates provisions of applicable state
law relating to the
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corporate practice of medicine in any material respect. Company and Subsidiaries
are in compliance (without obtaining waivers, variances or extensions) with all
federal, state and local laws, rules and regulations which relate to the
operations of the Business, except where the failure to be in compliance would
not have a material adverse effect on the Business. All Certificates of Medical
Necessity filed by the Company or Subsidiaries have been properly completed,
executed and filed in compliance with all applicable laws, rules and
regulations. All healthcare, tax and other returns, reports, plans and filings
of any nature required to be or otherwise filed by Company, Subsidiaries or the
Sellers with any governmental authorities or third party payors have been
properly completed, except where the failure to be so completed or filed could
not have a material adverse effect on the Business, and timely filed in
compliance with all applicable requirements. Each return, report, plan and
filing contains no materially untrue or misleading statements and does not omit
anything which could cause it to be misleading or inaccurate in any material
respect.
3.18 WARN Act. Since ninety (90) days prior to Effective Date, Company
and Subsidiaries have not temporarily or permanently closed or shut down any
single site of employment or any facility or any operating unit, department or
service within a single site of employment, as such terms are used in WARN.
3.19 Tax Returns; Taxes. Company and Subsidiaries have filed all
federal, state and local tax returns and tax reports required by such
authorities to be filed as of the time of Closing. Company and Subsidiaries have
paid or properly accrued on its Financial Statements all taxes, assessments,
governmental charges, penalties, interest and fines due or claimed to be due as
of the time of Closing (including, without limitation, taxes on properties,
income, franchises, licenses, sales and payrolls) by any governmental authority.
There is no pending tax examination or audit of, nor any action, suit,
investigation or claim asserted or, to the best knowledge of Company and JGM,
JSM, WKM and the Partnership Shareholders, threatened against Company or
Subsidiaries by any governmental authority; and Company and Subsidiaries have
not been granted any extension of the limitation period applicable to any tax
claims.
3.20 No Omissions or Misstatements. None of the information included in
this Agreement and Exhibits hereto, or other documents furnished or to be
furnished pursuant to the terms of this Agreement by JGM, JSM, WKM or the
Partnership Shareholders, Company or Subsidiaries, or any of their
representatives, contains any untrue statement of a material fact or is
misleading in any material respect or omits to state any material fact necessary
in order to make any of the statements herein or therein not misleading in light
of the circumstances in which they were made. Copies of all documents referred
to in any Exhibit hereto have been delivered or made available to Buyer and
constitute true, correct and complete copies thereof and include all amendments,
exhibits, schedules, appendices, supplements or modifications thereto or waivers
thereunder.
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3.21 Representations and Warranties of the Trust Shareholders. As a
material inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereunder, each of the Trust Shareholders hereby
severally, but not jointly, represents and warrants to Buyer, only with respect
to such Trust Shareholder except as otherwise specifically set forth herein,
which representations and warranties, except for those representations and
warranties which speak as of a specific date of dates, will be true and correct
on the date of Closing, as follows:
(1) Full Power and Authority. The Trust Shareholders have the
full right, power and authority to execute, deliver and carry out the terms of
this Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement, to consummate the transactions contemplated on the
part of the Trust Shareholders, and to take all actions necessary, in its
capacity, to permit or approve the actions of Company and the Trust Shareholders
taken in connection with this Agreement. The execution, delivery and
consummation of this Agreement, and all other agreements and documents executed
in connection herewith. This Agreement and all other agreement and documents
executed in connection herewith by the Trust Shareholders, have been duly
authorized by all necessary action on the part of such party. No other action,
consent or approval on the party of the Trust Shareholders or, to the knowledge
of the Trust Shareholders, any other person or entity, is necessary to authorize
due and valid execution, delivery and consummation of this Agreement and all
other agreements and documents executed in connection herewith by the Trust
Shareholders. This Agreement and all other agreements and documents executed in
connection herewith by the Trust Shareholders, upon due execution and delivery
thereof by all other indicated signatories, will constitute the valid and
binding obligations of the Trust Shareholders enforceable in accordance with
their respective terms, except as enforcement my be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
(2) Capitalization and Share Ownership. Except for Sellers, no
other person or entity owns or holds, has any interest in, whether legal,
equitable or beneficial, or has the right to purchase, any capital Shares or
other security of Company. The Shares owned by the Trust Shareholders, as
indicated on the signature page hereof, together with all other Shares listed
thereon, constitute all issued and outstanding common stock of Company, and have
been duly authorized, validly issued, and are fully paid and nonassessable. The
Trust Shareholders own the indicated Shares free and clear of any liens,
charges, encumbrances, security interests, pledges or any other restrictions
whatsoever. At Closing, to the knowledge of the Trust Shareholders, Company will
have no outstanding subscriptions, options, warrants, calls, contracts,
convertible securities or other instruments, agreements or arrangements of any
nature whatsoever under which Company is or may be obligated or compelled to
issue any capital stock of the Company, security or interest of any kind, or to
transfer or modify any right with respect to any capital stock, security or
other interest, and the Trust Shareholders have no preemptive rights,
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right of first refusal or similar rights with respect to acquire other Shares or
any equity interest in Company. Neither Company nor the Trust Shareholders, nor
to the knowledge of the Trust Shareholders, any other shareholders of Company,
is a party to any, and there exist no, voting trusts, shareholder agreements,
pledge agreements or other agreements relating to or restricting the
transferability of any shares of the Shares or equity interests of Company. To
the knowledge of the Trust Shareholders, the Shares owned by the Trust
Shareholders have been issued in accordance with all applicable federal and
state securities laws.
(3) Absence of Default. The execution, delivery and
consummation of this Agreement, and all other agreements and documents executed
in connection herewith by the Trust Shareholders will not constitute a violation
of, or be in conflict with, will not, with or without the giving of notice or
the passage of time, or both, result to the knowledge of the Trust Shareholders
in a breach of, constitute a default under, create (or cause the acceleration of
the maturity of) any debt, indenture, obligation or liability affecting Company
or its Business or rights in the Shares, result in the creation or imposition of
any security interest, lien, charge or other encumbrance upon any of the Shares
owned by the Trust Shareholders, or otherwise adversely affect Buyer, Company or
the Business under: (a) to the knowledge of the Trust Shareholders, any term or
provision of the Charter or Bylaws of Company; (b) any contract, lease, purchase
order, agreement, document, instrument, indenture, mortgage, pledge, assignment,
permit, license, approval or other commitment to which any Trust Shareholder is
a party or by which any Trust Shareholder is bound; (c) to the knowledge of any
Trust Shareholder, any judgment, decree, order, regulation or rule of any court
or regulatory authority;(d) to the knowledge of the Trust Shareholders, any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Company or any
Trust Shareholder or their Shares are subject; or (e) any of the constitute
documents of the Trust Shareholders.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers and Company to enter into this Agreement
and to consummate the transactions contemplated hereunder, Buyer hereby
represents and warrants to Sellers and Company, which representations and
warranties will be true and correct on the date of Closing, as follows:
4.1 Organization, Qualification and Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee. Buyer has the full corporate power and authority to own,
lease and operate its properties and assets as presently owned, leased and
operated and to carry on its business as it is now being conducted. Buyer has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all documents and agreements necessary to
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give effect to the provisions of this Agreement and to consummate the
transactions contemplated on the part of Buyer hereunder. The execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith by Buyer has been duly authorized by
all necessary corporate action on the part of Buyer. No other action on the part
of Buyer or any other person or entity is necessary to authorize the execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith. This Agreement, and all other
agreements and documents executed in connection herewith by Buyer, upon due
execution and delivery thereof, will constitute the valid binding obligations of
Buyer, enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
4.2 Absence of Default. The execution, delivery and consummation of
this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
with or without the giving of notice or the passage of time, or both, result in
a breach of, constitute a default under, or create (or cause the acceleration of
the maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets (except in the ordinary course pursuant to
the existing credit agreement of Buyer's parent) under: (a) any term or
provision of the Charter or Bylaws of Buyer; (b) any contract, lease, agreement,
indenture, mortgage, pledge, assignment, permit, license, approval or other
commitment to which Buyer is a party or by which Buyer is bound; (c) any
judgment, decree, order, regulation or rule of any court or regulatory
authority, or (d) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
4.3 SEC Reports. Prior to Closing, Buyer will furnish to Shareholders
true and complete copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, and its proxy materials for the most recently
held annual meeting of shareholders (collectively, the "SEC Reports") as such
reports were filed with the Securities and Exchange Commission. The SEC Reports,
at the time they were filed, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since September 30, 1997, there has been
no material adverse change in the operation of the business of the Buyer or its
parent, taken as a whole, which would necessitate any filings with the
Securities and Exchange Commission modifying the SEC reports.
