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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) October 1, 1997
Transworld HealthCare, Inc.
(Exact name of Registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
1-11570 13-3098275
(Commission File Number) (I.R.S. Employer Identification No.)
555 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 750-0064
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Transworld HealthCare, Inc. ("Transworld") announced on October 1,
1997 that its wholly-owned subsidiary, IMH Acquisition Corp., completed its
previously announced merger with Health Management, Inc. ("HMI") and HMI has
become a wholly owned subsidiary of Transworld. Under the terms of the merger
agreement, HMI stockholders are entitled to receive $0.30 in cash for each
outstanding share of HMI common stock not already owned by Transworld. The
balance of the consideration of approximately $2.8 million required to complete
the merger and the remaining class action settlement payment of $1.35 million
was derived by Transworld from the proceeds of the sale to Counsel Corporation
described below.
Concurrently with the closing of the merger, Transworld also
completed the previously reported sale of substantially all the assets of HMI to
Stadtlander Drug Co., Inc. ("Stadtlander"), a subsidiary of Counsel Corporation
("Counsel"). Under the terms of the Asset Purchase Agreement with Stadtlander,
HMI and its subsidiaries (collectively, the "Sellers"), sold substantially all
of their assets, other than accounts receivable, for a cash payment of $18
million, subject to adjustment based on changes in the Sellers' book value. Of
such amount, $2.5 million was placed in escrow with Bankers Trust Company
pending determination of the book value adjustment. Pursuant to the Asset
Purchase Agreement, Stadtlander will not assume any liabilities of the Sellers
other than certain liabilities arising after the closing under assumed contracts
and certain employee-related liabilities.
Additionally, at closing, Stadtlander lent $20 million to certain of
HMI's subsidiaries, of which $7.5 million was placed in escrow with Bankers
Trust. The loan is secured by the Sellers' accounts receivable and is guaranteed
by Transworld. As accounts receivable are collected, the proceeds will be
applied to reduce the loan. Once the loan balance is reduced to $7.5 million,
the escrow will be released to the Sellers as receivables are collected.
The Sellers and Stadtlander also entered into a transitional service
agreement pursuant to which the Sellers will provide certain facilities and
facilities services to Stadtlander on a transitional basis, and Stadtlander will
act as collection agent for Sellers with respect to the accounts receivable.
Stadtlander will retain collections of accounts receivable in excess of the loan
amount as a collection fee.
Transworld has also agreed to guaranty the Sellers' obligations to
Counsel and Stadtlander in connection with the above transactions.
In connection with the consummation of the merger with HMI and the
subsequent disposition to Stadtlander, Transworld also entered into an amendment
to the Credit Agreement with its senior lenders which amendment provides for,
among other things, the lenders consenting to the merger with HMI and the sale
to Stadtlander on the terms contained in the amendment, and that additional
loans to Transworld will require the approval of the required lenders in
accordance with the terms of the amendment; provided, however, that under
certain circumstances contained in the amendment, the lenders and Transworld
shall endeavor in good faith to eliminate the approval requirement on and after
January 1, 1998 with respect to up to $3 million of additional working capital
loans.
The net proceeds of the transactions described above not used to
complete the merger with HMI, fund the class action settlement or fund working
capital reserves were used to repay $15 million of senior secured debt owed by
Transworld under the Credit Agreement. The amendment to Transworld's Credit
Agreement described above also provides that Transworld shall repay the lenders
the following amounts on the following dates (less any amounts voluntarily
prepaid through such dates): (i) &8.5 million on December 31, 1997, (ii)
$500,000 on February 28, 1998, and (iii) $1 million by June 30, 1998.
Transworld may make certain additional advances to HMI to cover accrued
liabilities of HMI and subsidiaries.
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ITEM 5. OTHER EVENTS
Transworld and Hyperion Partners II, L.P. ("HPII") amended the
previously reported and pending Stock Purchase Agreement dated as of March 26,
1997 to (i) include within the HMI payables to be transferred to Transworld, a
$3 million face amount subordinated note, a related guaranty and certain
accounts receivable originally owed by HMI Illinois, Inc. to Caremark, Inc., and
(ii) provide that the purchase price for all of the HMI payables transferred to
Transworld shall equal such number of shares of Transworld common stock
determined by dividing the "Agreed Value" by the "Agreed Price." As defined in
the amendment, (A) "Agreed Value" means the sum of the following amounts: (i) $4
million, plus (ii) 10% of the first $20 million of Net Recovery, plus (iii) 30%
of the next $10 million of Net Recovery, plus (iv) 50% of any amount of Net
Recovery in excess of $30 million; (B) "Net Recovery" means the amount realized
or recovered by Transworld on or after September 1, 1997 on or in respect of (i)
any indebtedness owed by HMI and/or its subsidiaries to Transworld; (ii) any
investment made by Transworld in HMI and/or its subsidiaries; and (iii) the HMI
payables transferred by HPII to Transworld (including, without limitation, by
reason of any claims against third parties relating to the purchase of any of
the foregoing), net of (x) the merger consideration paid by Transworld to
acquire HMI and (y) all reasonable out-of-pocket costs and expenses incurred by
Transworld in connection with such realization or recovery and excluding any tax
benefit to Transworld from the net loss on its equity and debt investments in
HMI; and (C) "Agreed Price" means the lesser of $7-5/8 and the closing price of
the common stock of Transworld on the last trading day prior to the closing of
the Stock Purchase Agreement.
Consummation of the Stock Purchase Agreement, as amended, is subject
to customary closing conditions and shareholder approval.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
1. Seventh Amendment to Credit Agreement dated as of
October 1, 1997.
2. Asset Purchase Agreement dated as of October 1, 1997
among Health Management, Inc., Health Reimbursement
Corporation, HMI Illinois, Inc., HMI Maryland, Inc., HMI
Pennsylvania, Inc., HMI PMA, Inc., HMI Retail Corp.,
Inc., Home Care Management, Inc., Transworld HealthCare,
Inc., Stadtlander Drug Distribution Co., Inc. and
Counsel Corporation.
3. Amendment dated as of August 14, 1997 to Stock Purchase
Agreement dated March 26, 1997 between Hyperion Partners
II L.P. and Transworld HealthCare, Inc.
ITEM 8. CHANGE IN FISCAL YEAR
Subject to the formal approval of Transworld's lenders, Transworld
intends to change its fiscal year-end from October 31 to September 30, effective
September 30, 1997. Transworld intends to file a Transition Report on Form 10-K
for the eleven-month transition period ended September 30, 1997.
Certain statements contained herein are forward-looking statements
that have been made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties which may cause the actual results in
the future periods or plans for future periods to differ materially from those
described herein as anticipated, believed or estimated.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 10, 1997
TRANSWORLD HEALTHCARE, INC.
(Registrant)
By: /s/ Wayne A. Palladino
--------------------------
Wayne A. Palladino
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Item No. Description
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1. Seventh Amendment to Credit Agreement dated as of
October 1, 1997.
2. Asset Purchase Agreement dated as of October 1, 1997
among Health Management, Inc., Health Reimbursement
Corporation, HMI Illinois, Inc., HMI Maryland, Inc., HMI
Pennsylvania, Inc., HMI PMA, Inc., HMI Retail Corp.,
Inc., Home Care Management, Inc., Transworld HealthCare,
Inc., Stadtlanderf Drug Distribution Co., Inc. and
Counsel Corporation.
3. Amendment dated as of August 14, 1997 to Stock Purchase
Agreement dated March 26, 1997 between Hyperion Partners
II L.P. and Transworld HealthCare, Inc.
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Exhibit 1
SEVENTH AMENDMENT TO CREDIT AGREEMENT
SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of October 1, 1997, among TRANSWORLD HEALTHCARE, INC. (the "Borrower"), the
lenders party to the Credit Agreement referred to below (each a "Bank" and,
collectively, the "Banks"), and BANKERS TRUST COMPANY, as Agent (in such
capacity, the "Agent"). All capitalized terms used herein and not otherwise
defined shall have the respective meanings provided such terms in the Credit
Agreement.
WITNESSETH:
WHEREAS, the Borrower, the Banks and the Agent are parties to a
Credit Agreement, dated as of July 31, 1996 (as in effect on the date hereof,
the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
provided herein;
NOW, THEREFORE, it is agreed:
I. Amendments and Modifications to Credit Agreement.
1. Notwithstanding the provisions of Section 13.20 or any other
section of the Credit Agreement or any other Credit Document, it is acknowledged
and agreed that the Borrower may consummate the HMI Merger so long as the
following conditions are satisfied: (I) no Default or Event of Default is in
existence at the time of the consummation of the HMI Merger or immediately after
giving effect thereto, (II) the Borrower does not waive any condition precedent
to the HMI Merger set forth in the HMI Merger Agreement without the consent of
the Agent, provided that the Borrower may make immaterial waivers without the
consent of the Agent, (III) the consideration payable to holders of stock of HMI
in connection with the HMI Merger is as set forth in the HMI Merger Agreement on
the date hereof, (IV) the aggregate consideration paid to holders of stock of
HMI or options to purchase stock of HMI in connection with the HMI Merger (the
"HMI Merger Consideration") does not exceed $2,800,000 and (V) the HMI Sale (as
defined below) is consummated immediately following consummation of the HMI
Merger.
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2. Notwithstanding the provisions of the Credit Agreement or any other
Credit Document, it is acknowledged and agreed that the Borrower may sell
substantially all of the assets (other than accounts receivable and certain
retained assets as set forth in the HMI Sale Agreement (as defined below) ("the
Retained Assets")) of HMI and its Subsidiaries to Stadtlander Drug Distribution
Co., Inc. ("Stadtlander") (the "HMI Sale") and that the provisions of Section
3.03(c) shall not apply to the HMI Sale so long as the following conditions are
satisfied: (I) the HMI Merger has been consummated in accordance with the terms
of the Credit Agreement and this Amendment, (II) the HMI Sale is consummated in
accordance with the Asset Purchase Agreement, dated as of October 1, 1997, among
Health Management, Inc., Health Reimbursement Corporation, HMI Illinois, Inc.,
HMI Pennsylvania, Inc., HMI PMA, Inc., HMI Retail Corp., Inc., Home Care
Management, Inc. (the "HMI Subsidiaries"), as Sellers, the Borrower, as Seller
Guarantor, Stadtlander, as Purchaser, and Counsel Corporation, as Purchaser
Guarantor and the schedules, exhibits and/or annexes thereto, (the "HMI Sale
Agreement"), (III) the aggregate gross consideration received at the time of
such sale (without giving effect to (x) any application of such amounts to the
liabilities set forth on Annex XIV hereto and (y) any amounts loaned by
Stadtlander to HMI or any of its Subsidiaries) is not less than $20,000,000
(less reductions of up to $2,000,000 based on book value adjustments in
accordance with the HMI Sale Agreement) (the "HMI Consideration"), (IV) at the
time of such sale Stadtlander lends a gross amount of not less than $20,000,000
to HMI and/or its Subsidiaries (the "Stadtlander Loan") as permitted by the
Credit Agreement as amended by this Amendment, (V) not more than $10,000,000 of
the amounts received in satisfaction of clauses (III) and (IV) is placed into
escrow, which amounts shall be held in escrow either pursuant to an escrow
arrangement required by the HMI Sale Agreement or pursuant to the Loan Escrow
Agreement, dated as of October 1, 1997, between the Borrower and Bankers Trust
Company, as Escrow Agent, (VI) upon consummation of the HMI Sale the Borrower
shall receive an aggregate amount of not less than $15,000,000 from HMI from (1)
repayment of outstanding HMI Loans held by the Borrower and/or (2) repayment of
other amounts owing to the Borrower and its Subsidiaries (other than HMI and its
Subsidiaries), (VII) not less than $15,000,000 of the amounts received in
accordance with clause (VI) shall be applied by the Borrower to repay
outstanding Loans and (VIII) after giving effect to the HMI Sale, HMI and its
Subsidiaries have no material assets other than the Retained Assets (which shall
include accounts receivable with an aggregate net value of at least $23,000,000
and no material liabilities other than pursuant to the HMI Sale Agreement and
the Stadtlander Loan, liabilities owing to the Borrower and its Subsidiaries,
liabilities owing to HPII and its Affiliates, and those liabilities set forth on
Annex XIV to this Amendment.
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3. The parties hereto acknowledge and agree that failure by the
Borrower to comply in all material respects with paragraphs one and two of this
Amendment shall constitute an immediate Event of Default under the Credit
Agreement.
4. Section 4.02 is hereby amended by adding at the end thereof the
following clause (d):
"(d) In addition to any other mandatory repayment pursuant to
this Section 4.02, the Borrower shall be required to repay that
principal amount of Revolving Loans, to the extent then
outstanding, equal to (i) $15,000,000 on the HMI Sale Effective
Date, (ii) $8,500,000 (less any amounts voluntarily prepaid
pursuant to Section 4.01 during the period from but not including
the HMI Sale Effective Date to and including December 31, 1997) on
December 31, 1997, (iii) $500,000 (less any amounts voluntarily
prepaid pursuant to Section 4.01 during the period from and
including January 1, 1998 to and including February 28, 1998) on
February 28, 1998 and (iv) $1,000,000 (less any amounts theretofore
voluntarily prepaid pursuant to Section 4.01 during the period from
and including March 1, 1998 to and including the Final HMI Sale
Prepayment Date) on the Final HMI Sale Prepayment Date."
5. Section 8.01(k) of the Credit Agreement is hereby amended by (1)
deleting the word "Promptly" appearing in the first sentence thereof and
inserting in lieu thereof the phrase "At any time on or prior to the HMI Merger
Effective Date," and (2) inserting immediately following the phrase "after the
HMI Stock Purchase Effective Date" appearing in the second sentence thereof the
phrase "and ending prior to the HMI Merger Effective Date".
6. Section 8.14(a) of the Credit Agreement is hereby amended by
deleting the last sentence thereof and inserting in lieu thereof the following
sentence:
"Notwithstanding anything herein to the contrary, no Permitted
Acquisition may be effected without the consent of the Required
Banks, which consent may be granted or withheld by the Banks in
their sole discretion."
7. Section 8.19 of the Credit Agreement is hereby amended by deleting
the text contained therein and inserting in lieu thereof the following text:
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"On or prior to December 31, 1997, the Borrower shall have filed
the preliminary proxy materials necessary under the Securities
Exchange Act of 1934 to consummate the Supplemental Payables Equity
Financing and receive the Hyperion Trade Payables."
8. Section 9.01 of the Credit Agreement is hereby amended by inserting
at the end thereof the following new clause:
"(e) HMI and its Subsidiaries shall (x) engage in no business
other than and (y) take no actions and incur no liabilities except
related to, the Retained Assets, the Retained Liabilities, the HMI
Sale Agreement and the Stadtlander Loan."
9. Section 9.02 of the Credit Agreement is hereby amended by inserting
immediately following the phrases "Domestic Subsidiary of the Borrower" and
"Wholly-Owned Domestic Subsidiary of the Borrower" each time either such phrase
appears in clauses (f) and (g) of said Section the parenthetical "(other than
HMI and its Subsidiaries)".
10. Section 9.03 of the Credit Agreement is hereby amended by (1)
deleting the word "and" at the end of clause (l) thereof, (2) deleting the
period at the end of clause (m) thereof and inserting in lieu thereof ";" and
(3) inserting at the end thereof the following new clauses:
"(n) Liens created pursuant to the Stadtlander Loan Documents
on Retained Assets constituting accounts receivable of HMI and its
Subsidiaries securing the Stadtlander Loan;
(o) rights established pursuant to HMI Sale Documents to cash
held in escrow in an amount not to exceed $2,500,000 less amounts
released from such escrow arrangement; and
(p) rights established pursuant to the Stadtlander Loan
Documents to proceeds of the Stadtlander Loan held in escrow in an
amount not to exceed to the lesser of (x) $10,000,000 less the
amount in escrow on the HMI Sale Date as permitted by clause (o)
and (y) the aggregate principal amount of the Stadtlander Loan,
securing the Stadtlander Loan."
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11. Section 9.04 of the Credit Agreement is hereby amended by (1)
deleting the word "and" at the end of clause (i) thereof, (2) relettering clause
(j) thereof as clause (k) and (3) inserting at the end of clause (i) the
following new clause:
"(j) Indebtedness of HMI and its Subsidiaries constituting the
Stadtlander Loan (and the guaranty thereof by the Borrower); and"
12. Section 9.05 of the Credit Agreement is hereby amended by (1)
inserting immediately following the phrases "Wholly-Owned Subsidiaries" and
"Wholly-Owned Subsidiary" each time either such phrase appears in clause (f)
thereof the parenthetical "(other than HMI and its Subsidiaries)", (2) inserting
immediately following the phrase "Third Amendment Effective Date" appearing in
clause (r) thereof the phrase "and prior to the occurrence of the HMI Merger
Effective Date", (3) deleting the word "and" at the end of clause (s) thereof,
(4) deleting the period at the end of clause (t) thereof and inserting in lieu
thereof "; and" and (5) inserting at the end thereof the following additional
clause:
"(u) the Borrower may make additional HMI Loans to HMI and its
Subsidiaries, provided that (i) the aggregate amount of such HMI
Loans does not exceed $12,000,000 less the amount by which the
aggregate gross consideration received at the time of the HMI Sale
was reduced by the application of amounts to the liabilities set
forth on Annex XIV hereto to the extent such amounts otherwise
would have been payable to HMI, (ii) no Default or Event of Default
under Section 10.11 then exists or would result therefrom, and
(iii) the proceeds of any such HMI Loans are used promptly to make
payments on liabilities of HMI and its Subsidiaries."
13. Section 9.12 of the Credit Agreement is hereby amended by (1)
inserting immediately following the phrase "the Omnicare Stock Purchase
Documents" appearing in clause (i) thereof the phrase ", any Stadtlander Loan
Document, any HMI Sale Document" and (2) inserting immediately following the
phrase "any Seller Subordinated Notes" appearing in clause (ii) thereof the
phrase "or the Stadtlander Loan, provided that voluntary principal repayments
may be made by HMI and its Subsidiaries on the Stadtlander Loan with the
proceeds from any collection by HMI and its Subsidiaries of amounts owing to
them under their accounts receivable".