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ARTICLE V. COVENANTS OF PARTIES
5.1 Preservation of Business and Assets. From the date of this
Agreement until Closing, Company, JGM, JSM, WKM and the Partnership Shareholders
will use their reasonable best efforts and will do or cause to be done all such
acts and things as may be necessary to preserve, protect and maintain intact the
operation of the Business and Assets as a going concern consistent with prior
practice and not other than in the ordinary course of business, to preserve,
protect and maintain for Buyer the goodwill of the suppliers, employees,
clientele, patients and others having business relations with Company,
Subsidiaries or the Business. Company will use its best efforts to retain its
employees in their current positions up to Closing. Buyer acknowledges that the
foregoing covenants are subject to the cost reduction measures specified in
Exhibit 3.5. Until termination of this Agreement, Company, Subsidiaries and
Sellers will not sell, transfer or pledge, or negotiate the sale, transfer or
pledge of, either any of the Assets or Shares or any other security of Company
or Subsidiaries, nor merge or consolidate with any other entity; neither
Company, Subsidiaries nor Sellers will solicit any inquiries, proposals or
offers relating to any such transactions; and such parties will promptly notify
Buyer orally, and confirm in writing, of all relevant details relating to
inquires, proposals or offers which either may receive relating to any such
matters. From the Effective Date until Closing, subject to the provisions of
Section 1.4 and the last paragraph of Section 3.5, Company and Subsidiaries will
pay no dividend, and will make no distribution or extraordinary payment to
Sellers or any third party or pay any intercompany payable and, other than in
the ordinary course of business, Company and Subsidiaries will not sell, discard
or dispose of any of the Assets. Except in the ordinary course of business, none
of the Contracts will be amended in any material respect between the date hereof
and Closing without the prior written consent of Buyer, and Company and
Subsidiaries will not enter into any new material contract, commitment or other
transaction with respect to the Business or the Assets without the prior written
consent of Buyer. From the Effective Date until Closing, Company, Subsidiaries
and any party in possession of all or any part of the Assets will maintain and
keep the Assets in a sanitary, well-maintained condition and in good order and
repair. Buyer, Company and JGM, JSM, WKM and the Partnership Shareholders shall
use their best efforts to facilitate the consummation of the transactions
contemplated under this Agreement.
5.2 Books and Records.
(1) From the date hereof until the Closing, Company and
Subsidiaries will maintain their books of account in the usual, regular and
ordinary manner on a basis consistent with prior years and will make no change
in its accounting methods or practices.
(2) Until Closing, Company, Subsidiaries and JGM, JSM, WKM and
the Partnership Shareholders will give to Buyer, during normal business hours
and upon reasonable notice, reasonable access to all of Company's offices,
properties, books,
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contracts, commitments, records and affairs relating to the Shares, Assets or
the Business so that Buyer may inspect and audit them, provided that Buyer shall
not interfere with the day to day conduct of the Company's business, and Company
will furnish to Buyer a copy of all documents and information concerning the
properties and affairs of Company, Subsidiaries, the Business, Shares or the
Assets as Buyer may reasonably request. If any such books, records and materials
are in the custody of third parties, Company and JGM, JSM, WKM and the
Partnership Shareholders will use their best efforts to cause such third parties
to promptly provide them to Buyer. All direct, documented out-of-pocket expenses
reasonable incurred by Company and associated with the copying and delivery of
documents for the sole purpose of a financial audit by Buyer will be reimbursed
by Buyer.
(3) Following the Closing, Buyer will permit Sellers, during
normal business hours, to have reasonable access to, and examine and make copies
of, all books and records of the Business which relate to transactions or events
occurring prior to the Closing. All out-of-pocket costs associated with the
delivery or copying of the requested documents will be paid by the Sellers who
request them.
(4) Following the Closing, Sellers will permit Buyer to have
access to, and examine and make copies of, any books and records relating to the
Business, Shares or Assets which Sellers are required by law to retain, if any,
and which relate to transactions or events occurring prior to the Closing. For a
period of seven (7) years after the Closing, Sellers agree that, prior to the
destruction or disposition of any such books or records, Sellers will provide
not less than thirty (30) days', nor more than ninety (90) days', prior written
notice to Buyer of such proposed destruction or disposal. If Buyer desires to
obtain any such documents or records, it may do so by notifying Sellers in
writing at any time prior to the date scheduled for such destruction or
disposal. In such event, Sellers will not destroy such documents or records and
the parties will then promptly arrange for the delivery of such documents or
records to Buyer, its successors or assigns. All out-of-pocket costs associated
with the delivery of the requested documents or records will be paid by Buyer.
(5) The JGM, JSM, WKM and the Partnership Shareholders will
use reasonable efforts to cause Company's accounting firm to cooperate with
Buyer and, as applicable, consent to the inclusion of the audited Financial
Statements in any registration statements, private placement memoranda, and
periodic reports, if any, necessary or appropriate in order to enable Buyer or
its Affiliates to comply with any applicable registration or reporting
requirements of federal or state securities laws. After Closing, to the extent
they possess any of same, JGM, JSM, WKM and the Partnership Shareholders will
make the books and records of Company and Subsidiaries available to Buyer and
will otherwise cooperate with Buyer in order to permit Buyer, at its expense, to
conduct an audit of Company's and Subsidiaries' financial statements for any
period prior to Closing not already audited. JGM, JSM, WKM and the Partnership
Shareholders agree to cooperate with Buyer in Buyer's preparation of financial
statements relating to such periods
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and Buyer's filing in a timely manner of registration statements, private
placement memoranda and periodic reports, if any, pursuant to any applicable
federal or state securities law.
5.3 Preserve Accuracy of Representations and Warranties. Each of
Sellers, Subsidiaries and Company will refrain from taking any action which
would render any representation and warranty contained in Article III untrue,
inaccurate or misleading as of Closing. JGM, JSM, WKM and the Partnership
Shareholders and Company will promptly notify Buyer of any lawsuit, claim,
audit, investigation, administrative action or other proceeding asserted or
commenced against Company, Subsidiaries or its directors, officers, or Sellers,
that may involve or relate in any way to Company, Subsidiaries, the Assets,
Shares, Sellers or the operation of the Business. Each Seller and Company will
promptly notify Buyer of any facts or circumstances that come to its attention
and that cause, or through the passage of time may cause, any of Sellers' or
Company's representations, warranties or covenants to be untrue or misleading at
any time from the date hereof through Closing
5.4 Broker's or Finder's Fee. Neither Buyer, Company, Subsidiaries nor
any Seller has employed or is liable for the payment of any fee to any finder,
broker, government official or similar person in connection with the
transactions contemplated under this Agreement.
5.5 Indebtedness; Liens. Other than in the ordinary course of business
in accordance with past practice, and as reflected in the Financial Statements,
from the Effective Date through Closing Company and Subsidiaries will not
create, incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money, nor make any loan or advance to,
or any investment in, any person or entity, nor create any lien, security
interest, mortgage, right or other encumbrance in any of the Assets, without
Buyer's prior written approval. At Closing, the Shares, Assets and capital stock
of the Subsidiaries will be free and clear of all mortgages, security interests,
liens, leases, covenants, assessments, easements, options, rights of first
refusal, restrictions, reservations, defects in title, encroachments or other
encumbrances, except as set forth in those Contracts which are to be retained by
Company, and Sellers will deliver to Buyer such pay-off letters, releases,
U.C.C. termination statements and other documents as Buyer may reasonably
request to evidence the same.
5.6 Compliance with Laws and Regulatory Consents. From the date hereof
through Closing, (a) Company and Subsidiaries will comply with all applicable
statutes, laws, ordinances and regulations, (b) Company and Subsidiaries will
keep, hold and maintain all material Licenses necessary or advisable for the
Business and operation of the Assets, (c) Sellers, Subsidiaries and Company will
use their reasonable efforts and will cooperate fully with Buyer to obtain all
consents, approvals, exemptions and authorizations of third parties, whether
governmental or private, necessary to consummate the
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transactions contemplated by this Agreement, and (d) Sellers, Subsidiaries and
Company will make and cause to be made all filings and give and cause to be
given all notices which may be necessary or desirable on their part under all
applicable laws and under their respective contracts, agreements and commitments
in order to consummate the transactions contemplated under this Agreement.
5.7 Maintain Insurance Coverage. From the date hereof through Closing,
JGM, JSM, WKM and the Partnership Shareholders will cause Company and
Subsidiaries to maintain in full force and effect the existing insurance on the
Assets and the operations of the Business and will provide at Closing written
evidence satisfactory to Buyer that such insurance continues to be in effect,
that all premiums due have been paid, and that Buyer has been named additional
named insured since the Effective Date. JGM, JSM, WKM and the Partnership
Shareholders will cause the Company's and Subsidiaries' worker's compensation
policy to be canceled effective as of the date of Closing, and Buyer will obtain
worker's compensation for the Company beginning as of the Closing.
5.8 Medicare and Medicaid Reporting. From the Effective Date and
through Closing, Company and Subsidiaries will adequately accrued or reserve for
all liabilities for contractual adjustments, discounts, refunds and other
offsets in connection with such reports. Shareholders will be entitled to
receive any refund or other benefit which may result for the filing of said
reports and claims for operations up to the Effective Date, and Buyer will
likewise be so entitled beginning on the Effective Date. If, following Closing,
Company or Subsidiaries suffer any offsets which are not expressly reflected or
reserved in the Interim Financial Statements and which offsets are against any
reimbursement under any third-party payor or reimbursement programs due to
Buyer, Subsidiaries or Company relating to the periods on or prior to the
Closing, then JGM, JSM, WKM and the Partnership Shareholders, subject to the
provisions of Article X, will immediately pay to Company the amounts offset,
with interest at a rate equal to seven percent (7%) per annum; provided, however
that Buyer will bear the risk of offset as to operations from the Effective Date
through Closing so long as such offsets are not caused by the wilful acts or
omissions, or negligence, of JGM, JSM, WKM and the Partnership Shareholders,
Subsidiaries, Company and/or their respective employees, representatives or
agents. The interest will accrue from the date of offset by the third party
until the date paid by JGM, JSM, WKM and the Partnership Shareholders to
Company.
5.9 Current Return Filing. JGM, JSM, WKM and the Partnership
Shareholders will be responsible for the preparation and filing of all federal,
state and local income tax and gross receipts and use tax returns of Company and
Subsidiaries which are due on or before Closing. Buyer will be responsible for
the preparation and filing of all such returns which relate to periods beginning
subsequent to Closing. Buyer's and JGM, JSM, WKM and the Partnership
Shareholders' accountants will cooperate in the preparation of such returns for
the stub period ending on the date of Closing (the "Stub Returns"), and each
party will pay the fees and expenses of its respective accountants. JGM, JSM,
WKM and
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the Partnership Shareholders' accountants will complete the Stub Returns and
deliver them to Buyer's accountants for review at least fifteen (15) days prior
to the applicable required filing dates. During such fifteen (15) day period,
Buyer's accountants may review and comment on the Stub Returns. The Stub Returns
will not be filed until approved by both accounting firms. The Stub Returns, as
filed, will establish an effective tax rate for the Stub Period. This effective
tax rate will be applied to the taxable income of the Company for the period
from September 1, 1997 through November 30, 1997 to establish the aggregate tax
liability which is the responsibility of JGM, JSM, WKM and the Partnership
Shareholders (the "Shareholders' Tax Liability"). If the Shareholders' Tax
Liability exceeds the tax liability of Company and Subsidiaries' recorded on the
Interim Financial Statements, then subject to the provisions of Article X, JGM,
JSM, WKM and the Partnership Shareholders will, jointly and severally, pay the
shortfall to Buyer within ten (10) days of the date of the filing of the Stub
Returns.
5.10 Financial Analysis. Buyer covenants to provide Sellers all
information which Sellers feel relevant to their decision to accept the form of
Purchase Price stipulated in Section 1.2, exclusive of confidential and/or
proprietary information which Buyer in good faith determines is not relevant to
Sellers' determination. Sellers represent that they possess, with their
financial advisors (if any), the financial and business experience to make an
informed decision regarding the form of the Purchase Price and the financial
means to bear the economic risk of the same. The representations, warranties and
covenants contained in this Agreement are not to be deemed acknowledgments by
any party that any portion of the Purchase Price constitutes a "security" as
defined in either the Security Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.
5.11 Hart-Scott-Rodino Filing. Sellers and Company will (with the
assistance of the Buyer if and when required) timely and promptly make, and
Buyer will cause its "ultimate parent" (with the assistance of Sellers and
Company if and when required) to timely and promptly make, all filings which are
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"Antitrust Improvements Act"). The parties will use their best efforts to obtain
the approval of the United States Federal Trade Commission or the Antitrust
Division of the United States Department of Justice, as the case may be, to the
purchase of the Shares by Buyer or the lapse prior to the Closing Date of the
waiting period under the Antitrust Improvements Act without the commencement of
litigation, or threat thereof, by the appropriate governmental enforcement
agency to restrain the transactions contemplated under this Agreement.