14. Section 9.12(a)(iii) of the Credit Agreement is hereby amended by
inserting the following new clause (w) immediately preceding clause (x):
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"(w) those changes to the Partners II Second Stock Purchase
Agreement contained in the First Amendment to Partners II Second
Stock Purchase Agreement,"
15. Section 9.15(a) of the Credit Agreement is hereby amended by
deleting the phrase "prior the consummation of the HMI Merger" appearing in the
last sentence thereof and inserting in lieu thereof the phrase "unless requested
by the Required Banks".
16. Section 10 of the Credit Agreement is hereby amended by (1)
inserting "or" at the end of Section 10.10 thereof and (2) inserting following
Section 10.10 the following new Section 10.11:
"10.11 HMI Sale Net Proceeds. The HMI Sale Net Proceeds Amount
shall at any time, (i) after the HMI Merger Effective Date and on
or prior to December 30, 1997, be less than $15,000,000, (ii) from
and including December 31, 1997 to and including February 27, 1998,
be less than $23,500,000, (iii) from and including February 28,
1998 to but excluding the Final HMI Sale Prepayment Date be less
than $24,000,000 and (iv) thereafter be less than $25,000,000."
17. The definition of "Partners II Second Stock Purchase Agreement"
appearing in Section 11 of the Credit Agreement is hereby amended by inserting
the phrase ", as amended in accordance with the First Amendment to Partners II
Second Stock Purchase Agreement" immediately before the period at the end
thereof.
18. The definition of "Supplemental Payables Equity Financing"
appearing in Section 11 of the Credit Agreement is hereby amended by deleting
the number "1,234,176" appearing therein.
19. Section 11 of the Credit Agreement is hereby amended by inserting
immediately prior to the period at the end of the definition of "Subsidiary" the
following new proviso:
"provided further that notwithstanding anything to the contrary
contained in this agreement and any other Credit Document, on and
after the HMI Merger Effective Date (I) the provisions of Section
8.11 (although the capital stock of HMI (other than capital stock
constituting Margin Stock) owned by the Borrower and its
Subsidiaries other than HMI and its Subsidiaries shall be required
to be pledged pursuant to the Pledge
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Agreement) shall not apply to HMI or any of its Subsidiaries unless
the Required Banks deliver a written notice to the Borrower stating
otherwise, (II) neither HMI nor any of its Subsidiaries shall be
required to become a party to the Subsidiaries Guaranty, the Pledge
Agreement or the Security Agreement unless requested to do so in
writing by the Required Banks, (III) none of the capital stock of
any Subsidiary of HMI (except to the extent owned by the Borrower
and its Subsidiaries other than HMI and its Subsidiaries and not
constituting Margin Stock) shall be required to be pledged or
delivered to the Collateral Agent unless such pledge or delivery is
requested in writing by the Required Banks and (IV) HMI and its
Subsidiaries may (1) transfer assets (other than accounts
receivable), (2) make advances, investments or loans and (3)
declare or pay a Dividend, in each case amongst themselves"
20. Section 11 of the Credit Agreement is hereby amended by inserting
in appropriate alphabetical order the following new definitions:
"Final HMI Sale Prepayment Date" shall mean the later of (x)
March 1, 1998 and (y) the date on which HMI or any of its
Subsidiaries receives payment from its insurers with respect to the
litigation related to the Second Restated Stipulation of Partial
Settlement, but in any event shall not be later than June 30, 1998.
"First Amendment to Partners II Second Stock Purchase
Agreement" shall mean the amendment to the Partners II Second Stock
Purchase Agreement in substantially the form of the draft dated
September 29, 1997.
"HMI Merger Effective Date" shall mean the date on which the
HMI Merger is consummated in accordance with the terms of this
Agreement and the Seventh Amendment.
"HMI Sale Net Proceeds Amount" shall mean, at any time, an
amount equal to (A) the sum of (x) $2,900,000 and (y) the aggregate
amount received by the Borrower during the period from and
including the HMI Sale Effective Date to and including such time
from (1) repayment of outstanding HMI Loans held by the Borrower
and (2) repayment of other amounts owing to the Borrower and its
Subsidiaries (other than HMI and its Subsidiaries) less (B) amounts
invested by the Borrower and its Subsidiaries (other than HMI and
its Subsidiaries) in
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HMI during such period (including without limitation pursuant to
Section 9.05(u)).
"HMI Sale" shall mean the sale of substantially all of the
assets (other than Retained Assets) of HMI and its Subsidiaries to
Stadtlander of HMI and its Subsidiaries to Stadtlander.
"HMI Sale Documents" shall mean the Asset Purchase Agreement,
dated as of October 1, 1997, among Health Management, Inc., Health
Reimbursement Corporation, Inc., HMI Illinois, Inc., HMI
Pennsylvania, Inc., HMI PMA, Inc., HMI Retail Corp., Inc., Home
Care Management, Inc., as Sellers, the Borrower, as Seller
Guarantor, Stadtlander, as Purchaser, and Counsel Corporation, as
Purchaser Guarantor and the schedules, exhibits and annexes
thereto.
"HMI Sale Effective Date" shall mean the date on which the HMI
Sale is consummated in accordance with the terms of this Agreement
and the Seventh Amendment.
"Retained Assets" shall mean those assets held by HMI and its
Subsidiaries on the HMI Sale Effective Date after giving effect to
the HMI Sale.
"Retained Liabilities" shall mean those liabilities set forth
on Annex XIV to this Agreement in existence on the HMI Sale
Effective Date and after giving effect to the HMI Sale (other than
liabilities under the HMI Sale Documents and the Stadtlander Loan
Documents).
"Seventh Amendment" shall mean the Seventh Amendment to this
Agreement, dated as of October 1, 1997.
"Stadtlander" shall mean Stadtlander Drug Distribution Co.,
Inc.
"Stadtlander Loan" shall mean the loan in the amount of
$20,000,000 (less any repayments of principal thereof) by
Stadtlander to HMI and its Subsidiaries guaranteed by the Borrower
pursuant to and in accordance with the Stadtlander Loan Documents.
"Stadtlander Loan Documents" shall mean the Loan Agreement,
dated as of October 1, 1997, among the HMI Subsidiaries, as
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Borrowers, and Stadtlander, as Lender, the Loan Escrow Agreement,
dated as of October 1, 1997, among the Borrower, the HMI
Subsidiaries and Stadtlander, the Loan Escrow Agreement, dated as
of October 1, 1997, between the Borrower and Bankers Trust Company,
as Escrow Agent, and the Pledge Agreement, dated as of October 1,
1997, among the HMI Subsidiaries and Stadtlander and all other
documents executed in connection with the Stadtlander Loan."
"Supermajority Banks" shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in,
this Agreement if the percentage "50%" contained therein were
changed to "66-2/3%.""
21. The Credit Agreement is hereby further amended by adding new Annex
XIV in the form attached hereto as Annex XIV.
22. As consideration for the approval of this Amendment, the parties
hereto acknowledge and agree that, notwithstanding anything to the contrary
contained in the Credit Agreement or any other Credit Document, the Borrower
shall not be permitted to request or incur any additional Loans or to request or
have any additional Letters of Credit issued for its account, in either case
unless and until either (x) the Agent and the Required Banks or (y) the
Supermajority Banks, in all cases in their sole discretion, otherwise agree.
The parties hereto acknowledge and agree that either the Agent and/or
one or more Banks may, in their sole discretion, decline to agree to permit the
Borrower to request or incur additional Loans or to request or have any
additional Letters of Credit issued for its account pursuant to the Credit
Agreement (as contemplated by the immediately preceding paragraph) or may impose
conditions on such permission and (ii) neither the Agent nor any Bank shall have
any liability whatsoever to the any of the parties hereto, or any other Person,
as a result of any refusal (for any reason whatsoever) of the Agent and/or one
or more Banks to grant permission as is required above with respect to
additional Loans or Letters of Credit as described above.
The parties hereto further acknowledge and agree that in the event that
on December 31, 1997 (x) no Default or Event of Default then exists and (y) the
Borrower shall have made all repayments of Loans required by Sections 4.02(d)(i)
and (ii), then the Banks shall endeavor in good faith to eliminate the approval
requirement of this Section 22 with respect to additional Loans on and after
January 1, 1998 in an amount not to exceed $3,000,000 in accordance with, and
subject to compliance with all terms
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and conditions (including applicable conditions precedent) contained in, the
Credit Agreement, provided that all proceeds of such Loans shall be required to
be used for the working capital purposes of the Borrower and its Subsidiaries
(other than HMI and its Subsidiaries).
II. Miscellaneous Provisions.
23. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Seventh
Amendment Effective Date (as defined below), after giving effect to
this Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in
all material respects as of the Seventh Amendment Effective Date, both
before and after giving effect to this Amendment, with the same effect
as though such representations and warranties had been made on and as
of the Seventh Amendment Effective Date (it being understood that any
representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
24. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
25. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
26. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
27. This Amendment shall become effective as of the date (the "Seventh
Amendment Effective Date") when (i) the Borrower, each other Credit Party and
the Required Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of facsimile
transmission) the
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<PAGE> 11
same to the Agent at its Notice Office and (ii) the HMI Merger is consummated in
accordance with the terms of the Credit Agreement and this Amendment. The Agent
shall promptly notify the Borrower and the Banks in writing of the Seventh
Amendment Effective Date.
28. From and after the Seventh Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.
* * *
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
TRANSWORLD HEALTHCARE, INC.,
as Borrower
By /s/
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/
---------------------------------
Name:
Title:
THE BANK OF NEW YORK
By /s/
---------------------------------
Name:
Title:
<PAGE> 13
BANQUE PARIBAS
By /s/
---------------------------------
Name:
Title:
By /s/
---------------------------------
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/
---------------------------------
Name:
Title:
By /s/
---------------------------------
Name:
Title:
FLEET BANK, N.A.
By /s/
---------------------------------
Name:
Title:
<PAGE> 14
Each of the undersigned, each being a Subsidiary Guarantor pursuant to the
Credit Agreement referenced in the foregoing Seventh Amendment and a party to
various Security Documents, hereby acknowledges and agrees to the foregoing
provisions of the Seventh Amendment.
Acknowledged and
Agreed this first day
of October, 1997.
DERMAQUEST, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
MK DIABETIC SUPPORT
SERVICES, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
THE PROMPTCARE COMPANIES, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
<PAGE> 15
THE PROMPTCARE LUNG CENTER, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
STERI-PHARM, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
TRANSWORLD HOME HEALTHCARE NURSING DIVISION, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
RESPIFLOW, INC.,
as a Pledgor
By /s/
---------------------------------
Title:
<PAGE> 1
Exhibit 2
ASSET PURCHASE AGREEMENT
among
HEALTH MANAGEMENT, INC.
HEALTH REIMBURSEMENT CORPORATION
HMI ILLINOIS, INC.
HMI MARYLAND, INC.
HMI PENNSYLVANIA, INC.
HMI PMA, INC.
HMI RETAIL CORP., INC.
HOME CARE MANAGEMENT, INC.
as Sellers,
TRANSWORLD HEALTHCARE, INC.
as Seller Guarantor
STADTLANDER DRUG DISTRIBUTION CO., INC.,
as Purchaser
and
COUNSEL CORPORATION,
as Purchaser Guarantor
dated
October 1, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. SALE OF ASSETS................................................... 2
Section 1.01 Purchase and Sale of Purchased Assets........................... 2
Section 1.02 Excluded Assets................................................. 3
Section 1.03 Liabilities..................................................... 5
ARTICLE II. CONSIDERATION................................................... 7
Section 2.01 Amount of Purchase Price....................................... 7
Section 2.02 Payment of Purchase Price...................................... 7
Section 2.03 Assumption of Liabilities....................................... 7
Section 2.04 Allocation...................................................... 7
Section 2.05 Closing Adjustments............................................. 7
Section 2.06 Bulk Transfer Laws.............................................. 8
Section 2.07 Offset for Certain Payments Due to Purchaser.................... 8
ARTICLE III. THE CLOSING.................................................... 8
Section 3.01 Time and Place.................................................. 8
Section 3.02 Sellers' Obligations at Closing................................. 8
Section 3.03 Purchaser's Obligations at Closing.............................. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES BY SELLERS...................... 10
Section 4.01 Organization, Standing and Qualification; Corporate Documents.. 10
Section 4.02 Sole Shareholder............................................... 10
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<PAGE> 3
Section 4.03 Execution, Delivery and Performance of Agreement............... 10
Section 4.04 HMI Subsidiaries............................................... 11
Section 4.05 Absence of Changes or Events................................... 11
Section 4.06 Litigation..................................................... 12
Section 4.07 Compliance with Legal Requirements and Other Instruments....... 12
Section 4.08 Title to Assets................................................ 13
Section 4.09 Disclosure Schedules........................................... 14
Section 4.10 Contracts...................................................... 15
Section 4.11 Proprietary Rights, Etc........................................ 15
Section 4.12 Employee Benefit Plans......................................... 15
Section 4.13 Environmental Matters.......................................... 15
Section 4.14 Brokers and Finders............................................ 17
Section 4.15 No Material Interests.......................................... 17
Section 4.16 Employment Relations........................................... 17
Section 4.17 Insurance...................................................... 18
Section 4.18 Payments....................................................... 18
Section 4.19 Compliance with Health Care Laws and Regulations............... 18
Section 4.20 HSR Act Filing................................................. 19
ARTICLE V. REPRESENTATIONS AND WARRANTIES BY SELLER GUARANTOR.............. 20
Section 5.01 Organization................................................... 20
Section 5.02 Execution, Delivery and Performance of Agreement; Authority.... 20
Section 5.03 Brokers and Finders............................................ 20
-ii-
<PAGE> 4
ARTICLE VI. REPRESENTATIONS AND WARRANTIES BY PURCHASER.................... 21
Section 6.01 Organization................................................... 21
Section 6.02 Execution, Delivery and Performance of Agreement; Authority.... 21
Section 6.03 Brokers and Finders............................................ 21
Section 6.04 HSR Act Filing................................................. 21
Section 6.05 Acknowledgments................................................ 21
ARTICLE V. REPRESENTATIONS AND WARRANTIES BY PURCHASER GUARANTOR........... 22
Section 7.01 Organization................................................... 22
Section 7.02 Execution, Delivery and Performance of Agreement; Authority.... 22
Section 7.03 Brokers and Finders............................................ 22
ARTICLE VIII. CONDITIONS OF CLOSING........................................ 23
Section 8.01 Conditions Precedent to Purchaser's Obligations................ 23
Section 8.02 Conditions Precedent to Sellers' and Seller Guarantor's
Obligations.................................................... 25
ARTICLE IX. ADDITIONAL COVENANTS........................................... 26
Section 9.01 Noncompetition; Nonsolicitation................................ 26
Section 9.02 Employees...................................................... 27
Section 9.03 Taxes.......................................................... 29
Section 9.04 Use of HMI Name or Marks...................................... 29
Section 9.05 Preparation of Closing Date Balance Sheet...................... 29
Section 9.06 Certain Post-Closing Adjustments.............................. 31
Section 9.07 Certain Closing Adjustments................................... 31
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<PAGE> 5
Section 9.08 Indemnification................................................ 32
Section 9.09 Right to Offset................................................ 38
Section 9.10 Nondisclosure.................................................. 38
Section 9.11 Assignment of Contracts....................................... 39
Section 9.12 Maintenance of Corporate Existence of Sellers.................. 39
Section 9.13 New York State Settlement...................................... 39
Section 9.14 Preservation of Copies of Certain Records...................... 39
Section 9.15 Guarantee of Sellers' Obligations; Bankruptcy.................. 40
Section 9.16 Guarantee of Purchaser's Obligations........................... 40
Section 9.17 Nonpurchased Assets............................................ 40
Section 9.18 Ronkonkoma Sublease............................................ 40
ARTICLE X. GENERAL PROVISIONS.............................................. 41
Section 10.01 Survival of Representation and Warranties..................... 41
Section 10.02 Notices....................................................... 41
Section 10.03 Entire Agreement; Amendment................................... 43
Section 10.04 Waiver........................................................ 43
Section 10.05 Binding Nature................................................ 43
Section 10.06 Assignment.................................................... 43
Section 10.07 Captions; Language............................................ 43
Section 10.08 Cross-References; Exhibits.................................... 44
Section 10.09 Costs......................................................... 44
Section 10.10 Rights of Other Parties....................................... 44
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<PAGE> 6
Section 10.11 Enforceability................................................ 44
Section 10.12 Equitable Remedies............................................ 44
Section 10.13 Further Assurances............................................ 44
Section 10.14 Counterparts.................................................. 45
Section 10.15 Applicable Law................................................ 45
Section 10.16 Access; Notice of Actions..................................... 45
Section 10.17 Certain Definitions........................................... 45
Section 10.18 Publicity.................................................... 48
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<PAGE> 7
EXHIBITS
1.01(a) Form of Bill of Sale
Attachment 1-Items not Included within Purchased Assets
2.03 Form of Assumption Agreement
3.02(a)(ii) Form of Assignment of Contracts
3.02(a)(iii)(1) Form of Assignment of Copyrights
3.02(a)(iii)(2) Form of Assignment of Patents
3.02(a)(iii)(3) Form of Assignment of Trademarks and Trade Names
3.02(d) Form of Adjustment Escrow Agreement
8.01(k)(1) Form of License Agreement
8.01(k)(2) Form of Transition Agreement
8.01(l)(1) Form of Loan Agreement
8.01(l)(2) Form of Pledge Agreement
8.01(l)(3) Form of Guaranty
8.01(l)(4) Form of Loan Escrow Agreement
9.05(a) June 30, 1997 and August 31, 1997 Adjusted Balance Sheets
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<PAGE> 8
SCHEDULES
1.02(g) Excluded Contracts
1.02(l) Excluded Records of Sellers
4.01 States in Which Sellers Have Authority to do Business
4.03 Conflicts and Breaches
4.05 Changes or Events Since June 30, 1997
4.06 Litigation
4.07 Compliance with Legal Requirements; Authorizations
4.08 Title to Assets
4.09(a) Leases, Subleases, Licenses
4.09(b) Recent Analyses of Business and Industry
4.09(c) Material Contracts
4.09(d) Collective Bargaining Agreements, Employment Agreements, etc.