5.12 Termination of Participation in Benefit Plans; Buyer
Responsibility Post-Closing. JGM, JSM, WKM and the Partnership Shareholders
will cause the Company and Subsidiaries to take all necessary action prior to
Closing to cease to be a participating employer under any Benefit Plan, to
ensure that the benefit Plans are in compliance with all applicable laws and to
ensure that the transactions contemplated by this Agreement will not cause the
disqualification of the benefit Plans. Buyer shall be responsible for providing
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employee benefits for all employees of Company and Subsidiaries who continue
with the Company or Subsidiaries after Closing, pursuant to Buyer's employee
benefit plans, on terms and conditions substantially equivalent to those
provided for Buyer's employees similarly situated, except where otherwise
contemplated by this Agreement.
5.13 Regulatory Approvals. Buyer will use reasonable efforts to obtain
prior to Closing: (a) certification for participation in the Medicaid Programs
of the states where the Business is conducted, (b) certification from the
appropriate agency of the federal government for participation in the federal
Medicare Program, and (c) all other governmental consents, licenses, permits,
approvals, provider contracts, determinations or certificates of need necessary
in the judgment of Buyer to acquire the Shares and operate the Assets and
Business as contemplated hereunder.
5.14 Reserves. Company and Subsidiaries shall, prior to Closing adjust
the reserve accounts identified on Exhibit 5.14 attached hereto to the
respective amounts shown on Exhibit 5.14.
5.15 Litigation. With respect to litigation ongoing at Closing (the
"Claims"), Buyer, on the one hand, and Sellers, on the other hand, shall each
appoint one agent (the "Agents") for the management and disposition of the
Claims. Neither Buyer, Company nor Sellers shall compromise, settle, resolve or
otherwise dispose of any Claims without the prior unanimous approval of the
Agents. In the event the Agents are unable to agree as to the appropriate
disposition of a Claim, the parties shall each appoint one arbitrator, those
arbitrators shall mutually appoint a third arbitrator, and the three arbitrators
shall resolve the issue(s) in dispute.
ARTICLE VI. COMPANY'S AND SELLERS' CONDITIONS TO CLOSE
The obligations of Company and Sellers under this Agreement are subject
to the satisfaction on or prior to Closing, of the following conditions (which
may be waived in writing by Company or Sellers, in whole or in part):
6.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Buyer contained in this
Agreement and in any certificate or document delivered pursuant hereto will be
deemed to have been made again at the Closing and will then be true in all
respects. Buyer will have performed and complied with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or at Closing.
6.2 No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Company, Sellers or Buyer
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as a result of which Company or Sellers reasonably and in good faith deem that
to proceed with the transactions hereunder may constitute a violation of law.
The waiting periods specified under the Antitrust Improvements Act with respect
to the transactions contemplated under this Agreement will have lapsed or been
terminated.
6.3 Order Prohibiting Transaction. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There will have been no United States federal or state statute,
rule or regulations enacted or promulgated after the date of this Agreement that
would reasonably result, directly or indirectly, in any of the consequences
referred to in this Section.
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer, in whole or in part):
7.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Sellers and Company contained
in this Agreement (including the Exhibits hereto) and in any certificate or
document delivered pursuant hereto will be deemed to have been made again at the
Closing and will then be true in all respects. Company and Sellers will have
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at Closing.
7.2 No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Company, Sellers or Buyer as a result of which Buyer
reasonably and in good faith deems that to proceed with the transactions
hereunder may constitute a violation of law. The waiting periods specified under
the Antitrust Improvements Act with respect to the transactions contemplated
under this Agreement will have lapsed or been terminated.
7.3 No Material Adverse Change; U.C.C. Searches; etc. Company and
Subsidiaries shall not have suffered a material adverse change with respect to
their Business, Assets, financial condition or results of operation between the
date of the Interim Financial Statements and the Closing Date, and JGM, JSM, WKM
and the Partnership Shareholders, Company and Subsidiaries shall have furnished
a certificate to Buyer to such effect. Company, Subsidiaries and Sellers will
have delivered to Buyer, at Sellers'
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expense, all U.C.C. financing statements, local and central and federal and
state pending litigation, tax lien and judgment searches, with respect to
Company and Subsidiaries, including all "DBA's," trade names and fictitious
names of Company and Subsidiaries, dated no more than ten (10) days prior to
Closing, reflecting confirmation, to Buyer's reasonable satisfaction, of
Company's and Sellers' representations, warranties and covenants made in this
Agreement.
7.4 Order Prohibiting Transaction. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal or (b) otherwise preventing consummation of such transactions.
There will have been no United States federal or state statute, rule or
regulations enacted or promulgated after the date of this Agreement that would
reasonably result, directly or indirectly, in any of the consequences referred
to in this Section.
7.5 Lease Amendments. Those certain lease agreements with MoCo
Investment Partnership regarding Real Estate located in Hot Springs and
Springdale, Arkansas will be amended in a manner reasonably acceptable to Buyer
to stipulate that Buyer may cancel either lease agreement at any time upon
thirty (30) days' written notice without penalty or further obligation.
ARTICLE VIII. OBLIGATIONS OF COMPANY AND
SELLERS AT CLOSING
At Closing, Company and Sellers will deliver or cause to be delivered
to Buyer the following in form and substance reasonably satisfactory to Buyer:
8.1 Documents Relating to Title. Sellers will execute, acknowledge,
deliver and cause to be executed, acknowledged and delivered to Buyer:
(1) Share certificates, registered in the name of the Sellers,
duly endorsed by Sellers or with stock powers attached, representing all of the
Shares.
(2) The resignation of each member of the Board of Directors
and each officer of Company and Subsidiaries effective as of the Closing.
8.2 Possession. Company will deliver to Buyer full possession and
control of the Shares, Business, capital stock of Subsidiaries and Assets.
8.3 Opinion of Counsel. Sellers will deliver to Buyer a favorable
opinion of counsel, dated as of Closing, in the form attached hereto as Exhibit
8.3.
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8.4 Corporate Good Standing and Corporate Resolution. Sellers will
deliver to Buyer certificates of good standing from the Secretary of State of
Company's and Subsidiaries' state of organization, and from each jurisdiction in
which Company or Subsidiaries are qualified to do business, certified copies of
the Bylaws and Charter of Company and Subsidiaries, and a certified copy of the
resolutions of the Board of Directors of Company and as applicable,
shareholders, authorizing the execution, delivery and consummation of this
Agreement and the execution, delivery and consummation of all other agreements
and documents executed in connection herewith by it, including all instruments
required hereunder, sufficient in form and content to meet the requirements of
the law of the State of Company's incorporation relevant to such transactions
and certified by officers of Company to be validly adopted and in full force and
effect and unamended as of Closing.
8.5 Closing Certificate. Company will deliver to Buyer a certificate of
an officer of Company and of Sellers, dated as of Closing, certifying that (a)
each covenant and obligation of Company and Sellers has been complied with, and
(b) each representation, warranty and covenant of Company and Sellers is true
and correct in all respects at the Closing as if made on and as of the Closing.
8.6 Third Party Consents. Sellers will deliver to Buyer by Closing all
consents, estoppels, approvals, releases, pay-off letters, U.C.C. termination
statements and other filings, and authorizations of third parties that Buyer
reasonably believes are necessary or advisable for the legal and proper
execution, delivery and consummation of this Agreement, and the transactions
contemplated hereunder, including but not limited to releases of all mortgages,
security interests, liens, pledges, restrictions or other encumbrances on or
applicable to the Shares or Assets as specified hereby.
8.7 Confidentiality and Employment Agreements. Sellers will deliver to
Buyer each of the agreements described in Sections 7.5.
8.8 Closing Statement. Sellers and Company will, along with Buyer,
execute a Closing Statement setting forth the Purchase Price and various
adjustments thereto.
8.9 Additionally Requested Documents; Post-Closing Assistance. At the
reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Sellers will (a) cooperate with Buyer to put Buyer in actual
possession and operating control of the Shares, Company, Subsidiaries, Business
and Assets, (b) execute and deliver such further instruments of sale,
conveyance, transfer and assignment effectively to sell, convey, transfer and
assign the Shares to Buyer, (c) execute and deliver such further instruments and
to take such other actions as Buyer may reasonably request to release Buyer,
Company and Subsidiaries from all obligation and liability with regard to any
obligation or liability retained or assumed by Sellers, and (d) execute and
deliver such further instruments and to cooperate with Buyer as Buyer may
reasonably request to
29
<PAGE> 34
enable Buyer, Company and Subsidiaries to obtain all necessary health care or
regulatory certifications, approvals, consents and licenses, accreditation or
permits.
ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer will deliver or cause to be delivered to Sellers the
following in a form and substance reasonably satisfactory to Sellers:
9.1 Purchase Price. Buyer will pay to Sellers the Purchase Price upon
the terms specified in this Agreement.
9.2 Corporate Good Standing and Certified Board Resolutions. Buyer will
deliver to Sellers a certificate of existence from the Secretary of State of
Tennessee, dated the most recent practical date prior to Closing, together with
a certified copy of the resolutions of the Board of Directors of Buyer
authorizing the execution, delivery and consummation of this Agreement and the
consummation of the transactions contemplated hereunder.
9.3 Closing Certificate. Buyer will deliver to Sellers a certificate of
an officer of Buyer, dated as of Closing, certifying that (a) each covenant and
obligation of Buyer has been complied with, and (b) each representation,
warranty and covenant of Buyer is true and correct at the Closing as if made on
and as of the Closing.
9.4 Opinion of Buyer's Counsel. Buyer will deliver to Sellers the
favorable opinion of Harwell Howard Hyne Gabbert & Manner, P.C., dated as of the
date of the Closing, in the form attached hereto as Exhibit 9.4.
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
10.1 Survival. The covenants, obligations, representations and
warranties of Buyer, Company and Sellers contained in this Agreement, or in any
certificate or document delivered pursuant to this Agreement, will be deemed to
be material and to have been relied upon by the parties hereto notwithstanding
any investigation prior to the Closing will not be merged into any documents
delivered in connection with the Closing, and will survive the date of Closing
for a period of three (3) years; provided, however, that the representations,
warranties and covenants set forth in Sections 3.8, 3.11, 3.17 (as such Section
pertains to health care matters), 3.19, 5.8 and 5.9 will each survive for the
applicable statute of limitations.
10.2 Indemnification by Shareholders. Subject to the provisions of
Section 10.4, JGM, JSM, WKM and the Partnership Shareholders will, jointly and
severally, promptly indemnify, defend, and hold harmless Buyer, Company and
Subsidiaries against any and
30
<PAGE> 35
all losses, costs, and expenses (including reasonable cost of investigation,
court costs and legal fees actually incurred) and other damages resulting from
any breach by either Company or JGM, JSM, WKM and the Partnership Shareholders
of any of the covenants, obligations, representations or warranties or breach or
untruth of any representation, warranty, fact or conclusion contained in this
Agreement or any certificate or document of Company and/or Sellers delivered
pursuant to this Agreement, provided that no such indemnification obligation
shall exist unless JGM, JSM, WKM and the Partnership Shareholders shall have
received notice of any such claim of indemnification prior to the expiration of
the survival period set forth in Section 10.1 hereof. Any indemnification
payment made pursuant to this Article will include interest at a floating rate
equal to two points over the prime rate of Bankers Trust Company established
from time to time (the "Rate") payable for the period measured from the date
that the loss, cost, expense or damage was incurred until the date of payment,
and shall be net of any tax benefit inuring to the benefit of the party seeking
indemnification and arising as a result of the matter for which indemnification
is sought.
10.3 Indemnification by Buyer. Subject to the provisions of Section
10.4, Buyer will promptly indemnify, defend, and hold Sellers harmless against
any and all losses, costs, and expenses (including reasonable cost of
investigation, court costs and legal fees) and other damages resulting from any
breach by Buyer of any of its covenants, obligations, representations or
warranties or breach or untruth of any representation, warranty, fact or
conclusion contained in this Agreement or any certificate or document of Buyer
delivered pursuant to this Agreement, provided that no such indemnification
obligation shall exist unless Buyer shall have received notice of any such claim
of indemnification prior to the expiration of the survival period set forth in
Section 10.1 hereof. Any indemnification payment made pursuant to this Article
will include interest at a floating rate equal to two points over the prime rate
of Bankers Trust Company established from time to time (the "Rate") payable for
the period measured from the date that the loss, cost, expense or damage was
incurred until the date of payment, and shall be net of any tax benefit inuring
to the benefit of the party seeking indemnification and arising as a result of
the mater for which indemnification is sought.
10.4 Rules Regarding Indemnification. The obligations and liabilities
of each party which may be subject to indemnification liability hereunder (the
"indemnifying party") to the other party (the "indemnified party") will be
subject to the following terms and conditions:
(1) Claims by Non-Parties. The indemnified party will give
written notice to the indemnifying party, within such time as not to prejudice
unduly the indemnifying party's ability to defend against the underlying claim,
of any written claim by a third party which is likely to give rise to a claim by
the indemnified party against the indemnifying party based on the indemnity
agreements contained in this Article, stating the nature of said claim and the
amount thereof, to the extent known. The indemnified party will give notice to
the indemnifying party that pursuant to the indemnity, the indemnified party is
asserting
31
<PAGE> 36
against the indemnifying party a claim with respect to a potential loss from the
third party claim, and such notice will constitute the assertion of a claim for
indemnity by the indemnified party. If, within twenty (20) days after receiving
such notice, the indemnifying party advises the indemnified party that it will
provide indemnification and assume the defense at its expense, then so long as
such defense is being conducted, the indemnified party will not settle or admit
liability with respect to the claim, will fully cooperate with the indemnifying
party and will afford to the indemnifying party and defending counsel reasonable
assistance in defending against the claim. If the indemnifying party assumes the
defense, counsel will be selected by such party and if the indemnified party
then retains its own counsel, it will do so at its own expense. If the
indemnified party does not receive a written objection to the notice from the
indemnifying party within twenty (20) days after the indemnifying party's
receipt of such notice, the claim for indemnity will be conclusively presumed to
have been assented to and approved, and in such case the indemnified party may
control the defense of the matter or case and, at its sole discretion, settle or
admit liability. If within the aforesaid twenty (20) day period the indemnified
party will have received written objection to a claim (which written objection
will briefly describe the basis of the objection to the claim or the amount
thereof, all in good faith), then for a period of sixty (60) days after receipt
of such objection the parties will attempt to settle the dispute as between the
indemnified and indemnifying parties.