4.09(e) Payor/Provider Relationships
4.09(f) Claims or Rights of Offset
4.09(g) Audits
4.10 Defaults under Contracts
4.11 Proprietary Rights, etc.
4.12(a) Employee Benefit Plans
4.12(c) Value of Plan Assets
4.13 Environmental Matters
4.15 Material Interests
4.16 Employment Relations
4.17 Insurance
4.19(a) Reviews/Fraud and Abuse
4.19(b) Filings
5.01 Good Standing for Seller Guarantor
8.01(h) Opinion of Proskauer Rose LLP
8.01(j) UCC, Judgment, and Tax Lien Searches
8.02(h) Opinion of Stroock & Stroock & Lavan LLP
9.02 Employees
9.07 Changes to Closing Payment and Purchase Price
-vii-
<PAGE> 9
INDEX OF DEFINED TERMS
TERM SECTION WHERE DEFINED
Adjusted Balance Sheet.......................................... 9.05(a)
Adjustment Escrow Agreement..................................... 3.02(d)
Adjustment Escrow Fund.......................................... 3.02(d)
Affiliate..................................................... 10.17(a)
Agreement..................................................... Preamble
Approval...................................................... 10.17(b)
Arthur Andersen................................................. 9.05(b)
Assigned Contracts............................................. 1.01(c)
Assignment of Contracts......................................... 3.02(a)
Assignment of Proprietary Rights................................ 3.02(a)
Assumed Liabilities............................................ 1.03(a)
Assumption Agreement............................................... 2.03
Balance Sheet Shortfall............................................ 9.07
Banks........................................................... 8.02(a)
Benchmark Asset Amount.......................................... 9.06(c)
Bill of Sale................................................... 3.02(a)
Breach........................................................ 10.17(c)
Business....................................................... 9.01(a)
CERCLA......................................................... 4.13(a)
Claim......................................................... 10.17(d)
Closing Date Asset Amount....................................... 9.06(a)
Closing Date Balance Sheet..................................... 9.05(b)
Closing Date....................................................... 3.01
Closing Payment................................................. 2.02(a)
Closing............................................................ 3.01
Contract....................................................... 10.17(e)
Corporate Documents............................................ 10.17(f)
Credit Agreement................................................ 8.02(a)
Environmental Law............................................... 4.13(a)
ERISA........................................................... 4.12(a)
Escrow Agent.................................................... 2.02(b)
Escrow Amount................................................... 2.02(b)
Excluded Assets.................................................... 1.02
Excluded Facilities............................................. 1.02(a)
FWPCA........................................................... 4.13(a)
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<PAGE> 10
Guarantee....................................................... 8.01(l)
Hazardous Discharge............................................. 4.13(e)
Hazardous Substance............................................. 4.13(a)
HMI Receivables................................................. 9.06(b)
HMI Records..................................................... 1.01(i)
HMI Subsidiaries............................................... Preamble
HMI............................................................ Preamble
HSR Act............................................................ 4.20
Indemnitor...................................................... 9.08(c)
Independent Firm................................................ 9.05(c)
Inventory...................................................... 10.17(g)
IRS............................................................. 9.02(e)
Key Consultant.................................................. 4.05(h)
Key Employee.................................................... 4.05(h)
Legal Body..................................................... 10.18(h)
Legal Proceeding............................................... 10.18(i)
Legal Requirement.............................................. 10.18(j)
Liabilities.................................................... 10.18(k)
Liability...................................................... 10.18(k)
License Agreement............................................... 8.01(k)
Licenses........................................................ 1.01(h)
Loan Agreement.................................................. 8.01(l)
Loan Escrow Agreement........................................... 8.01(l)
Loan Escrow Fund................................................ 8.01(l)
Medical Records.................................................... 1.01
Merger........................................................ Preamble
New York Settlement................................................ 9.13
Other Assets.................................................... 1.01(g)
Permitted Liens.................................................... 4.08
Person......................................................... 10.18(l)
Personal Property............................................... 1.01(a)
Plan(s)......................................................... 4.12(a)
Pledge Agreement.................................................8.01(l)
Proprietary Right.............................................. 10.18(m)
Purchase Price..................................................... 2.01
Purchase Price Adjustment.......................................... 9.07
Purchased Assets................................................... 1.01
Purchaser Guarantor............................................ Preamble
Purchaser Indemnitees........................................... 9.08(a)
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<PAGE> 11
Purchaser...................................................... Preamble
RCRA............................................................ 4.13(a)
Receivable(s).................................................. 10.18(n)
Related Agreements................................................. 4.03
Restriction.................................................... 10.18(o)
Return......................................................... 10.18(p)
Seller Guarantor............................................... Preamble
Seller Indemnitees.............................................. 9.08(b)
Seller(s)...................................................... Preamble
Sellers Material Adverse Change................................. 8.01(d)
Sellers' Counsel................................................... 3.01
Tax............................................................ 10.18(q)
Transfer(red).................................................. 10.18(r)
Transferred Employee............................................ 9.02(a)
Transferred Facility............................................ 9.02(a)
Transition Agreements........................................... 8.01(k)
WARN Act........................................................ 9.08(a)
Waste........................................................... 4.13(a)
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<PAGE> 12
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated October 1,
1997 among HEALTH MANAGEMENT, INC., a Delaware corporation ("HMI"), HEALTH
REIMBURSEMENT CORPORATION, a Delaware corporation, HMI ILLINOIS, INC., a
Delaware corporation, HMI MARYLAND, INC., a Delaware corporation, HMI
PENNSYLVANIA, INC., a Delaware corporation, HMI PMA, INC., a Delaware
corporation, HMI RETAIL CORP., INC., a Delaware corporation, HOME CARE
MANAGEMENT, INC., a New York corporation (collectively, the "HMI Subsidiaries";
HMI and the HMI Subsidiaries are referred to collectively as the "Sellers" and
individually as a "Seller"), STADTLANDER DRUG DISTRIBUTION CO., INC., a Delaware
corporation ("Purchaser"), TRANSWORLD HEALTHCARE, INC., a New York corporation
("Seller Guarantor") and COUNSEL CORPORATION, an Ontario corporation ("Purchaser
Guarantor").
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement and Plan of Merger, as
amended, IMH Acquisition Corp., a wholly-owned subsidiary of Seller Guarantor,
has merged with and into HMI on the date hereof (the "Merger");
WHEREAS, each of the Sellers other than HMI is a wholly owned
subsidiary of HMI;
WHEREAS, Sellers desire to sell certain of their assets and
Purchaser desires to purchase such assets;
WHEREAS, as a result of the Merger, Seller Guarantor has
become the record and beneficial owner of all of the issued and outstanding
capital stock of HMI and has agreed to guarantee all the obligations of Sellers
under this Agreement in order to induce Purchaser and Purchaser Guarantor to
enter into this Agreement;
WHEREAS, Purchaser Guarantor owns all of the outstanding stock
of Purchaser and has agreed to guarantee all the obligations of Purchaser under
this Agreement in order to induce Sellers and Seller Guarantor to enter into
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and subject to the terms and conditions hereof,
the parties hereby agree as follows:
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<PAGE> 13
ARTICLE I. SALE OF ASSETS
1.01 Purchase and Sale of Purchased Assets. Sellers shall
sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall
purchase from Sellers, at the Closing (as defined in Section 3.01), all of
Sellers' right, title and interest in and to all the assets, properties and
rights of Sellers, wherever located and whether or not carried or reflected on
the books and records of Sellers and whether or not carried in the name of any
Seller, in existence as of the Closing Date (as defined in Section 3.01),
including, but not limited to, the following, but excluding, however, in each
case the assets, properties and rights defined in Section 1.02 as the "Excluded
Assets":
(a) except as otherwise set forth in Attachment 1 to the
Bill of Sale attached as Exhibit 1.01(a), all of
Sellers' right, title and interest in and to any
furniture, fixtures, motor vehicles, pharmaceutical
and other equipment, computers and computer software
(including, but not limited to, all computer software
owned by Sellers and used at the Excluded Facilities
or any other location), machinery, samples, models,
pharmaceutical and other supplies, packaging, sales
and product literature, work-in-process and other
tangible personal property owned by Sellers, whether
in the possession of any Seller, a sales
representative or any other person (collectively,
excluding the items described in Section 1.02(b), the
"Personal Property");
(b) all of Sellers' Inventory (as defined in Section
10.17), wherever located;
(c) except as otherwise stated herein, all of Sellers'
rights under (i) the leases for any of Sellers'
facilities (other than those relating to the Excluded
Facilities referred to in Section 1.02(a)),
including, but not limited to, all rights of Sellers
with respect to any rental deposits for any of such
facilities (other than the Excluded Facilities), (ii)
any payor/provider agreements and (iii) any other
Contracts (as defined in Section 10.17) to which any
of Sellers is a party (other than Contracts relating
solely to the Excluded Assets) (the leases,
agreements and other Contracts described in clauses
(i), (ii) and (iii), excluding those referred to in
Section 1.02(g), being referred to collectively as
the "Assigned Contracts");
(d) all licenses, rights and Approvals granted by legal
bodies to Sellers, to the extent assignable, (the
"Licenses");
(e) all of Sellers' Proprietary Rights (as defined in
Section 10.17);
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<PAGE> 14
(f) the rights of Sellers to use their present telephone
and telefax numbers, and any "yellow page" or other
advertising rights in connection therewith;
(g) all of Sellers' rights in and to (i) any insurance
proceeds arising from any casualty after the Closing
Date to the assets being purchased pursuant to this
Agreement; (ii) any manufacturer's warranties
relating to the Inventory; (iii) security deposits,
prepaid expenses and other similar deposits, other
than any thereof relating to the Excluded Facilities;
(iv) prepayments and similar items; and (v) vendor
lists (collectively, the "Other Assets");
(h) all prescription records, medical records and patient
files (including, but not limited to, all data and
other information, wherever located, concerning
customers, patients, payors and referral sources)
(collectively, the "Medical Records"); and
(i) subject to Section 1.02(l), all books, records, books
of account, computer records, documents and related
information (including but not limited to files,
lists, marketing literature, blueprints, plans,
specifications and drawings), wherever located,
regarding Sellers' Personal Property, Inventory,
Receivables, Assigned Contracts, Licenses,
Proprietary Rights, Other Assets and Medical Records,
other than those specifically relating solely to the
Excluded Facilities or the other Excluded Assets
(each as defined in Section 1.02) (collectively, the
"HMI Records").
The assets being purchased from Sellers are sometimes referred to as the
"Purchased Assets." To the extent that any assets, property or rights of Sellers
are intended to be transferred to Purchaser pursuant to the general language of
this Agreement but do not appear on the applicable Schedules or Exhibits to this
Agreement, the general language shall govern and such assets, property and
rights shall nonetheless be deemed transferred to Purchaser.
1.02 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, Purchaser is not purchasing any of the following
assets of Sellers (collectively, the "Excluded Assets"):
(a) the leasehold interests (and related deposits)
relating to or located at Sellers' facilities located
at Chicago (Buffalo Grove), Illinois, Ronkonkoma, New
York and Pittsburgh, Pennsylvania (other than
leasehold improvements in the pharmacy located at
Ronkonkoma, New York) (collectively, the "Excluded
Facilities"):
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<PAGE> 15
(b) furniture, fixtures, equipment, computer hardware,
machinery and other tangible personal property
located at the Excluded Facilities (other than any
such assets used in the operations of the pharmacies
located at the Excluded Facilities);
(c) cash, cash equivalents and (subject to the terms of
the Transition Agreement) bank accounts;
(d) rights of Sellers to any Tax refunds;
(e) Claims, causes of action, rights of recovery or
set-off, including, without limitation, proceeds from
any litigation or insurance claims, to the extent any
of the foregoing relate to events occurring prior to
the Closing Date;
(f) the assets noted on Attachment 1 to Exhibit 1.01(a);
(g) Contracts listed on Schedule 1.02(g);
(h) all rights of Sellers under Plans (as defined in
Section 4.12);
(i) any of Sellers' Receivables (as defined in Section
10.17);
(j) any capital stock of Sellers;
(k) any Corporate Documents (as defined in Section 10.17)
of Sellers;
(l) all historical books of account, financial and
accounting and tax records, including general ledger
and similar documents, and any other records of
Sellers described on Schedule 1.02(l); provided,
however, that none of the Medical Records shall be
Excluded Assets;
(m) insurance policies; and
(n) any of Sellers' Medicaid and Medicare provider
numbers.
1.03 Liabilities.
(a) The Purchased Assets shall be conveyed free and clear of
all Liabilities and Restrictions (as defined in Section 10.17),
excepting only (i) Liabilities under the Assigned Contracts, to the
extent arising subsequent to the Closing Date, (ii) liabilities secured
by Permitted Liens (as defined in Section 4.08) and (iii) liabilities
expressly assumed by Purchaser pursuant to Section 9.02. Subject to
Section 1.03(b), Purchaser
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<PAGE> 16
hereby agrees to assume and be liable for the liabilities described in
clauses (i) and (iii) of the preceding sentence (the liabilities
described in such clauses (i) and (iii) are referred to collectively as
the "Assumed Liabilities").
(b) Except as expressly set forth in this Agreement, Purchaser
is not assuming, and shall not be liable for, any liabilities or
obligations of, or Claims or causes of action against, any Seller,
whether known or unknown, material or immaterial, absolute or
contingent (including, but not limited to, any liabilities,
obligations, Claims or causes of action (i) under Contracts which shall
not have been expressly assumed by Purchaser pursuant to this
Agreement; (ii) for indebtedness for borrowed money; (iii) for bank
overdrafts; (iv) by reason of or arising out of any default or Breach
by Sellers prior to the Closing of any Contract, for any penalty
against Sellers under any Contract arising prior to the Closing, or
relating to or arising out of any event occurring prior to the Closing
which with the passage of time or after giving of notice, or both,
would constitute or give rise to such a Breach, default or penalty,
whether or not such Contract is being assigned to and assumed by
Purchaser pursuant to this Agreement; (v) under Contracts the existence
of which would conflict with or constitute a Breach of the
representation in Section 4.09(c) hereof, (vi) relating to or arising
out of the Excluded Assets; (vii) relating to trade debt (other than
purchase orders); (viii) except to the extent arising under any of the
Assigned Contracts, to any shareholder or Affiliate of Sellers, in
their capacity as such; (ix) except as expressly stated in this
Agreement or the Transition Agreement (as defined in Section 8.01(k)),
to any present or former employee, officer or director of Sellers,
including, without limitation, any bonuses, any termination or
severance pay related to the Transfer of employees to Purchaser in
connection with the transactions contemplated hereby, and any
post-retirement or termination medical or other benefits or other
compensation or benefits, or any obligations under any employee benefit
plan of Sellers; (x) relating to the execution, delivery and
consummation of this Agreement and the transactions contemplated hereby
by Sellers or their Affiliates or arising under this Agreement,
including, without limitation, any and all liabilities to Purchaser or,
except as provided in Section 9.03, liabilities for Taxes incurred by
Sellers as a result of the sale contemplated by this Agreement; (xi)
for any Taxes accrued or incurred by any Seller or its Affiliates prior
to or after the Closing Date or relating to any period (or portion of a
period) prior or after thereto; (xii) relating to or arising out of any
violation by any Seller or its Affiliates of any Environmental Law (as
defined in Section 4.13) or any other Legal Requirement relating to
health and safety of the public or the employees of Sellers; (xiii)
relating to, or arising out of, products sold or services rendered
and/or warranties given with respect thereto by Sellers, or (except as
expressly stated herein) the conduct or operation of the business of
Sellers, prior to the Closing Date; (xiv) relating to any violation by
any Seller or its Affiliates of State or Federal Medicaid or Medicare
or similar laws; (xv) relating to any violation by any Seller or its
Affiliates of customs laws; (xvi) relating to any violation by any
Seller or its Affiliates of any fair packaging or
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<PAGE> 17
labeling laws; (xvii) relating to future offsets, refunds or credits in
favor of patients or third party payors arising from services performed
or products distributed or sold prior to the Closing Date, except as
provided in clause (F) of Section 9.08(b)(i); (xviii) relating to
violations by any Seller or its Affiliates of State or Federal
securities laws or regulations; (xix) relating to any violation by any
Seller or its Affiliates of criminal or civil fraud, common law fraud,
racketeering and other offenses; and (xx) of Sellers arising under or
pursuant to this Agreement).
THE PARTIES ACKNOWLEDGE THAT PURCHASER IS NOT
ASSUMING ANY LIABILITIES OF SELLERS OTHER THAN THE LIABILITIES
EXPRESSLY REFERRED TO IN SECTION 1.03(a), AND THAT SELLERS AND
SELLER GUARANTOR HAVE AGREED, JOINTLY AND SEVERALLY, IN
ACCORDANCE WITH SECTION 9.08(a) OF THIS AGREEMENT, TO
INDEMNIFY PURCHASER AGAINST ANY SUCH NON-ASSUMED LIABILITIES
OF SELLERS.
(c) Sellers make no representations or warranties as to the
assignability of the Contracts or Licenses or of any such other
contracts, leases, commitments, licenses or permits that are included
within the Purchased Assets, and Purchaser shall assume all of the same
as provided in Section 1.03(a) regardless of whether the same are by
their terms assignable and, upon their receipt thereof, Sellers shall
deliver to Purchaser any benefits received by Sellers arising out of
services rendered or products supplied by Purchaser under any of the
same after the Closing.
ARTICLE II. CONSIDERATION
2.01 Amount of Purchase Price. The total consideration (the
"Purchase Price") to be paid by Purchaser for the Purchased Assets, subject to
Section 9.07, shall be $20,000,000.
2.02 Payment of Purchase Price. On the Closing Date, Purchaser
shall pay the Purchase Price as follows:
(a) $17,500,000 of the Purchase Price, as such amount may be
adjusted in accordance with Section 9.07 (such amount, as so adjusted,
the "Closing Payment"), shall be paid, subject to Section 2.07, by
means of wire transfers aggregating such amount to account numbers and
banks designated by Sellers in a written notice to Purchaser given not
less than one full business day prior to the Closing.