(2) Claims by a Party. The determination of a claim asserted by a party
hereunder (other than as set forth in subparagraph (1) above) pursuant to this
Article will be made as follows: The indemnified party will give written notice
(which written notice will briefly describe the basis of the claim and the
amount thereof) to the indemnifying party, within such time as not to materially
prejudice the indemnifying party's ability to defend against the underlying
claim, of any claim by the indemnified party which has not been made pursuant to
subparagraph (1) above, stating the nature and basis of such claim and the
amount thereof, to the extent known. The claim will be deemed to have resulted
in a determination in favor of the indemnified party and to have resulted in a
liability of the indemnifying party in an amount equal to the amount of such
claim estimated pursuant to this Section if within thirty (30) days after the
indemnifying party's receipt of the claim the indemnified party will not have
received written objection to the claim. In such event, the claim will be
conclusively presumed to have been assented to and approved. If within the
aforesaid thirty (30) day period the indemnified party will have received
written objection to a claim (which written objection will briefly describe the
basis of the objection to the claim or the amount thereof, all in good faith),
then for a period of sixty (60) days after receipt of such objection the parties
will attempt to settle the disputed claim as between the indemnified and
indemnifying parties. Notwithstanding the provisions of this clause (2), the
enforcement provisions set forth in Section 11.2 will be available in the event
of a breach of Section 11.1.
(3) Claims by a Straddle Patient. Any claim by a patient
relating to professional negligence or similar matters involving a patient
served both prior to the
32
<PAGE> 37
Effective Date and subsequent to the Effective Date will be the responsibility
of either Buyer on the one hand or JGM, JSM, WKM and the Partnership
Shareholders, in accordance with the following guidelines: (i) if it is a claim
in which the incident giving rise to liability clearly arose prior to the
Effective Date, JGM, JSM, WKM and the Partnership Shareholders will jointly and
severally respond to the loss and defense expenses; (ii) subject to the other
provisions of this Agreement, if it is a claim in which the incident giving rise
to liability clearly arose on or after the Effective Date, Buyer will respond to
the loss and defense expenses; and (iii) if the incident giving rise to
liability as to time is not clear, JGM, JSM, WKM and the Partnership
Shareholders and Buyer will jointly defend the case and each will fully
cooperate with the other in such defense.
(4) Threshold Amount. The obligations of JGM, JSM, WKM and the
Partnership Shareholders, on the one hand, and the Buyer, on the other hand,
under this Article X will not begin until the indemnified party incurs one or
more claims that equal, in the aggregate, Five Hundred Thousand and No/100
Dollars ($500,000.00) (the "Threshold Amount"); provided that once such
Threshold Amount is reached, the obligations of the indemnifying party under
this Agreement will apply to all claims of the indemnified party, whether such
claims are part of or in excess of the Threshold Amount. The parties acknowledge
and agree that the materiality caveats set forth elsewhere in this Agreement
will provide no limitation on obligations of an indemnifying party in excess of
or in addition to the Threshold Amount.
ARTICLE XI. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
11.1 Covenant Not to Compete. JGM, JSM, WKM and the Partnership
Shareholders hereby, jointly and severally, covenant and agree with Buyer that,
during the Non-Compete Period (as such term is defined herein) and within the
Non-Compete Area (as such term is defined herein), none of JGM, JSM, WKM or the
Partnership Shareholders will directly or indirectly, (a) acquire, lease,
manage, consult for, serve as agent or subcontractor for, finance, invest in,
own any part of or exercise management control over any health care operation or
business which provides any goods or services competitive with the goods and
services provided by the Business as of the Closing, or (b) without Buyer's
written consent solicit for employment or employ any person who at Closing or
thereafter became an employee of Buyer, Company, Subsidiaries or an affiliate
unless such person is not so employed for at least six (6) months, or (c) with
respect to any customer, patient, physician, physician group, or healthcare
provider with whom Buyer, Company, Subsidiaries and/or an Affiliate contracts
with in connection with the Business, solicit the same in a manner which could
adversely affect Buyer, Company, Subsidiaries or an Affiliate or make statements
to the same which materially disparage Buyer, Company, Subsidiaries an Affiliate
or their respective operations. The "Non-Compete Period" will commence at the
Closing and terminate on the fifth (5th) anniversary thereof.
33
<PAGE> 38
The "Non-Compete Area" will mean the area within a fifty (50) mile radius of
each location from which the Business is operated or conducted as of the
Closing. Ownership of less than five percent (5%) of the Shares of a publicly
held company will not be deemed a breach of this covenant. Notwithstanding the
parties' agreement with respect to Non-Competition, the parties agree and
acknowledge that no portion of the Purchase Price shall be separately allocated
to this covenant for tax purposes.
11.2 Enforceability. In the event of a breach of Section 11.1, JGM,
JSM, WKM and the Partnership Shareholders recognize that monetary damages will
be inadequate to compensate Buyer and Company, and Buyer, Subsidiaries and
Company will be entitled, without the posting of a bond or similar security and
notwithstanding the arbitration provisions contained in Article X, to an
injunction restraining such breach, with the costs (including attorney's fees)
of securing such injunction to be borne by JGM, JSM, WKM and the Partnership
Shareholders. Nothing contained herein will be construed as prohibiting Buyer,
Subsidiaries or Company from pursuing any other remedy available to either for
such breach or threatened breach. All parties hereby acknowledge the necessity
of protection against the competition of JGM, JSM, WKM and the Partnership
Shareholders and that the nature and scope of such protection has been carefully
considered by the parties. The period provided and the area covered are
expressly represented and agreed to be fair, reasonable and necessary. The
consideration provided for in this Agreement is deemed to be sufficient and
adequate to compensate JGM, JSM, WKM and the Partnership Shareholders for
agreeing to the restrictions contained in Section 11.1. If, however, any court
determines that the forgoing restrictions are not reasonable, such restrictions
will be modified, rewritten or interpreted to include as much of their nature
and scope as will render them enforceable.
ARTICLE XII. MISCELLANEOUS
12.1 Assignment. Following Closing, Buyer and Company may freely assign
any or all of their respective rights or delegate any or all of their respective
obligations under this Agreement without the express written consent of Sellers,
except that no assignment of any obligation to make any payments to the Sellers
hereunder shall relieve Buyer of such obligations. No Seller may assign any
rights or delegate any obligations under this Agreement without the prior
written consent of Buyer, and any prohibited assignment or delegation will be
null and void. Subject to the foregoing, this Agreement will be binding upon and
inure to the exclusive benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns. This Agreement is not intended to
nor will it, create any rights in any other party.
12.2 Other Expenses. Except as otherwise provided in this Agreement,
the Sellers will jointly and severally pay all of their and Company's and
Subsidiaries' expenses in connection with the negotiation, execution, and
implementation of the transactions
34
<PAGE> 39
contemplated under this Agreement and Buyer will pay all of its expenses in
connection with the negotiation, execution, and implementation of the
transactions contemplated under this Agreement. All sales and use taxes,
recording fees and transfer fees and taxes incurred in connection under the
transactions contemplated within this Agreement will be jointly and severally
borne by Sellers and paid at Closing.