(b) $2,500,000 of the Purchase Price (such amount, the Escrow
Amount"), shall be paid to Bankers Trust Company, as escrow agent (the
"Escrow Agent"), by means of a wire transfer to an account designated
by the Escrow Agent. The Escrow
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Agent shall hold the Escrow Amount in accordance with the terms and
conditions of the Adjustment Escrow Agreement (as defined in Section
3.02(d)). The Escrow Amount shall be disbursed as provided in the
Adjustment Escrow Agreement and in Section 9.06.
2.03 Assumption of Liabilities. As additional consideration
hereunder, at the Closing Purchaser shall assume the Assumed Liabilities by
executing and delivering an Assumption Agreement in the form of Exhibit 2.03
(the "Assumption Agreement").
2.04 Allocation. Following the completion of the Closing Date
Balance Sheet described in Section 9.05, the total proceeds of the transactions
contemplated hereby shall be assigned to the various categories of assets
included on such balance sheet as shall be mutually agreed between HMI and
Purchaser. Such allocation shall be made in a fair and reasonable manner and in
accordance with the Closing Date Balance Sheet. Such allocation shall be binding
on Purchaser and Sellers for all purposes, including federal Tax purposes, and
the parties agree not to take a contrary position on any Tax Return or any
documents filed by any of said parties with federal, state or local authorities.
2.05 Closing Adjustments. Any rent, utility charges and
similar charges for Sellers' facilities (other than the Excluded Facilities)
which relate to the period before and after the Closing shall be apportioned
between Sellers and Purchaser in a manner consistent with Section 1.03.
2.06 Bulk Transfer Laws. Purchaser hereby waives compliance by
Sellers with the provisions of any bulk transfer laws of any state in connection
with the transactions contemplated by this Agreement; provided, however, the
foregoing waiver shall not affect Purchaser's rights under the indemnification
provisions of this Agreement.
2.07 Offset for Certain Payments Due to Purchaser. Sellers
and Purchaser agree that the amount of the Closing Payment to be made pursuant
to Section 2.02(a) shall be reduced by the amount payable by Sellers to
Purchaser on the date hereof pursuant to Section 5 of the Transition Agreement
(as defined in Section 8.01(k)).
ARTICLE III. THE CLOSING
3.01 Time and Place. The closing of the transactions which are
the subject of this Agreement (the "Closing") shall take place at 10:00 a.m.,
local time, on the date hereof, at the offices of Proskauer Rose LLP ("Sellers'
Counsel"), 1585 Broadway, New York, New York 10036, or such other time and place
as the parties may agree upon. The day on which the Closing actually takes place
is sometimes referred to as the "Closing Date."
3.02 Sellers' Obligations at Closing. At the Closing, Sellers
shall:
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(a) execute and deliver to Purchaser (i) a bill of sale in
substantially the form attached as Exhibit 1.01(a) (the "Bill of
Sale"), (ii) an assignment of the Assigned Contracts in substantially
the form of Exhibit 3.02(a)(ii) (the "Assignment of Contracts"), and
(iii) assignments of Proprietary Rights in substantially the forms of
Exhibits 3.02(a)(iii)(1), 3.02(a)(iii)(2) and 3.02(a)(iii)(3) (the
"Assignments of Proprietary Rights");
(b) execute and deliver such other good and sufficient
instruments of conveyance, assignment and transfer, in form and
substance reasonably satisfactory to Purchaser's counsel, as may be
reasonably requested by Purchaser to vest in Purchaser good title to
the Purchased Assets, subject only to Permitted Liens;
(c) deliver all documents, certificates, consents and
undertakings required to be delivered by Sellers or Seller Guarantor to
Purchaser under the provisions of this Agreement;
(d) enter into an escrow agreement in substantially the form
of Exhibit 3.02(d) (the "Adjustment Escrow Agreement"), pursuant to
which there shall be established an escrow fund (the "Adjustment Escrow
Fund") for the purposes set forth therein;
(e) provide to Purchaser insurance certificates naming
Purchaser as a loss payee on Sellers' general, professional and product
liability and umbrella policies for at least 30 days following the
Closing Date (it being understood that Purchaser shall be liable for
payment of premiums on such policies for the period commencing on the
Closing Date);
(f) deliver or relinquish physical possession of the Purchased
Assets wherever located;
(g) execute and deliver to Purchaser for filing with the
Secretary of State of Delaware an Amendment to the Certificate of
Incorporation of Sellers, eliminating from their respective names the
words "Health Management, Inc.," "HMI" and all derivatives and
variations thereof and comparable executed certificates for those
states in which they are qualified to do business; provided, however,
that with respect to any such certificate to be filed in a state other
than Delaware, Sellers shall have 20 days from the Closing Date to
deliver the same to Purchaser;
(h) deliver a "good standing certificate" from the Secretary
of State of each Seller's state of incorporation and the Secretary of
State of Seller Guarantor's state of incorporation dated no earlier
than 15 days prior to the Closing Date; and
(i) enter into the License Agreement and Transition Agreement
described in Section 8.01(k).
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3.03 Purchaser's Obligations at Closing. At the Closing,
Purchaser shall:
(a) pay to Sellers the Closing Payment, subject to Section
2.07, by wire transfers to the accounts specified by Sellers in
accordance with Section 2.02;
(b) execute and deliver the Assumption Agreement referred to
in Section 2.03;
(d) enter into the Adjustment Escrow Agreement and fund the
Escrow Amount in accordance with Section 2.02(b) of this Agreement;
(e) deliver all documents, certificates, consents and
undertakings required to be delivered by Purchaser or Purchaser
Guarantor to Sellers under the provisions of this Agreement;
(f) deliver a "good standing certificate" as to Purchaser and
Purchaser Guarantor from the Secretary of State of their respective
jurisdictions of incorporation dated no earlier than 15 days prior to
the Closing Date; and
(g) reimburse Sellers for all pre-paid rent for the month of
October 1996 with respect to facilities of Sellers (other than the
Excluded Facilities).
ARTICLE IV. REPRESENTATIONS AND WARRANTIES BY SELLERS
Sellers represent and warrant to Purchaser as follows:
4.01 Organization, Standing and Qualification; Corporate
Documents. Each Seller is a corporation validly existing and in good standing
under the laws of its state of incorporation, has all requisite corporate power
and authority to carry on its business as now being conducted and to own, lease
or operate its properties as and in the places where its business is now
conducted and its properties are now owned, leased or operated, and, except as
disclosed on Schedule 4.01, is duly qualified or licensed and in good standing
as a foreign corporation authorized to do business in each state where the
character of the properties it owns, leases or operates, or the conduct of its
business, requires such qualification or licensing, except where the failure to
be so qualified or licensed would not have a material adverse effect on the
condition (financial or otherwise), business, properties, assets, liabilities or
operations of the Sellers taken as a whole (a "Sellers Material Adverse
Effect"). The jurisdictions in which Sellers are qualified or licensed to do
business are set forth on Schedule 4.01.
4.02 Sole Shareholder. Each Seller other than HMI is a
wholly-owned subsidiary of HMI. The Merger has been consummated and Seller
Guarantor is HMI's sole shareholder.
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4.03 Execution, Delivery and Performance of Agreement;
Authority. Sellers have the requisite corporate power and authority to enter
into this Agreement and the agreements required to be executed by Sellers
pursuant hereto (the "Related Agreements") and to carry out the transactions
contemplated hereby and thereby. All proceedings required to be taken by each
Seller and its shareholders to authorize the execution, delivery and performance
of this Agreement and the Related Agreements have been properly taken. Each of
this Agreement and, when executed, the Related Agreements to which Sellers are a
party constitutes (or will constitute) a legal, valid and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting the
rights of creditors generally and subject to the discretion of a court in
granting of equitable remedies. The execution, delivery and performance of this
Agreement and the Related Agreements by Sellers will not conflict with, result
in a material Breach, default, right to accelerate or loss of rights under, or
result in the creation of any material restriction pursuant to, or require
consent of any Person under any provision of Sellers' Corporate Documents, any
loan or other similar agreement (except to the extent waived prior to the
Closing or noted in Schedule 4.03) or Legal Requirement (as defined in Section
10.17), except as noted on Schedule 4.03, to which any of the Sellers is a party
or by which they or any of their properties or assets may be bound or materially
affected, except as would not have a Sellers Material Adverse Effect, except
that no representation is made with respect to Legal Requirements applicable to
Licenses, Contracts (including payor/provider agreements), the License Agreement
and the Transition Agreement (each as defined in Section 8.01(k)).
4.04 HMI Subsidiaries. HMI has no subsidiaries which own any
assets, other than those subsidiaries which are Sellers under this Agreement.
4.05 Absence of Changes or Events. Except as set forth on
Schedule 4.05, since June 30, 1997 Sellers have conducted their business only in
the ordinary course and have not:
(a) incurred any Liability which would become (i) a liability
of Purchaser from and after the Closing Date, other than Liabilities
under Assumed Contracts and Liabilities expressly assumed by Purchaser
pursuant to Section 9.02, or (ii) a Restriction on the Purchased
Assets, other than Permitted Liens;
(b) mortgaged, pledged or subjected (or permitted to be
subjected) to any restrictions (other than Permitted Liens) any of the
Purchased Assets;
(c) materially amended or terminated, or received any notice
of termination of, any Assigned Contract or suffered any damage,
destruction or loss which, in any case or in the aggregate, has had
would have a Sellers Material Adverse Effect;
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(d) Transferred or granted any material rights under any
Proprietary Right or modified any existing material rights with respect
thereto;
(e) entered into any transactions, Contracts or commitments
involving more than $100,000 in any one instance or $300,000 in the
aggregate other than in the ordinary course of business;
(f) to the best of Sellers' knowledge, had any material
adverse change in their relations with any of Sellers' employees,
agents, customers or suppliers;
(g) made any change in the rate of compensation, commission,
bonus, deferred compensation or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus, extra compensation, deferred compensation or
severance or vacation pay, to any employee other than (A) changes in
the ordinary course of business in employee compensation consistent
with prior pay increase policies (such changes in the aggregate not
exceeding $10,000 per Person and $250,000 for all such Persons on an
annual basis) or (B) payments pursuant to workers' compensation laws;
(h) terminated or received any notice of termination from any
employee of Sellers whose annual base salary is equal to or greater
than $75,000 (a "Key Employee") or any consultant of the Sellers who
was paid more than $100,000 in the Sellers' most recent fiscal year
("Key Consultant");
(i) suffered any other change, event or condition which, in
any case or in the aggregate, has had or is reasonably expected to have
a Sellers Material Adverse Effect; or
(j) entered into any agreement or made any commitment to take
any of the types of action described in paragraphs (a) through (i)
above.
4.06 Litigation. Except as set forth on Schedule 4.06, there
is no Legal Proceeding, nor any order, decree or judgment in progress, pending
or in effect, or to the best of Sellers' knowledge, threatened, against or
relating to any of the Sellers, or any of the assets or business of Sellers or
the transactions contemplated by this Agreement.
4.07 Compliance with Legal Requirements and Other Instruments.
(a) Except as disclosed on Schedule 4.07, Sellers have
complied with all Legal Requirements applicable to their business,
assets or operations as presently or previously conducted (including,
without limitation, Legal Requirements relating to zoning, building
codes, antitrust, occupational safety and health, environmental
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protection and conservation, water or air pollution, toxic and
hazardous waste and substances control, employment eligibility
verification pursuant to the immigration laws, customs, trade, consumer
product safety, product liability, hiring, wages, hours, equal
employment, employee benefit plans and programs, collective bargaining
and withholding and social security Taxes), without giving effect to
the Merger and except for such noncompliance or violations that
individually or in the aggregate would not have a Sellers Material
Adverse Effect.
(b) Except as disclosed on Schedule 4.07, Sellers holds all
the permits, licenses and franchises which are necessary for or
material to their current use, occupancy or operation of the Purchased
Assets and the conduct of their business (subject to the effect of the
Merger on any thereof ), except where the failure to hold such permits,
licenses and franchises individually or in the aggregate would not have
a Sellers Material Adverse Effect; and no notice of violation of any
applicable material Legal Requirement binding on Sellers with respect
to the Purchased Assets or their business has been received.
(c) Subject to the disclaimer of representations and
warranties as to the assignability of Contracts and Licenses in Section
1.03(c), and except as set forth on Schedule 4.07, no authorization,
approval, order, license, permit, franchise or consent by, and no
registration, declaration or filing by Sellers with, any Legal Body is
required in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
other than as required by the HSR Act.
4.08 Title to Assets. Except as disclosed on Schedule 4.08,
Sellers have marketable title to all the tangible property included in the
Purchased Assets, subject to any Permitted Liens (as defined below). Sellers
own, lease or validly license all of the intangible property included in the
Purchased Assets. None of the Purchased Assets is subject to any encumbrance
except (a) Taxes not yet due and payable or (b) as disclosed on Schedule 4.08,
or (c) those imperfections of title and encumbrances, if any, which (i) are not
significant in character, amount or extent and do not materially detract from
the value of the assets subject thereto, (ii) do not interfere in any material
respect with either the present and continued use of such assets or the conduct
of the business of Sellers and (iii) have arisen only in the ordinary course of
business (the encumbrances referred to in clauses (a), (b) and (c) being
referred to as "Permitted Liens"). Sellers own all of the assets used by them in
the operation and conduct of their business, or required by Sellers for the
normal conduct of their business, except for those assets leased by Sellers
under leases or as noted in Schedule 4.08. Subject to the exceptions noted in
the foregoing sentence or as noted in Schedule 4.08, the Purchased Assets,
together with the Excluded Assets, constitute all of the assets used in, related
to or required by Sellers for, the normal conduct of their business. Except as
noted in Schedule 4.08, all computer software used by Sellers at any location
(including, but not limited to, the Excluded Facilities) is owned by
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Sellers and included in the Purchased Assets and all such owned computer
software may be freely transferred to Purchaser pursuant to this Agreement.
4.09 Disclosure Schedules. Schedules 4.09(a) through 4.09(g)
(each schedule corresponding to the similarly numbered paragraph noted below)
constitute an accurate and complete list of (or, as appropriate, reference to
separately delivered listings of) the noted matters as of the date hereof,
unless otherwise set forth therein:
(a) each lease, sublease, license or any other instrument
under which Sellers claims or holds such leasehold or other interest or
right to the use all real property which is used by Sellers in
connection with the operation of their business on the date hereof or
pursuant to which Sellers have assigned, sublet or granted any rights
therein, identifying the parties thereto;
(b) to the best knowledge of Sellers, all analyses of the
Sellers' business or their industry prepared within one year prior to
the date hereof on Sellers' behalf by investment bankers, management
consultants, accountants or others;
(c) all Contracts (other than payor/provider agreements,
insurance contracts and purchase and sales orders) that are material to
the Sellers, taken as a whole;
(d) all collective bargaining agreements, employment and
consulting agreements, incentive agreements, bonus agreements, deferred
compensation agreements, employee pension, profit sharing, thrift,
retirement, employee stock option, stock purchase, or stock ownership
agreements and group life, health and accident insurance and other
employee benefit agreements, arrangements or commitments, whether or
not legally binding;
(e) to the best knowledge of Sellers, all parties with which
Sellers have payor/provider agreements or relationships on the date
hereof;
(f) to the best knowledge of Sellers, (i) all pending claims
or rights of offset asserted in writing by any governmental payor (1)
of an unspecified or indefinite amount or (2) for more than $2,000
asserted in the aggregate in any single communication; and (ii) all
pending claims or rights of offset for more than $10,000 asserted by
any private payor; and
(g) to the best knowledge of Sellers, all audits being
conducted by any Legal Body or third party.
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True and complete copies of all agreements and documents referenced in any of
the disclosure schedules to this Agreement have been provided or made available
to Purchaser.
4.10 Contracts. Except as disclosed on Schedule 4.10 or as
otherwise noted in Schedules 4.09(a) through (e), and without giving effect to
the Merger or the transactions contemplated hereby, (i) all of the Contracts
listed in Schedule 4.09 are in full force and effect as to the applicable Seller
(and, to the best knowledge of Sellers, in full force and effect as to the other
party or parties thereto), and (ii) there is not under any such Contract any
existing material default by Sellers or event which, after notice or lapse of
time, or both, would constitute a default by Sellers or result in a right to
accelerate by the other party or loss by Sellers of rights and, to the best
knowledge of Sellers, there is no material default by any other party under any
such Contract, except as would not have a Sellers Material Adverse Effect..
4.11 Proprietary Rights, Etc. Except as disclosed in Schedule
4.08 or Schedule 4.11, Sellers own, or have the right to use and transfer to
Purchaser, all Proprietary Rights necessary to conduct their business as it is
presently operated; to the best of Sellers' knowledge, Sellers are not
infringing upon any material Proprietary Rights owned or obtained by any other
Person or Persons; and there is no Claim or action by any such Person pending,
or, to the knowledge of Sellers, threatened, with respect to any material
Proprietary Right.
4.12 Employee Benefit Plans. Set forth on Schedule 4.12 is a
list of each "employee benefit plan," as that term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
sponsored, maintained or contributed to by Sellers on behalf of employees of
Sellers (the "Plans"). Except for noncompliance and any failures to maintain and
operate any Plan as would not individually or in the aggregate have a Sellers
Material Adverse Effect, to the knowledge of the Sellers, the Plans have been
maintained and operated in accordance with their terms and with the applicable
provisions of ERISA and the Internal Revenue Code of 1986, as amended, (the
"Code") (including rules and regulations thereunder) and other applicable
federal and state laws.
4.13 Environmental Matters.
(a) For the purpose of this Section 4.13, a "hazardous
substance or waste" shall mean (i) all substances which are regulated
pursuant to Section 311(b)(2)(A) of the Federal Water Pollution Control
Act ("FWPCA"), 33 U.S.C Section 1251 et seq.; (ii) any element,
compound, mixture, solution, or substance which is regulated pursuant
to Section 102 of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq.; (iii) any regulated hazardous waste having the characteristics
which are identified under or listed pursuant to Section 3001 of the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901
et seq.; (iv) any toxic pollutant listed and regulated under Section
307(a) of the FWPCA; (v) any hazardous air pollutant which is listed
and regulated under Section 112 of the Clean Air
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Act, 42 U.S.C. Section 7401 et seq.; (vi) any imminently hazardous
chemical substance or mixture with respect to which action has been
taken pursuant to Section 7 of the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; (vii) waste oil, (viii) asbestos, and (ix)
toxic or hazardous substances or such materials as are regulated under
any other federal, state and local environmental, health and safety
law, code, ordinance, or any rule and regulation promulgated
thereunder, including, without limitation, any law regulating
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes into the environment (i.e., air, surface water, ground water,
land surface or subsurface strata) or otherwise regulating the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals,
or industrial, solid, toxic or hazardous substances or wastes
("Environmental Law").
(b) Except as set forth in Schedule 4.13, Sellers have
complied in all respects with all applicable Environmental Laws and
obtained all permits, licenses, certificates and other authorizations
which are required with respect to their operation under any
Environmental Laws (except for such noncompliances, violations or
failures to obtain a permit, license, certificate or other
authorization that individually or in the aggregate would not have a
Sellers Material Adverse Effect). Except as set forth in Schedule 4.13,
Sellers are in compliance in all respects with all permits, licenses
and authorizations required by any Environmental Laws (except for such
noncompliances, violations or failures to obtain a permit, license,
certificate or other authorization that individually or in the
aggregate would not have a Sellers Material Adverse Effect). Sellers
have delivered to Purchaser true and complete copies of all
environmental studies in Sellers' possession made in the last two years
relating to the business or assets of Sellers.
(c) Except as set forth in Schedule 4.13, there is no pending
or, to Sellers' knowledge, threatened civil, criminal or administrative
Action, outstanding written order or agreement with any Legal Body that
affects or applies to Sellers, their business or assets, or the
services they have provided which arises under any Environmental Laws.
(d) Except as set forth in Schedule 4.13, to Sellers'
knowledge, there are no past or present events, conditions, practices,
incidents or actions which may prevent compliance or continued
compliance by Sellers in all material respects with any Environmental
Laws or with any order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, or which
may give rise to any material Liability based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, by Sellers of any hazardous
substance or waste.
(e) Except in accordance with applicable Environmental Law or
with a valid governmental permit, license, certificate or approval, to
the best knowledge of Sellers
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there has been no material emission, spill, release or discharge by
Sellers, from any of their assets, from any site at which any of such
assets are or were located or at any other location or disposal site,
into or upon (i) the air, (ii) soils or improvements, (iii) surface
water or ground water, or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing such assets of any
hazardous substances or wastes used, stored, generated, treated or
disposed at or from any of such assets (any of which events is
hereinafter referred to as "Hazardous Discharge"). Except as listed on
Schedule 4.13, none of the operations of Sellers involve the
generation, transportation, treatment or disposal of hazardous
substances or wastes.
(f) Sellers have not received any notice or letter naming any
of the Sellers as a Potentially Responsible Party as defined in and
pursuant to CERCLA or any comparable Environmental Law whereby Sellers
are alleged to be required to remove and/or clean sites and facilities
which have been contaminated by hazardous substances or wastes.
4.14 Brokers and Finders. Neither Sellers nor any Person
acting on their behalf has engaged any broker, agent or finder or incurred any
Liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
4.15 No Material Interests. Except as set forth on Schedule
4.15, to the best of Sellers' knowledge, no shareholder, officer or employee of
Sellers or any Affiliate of Sellers has any direct or indirect material interest
in any creditor, competitor, supplier or lessor of Sellers.
4.16 Employment Relations. Except as described in Schedule
4.16, (a) to the best of Sellers' knowledge, no Key Employee or Key Consultant
of Sellers has notified the Sellers that he or she has any plans to terminate
his or her employment or consulting relationship with Sellers; and (b) since
June 30, 1997, there has not been, and Sellers have not received any written
notice that there is likely to be, any materially adverse change in relations
with employees or consultants as a result of the announcement or consummation of
the transactions contemplated by this Agreement.
4.17 Insurance. Schedule 4.17 contains a complete and accurate
list of all policies of fire, liability, workers' compensation and other forms
of insurance (showing as to each policy the carrier, policy number, coverage
limits, expiration dates, annual premiums and a general description of the type
of coverage provided) maintained by Sellers on their business, property or
personnel. Copies of all such policies have been made available to Purchaser.
All pending Claims, if any, made against Sellers which are covered by insurance
are listed on Schedule 4.17.
4.18 Payments. To the best knowledge of Sellers, no Seller nor
any of its respective officers, directors or employees has, directly or
indirectly, paid or delivered any fee,
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commission or other sum of money or item or property, however characterized, to
any finder, agent, government official or other party, in the United States or
any other country, which is in any manner related to the business or operations
of Sellers, which Sellers know to have been illegal under any federal, state or
local laws of the United States or any other country having jurisdiction;
Sellers have not participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers; no Seller
nor any of their respective officers, directors or employees has made any
payment (i) to any customer or supplier of Sellers or any officer, director,
partner, employee or agent of any such customer or supplier, for the sharing of
fees which Sellers know to have been illegal under any such federal, state or
local laws or (ii) to any such customer or supplier or any such officer,
director, partner, employee or agent for the rebating of charges which Sellers
know to have been illegal under any such federal, state or local laws.
4.19 Compliance with Health Care Laws and Regulations. The
following are the only representations made by Sellers with respect to
compliance with health care laws and regulations:
(a) Except as set forth on Schedule 4.19(a) hereto, and to the
best of Sellers' knowledge: (i) no validity review or program integrity
review related to Sellers has been conducted by any Legal Body in
connection with the Medicare or Medicaid programs and no such review,
audit or audit assessment is scheduled, pending or threatened against
Sellers, their business, assets, or the consummation of the
transactions contemplated hereby, (ii) Sellers have not received a
subpoena or formal or informal request for records from any Legal Body,
and (iii) Sellers have not received notice of any pending, threatened
or possible decertification, or audit, offset, other action or loss of
participation in, any Medicaid or Medicare programs.
(b) Except as set forth on Schedule 4.19(b) hereto and to the
best of Sellers' knowledge: (i) Sellers have not failed to file cost
reports and other documentation and
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reports, if any, required to be filed by any commercial third-party
payors and governmental agencies in compliance with applicable
contractual provisions and/or laws, regulations and rules, which were
due on or before the Closing Date, and (ii) there are no Claims
(including notices of any offsets against future reimbursements)
pending on threatened or scheduled before any Person, including without
limitation, any intermediary, carrier, the Health Care Financing
Administration, or any other state or federal agency with respect to
Medicare and Medicaid Claims filed by Sellers or the operation of the
business of Sellers on or before the Closing Date, or program
compliance matters, in either case which would have a Sellers Material
Adverse Effect. Sellers have delivered to Purchaser accurate and
complete copies of any Claims, actions, inquiries or other
correspondence or appeals listed on Schedule 4.19(b).
(c) To the best of Sellers' knowledge, except as otherwise
disclosed on Schedule 4.09(c), Sellers deliver goods and services,
charge rates, and bill for services which are in all material respects
legal and proper.
(d) To the best of Sellers' knowledge, Sellers in all material
respects properly pay any appropriate refunds, bill and use their best
efforts to collect deductibles and co-payment amounts and apply all
payments received.
(e) To the best of Sellers' knowledge, Sellers have not
engaged in any activities in connection with Sellers' business which
are prohibited under, and have complied in all material respects with,
the Controlled Substances Act, 21 U.S.C. Section 801 et seq. or the
regulations promulgated pursuant to such statute or any related state
or local statutes or regulations concerning the dispensing and sale of
controlled substances.
4.20 HSR Act Filing. Sellers have submitted and caused their
respective ultimate parent entities (including Seller Guarantor) to submit all
documents, reports and notifications, and satisfy all requests for additional
information, if any, pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act").
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET
FORTH IN THIS ARTICLE IV OF THIS AGREEMENT, THE PURCHASED ASSETS ARE
BEING CONVEYED TO PURCHASER ON AN "AS IS, WHERE IS, WITH ALL FAULTS"
BASIS. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH
IN THIS ARTICLE IV OF THIS AGREEMENT, SELLERS MAKE NO REPRESENTATION OR
WARRANTY AND EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, RELATING TO THE PURCHASED ASSETS, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES BY SELLER GUARANTOR
Seller Guarantor represents and warrants to Purchaser as
follows:
5.01 Organization. Seller Guarantor is a corporation validly
existing and, except as noted in Schedule 5.01, in good standing under the laws
of the State of New York and has all requisite corporate power and authority to
carry on its business as now being conducted and to own, lease or operate its
properties as and in the places where its business is now conducted and its
properties are now owned, leased or operated.
5.02 Execution, Delivery and Performance of Agreement;
Authority. Neither the execution, delivery nor performance of this Agreement by
Seller Guarantor will, with or without the giving of notice or the passage of
time, or both, conflict with, result in a material Breach, default, right to
accelerate or loss of rights under, or result in the creation of any material
restriction, pursuant to, any provision of Seller Guarantor's Corporate
Documents or any agreement or Legal Requirement to which Seller Guarantor is a
party or by which Seller Guarantor or any of its properties may be bound or
materially affected. Seller Guarantor has the requisite corporate power and
authority to enter into this Agreement and the Related Agreements to which it is
a party and to carry out the transactions contemplated hereby and thereby. All
proceedings required to be taken by Seller Guarantor to authorize the execution,
delivery and performance of this Agreement and the Related Agreements have been
properly taken. Each of this Agreement and, when executed, the Related
Agreements to which Seller Guarantor is a party constitutes (or will constitute)
a valid and binding obligation of Seller Guarantor enforceable against it in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting equitable remedies.
5.03 Brokers and Finders. Neither Seller Guarantor nor any
Person acting on its behalf has employed any broker, agent or finder or incurred
any Liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein.
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES BY PURCHASER
Purchaser represents and warrants to Sellers as follows:
6.01 Organization. Purchaser is a corporation validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business as now being
conducted and to own, lease or operate its properties as and in the places where
its business is now conducted and its properties are now owned, leased or
operated.
6.02 Execution, Delivery and Performance of Agreement;
Authority. Neither the execution, delivery nor performance by Purchaser of this
Agreement or the other agreements required to be executed by Purchaser pursuant
hereto will, with or without the giving of notice or the passage of time, or
both, conflict with, result in a material Breach, default, right to accelerate
or loss of rights under, or result in the creation of any material restriction,
pursuant to, any provision of Purchaser's Corporate Documents or any agreement
or Legal Requirement to which Purchaser is a party or by which Purchaser or any
of its properties may be bound or materially affected. Purchaser has the power
and authority to enter into this Agreement and or the other agreements required
to be executed by Purchaser pursuant hereto and to carry out the transactions
contemplated hereby and thereby. All proceedings required to be taken by
Purchaser to authorize the execution, delivery and performance of this Agreement
and such other agreements have been properly taken. Each of this Agreement and
the other agreements required to be executed by Purchaser pursuant hereto
constitutes a valid and binding obligation of Purchaser enforceable against it
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting equitable remedies.
6.03 Brokers and Finders. Neither Purchaser nor any Person
acting on its behalf has employed any broker, agent or finder or incurred any
Liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein.
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6.04 HSR Act Filing. Purchaser has submitted or caused its
ultimate parent entity to submit all documents, reports and notifications, and
to satisfy all requests for additional information, if any, pursuant to the HSR
Act.
6.05 Acknowledgments. Purchaser acknowledges that it has had
the opportunity to visit with the Sellers and meet with their respective
officers and other representatives to discuss the business and the assets,
liabilities, financial condition, cash flow and operations of the Sellers.
Purchaser acknowledges that it has made its own independent examination,
investigation, analysis and evaluation of Sellers, including Purchaser's own
estimate of the value of the Sellers' business. Purchaser acknowledges that,
Sellers have made no representation or warranty to Purchaser with respect to any
projections, estimates or budgets heretofore delivered to or made available to
Purchaser of future revenues, expenses or expenditures or future results of
operations. Nothing contained in this Section 6.05 shall limit the scope of or
otherwise affect Sellers' representations in Article IV or Purchaser's rights
and remedies under the provisions of this Agreement (including, but not limited
to, its rights under Section 9.08).
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
BY PURCHASER GUARANTOR
Purchaser Guarantor represents and warrants to Sellers as
follows:
7.01 Organization. Purchaser Guarantor is a corporation
validly existing and in good standing under the laws of the Province of Ontario,
Canada and has all requisite corporate power and authority to carry on its
business as now being conducted and to own, lease or operate its properties as
and in the places where its business is now conducted and its properties are now
owned, leased or operated.
7.02 Execution, Delivery and Performance of Agreement;
Authority. Neither the execution, delivery nor performance by Purchaser
Guarantor of this Agreement or the other agreements required to be executed by
Purchaser Guarantor pursuant hereto will, with or without the giving of notice
or the passage of time, or both, conflict with, result in a material Breach,
default, right to accelerate or loss of rights under, or result in the creation
of any material restriction, pursuant to, any provision of Purchaser Guarantor's
Corporate Documents or any agreement or Legal Requirement to which Purchaser
Guarantor is a party or by which Purchaser Guarantor or any of its properties
may be bound or materially affected. Purchaser Guarantor has the power and
authority to enter into this Agreement and or the other agreements required to
be executed by Purchaser Guarantor pursuant hereto and to carry out the
transactions contemplated hereby and thereby. All proceedings required to be
taken by Purchaser Guarantor to authorize the execution, delivery and
performance of this Agreement and such other agreements have been
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properly taken. Each of this Agreement and the other agreements required to be
executed by Purchaser Guarantor pursuant hereto constitutes a valid and binding
obligation of Purchaser Guarantor enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting the rights of creditors generally and subject to the discretion
of a court in granting equitable remedies.
7.03 Brokers and Finders. Neither Purchaser Guarantor nor any
Person acting on its behalf has employed any broker, agent or finder or incurred
any Liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein.
ARTICLE VIII. CONDITIONS OF CLOSING
8.01 Conditions Precedent to Purchaser's Obligations. All
obligations of Purchaser at the Closing are subject, at the option of Purchaser,
to the fulfillment of each of the following conditions at or prior to the
Closing, and Sellers and Seller Guarantor shall exert their best efforts to
cause each such condition to be so fulfilled:
(a) All representations and warranties of Sellers and Seller
Guarantor contained herein or in any document delivered pursuant hereto
shall be true and correct in all material respects.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by each of Sellers and Seller
Guarantor on or before the Closing shall have been duly and properly
performed in all material respects.
(c) Purchaser shall have received evidence reasonably
satisfactory to Purchaser that the Merger has been consummated.
(d) There shall not have been a material adverse change in the
business, financial condition, results of operations, assets or
liabilities of Sellers ("Sellers Material Adverse Change") since June
30, 1997, other than as disclosed in the Schedules to this Agreement.
For purposes of this Section 8.01(d), but not for any other purposes of
this Agreement, a Sellers Material Adverse Change shall not include
losses incurred in the ordinary course of business which do not exceed
$2,000,000 per month or any regulatory action by the United States Food
and Drug Administration with regard to Clozaril(R) or the Company's
Clozaril(R) Patient Management Business.
(e) All documents required to be delivered to Purchaser by
Sellers or Seller Guarantor at or prior to the Closing shall have been
so delivered.
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(f) None of Sellers, Seller Guarantor or Purchaser shall be a
party to any Legal Proceeding, nor the subject of any order, writ,
injunction, judgment or decree, in connection with or relating to the
transactions contemplated by this Agreement.
(g) Sellers and Seller Guarantor shall have delivered to
Purchaser a copy of the resolutions of their respective Boards of
Directors together with any and all required resolutions or consents of
their shareholders and appropriate incumbency certificates, duly
certified, approving the execution and delivery of this Agreement and
the consummation of all of the transactions contemplated hereby.
(h) Purchaser shall have received a favorable opinion of
Proskauer Rose LLP, dated the Closing Date and in form and substance
reasonably satisfactory to Purchaser and its counsel substantially to
the effect set forth on Schedule 8.01(h) (with any customary
qualifications). In rendering such opinion, such counsel may (i) rely
upon opinions of other counsel, reports of public officials and, as to
matters of fact, upon certificates of any officer or officers of
Sellers and Seller Guarantor, and (ii) assume the genuineness of all
signatures on, and the authenticity of, documents and conformity with
the original of any copies of such documents.
(i) Seller Guarantor, as HMI's sole shareholder, shall have
approved the execution, delivery and performance of this Agreement as
required by law.
(j) Purchaser shall have obtained UCC, judgment and Tax lien
searches covering the filing offices identified in Schedule 8.01(j)
dated no earlier than 15 days prior to the Closing Date confirming that
there are no financing statements, judgment or Tax liens of record with
respect to the Purchased Assets or Purchaser shall have received
properly executed UCC termination statements or releases therefor,
provided, however, that if Sellers are unable to deliver any such
termination statements or releases on the Closing Date, Sellers shall
have 14 calendar days from the Closing to deliver to Purchaser any such
termination statements or releases.
(k) Sellers and Seller Guarantor shall have entered into (i)
an Agreement Regarding Use of Licenses substantially in the form
attached hereto as Exhibit 8.01(k)(1) (the "License Agreement") and
(ii) a Transition Agreement substantially in the form attached hereto
as Exhibit 8.01(k)(2) (the "Transition Agreement").
(l) Sellers shall have entered into a loan agreement
substantially in the form attached as Exhibit 8.01(l)(1) (the "Loan
Agreement"), a promissory note in the form referred to in the Loan
Agreement and a pledge agreement substantially in the form attached as
Exhibit 8.01(l)(2) (the "Pledge Agreement"), Seller Guarantor shall
have entered into a Guaranty substantially in the form attached as
Exhibit 8.01(l)(3) (the "Guaranty"), Sellers shall have entered into an
escrow agreement substantially in the form attached as Exhibit
8.01(l)(4) (the "Loan Escrow Agreement") and the escrow fund
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required by the Loan Escrow Agreement (the "Loan Escrow Fund") shall be
deposited with the Escrow Agent named therein concurrently with the
Closing.