12.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given: (a) if delivered personally
or sent by facsimile, on the date received, (b) if delivered by overnight
courier, on the day after mailing, and (c) if mailed, five days after mailing
with postage prepaid. Any such notice will be sent as follows:
35
<PAGE> 40
To Shareholders and, prior to Closing, Company:
c/o James S. Mosley
P.O. Box 21075
Little Rock, Arkansas 72221
with a courtesy copy to:
H. Watt Gregory, III
Giroir, Gregory, Holmes & Hoover, PLC
111 Center Street, Suite 1900
Little Rock, Arkansas 72201
To the Buyer and, after Closing to the Company:
American HomePatient, Inc.
5200 Maryland Way
Suite 400
Brentwood, Tennessee 37027
Attn: Edward K. Wissing
with a courtesy copy to:
Lauren W. Anderson
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
315 Deaderick Street
Nashville, Tennessee 37238-1800
12.4 Confidentiality; Prohibition on Trading. Subject to filings under
the Antitrust Improvements Act, Company and the Sellers agree to maintain the
confidentiality of the existence of this Agreement and the transactions
contemplated hereunder, unless disclosure is required by law. Sellers, Company
and their affiliates agree not to trade in the securities of Buyer or its
affiliates based upon any nonpublic information.
12.5 Partial Invalidity; Waiver. The invalidity or unenforceability of
any particular provision of this Agreement will not affect the other provisions
hereof, and this Agreement will be construed in all respects as if such invalid
or unenforceable provisions were omitted. Further, there will be automatically
substituted for such invalid or unenforceable provision a provision as similar
as possible which is valid and enforceable. Neither the failure nor any delay on
the part of any party hereto in exercising any rights, power or remedy hereunder
will operate as a waiver thereof, or of any other right, power or remedy; nor
will any single or partial exercise of any right, power or remedy preclude any
further or other
36
<PAGE> 41
exercise thereof, or the exercise of any other right, power or remedy. No waiver
of any of the provisions of this Agreement will be valid unless it is in writing
and signed by the party against which it is sought to be enforced.
12.6 Interpretation; Knowledge. All pronouns and any variation thereof
will be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or entity, or the context, may require. Further,
it is acknowledged by the parties that this Agreement has undergone several
drafts with the negotiated suggestions of both; and, therefore, no presumptions
will arise favoring either party by virtue of the authorship of any of its
provisions or the changes made through revisions. Any table of contents and
Section headings in this Agreement are for convenience of reference only and
will not be considered or referred to in resolving questions of interpretation.
Whenever in this Agreement the term "to the best knowledge" or "to the
knowledge" or the like is used, with respect to the Company, JGM, JSM, WKM and
the Partnership Shareholders, the person or persons making such representations
or warranty, as applicable, will each be deemed to have the knowledge of
Company's officers and directors and JGM, JSM, WKM, individually, and each will
be under a duty of due inquiry to such persons and with respect to Company and
Subsidiary records.
12.7 Entire Agreement; Counterparts. This Agreement, including the
Exhibits and attachments hereto, constitutes the entire agreement between the
parties hereto with regard to the matters contained herein and it is understood
and agreed that all previous undertakings, negotiations, letters of intent and
agreements between the parties are merged herein. This Agreement may not be
modified orally, but only by an agreement in writing signed by Buyer, Company
and Sellers. This Agreement may be executed simultaneously in two or more
counterparts each of which will be deemed an original and all of which together
will constitute but one and the same instrument.
12.8 Legal Fees and Costs. In the event any party hereto incurs legal
expenses to enforce or interpret any provision of this Agreement, the prevailing
party will be entitled to recover such legal expenses, including, without
limitation, attorney's fees, costs and disbursements, in addition to any other
relief to which such party will be entitled.
12.9 Controlling Law. This Agreement will be construed, interpreted and
enforced in accordance with the substantive laws of the State of Tennessee,
without giving effect to its conflicts of laws provisions.
12.10 Guaranty. Parent does hereby unconditionally guaranty to Sellers
the due and punctual payment and performance of the obligations and undertakings
of Buyer in this Agreement as and when such payment or performance shall become
due.
37
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"COMPANY":
NATIONAL MEDICAL SYSTEMS, INC.
By: /s/ James Mosley
----------------------------------------
Title: Chairman/CEO
------------------------------------
/s/ James G. Mosley
-------------------------------------------
JAMES G. MOSLEY
/s/ James S. Mosley
-------------------------------------------
JAMES S. MOSLEY
/s/ WM. Kent Mosley
------------------------------------------
WM. KENT MOSLEY
"SELLERS":
NATIONAL MEDICAL SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ James Steven Mosley
---------------------------------------
JAMES STEVEN MOSLEY, TRUSTEE
Number of Shares: 250,000
JULIE ANNE MOSLEY TRUST, UTA 8-12-97
By: /s/ Phil Herrington
---------------------------------------
PHIL HERRINGTON, TRUSTEE
Number of Shares: 7,500
<PAGE> 43
WILLIAM ZACHARY MOSLEY TRUST, UTA
8-12-97
By: /s/ Phil Herrington
----------------------------------
PHIL HERRINGTON, TRUSTEE
Number of Shares: 7,500
ASHLEY MARIE MOSLEY TRUST
By: /s/ Phil Herrington
----------------------------------
PHIL HERRINGTON, TRUSTEE
Number of Shares: 7,500
CRYSTAL BROOKE MOSLEY TRUST
By: /s/ Phil Herrington
----------------------------------
PHIL HERRINGTON, TRUSTEE
Number of Shares: 7,500
STEVEN AUSTIN MOSLEY TRUST
By: /s/ Phil Herrington
-----------------------------------
PHIL HERRINGTON, TRUSTEE
Number of Shares: 7,500
JSM INVESTMENTS, LIMITED PARTNERSHIP
By: JAMES STEVEN MOSLEY ENTERPRISE,
INC., general partner
By: /s/ James Steven Mosley
-----------------------------
Its: President
Number of Shares: 287,823
<PAGE> 44
JGM INVESTMENTS, LIMITED PARTNERSHIP
By: JAMES GORDON MOSLEY
ENTERPRISE, INC., general partner
By: /s/ James Gordon Mosley
---------------------------------
Its: President
Number of Shares: 600,954
WKM INVESTMENTS, LIMITED PARTNERSHIP
By: WM. KENT MOSLEY ENTERPRISE, INC.,
general partner
By: /s/ Wm. Kent Mosley
--------------------------------
Its: President
Number of Shares: 195,323
"BUYER":
AMERICAN HOMEPATIENT, INC.,
a Tennessee Corporation
By: /s/ Rita N. Hill
-------------------------------------
Title: Sr. Vice President
---------------------------------
"PARENT"
AMERICAN HOMEPATIENT, INC.,
a Delaware Corporation
By: /s/ Rita N. Hill
------------------------------------
Title: Sr. Vice President
----------------------------------
<PAGE> 1
AMENDMENT NO.1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (this "Amendment") is
entered into on February 5, 1998 by and among NATIONAL MEDICAL SYSTEMS, INC., an
Arkansas corporation, (the "Company"), JAMES G. MOSLEY ("JGM"), JAMES S. MOSLEY
("JSM"), and WM. KENT MOSLEY ("WKM"), residents of the State of Arkansas, and
JSM INVESTMENTS, LIMITED PARTNERSHIP, JGM INVESTMENTS, LIMITED PARTNERSHIP, and
WKM INVESTMENTS, LIMITED PARTNERSHIP, each an Arkansas limited partnership (each
of the foregoing limited partnerships are collectively referred to herein as,
the "Partnership Shareholders"), and NATIONAL MEDICAL SYSTEMS, INC. EMPLOYEE
STOCK OWNERSHIP TRUST, JULIE ANNE MOSLEY TRUST, UTA 8-12-97, WILLIAM ZACHARY
MOSLEY TRUST, UTA 8-12-97, ASHLEY MARIE MOSLEY TRUST, CRYSTAL BROOKE MOSLEY
TRUST, and STEVEN AUSTIN MOSLEY TRUST (the foregoing trusts are collectively
referred to herein as the "Trust Shareholders" and, together with the
Partnership Shareholders, collectively as the "Sellers"), AMERICAN HOMEPATIENT,
INC., a Tennessee corporation ("Buyer") and AMERICAN HOMEPATIENT, INC., a
Delaware corporation ("Parent").