8.02 Conditions Precedent to Sellers' and Seller Guarantor's
Obligations. All obligations of Sellers and Seller Guarantor at the Closing are
subject, at the option of Sellers and Seller Guarantor, to the fulfillment of
each of the following conditions at or prior to the Closing, and Purchaser shall
exert its best efforts to cause each such condition to be so fulfilled:
(a) The lenders (the "Banks") parties to the Credit Agreement,
dated as of July 31, 1996, as amended (the "Credit Agreement"), among
Seller Guarantor, the Banks, and Bankers Trust Company, as agent, shall
have consented to the Merger and to the transactions contemplated
hereby and shall have agreed to amendments to the Credit Agreement in
order to permit the Merger and the transactions contemplated hereby,
all in the sole and absolute discretion of such Banks.
(b) All representations and warranties of Purchaser and
Purchaser Guarantor contained herein or in any document delivered
pursuant hereto shall be true and correct in all material respects as
of the Closing Date.
(c) All covenants, agreements, and obligations required by the
terms of this Agreement to be performed by Purchaser and Purchaser
Guarantor at or before the Closing shall have been duly and properly
performed in all material respects.
(d) Sellers shall have received evidence reasonably
satisfactory to Sellers that the Merger has been consummated.
(e) All documents required to be delivered by Purchaser to
Sellers at or prior to the Closing shall have been so delivered.
(f) None of Sellers, Seller Guarantor or Purchaser shall be a
party to any Legal Proceeding, nor the subject of any order, writ,
injunction, judgment or decree, in connection with or relating to the
transactions contemplated by this Agreement.
(g) Purchaser and Purchaser Guarantor shall have delivered to
Sellers a copy of the resolutions of their respective Boards of
Directors and appropriate incumbency certificates, duly certified,
approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby.
(h) Sellers shall have received a favorable opinion of
Purchaser's and Purchaser Guarantor's counsel dated the Closing Date
and in form and substance reasonably satisfactory to Sellers' Counsel,
to the effect set forth on Schedule 8.02(h) (with any customary
qualifications). In rendering such opinion, such counsel may (i) rely
upon opinions of other counsel, reports of public officials and, as to
matters of fact, upon
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certificates of any officer or officers of Purchaser and Purchaser
Guarantor, and (ii) assume the genuineness of all signatures on, and
the authenticity of, documents and conformity with the original of any
copies of such documents.
(i) Purchaser shall have entered into the Loan Agreement and
the Loan Escrow Agreement and the amount of $20,000,000 shall be loaned
to Sellers pursuant to the Loan Agreement and the promissory note
referred to therein concurrently with the Closing hereunder.
ARTICLE IX. ADDITIONAL COVENANTS
9.01 Noncompetition; Nonsolicitation.
(a) Effective on the Closing Date, and for three years
following the Closing Date, neither Sellers nor Seller Guarantor shall,
either directly or indirectly through subsidiaries, engage in the
United States in a business in the area of mental illness, transplant
and infertility services that directly competes with the business being
conducted by Sellers as of the Closing Date (the "Business") (it being
acknowledged by Purchaser that none of the businesses in which Seller
Guarantor currently engages violates this Section 9.01(a)).
(b) Effective on the Closing Date, and for 18 months following
the Closing Date, neither Sellers nor Seller Guarantor shall directly
or indirectly hire, offer to hire, entice away, retain, employ or
solicit or attempt to solicit (either for itself or as agent for
another) for employment or induce, persuade or encourage any Person to
leave Purchaser's employ or cease to serve as a consultant to Purchaser
who, prior to the Closing Date was, or during such 18 month period will
be, employed or retained by Purchaser as a consultant, agent, employee
or otherwise; provided, however that, from and after the first
anniversary of the Closing Date, Sellers and Seller Guarantor shall
have the right to hire any such Person so long as none of the Sellers
or Seller Guarantor took any action to entice away, solicit or attempt
to solicit (either for itself or as agent for another) for employment
or induce, persuade or encourage such Person to leave Purchaser's
employ or cease to serve as a consultant to Purchaser.
(c) Effective on the Closing Date, and for 3 years following
the Closing Date, neither Sellers nor Seller Guarantor shall directly
or indirectly divert or attempt to divert from the Business conducted
by Purchaser any business whatsoever by influencing or attempting to
influence any customer or supplier of Purchaser in connection with the
Business or other person having a business relationship with Purchaser
in connection with the Business;
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provided, however, that nothing contained in this Section 9.01 shall prohibit
Seller Guarantor from (x) acquiring a company or business so long as the
activities which are in the Business are not the primary line of business of
such acquired company or business and (y) thereafter continuing the activities
of a company or business so acquired.
Sellers and Seller Guarantor acknowledge that the time, scope,
geographic area and other provisions of this Section 9.01 have been specifically
negotiated by sophisticated commercial parties and that all such provisions are
reasonable under the circumstances of the transactions contemplated by this
Agreement and that such restrictions do not unreasonably interfere with Sellers'
and Seller Guarantor's ability to engage in business or impose any undue
hardship. It is understood that Sellers and Seller Guarantor are agreeing to the
terms of this Section 9.01 in order to induce Purchaser to enter into this
Agreement. The parties acknowledge that the businesses of Sellers are currently
conducted throughout the United States and that a narrow geographic limitation
would deny Purchaser protection to which it is entitled to in this Agreement. If
any portion of this Section 9.01 shall be determined to be invalid and
unenforceable, such determination shall not affect the validity or
enforceability of the balance hereof, and such balance shall remain in full
force and effect.
9.02 Employees and Employee Benefits.
(a) On or prior to the Closing Date, Purchaser shall make an
offer of employment to each employee who is employed by any Seller at a
facility other than an Excluded Facility (a "Transferred Facility")
including, without limitation, all employees in active service, on
disability (long-term or short-term) or on leave of absence, except for
those employees who are identified on Schedule 9.02, and to each
employee identified on Schedule 9.02 who is employed at an Excluded
Facility. Each employee who accepts such offer by Purchaser is
hereinafter referred to as a "Transferred Employee." On and after the
Closing Date, Purchaser shall have the right, but not any obligation,
to employ any additional employees of Sellers whom it wishes to employ
and who wish to be employed by Purchaser. Sellers consent to Purchaser
contacting such employees with respect to the desire of such employees
to enter the employ of Purchaser. Sellers shall be responsible for all
obligations and liabilities relating to or arising under the group
health plan continuation coverage requirements of Section 4980B of the
Code and Title I, Subtitle B of ERISA for employees employed by Sellers
on or prior to the Closing Date other than Transferred Employees.
(b) Purchaser shall ensure that any employee benefit plan or
arrangement established, maintained or contributed to by Purchaser or
any of its affiliates grant full credit for all service or employment
with, or recognized by, Sellers and any of their affiliates, as
reported to Purchaser by Sellers, for purposes of eligibility and
vesting with respect to any employee pension benefit plan, as defined
in Section 3(2) of ERISA, and for purposes of eligibility and
determining the amount of any benefit with respect to any vacation
program. Purchaser shall assume all Contracts listed on Schedule 9.02
with
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employees who become Transferred Employees.
(c) As of the date immediately following the Closing Date,
Purchaser shall provide coverage for Transferred Employees under
health, dental, vision, group life insurance and accidental death and
dismemberment, long-term disability, short-term disability, workers'
compensation and unemployment benefit plans or policies sponsored,
maintained or contributed to by Purchaser, pursuant to the terms of
such plans and policies, including, without limitation, such terms as
may exclude categories of employees from eligibility to participate in
such plans and policies; provided, however, that such Transferred
Employees shall be granted full credit for all service or employment
with Sellers and any of their affiliates, as reported to Purchaser by
Sellers, for purposes of eligibility and the amount of any benefit
under such plans and policies. The plans or policies to be sponsored,
maintained or contributed to by Purchaser with respect to the
Transferred Employees pursuant to the preceding sentence need not be
the same as the plans or policies sponsored, maintained or contributed
to by Purchaser with respect to Purchaser's existing employees.
Purchaser shall cause any such health, dental or vision plan for the
Transferred Employees to waive any pre-existing condition exclusions
and waiting periods (except to the extent that such exclusions would
have then applied or waiting periods were not satisfied under Sellers'
medical plans) with respect to Transferred Employees (and their
dependents or other beneficiaries). For purposes of computing
deductible amounts, co-pays or other maximums under any such health,
dental or vision plan, expenses and claims recognized prior to the
Closing Date for similar purposes under the applicable plan of Sellers
or any of their affiliates shall be credited or recognized.
(d) In the event that any Transferred Employee is discharged
for any reason (other than for cause) by Purchaser within one year
after the Closing Date, Purchaser shall make payments to such
discharged Transferred Employee in an amount which is not less than the
amount which would have been payable under Sellers' severance practices
in effect immediately prior to Closing had Sellers terminated such
Transferred Employee as of the Closing and had Purchaser not made an
offer of employment to such Transferred Employee. Purchaser shall give
full credit for all service with Seller and any affiliate to each
Transferred Employee for all purposes (including, without limitation,
the amount of benefits payable) under the severance practices
maintained by Purchaser.
(e) As soon as practicable following the Closing Date,
Purchaser shall designate an eligible retirement plan (within the
meaning of Section 401(a)(31) of the Code) in order to enable
Transferred Employees to roll over (whether by direct or indirect
rollover, as selected by such employee) their eligible rollover
distributions from any tax-qualified retirement plan sponsored or
maintained by Sellers or their affiliates to a tax-qualified retirement
plan sponsored or maintained by Purchaser or any of its affiliates, in
the manner set forth therein but without regard to any waiting period
for participation, subject, however, to Purchaser's receipt of a copy
of either the Internal Revenue Service
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("IRS") determination letter received by Sellers' plan or the IRS
determination letter covering the prototype document underlying
Sellers' plan together with written confirmation that Sellers' plan
covers all employees of Sellers and all members of Sellers' "controlled
group" as defined in Section 4971(e)(2)(B) of the Code.
(f) On the date hereof, Purchaser hereby assumes the accrued
liability of Sellers with respect to accrued vacation and related
payroll tax obligations for the Transferred Employees.
9.03 Taxes. Sellers and Purchaser shall each bear one half of
all applicable sales, documentary, use, filing, Transfer and other Taxes payable
as a result of the Transfer of the Purchased Assets and Sellers and Purchaser
shall file all appropriate Returns related thereto required to be filed by each.
All Taxes on or measured by the net income or revenues of Purchaser or Sellers
(including without limitation, income, gross receipts, and net worth Taxes)
imposed or levied by or payable to any Taxing authority shall be paid or payable
by the party upon which such Taxes are imposed or levied.
9.04 Use of HMI Name or Marks. Neither Sellers nor Seller
Guarantor shall after the Closing directly or indirectly use, or conduct
business under, the names "Health Management, Inc." or "HMI" or any names
similar thereto, or other Proprietary Rights owned or previously used by
Sellers, except as authorized pursuant to the Transition Agreement.
9.05 Preparation of Closing Date Balance Sheet.
(a) Attached hereto as Exhibit 9.05(a)(1) are the Adjusted
Balance Sheets of Sellers as of June 30, 1997 and August 31, 1997. As
used in this Agreement, "Adjusted Balance Sheet" means the balance
sheet of Sellers as of the date in question, adjusted to exclude assets
which are not Purchased Assets or HMI Receivables (as defined in
Section 9.06).
(b) Within 45 days after the Closing Date, HMI shall prepare,
or cause to be prepared, and deliver to Purchaser an Adjusted Balance
Sheet of Sellers as of the Closing Date (the "Closing Date Balance
Sheet"). The Closing Date Balance Sheet will be prepared from the books
and records of Sellers in accordance with generally accepted accounting
principles on a basis consistent with the Adjusted Balance Sheets as of
June 30, 1997 and August 31, 1997. Purchaser shall cause its
independent accountants, Arthur Andersen LLP ("Arthur Andersen"), to
certify the Closing Date Balance Sheet, with any modifications which
Arthur Andersen deems necessary. Purchaser and Sellers will, without
charge by either to the other, cooperate with each other to facilitate
the preparation and certification of the Closing Date Balance Sheet.
Sellers expressly waive any conflicts of interest relating to any
assistance provided by any of Purchaser's employees to Sellers or
Sellers' independent auditors in connection with the preparation of the
Closing Date Balance Sheet and Purchaser agrees not to interfere with
the
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preparation of the Closing Date Balance Sheet by such employees or to
influence such employees in connection therewith. All fees and
disbursements of Arthur Andersen in connection with its duties under
this Section 9.05 and under Section 9.06 shall be paid by Sellers.
(b) Following Purchaser's receipt of the Closing Date Balance
Sheet and the making of any adjustments necessary for Arthur Andersen
to certify the Closing Date Balance Sheet, Purchaser shall deliver a
copy of the certified Closing Date Balance Sheet to HMI and Seller
Guarantor. HMI and Seller Guarantor, assisted by Coopers & Lybrand,
shall have the right to review the books and records of Purchaser
relating to the Purchased Assets and any work papers of Arthur Andersen
to determine whether they concur with, or object to, the various items
on the certified Closing Date Balance Sheet.
(c) Within 30 days following receipt by HMI of the certified
Closing Date Balance Sheet, HMI shall deliver to Purchaser a letter
either (i) stating that HMI concurs with the certified Closing Date
Balance Sheet or (ii) setting forth HMI's objections to the certified
Closing Date Balance Sheet. If Purchaser and HMI, together with their
respective independent auditors, are unable to resolve HMI's objections
to the Closing Date Balance Sheet within 30 days after receipt by
Purchaser of such letter, any such objections as remain unresolved
shall be resolved by an independent nationally known accounting firm
jointly selected by Purchaser and HMI (the "Independent Firm").
Purchaser and Sellers each agree to endeavor to cause the Independent
Firm to resolve, within 30 days after the submission thereof, all
disputes submitted to it. The fees and expenses of the Independent Firm
shall be borne one-half by Purchaser and one-half by Sellers.
(d) Not later than two (2) business days following the final
determination of the Closing Date Balance Sheet in accordance with this
Section 9.05, Purchaser shall furnish (or cause Arthur Andersen to
furnish) to HMI and Seller Guarantor a calculation of the difference,
if any, between the Closing Date Asset Amount and the Benchmark Asset
Amount (each as defined in Section 9.06) and the resulting amount to be
paid by Purchaser to HMI or by HMI to Purchaser under Section 9.06.
9.06 Certain Post-Closing Adjustments.
(a) In the event that the Closing Date Balance Sheet (in its
final form as provided in Section 9.05(c)) shows that the Purchased
Assets plus the HMI Receivables as of the Closing Date (the "Closing
Date Asset Amount") is different from the Benchmark Asset Amount, then
(i) if the Closing Date Asset Amount is greater than the Benchmark
Asset Amount, Purchaser shall pay to HMI the amount, if any, by which
the Closing Date Asset Amount exceeds the Benchmark Asset Amount, and
(ii) if the Benchmark Asset Amount is greater than the Closing Date
Asset Amount, (A) a portion of the Adjustment Escrow Fund equal to the
shortfall of the Closing Date Asset Amount
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as compared to the Benchmark Asset Amount shall be released to
Purchaser from the Adjustment Escrow Fund and (B) Sellers shall pay to
Purchaser the amount, if any, by which such shortfall exceeds the
amount of the Adjustment Escrow Fund released to Purchaser pursuant to
the preceding clause (A). Any payments required by this Section 9.06(a)
shall be made within five business days after final determination of
the Closing Date Balance Sheet by wire transfer to an account
designated by the party entitled to receive the payment. Any balance of
the Adjustment Escrow Fund following the final determination of the
Closing Date Asset Amount and the making of any adjustments and
payments required by the second preceding sentence shall be disbursed
to Sellers.
(b) As used in this Agreement, "HMI Receivables" means the
Receivables owned by Sellers and attributable to services rendered by
the Sellers prior to the date hereof. In determining the amount to be
recorded on the balance sheet with respect to the HMI Receivables,
reserves and allowances with respect to the HMI Receivables shall be
subtracted in a manner consistent with the June 30, 1997 Adjusted
Balance Sheet.
(c) As used in this Agreement, "Benchmark Asset Amount" means
an amount equal to (x) the assets shown on the June 30, 1997 Adjusted
Balance Sheet, minus (y) the amount of any Purchase Price Adjustment
(as defined in Section 9.07).
9.07 Certain Closing Adjustments. At the Closing, the parties
shall jointly determine the amount by which the assets reflected on the Adjusted
Balance Sheet as of August 31, 1997 have declined from the assets reflected on
the Adjusted Balance Sheet as of June 30, 1997 (such amount is referred to as
the "Balance Sheet Shortfall"). Based on such determination, the Purchase Price
referred to in Section 2.01 and the Closing Payment to be made pursuant to
Section 2.02(a) shall be reduced by an amount (the "Purchase Price Adjustment")
equal to any Balance Sheet Shortfall greater than $2,500,000, rounded to the
nearest $100,000. An analysis showing any reduction of the Purchase Price and
Closing Payment to be made pursuant to the preceding sentence shall be attached
to this Agreement as Schedule 9.07. The parties agree that in the event their
determination of the Balance Sheet Shortfall proves to have been incorrect, the
parties will make any appropriate adjustments between them to carry out the
purposes of this Section 9.07.
9.08 Indemnification.
(a) Each of Sellers and Seller Guarantor, jointly and
severally, shall indemnify and hold harmless Purchaser and its
officers, directors, agents, employees and Affiliates and their
respective representatives (collectively, "Purchaser Indemnitees") from
and against any and all of the following:
(i) any and all liabilities, Claims, costs, expenses
(including, but not limited to, reasonable legal fees,
disbursements or expenses incurred in defending any Legal
Proceeding brought against any Purchaser Indemnitee), damages
and
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losses which any Purchaser Indemnitee may sustain at any time
after the date hereof by reason of, arising out of, based upon
or incurred in connection with:
(A) any litigation or Legal Proceeding against
any of the Sellers relating to events
occurring prior to the Closing Date and to
which any Purchaser Indemnitee is made a
party or the settlement thereof;
(B) except with regard to severance pay
obligations and accrued vacation with
respect to Transferred Employees, and the
Contracts listed on Schedule 9.02 with
Transferred Employees, any Claim against any
Purchaser Indemnitee by any of the present
or former employees, officers, directors,
independent contractors, customers, vendors
or others involved with Sellers, Seller
Guarantor or any Affiliates of Sellers or
Seller Guarantor, including, but not limited
to, Claims related to compensation,
insurance, rights to indemnification,
termination, sexual harassment, defamation,
employee benefits or ERISA matters, if such
Claim relates to and arises out of events
occurring on or prior to the Closing Date;
(C) any Claim or investigation against any
Purchaser Indemnitee by any Person relating
to Sellers' billing practices or other legal
or regulatory matters with respect to events
occurring prior to the Closing (including,
but not limited to, any Claim arising from
any Medicaid or Medicare audit by any
governmental agency and any Claim arising
under any false claims statute);
(D) noncompliance by Sellers with applicable
bulk sales laws or Tax laws;
(E) any Claim brought against any Purchaser
Indemnitee by any actual or alleged present
or former shareholder (whether legal or
beneficial) of Sellers or Seller Guarantor,
in such person's capacity as a present or
former shareholder of any of Sellers or
Seller Guarantor;
(F) any Claims brought against any Purchaser
Indemnitee relating to the Merger or to
Seller Guarantor's acquisition of securities
or indebtedness of HMI;
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(G) any of Sellers' or Seller Guarantor's Tax
liabilities, including, but not limited to,
any Claim brought against any Purchaser
Indemnitee resulting from any audit of any
Seller's Tax Returns, or any Tax liability
for which any Seller may be liable by being
a member of any consolidated or combined
income tax group of which Seller Guarantor
is the common parent, or any Tax liability
to which any of Sellers or Seller Guarantor
may be liable as a transferee, a successor
or for any other reason;
(H) any Claim against any Purchaser Indemnitee
by reason of or arising out of any
activities conducted or actions taken by
Sellers or Seller Guarantor at any time
before, on or after the Closing Date (other
than the Assumed Liabilities);
(I) any Claims asserted against or suffered by
any Purchaser Indemnitee under the Worker
Adjustment and Retraining Notification Act
of 1988, 29 U.S.C. Sections 2101-2109
(the "WARN Act" ) arising out of or
resulting solely from Sellers' failure to
comply with the provisions of the WARN Act
prior to, on and after the Closing Date;
(J) any Claim against any Purchaser Indemnitee
for a refund, set-off, adjustment or credit
with respect to any Receivable relating to
services rendered prior to the date hereof,
but only to the extent all such refunds,
set-offs, adjustments or credits would cause
the loan made pursuant to the Loan Agreement
not to be repaid in full;
(K) any Claim against any Purchaser Indemnitee
for injury to person or property (regardless
of when made or asserted) which arises out
of or relates to any service performed or
product sold or distributed by or on behalf
of any Seller prior to the Closing Date;
(L) any Claim against any Purchaser Indemnitee
by reason of or arising out of any
bankruptcy or similar proceeding involving
any of the Sellers (including, but not
limited to, any such proceeding in which the
transactions contemplated by this Agreement
are called into question);
(M) any Claim against any Purchaser Indemnitee
by reason of or arising out of any
litigation or Legal Proceeding between
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Seller Guarantor, on the one hand, and any
of the Sellers or Sellers' professional
advisors (including, but not limited to,
attorneys, accountants, financial advisors
and other consultants), on the other hand;
(N) except with regard to severance pay
obligations and accrued vacation with
respect to Transferred Employees, and the
Contracts listed on Schedule 9.02 with
Transferred Employees, any liabilities and
any Claims relating to or arising out of any
Plans or any severance pay plan or
arrangement, employee relations policy,
practice or arrangement, agreement with
respect to leased or temporary employees,
vacation plan or arrangement, sick plan,
workers' compensation arrangement, stock
purchase plan, stock option plan, fringe
benefit plan, bonus plan, deferred
compensation agreement, plan or program or
any other benefit plan, policy, practice or
arrangement which was maintained,
contributed to or sponsored by the Sellers
or any member of a "controlled group" (as
defined in Section 4971(e)(2)(B) of the
Code) of which any of the Sellers is, or at
any time was, a member, including, without
limitation, (i) liabilities and Claims for
medical benefits with respect to covered
expenses incurred on or before the Closing
Date including, but not limited to, covered
hospital benefits for confinements that
commenced on or before the Closing Date;
(ii) liabilities and Claims for short-term
and long-term disability benefits for
disabilities which commenced on or before
the Closing Date for the period that each of
such affected individuals remains disabled;
(iii) liabilities and Claims for life and
survivor income benefits for deaths which
occur on or before the Closing Date; (iv)
liabilities and Claims for workers'
compensation benefits for work-related
injuries which occur on or before the
Closing Date; (v) liabilities and Claims for
severance pay which is payable to employees
other than Transferred Employees on or
before the Closing Date; (vi) liabilities
and Claims for any other benefits which
accrue on or before the Closing Date; (vii)
any joint and several liabilities relating
to or arising out of any plan which is or
has been subject to Section 412 of the Code
or Title IV of ERISA; and (viii) any
liabilities and Claims arising out of any
acts or omissions of Sellers or any
fiduciaries or trustees of any
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Plan of Sellers in connection with the
operation or administration of any such
Plan, whether occurring before, on or after
the Closing Date;
(O) any Restrictions (other than Permitted
Liens) to which the Purchased Assets are
subject; and
(P) any of Sellers' liabilities other than the
Assumed Liabilities;
(ii) any and all liabilities, Claims, costs, expenses
(including, but not limited to, reasonable legal fees, disbursements or
expenses), damages and losses which any Purchaser Indemnitee may
sustain at any time by reason of, arising out of, based upon, or
incurred in connection with the Breach, inaccuracy, misrepresentation
or failure to comply with any of the warranties, representations,
covenants, agreements or obligations of Sellers or Seller Guarantor
contained in this Agreement or the Related Agreements; and
(iii) any and all Legal Proceedings, damages, assessments,
judgments, costs and expenses (including, without limitation,
reasonable legal fees, disbursements or expenses) incurred by any
Purchaser Indemnitee as a result of Sellers' or Seller Guarantor's
failure or refusal to defend any Claim as to which it is required to
indemnify any Purchaser Indemnitee in accordance with any of the
foregoing provisions.
(b) Purchaser and Purchaser Guarantor, jointly and severally, shall
indemnify and hold harmless Sellers, Seller Guarantor and their respective
officers, directors, agents, employees and Affiliates and their respective
representatives (collectively, "Seller Indemnitees") from and against any and
all of the following:
(i) any and all liabilities, Claims, costs, expenses
(including, but not limited to, reasonable legal fees, disbursements or
expenses), damages and losses which any Seller Indemnitee may sustain
at any time by reason of, arising out of, based upon or incurred in
connection with:
(A) the Assumed Liabilities;
(B) the Breach, inaccuracy, misrepresentation or
failure to comply with any of the
warranties, representations, covenants,
agreements or obligations of Purchaser or
Purchaser Guarantor contained in this
Agreement;
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(C) any Legal Proceeding brought, asserted or
threatened against such Seller Indemnitee
arising from Sellers' refusal to hire or
employ any Person in adherence to Section
9.01(b) or arising out of or resulting from
Purchaser's failure to comply with its
obligations under the WARN Act at any time
after the Closing Date;
(D) arising out of the conduct of the business
relating to the Purchased Assets by
Purchaser after the Closing Date;
(E) any activities conducted or actions taken by
Purchaser or Purchaser Guarantor at any time
before, on or after the Closing Date;
(F) any Claim asserted subsequent to the date
hereof against any Seller Indemnitee for a
refund, set-off, adjustment or credit with
respect to any Receivable relating to
services rendered prior to the date hereof,
but only to the extent all such refunds,
set-offs, adjustments or credits would not
prevent the loan made pursuant to the Loan
Agreement from being repaid in full;
(G) any Claim against any Seller Indemnitee for
injury to person or property (regardless of
when made or asserted) which arises out of
or relates to any service performed or
product sold or distributed by or on behalf
of Purchaser after the Closing Date; and
(vii) any and all Legal Proceedings, damages,
assessments, judgments, costs and expenses (including, without
limitation, reasonable legal fees, disbursements or expenses)
incurred by any Seller Indemnitee as a result of Purchaser's
or Purchaser Guarantor's failure or refusal to defend any
Claim incident to, or otherwise comply with, any of the
foregoing provisions.
(c) Claims for indemnification for misrepresentation shall
survive the Closing as set forth in Section 10.01 for the period set
forth in Section 10.01. If any Indemnitee asserts a Claim for
indemnification and the party against whom such Claim for
indemnification is asserted (an "Indemnitor") contests in writing their
responsibility for such indemnification under this Section 9.10, then
the party prevailing in such contest shall be entitled to reimbursement
of its reasonable attorneys' fees and expenses by the other party or
parties (but not more than one counsel and one local and/or special
counsel for all the indemnified parties).
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(d) If any Legal Proceeding or other Claim is brought,
asserted or threatened against any Indemnitee and such Indemnitee seeks
or may seek indemnity under this Section 9.08, or an Indemnitee
otherwise delivers a notice to the Indemnitor that it is entitled to
indemnification hereunder, the Indemnitee promptly shall notify the
Indemnitor and in any event before such time as they may be prejudiced,
when known, of the facts constituting the basis for such Claim. In the
event of any such claim for indemnification hereunder resulting from or
in connection with any Claim or Legal Proceedings by a third party, the
notice to the Indemnitor shall specify, if known, the amount or an
estimate of the amount of the Liability arising therefrom. The
Indemnitor shall have the right, at its option (exercised by written
notice to the Indemnitee), to assume the control of the defense
thereof, including the employment of counsel reasonably satisfactory to
the Indemnitee, and, if they do so, shall proceed in good faith at all
times; provided, however, that (i) the control by the Indemnitor of
such defense shall not delay the timeliness of such defense, (ii) the
Indemnitor shall not consent to the entry of any judgment or enter into
any settlement without the prior written consent of the Indemnitee
(which shall not be unreasonably withheld), unless the Indemnitee is
released from all Liability in respect of or related to such action or
proceeding and is not otherwise required to take or forbear from taking
any action in respect thereof and such settlement is not harmful to the
Indemnitee's reputation in the reasonable determination of such
Indemnitee and (iii) the Indemnitor shall be responsible for all legal
fees and expenses in connection with such defense. The Indemnitee shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof at the expense of the Indemnitee. If
an Indemnitee is entitled to indemnification hereunder and if the
Indemnitor does not assume control of such defense, and a judgment or
settlement is entered or agreed to by the Indemnitee in respect of the
matter being defended, the amount of such judgment or settlement plus
the Indemnitee's legal fees and expenses (but not more than one counsel
and one local and/or special counsel for all the indemnified parties)
shall conclusively be "liabilities" subject to Section 9.08(a) and
other relevant sections.
(e) The Indemnitee shall cooperate fully, at the cost of the
Indemnitor, with the Indemnitor in the defense of any action assumed by
the Indemnitor and shall preserve and make available relevant records.
9.09. Right to Offset. Should Sellers or Seller Guarantor owe
monies or otherwise be liable to Purchaser under this Agreement or should
Purchaser owe monies of otherwise be liable to Sellers under this Agreement, in
each case as determined by mutual agreement of the applicable parties or a
determination by a Legal Body, the party to whom monies are owed may set-off and
deduct such sums from any payments otherwise due to such other party or parties
under any agreement or obligation to the maximum extent allowed by law.
9.10 Nondisclosure. Sellers and Seller Guarantor shall not at
any time during the period of five years after the date hereof disclose or
reveal to others, without the prior written
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consent of Purchaser, any financial, business, customer or technical information
relating to any confidential or proprietary aspects of the Purchased Assets
(including, without limitation, customer lists, supplier lists, prescription
files, medical records, names of referral sources and information about
contractual arrangements or pricing arrangements with patients, payors or
suppliers) and Sellers and Seller Guarantor will cooperate with Purchaser in
preserving such confidential or proprietary aspects of the Purchased Assets.
Purchaser shall be under no obligation to return or otherwise maintain the
confidentiality of any information previously disclosed to Purchaser or its
Affiliates pursuant to this Agreement.
9.11 Assignment of Contracts. To the extent that the
assignment of, or the agreement to assign, any Assigned Contract would
constitute a Breach of that Contract unless the consent or waiver of another
party thereto has been obtained, this Agreement shall not constitute any such
assignment or agreement to assign unless and until such consent or waiver is
obtained. In any such case, Sellers shall cooperate with Purchaser in any
reasonable arrangement (such as subcontracting, sublicensing or subleasing)
designed to provide for Purchaser, on terms no less favorable than Sellers are
entitled to, the benefits under the applicable Contracts, including, without
limitation, enforcement at the cost and for the benefit of Purchaser of any and
all rights of Sellers against any other party thereto, and Purchaser shall
perform the obligations arising on and after the Closing Date under such
Contracts.
9.12 Maintenance of Corporate Existence of Sellers. Seller
Guarantor and Sellers shall take all necessary steps to maintain the corporate
existence in good standing of HMI, Home Care Management Inc. and HMI Illinois,
Inc. for a period of not less than two (2) years from the Closing Date.
9.13 New York State Settlement. Home Care Management, Inc.
("HCM") shall pay to the New York State Department of Social Services, as and
when due, all amounts required by that certain Stipulation of Settlement entered
into on or about March 3, 1997 (the "New York Settlement"). So long as HCM have
not satisfied all of its liabilities pursuant to the New York Settlement, any
monies which otherwise would be released to HMI and/or one or more other Sellers
pursuant to the Loan Escrow Agreement shall be paid directly to the New York
State Department of Social Services. The parties shall provide the Escrow Agent
named in the Loan Escrow Agreement with all payment instructions and other
information necessary to fulfill the requirements of the preceding sentence.
9.14 Preservation of Copies of Certain Records. (a) Purchaser
shall use good faith efforts to preserve all records transferred to Purchaser as
part of the Purchased Assets for at least six years after the Closing Date in a
form and condition comparable to that in which such records were received by
Purchaser or in a form that comports with accepted business practices. From time
to time, upon request of Sellers, and at Sellers' expense, Purchaser shall
supply to Sellers copies of such records which Sellers may reasonably need.
Purchaser shall provide notice to Sellers and Seller Guarantor if Purchaser
intends to dispose of any of such records.
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(b) Sellers shall use good faith efforts to preserve all
records of Sellers set forth at Section 1.02(l) for at least six years after the
Closing Date in a form and condition comparable to that in which such records
existed at the time of the Closing or in a form that comports with accepted
business practices. From time to time, upon request of Purchaser, and at
Purchaser's expense, Sellers shall supply to Purchaser copies of such records
which Purchaser may reasonably need. Sellers and Seller Guarantor shall provide
notice to Purchaser if Sellers or Seller Guarantor intend to dispose of any of
such records.
9.15 Guarantee of Sellers' Obligations; Bankruptcy. Seller
Guarantor hereby absolutely and unconditionally guarantees the full and timely
payment and performance by Sellers of all of Sellers' obligations under this
Agreement and the Related Agreements. Until the second anniversary of the
Closing Date, (a) Seller Guarantor hereby covenants not to cause or permit any
or all of the Sellers to file for protection under any bankruptcy, insolvency or
similar laws and (b) Seller Guarantor shall contest in a commercially reasonable
manner any action commenced by a third party to adjudicate any of Sellers
insolvent under any bankruptcy, insolvency or similar laws.
9.16 Guarantee of Purchasers Obligations. Purchaser Guarantor
hereby absolutely and unconditionally guarantees the full and timely payment and
performance by Purchaser of all of Purchaser's obligations under this Agreement
and the other agreements required to be executed by Purchaser pursuant hereto.
9.17 Nonpurchased Assets. Purchaser shall promptly remit to
Sellers any assets of Sellers, other than Purchased Assets or proceeds thereof,
which Purchaser may from time to time receive, if any.
9.18 Ronkonkoma Sublease. Sellers shall use commercially
reasonable efforts to obtain the approval of the landlord of the Ronkonkoma, New
York facility to the sublease from the applicable Seller to Purchaser of the
pharmacy located at such facility for the remaining term of the lease. In the
event of any sublease under this section, Purchaser shall pay, or reimburse
Sellers for, all actual rent, utility charges, real estate taxes and other
out-of-pocket occupancy expenses incurred by Sellers and payable to third
parties during the remaining term of such lease.
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ARTICLE X. GENERAL PROVISIONS
10.01 Survival of Representation and Warranties.
(a) Each statement, representation and warranty, in this
Agreement or in any document, certificate or other instrument delivered
pursuant to this Agreement or in connection herewith shall survive the
Closing for a period of two years, notwithstanding any investigation at
any time made by or on behalf of Purchaser or Sellers, as the case may
be, following which such representations and warranties shall expire,
and no claims with respect to breach of any such representation or
warranty shall be made by Purchaser or any Purchaser Indemnitee or by
Sellers or any Seller Indemnitee, as the case may be, after such date;
provided, however that any indemnification claims under Section
9.08(a)(i) and 9.08(b)(i) shall survive without limitation.
(b) No claim may be made against Sellers or Seller Guarantor
for indemnification pursuant to Section 9.08(a)(ii) unless and only to
the extent the aggregate of all Claims of the Purchaser Indemnitees
exceed $200,000. No claim may be made against Purchaser or Purchaser
Guarantor for indemnification pursuant to Section 9.08(b)(ii) unless
and only to the extent the aggregate of all claims of the Seller
Indemnitees exceed $200,000.
(c) In no event shall the aggregate liability of Sellers or
Seller Guarantor under Section 9.08(a)(ii) or the aggregate liability
of Purchaser or Purchaser Guarantor under Section 9.08(b)(ii) exceed
$15,000,000.
(d) The remedies provided in this Article X constitute the
sole and exclusive remedies available to each party hereto for
recoveries against another party hereto for the matters covered by
Section 9.08 and any breaches or failures to comply with or
inaccuracies of the representations, warranties, covenants, and
agreements in this Agreement and the Related Agreements.