RECITALS:
A. On or about December 23,1997, the parties entered into that certain
Stock Purchase Agreement (the "Agreement") in connection with the sale
by Sellers and the purchase by Buyer of all the outstanding common
stock of the Company.
B. The parties desire to amend the Agreement as set forth herein, (i) to
more clearly describe the action contemplated to be taken by the
Company prior to the Closing with respect to its Benefit Plans, (ii)
to alter the payees under the Purchase Price Note, and (iii) to
replace certain Exhibits to the Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings ascribed to such terms in the
Agreement.
2. Correction of Reference to Payees on Purchase Price Note. The identity
of the payees on the Purchase Price Note is hereby modified by deleting Section
1.2(2) of the Agreement in its entirety, and inserting and substituting in its
place the following language:
"(2) One Million and No/100 Dollars ($1,000,000.00) by a
<PAGE> 2
purchase price note (the "Purchase Price Note"), the form of which is
attached as Replacement Exhibit 1.2(2) which Purchase Price Note is to
be payable to the Sellers, excluding the National Medical Systems,
Inc. Employee Stock Ownership Trust, in the respective percentages set
forth in the Purchase Price Note; and".
3. Benefit Plan Amendments/Termination. Section 5.12 of the Agreement is
deleted in its entirety, and the following language shall be substituted in its
place:
"5.12 Termination of Participation in Benefit Plans; Buyer
Responsibility Post-Closing. JGM, JSM, WKM and the Partnership
Shareholders will cause the Company and Subsidiaries to take all
necessary action prior to Closing (1) to permit immediate termination
of the National Medical Systems, Inc. Employee Stock Ownership Plan
(the "ESOP Plan") and, as promptly as practicable following a
subsequent favorable determination from the Internal Revenue Service,
distribute the assets in the ESOP Plan to the participants thereunder
in accordance with its terms and pursuant to the provisions of
applicable law, (2) to permit an immediate "freeze" the National
Medical Rentals, Inc. 401(k) Plan and Trust (the "401(k) Plan") and
authorize the trustee under the 401(k) Plan to administer the 401(k)
Plan as a frozen plan with a permanent discontinuance of all employer
and employee contributions thereunder, and a freezing of all future
benefit accruals, in accordance with its terms and the provisions of
applicable law, without further cost to the Company, (3) to ensure
that all Benefit Plans are in compliance with all applicable laws and
(4) to ensure that the transaction contemplated by this Agreement will
not cause the disqualification of the Benefit Plans. Buyer shall be
responsible for providing employee benefits for all employees of
Company and Subsidiaries who continue with the Company or Subsidiaries
after Closing, pursuant to Buyer's employee benefit plans, on terms
and conditions substantially equivalent to those provided for Buyer's
employees similarly situated, except where otherwise contemplated by
this Agreement."
4. Replacement of Exhibits. Exhibits 1.2, 1.2(2), 1.2(3) and 5.14 to the
Agreement are each hereby deleted, and replacement Exhibits in the forms
attached hereto shall be substituted in their entirety for the respective
exhibits so replaced.
<PAGE> 3
5. Other Provisions of Agreement Unaffected. Except to the extent
specifically amended by the provisions of this Amendment, the Agreement as
originally executed and delivered among the parties shall continue unabated in
its entirety and in full force and effect in all respects.
6. Controlling Law. This Amendment will be construed, interpreted and
enforced in accordance with the substantive laws of the State of Tennessee,
without giving effect to its conflicts of laws provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"COMPANY":
NATIONAL MEDICAL SYSTEMS, INC.
By: /s/ James S. Mosley
-----------------------------------
Title: Chairman & CEO
/s/ James G. Mosley
---------------------------------------
JAMES G. MOSLEY
/s/ James S. Mosley
---------------------------------------
JAMES S. MOSLEY
/s/ Wm. Kent Mosley
---------------------------------------
WM. KENT MOSLEY
<PAGE> 4
"SELLERS":
NATIONAL MEDICAL SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ James S. Mosley
------------------------------------
JAMES STEVEN MOSLEY, TRUSTEE
JULIE ANNE MOSLEY TRUST, UTA 8-12-97
By: /s/ Phil Herrington
------------------------------------
PHIL HERRINGTON, TRUSTEE
WILLIAM ZACHARY MOSLEY TRUST, UTA 8-12-97
By: /s/ Phil Herrington
------------------------------------
PHIL HERRINGTON, TRUSTEE
ASHLEY MARIE MOSLEY TRUST
By: /s/ Phil Herrington
-------------------------------------
PHIL HERRINGTON, TRUSTEE
CRYSTAL BROOKE MOSLEY TRUST
By: /s/ Phil Herrington
------------------------------------
PHIL HERRINGTON, TRUSTEE
<PAGE> 5
STEVEN AUSTIN MOSLEY TRUST
By: /s/ Phil Herrington
------------------------------------
PHIL HERRINGTON, TRUSTEE
JSM INVESTMENTS, LIMITED
PARTNERSHIP
By: JAMES STEVEN MOSLEY
ENTERPRISE, INC., general partner
By: /s/ James S. Mosley
------------------------------------
Its: President
JGM INVESTMENTS, LIMITED
PARTNERSHIP
By: JAMES GORDON MOSLEY
ENTERPRISE, INC., general partner
By: /s/ James Mosley
-------------------------------
Its: President
WKM INVESTMENTS, LIMITED
PARTNERSHIP
By: WM. KENT MOSLEY ENTERPRISE,
INC., general partner
By: /s/ Wm. Kent Mosley
---------------------------------
Its: President
<PAGE> 6
"BUYER":
AMERICAN HOMEPATIENT, INC., a
Tennessee corporation
By: /s/ Rita Hill
-------------------------------------
Title: Sr. Vice President
"PARENT":
AMERICAN HOMEPATIENT, INC., a
Delaware corporation
By: /s/ Rita Hill
-------------------------------------
Title: Sr. Vice President