10.02 Notices. Any and all notices or other communications
required or permitted to be given under any of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (i) to the
following addresses or telefax numbers:
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(a) If to Sellers or Seller Guarantor:
Transworld HealthCare, Inc.
555 Madison Avenue, 33rd Floor
New York, New York 10022
Fax: (212) 750-7221
Attn: Office of General Counsel
with a copy (which shall not constitute notice) to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Fax: (212) 969-2900
Attn: Bruce L. Lieb, Esq.
(b) If to Purchaser:
Stadtlander Drug Distribution Co., Inc.
600 Penn Center Blvd.
Pittsburgh, Pennsylvania 15235
Fax: (412) 825-0589
Attn: President and Chief Financial Officer
with copies (which shall not constitute notice) to:
DCAmerica, Inc.
280 Park Avenue
New York, New York 10017
Fax: (212) 867-3226
Attn: Allan Silber and Samuel Shimer
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Fax: (212) 806-6006
Attn: James R. Tanenbaum, Esq.
(or at such other address or telefax numbers as any party may specify by notice
to all other parties given as aforesaid). Unless otherwise specifically provided
in this Agreement, such communications shall be deemed to have been given (a)
three days after mailing, when mailed by
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registered or certified postage-paid mail, (b) on the next business day, when
delivered to a same-day or overnight national courier service or the U.S. Post
Office Express Mail or (c) upon the date of receipt by the addressee when
delivered personally or by telecopier; provided, however, that any notice of
change of address shall be effective only upon receipt. Notice may be given on
behalf of a party by its counsel.
10.03 Entire Agreement; Amendment. This writing constitutes
the entire and only agreement of the parties with respect to the subject matter
hereof and supersedes and cancels any and all prior negotiations, understandings
and agreements concerning the subject matter hereof, including, but not limited
to, the letter agreement dated August 13, 1997. This Agreement may be amended,
modified, superseded, canceled, renewed or extended only by a written instrument
executed by the parties hereto.
10.04 Waiver. The failure by any party at any time to require
performance or compliance by an other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by any party of a Breach of any provision hereof
shall not be taken or held to be a waiver of any preceding or succeeding Breach
of such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against which such waiver is sought to be enforced.
10.05 Binding Nature. This Agreement shall be binding upon and
inure to the benefit of each party hereto, its successors and permitted assigns.
10.06 Assignment. This Agreement and all rights hereunder may
not be Transferred or assigned, by operation of law or otherwise, without the
written consent of all the parties to the Agreement, except that Purchaser may
assign its rights and obligations hereunder to an Affiliate that agrees in
writing to be jointly and severally liable with Purchaser, but no such
assignment shall relieve Purchaser of its obligations hereunder.
10.07 Captions; Language. The article, section and paragraph
headings contained in this Agreement are for the purposes of convenience only
and are not intended to define or limit the contents of such articles, sections
or paragraphs. In this Agreement, unless the context requires otherwise, the
singular includes the plural, the plural the singular, and the word "or" is used
in the inclusive sense.
10.08 Cross-References; Exhibits. References in this Agreement
to Articles, Sections, Schedules and Exhibits are references to Articles and
Sections of this Agreement and to Schedules and Exhibits attached to this
Agreement. The Schedules and Exhibits are hereby made a part of this Agreement.
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10.09 Costs. Except as otherwise stated herein, each party
hereto will pay all costs and expenses incurred by it in connection with this
Agreement, whether or not the transactions contemplated herein shall be
consummated.
10.10 Rights of Other Parties. Nothing in this Agreement shall
be construed as giving any Person other than the parties hereto and their
respective successors and permitted assigns, any right, remedy or claim under or
in respect of this Agreement or any provision hereof.
10.11 Enforceability. Any provision of this Agreement which is
prohibited by, or unlawful or unenforceable under, any applicable law of any
jurisdiction shall be ineffective as to such jurisdiction without affecting any
other provision of this Agreement in such jurisdiction or all of the provisions
of this Agreement in other jurisdictions. To the full extent, however, that the
provisions of such applicable law may be waived, or the provisions of this
Agreement "blue-penciled" or reformed by any competent court or arbitral panel,
so that they become enforceable, such provisions of law shall be hereby deemed
waived or such provisions of this Agreement shall be so blue-penciled or
reformed to the end that this Agreement is deemed to be a valid and binding
agreement enforceable in accordance with its terms. If any term or provision of
this Agreement shall be held invalid by a competent court or arbitral panel, the
remainder of this Agreement shall not be affected thereby and the parties hereto
shall continue to be bound by the remaining terms hereof. In such event, the
relevant term or provision (or should such term(s) or provision(s) be such a
material element of this Agreement, then the entire Agreement) shall be
renegotiated by the parties in a good faith effort to achieve mutual agreement
consistent with such holding and the parties shall continue to perform under
this Agreement in a manner consistent with the intent and objectives of the
parties to this Agreement.
10.12 Equitable Remedies. Sellers and Seller Guarantor
acknowledge that because of the nature of Sellers' business and the subject
matter of this Agreement, a Breach of Section 9.01 will cause irreparable injury
to Purchaser for which money damages will not provide an adequate remedy and,
accordingly, Purchaser shall have the right to have the provisions of such
Section specifically enforced by a court having equity jurisdiction, in addition
to, and not in limitation of, any remedies at law that Purchaser may have.
10.13 Further Assurances. At any time and from time to time,
each party hereto, without further consideration, shall cooperate, take such
further action and execute and deliver such further instruments and documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement and to Transfer possession of and good
title to the Purchased Assets.
10.14 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall be deemed to evidence one
and the same agreement.
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<PAGE> 54
10.15 Applicable Law. This Agreement and its validity,
construction and performance shall be governed in all respects by the laws of
the State of New York without giving effect to principles of conflict of law.
10.16 Access; Notice of Actions. Following the Closing, (i)
Purchaser, Purchaser Guarantor, Sellers and Seller Guarantor shall each give
access to the other to inspect and copy the books of account of the Sellers in
their possession, and (ii) Sellers and Seller Guarantor shall give access to
Purchaser to inspect and copy the minute books and other records of Sellers in
Sellers' or Seller Guarantor's possession, if, in either case, the requesting
party reasonably requests such records. All such information, and any similar
information previously provided, shall be retained by the receiving party and
its agents in confidence and (other than information which has prior thereto
been made public) shall not at any time be disclosed by it to third Persons
except as may be required to comply with valid and applicable laws, rules,
regulations or orders of any court or governmental agency.
10.17 Certain Definitions. The following definitions shall
apply to the extent not otherwise defined, or used in capitalized form, in this
Agreement:
(a) The term "Affiliate" shall mean with respect to any Person
that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, such
Person and shall include subsidiaries, parents and brother-sister
companies.
(b) The term "Approval" shall include, but not be limited to,
any consent, waiver, license, permit, certificate or authorization.
(c) The term "Breach" shall include, but not be limited to,
any default, event of default or event, occurrence, condition or act
which, with notice or lapse of time or both, would constitute a breach,
default, or event of default or give the other party or parties a right
to accelerate any obligation under the applicable agreement or receive
any additional payment thereunder.
(d) The term "Claim" shall include, but not be limited to, any
and all claims, demands, actions, causes of action, suits, Legal
Proceedings.
(e) The term "Contract" shall include, but not be limited to,
any contract, purchase or sales order, franchise, insurance policy,
license agreement, undertaking, arrangement, understanding, commitment,
document, lease (whether for a facility, equipment or other property),
sublease, deed, mortgage, plan, indenture, bill of sale, assignment,
proxy, voting trust or other agreement or instrument, whether or not
written.
(f) The term "Corporate Document" shall mean any charter,
certificate or articles of incorporation or organization or resolution,
consent or action of, or minutes of
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<PAGE> 55
meetings of, the Incorporator, Board of Directors, stockholders or
shareholders, stock register, stock certificate book or any other
similar formational, organization or governing document of a
corporation.
(g) The term "Inventory" shall include, but not be limited to,
any raw materials, works-in-progress, supplies, finished goods,
works-in-transit and Returned or repossessed goods.
(h) The term "Legal Body" shall include, but not be limited
to, any court or federal, state, municipal or local department,
official, commission, authority, board, bureau, agency or other
instrumentality, whether domestic or foreign.
(i) The term "Legal Proceeding" shall include, but not be
limited to, any suit, action, arbitration, hearing, filed grievance,
contested assessment, order, directive, citation, other legal
proceeding, governmental investigation (of which Sellers are aware as
to matters involving Sellers) or governmental audit (of which Sellers
are aware as to matters involving Sellers) by or before any Legal Body
or arbitration association, or any Claim or demand related thereto,
whether pending or known to be threatened, relating to Sellers'
business, the Purchased Assets or the subject of this Agreement and
whether in law or equity or whether civil, criminal or administrative.
(j) The term "Legal Requirement" shall include, but not be
limited to, any federal, state, municipal, local, foreign law, act,
ordinance, rule, regulation, subpoena, order, injunction, judgment or
decree.
(k) The terms "Liability," "liability," "Liabilities" and
"liabilities" shall include but not be limited to any direct or
indirect indebtedness, Claim, loss, damage, penalty, deficiency
(including deferred income Tax and other net Tax deficiencies), cost,
expense, obligation, option, guarantee or responsibility, whether
accrued, absolute, or contingent, known or unknown, fixed or unfixed,
liquidated or unliquidated, matured or unmatured or secured or
unsecured. The term "Liability" as used in Section 9.08 shall include,
in addition to the definition above, the following: (i) in the case of
undisclosed liabilities of Sellers, the reasonable expenses (including
but not limited to reasonable counsel fees and any and all reasonable
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any Claim
whatsoever) of defending or prosecuting such Legal Proceedings and
satisfying such undisclosed liabilities, and (ii) in respect of all
other matters, the reasonable cost necessary to place Purchaser in the
position that it would have been in had the related representation,
warranty or covenant been true and correct or fully performed each in
accordance with its terms.
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<PAGE> 56
(l) The term "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or other Legal Body thereof.
(m) The term "Proprietary Right" shall include, but not be
limited to, any (i) patent, invention, trademark, service mark,
industrial design, trade name, trade style, trade dress, service name,
logo, slogan, brand name, brand mark, copyright and the like (whether
registered with federal, state or other governments of any country or
unregistered) or application, registration, permit or license relating
thereto and any reissue, continuation, continuation-in-part and
extension thereof, (ii) computer software or license related thereto
and (iii) invention, process, method, information, data, plan, art
work, blueprint, specification, design, drawing, engineering report,
test report, material standard, processing standard, performance
standard, know-how, formula, trade secret, concepts, applications,
procedures, marketing and technical data, customer or vendor list,
trade dress and other confidential information.
(n) The term "Receivable" shall include, but not be limited
to, any account receivable, unbilled shipment, loan or note receivable,
advance, debit balance from vendors, right to invoice for work
performed or goods sold and other indebtedness owed to such Person.
(o) The term "Restriction" shall include any mortgage, pledge,
lien, charge, security interest, encumbrance, option, lease, license,
or easement of any nature whatsoever, direct or indirect, whether
accrued, absolute, contingent or otherwise.
(p) The term "Return" shall include all returns, declarations,
reports, estimates, information returns and statements required to be
filed with or supplied to any Taxing authority in connection with any
Taxes.
(q) The term "Tax" shall include, but not be limited to, any
federal, state, municipal, local and foreign tax, assessment, levy,
impost, duty, license fee, registration fee, other fee or charge
imposed by a Legal Body and any interest, deficiency, penalty or other
addition thereon, including without limitation any income, gross
receipts, profits, franchise, sales, use, property (real and personal),
Transfer, payroll, unemployment, social security, occupancy and excise
tax and customs duties.
(r) The term "Transfer" shall include, but not be limited to,
any sale, pledge, gift, assignment, conveyance, lease or disposition
and the term "Transferred" shall include sold, pledged, gave, assigned,
conveyed, leased or disposed of.
10.18 Publicity. None of the parties hereto shall issue any
press release or make any other public statement, in each case relating to or
connected with or arising out of the Agreement or the matters contained herein,
without first providing an advance copy of the press
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<PAGE> 57
release or other public statement and affording the other parties a reasonable
opportunity to comment thereon; provided, however, that nothing herein shall
prevent any party from making any disclosures required by applicable law or
regulation (including regulation of the Securities and Exchange Commission and
the National Association of Securities Dealers).
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above written.
HEALTH MANAGEMENT, INC.
By: /s/
_________________________________
Name:
Title:
HEALTH REIMBURSEMENT CORPORATION
By: /s/
_________________________________
Name:
Title:
HMI ILLINOIS, INC.
By: /s/
_________________________________
Name:
Title:
HMI MARYLAND, INC.
By: /s/
_________________________________
Name:
Title:
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<PAGE> 59
HMI PENNSYLVANIA, INC.
By: /s/
_________________________________
Name:
Title:
HMI PMA, INC.
By: /s/
_________________________________
Name:
Title:
HMI RETAIL CORP., INC.
By: /s/
_________________________________
Name:
Title:
HOME CARE MANAGEMENT, INC.
By: /s/
_________________________________
Name:
Title:
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<PAGE> 60
TRANSWORLD HEALTHCARE, INC.
By: /s/
_________________________________
Name:
Title:
STADTLANDER DRUG DISTRIBUTION CO., INC.
By: /s/
_________________________________
Name:
Title:
COUNSEL CORPORATION
By: /s/
_________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 3
Transworld Healthcare, Inc.
555 Madison Avenue
New York, New York 10022
As of August 14, 1997
Hyperion Partners II L.P.
50 Charles Lindbergh Boulevard
Suite 500
Uniondale, New York 11553-3600
Gentlemen:
Reference is made to the Stock Purchase Agreement (the "Agreement")
dated as of March 26, 1997, by and between Transworld Healthcare, Inc. (the
"Company") and Hyperion Partners II L.P. (the "Investor"). Capitalized terms
used but not defined herein shall have the meanings given to them in the
Agreement.
The parties have agreed that in view of the events that have taken
place since the Agreement was executed, it is appropriate and in the best
interests of the Company to amend the Agreement.
Accordingly, the parties hereto agree as follow:
1. The first sentence of Section 1.1 of the Agreement is hereby
amended and restated to read in its entirety as follows:
"Subject to the terms and conditions of this Agreement, at the
Closing (as hereinafter defined), the Investor agrees to purchase
and the Company agrees to sell and issue to the Investor the number
of shares (the "Shares") of common stock, par value $.01 per share,
of the Company (the "Common Stock") determined by dividing the
"Agreed Value" by the "Agreed Price" (as such terms are defined on
Exhibit A hereto)."
2. The word "and" at the end of paragraph (a) of Section 1.1 is
hereby deleted.
3. The clause "(the "Bindley Receivable" and, together with the
FoxMeyer Receivable, the "HMI Receivables")." appearing at the end of paragraph
(b) of Section 1.1 is hereby deleted and replaced with the clause "(the "Bindley
Receivable"); and".
4. A new paragraph (c) is hereby added to Section 1.1 to read in its
entirety as follows:
<PAGE> 2
"(c) $3,000,000 of face amount of subordinated note dated
March 31, 1995, originally owed by HMI Illinois, Inc. to Caremark,
Inc. ("Caremark") and the related Subordinated Continuing Guaranty
of HMI dated as of March 31, 1995 with respect thereto, and $132,936
of face amount of accounts receivable originally owed by HMI to
Caremark, all of which were assigned to the Investor by Caremark
pursuant to a Purchase and Sale Agreement dated December 23, 1996, a
copy of which has been provided to the Company, together with any
rights of the Investor under such Agreement that are assignable (the
"Caremark Receivable" and, together with the FoxMeyer Receivable and
the Bindley Receivable, the "HMI Receivables")."
5. The following sentence is hereby added as the last sentence of
Section 1.2:
"If at any time or from time to time subsequent to the Closing the
Company realizes a further "Net Recovery" (as defined on Exhibit A
hereto), then the number of Shares shall be recalculated and the
Company shall promptly deliver to the Investor one or more
additional certificates representing the number of additional shares
of Common Stock resulting from such recalculation."
6. The date "August 31, 1997" in clause (b) of Section 8.1 is hereby
deleted and replaced with "March 31, 1998."
7. A new Exhibit A is hereby added to the Agreement, in the form
attached hereto.
* * *
Except to the extent amended hereby, the Agreement is and shall
remain in full force and effect and nothing herein shall affect, or be deemed to
be a waiver of, the other terms and provisions of the Agreement.
2
<PAGE> 3
If this letter correctly sets forth our understanding with respect
to the foregoing matters, kindly execute and return the enclosed copy of this
letter to evidence our binding agreement.
Very truly yours,
TRANSWORLD HEALTHCARE, INC.
By: /s/
----------------------------------
Name:
Title:
AGREED TO:
HYPERION PARTNERS II L.P.
By: Hyperion Ventures II L.P.,
its General Partner
By: Hyperion Funding II Corp.,
its General Partner
By: /s/
--------------------------
Name:
Title:
3
<PAGE> 4
Exhibit A
Certain Definitions
"Agreed Value" shall mean the sum of the following amounts: (i) $4
million, plus (ii) 10% of the first $20 million of Net Recovery, plus (iii) 30%
of the next $10 million of Net Recovery, plus (iv) 50% of any amount of Net
Recovery in excess of $30 million.
"Net Recovery" shall mean the amount realized or recovered by the
Company on or after September 1, 1997 on or in respect of (i) any indebtedness
owed by HMI and/or its subsidiaries to the Company; (ii) any investment made by
the Company in HMI and/or its subsidiaries; and (iii) the HMI Receivables
(including, without limitation, by reason of any claims against third parties
relating to the purchase of any of the foregoing), net of (x) the merger
consideration paid by the Company to acquire HMI and (y) all reasonable
out-of-pocket costs and expenses incurred by the Company in connection with such
realization or recovery. Net Recovery shall not include any tax benefit to the
Company from the net loss on its equity and debt investments in HMI.
"Agreed Price" shall mean the lesser of $7-5/8 and the closing price
of the Common Stock of the Company on the last trading day prior to the Closing.
4
