<PAGE> 1
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 earliest event reported) September 30, 1997
------------------
CORAM HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 1-11343 33-0615337
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1125 Seventeenth Street, Suite 2100, Denver, Colorado 80202
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (303) 292-4973
--------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. DISPOSITION OF ASSETS
On October 6, 1997, Coram Healthcare Corporation ("Coram")
announced that it had completed the sale to Integrated Health Services, Inc.
("IHS") of Coram's lithotripsy business (the "Lithotripsy Business") for an
aggregate cash purchase price of approximately $126.6 million and the assumption
of certain related liabilities. Pursuant to a side agreement amending the August
20, 1997 Purchase Agreement, Coram sold its interests in twelve of the thirteen
lithotripsy partnerships and the stock of Coram's equipment service company
effective September 30, 1997. Coram's interest in its remaining lithotripsy
partnership has been placed in escrow and will be delivered to IHS for an
additional purchase price of approximately $4.4 million if certain conditions
are satisfied on or prior to October 20, 1997. In the event that such conditions
are not met, the remaining partnership interest would not be conveyed to IHS
pursuant to the amended Purchase Agreement. No assurances can be given that such
conditions will be satisfied and that the sale of the remaining partnership
interest will be consummated. The purchase price for the Lithotripsy Business
was determined pursuant to arm's length negotiations between the parties.
Lithotripsy is a non-invasive medical procedure that uses shock waves to
dissolve kidney stones.
The net proceeds of the sale of the Lithotripsy Business and the
proceeds of the previously disclosed settlement with Caremark, Inc. will be
applied principally to the reduction of Coram's debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
1. Unaudited Pro Forma Consolidated Balance Sheet
at June 30, 1997.
2. Unaudited Pro Forma Consolidated Statements of
Operations for the twelve months ended December
31, 1996 and for the six months ended June 30,
1997.
3. Notes to the Unaudited Pro Forma Consolidated
Financial Statements.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C>
2.1 Side Agreement dated as of September 30, 1997 among
Coram Healthcare Corporation, T2 Medical, Inc., Coram Healthcare
Corporation of Greater New York and Integrated Health Services, Inc.
</TABLE>
<PAGE> 3
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.
CORAM HEALTHCARE CORPORATION
Date: October 15, 1997 By: /s/ Richard M. Smith
--------------------------------
Name: Richard M. Smith
Title: Chief Financial Officer
<PAGE> 4
CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet as of June 30, 1997
and the unaudited pro forma consolidated statements of operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 give effect to
the transaction described in Note 1 to the pro forma financial statements. The
unaudited pro forma consolidated balance sheet at June 30, 1997 gives effect to
the transaction as if it occurred on the balance sheet date. The unaudited pro
forma consolidated statements of operations for the year ended December 31, 1996
and the six months ended June 30, 1997 give effect to these transactions as if
they occurred at the beginning of the respective period presented.
Pro forma adjustments have been made to exclude the lithotripsy operations and
to give effect to events that are directly attributable to the transaction.
Explanations for these adjustments are included in the Notes to the Unaudited
Pro Forma Consolidated Financial Statements.
The unaudited pro forma consolidated financial statements have been prepared by
the Company's management based upon the historical financial statements of the
Company. These pro forma consolidated financial statements may not be indicative
of the results that actually would have occurred if the disposition had occurred
on the dates indicated. The pro forma consolidated financial statements should
be read in conjunction with the historical financial statements and pro forma
notes contained elsewhere herein, and in the Company's annual report on Form
10-K and the Company's quarterly reports on Form 10-Q.
<PAGE> 5
CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(In Thousands)
JUNE 30, 1997
ASSETS
<TABLE>
<CAPTION>
Coram Pro Forma
Healthcare Corp. Adjustments Pro Forma
--------------- -------------- --------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 9,109 $ (1,327) (A) $ 7,782
Accounts receivable, net of allowance 94,090 (5,736) (A) 88,354
Inventories 15,181 (2,805) (A) 12,376
Receivable from Caremark 45,000 - 45,000
Deferred income taxes, net 4,786 - 4,786
Other current assets 10,089 (1,656) (A) 8,433
--------------- -------------- --------------
Total current assets 178,255 (11,524) 166,731
Property and equipment, net 19,665 (5,475) (A) 14,190
Joint ventures and other assets 23,224 (3,533) (A) 19,691
Deferred income taxes, non-current 35 - 35
Other deferred costs 7,049 - 7,049
Goodwill, net of accumulated amortization 327,645 (78,598) (B) 249,047
=============== ============== ==============
Total assets $ 555,873 $ (99,130) $ 456,743
=============== ============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $ 33,825 $ (4,907) (A) $ 28,918
Current maturities of long-term debt 188,838 (118,000) (A) 70,838
Deferred income taxes 1,325 - 1,325
Reserve for litigation 2,689 - 2,689
Accrued merger and restructuring 10,456 - 10,456
Other accrued liabilities 29,743 (1,273) (A) 28,470
--------------- -------------- --------------
Total current liabilities 266,876 (124,180) 142,696
Long-term debt, including revolving lines-of-credit 150,774 - 150,774
Minority interest in consolidated joint ventures 4,208 (3,218) (C) 990
Other liabilities 1,386 - 1,386
Deferred income taxes, non-current 3,496 - 3,496
Stockholders' equity 129,133 28,268 (A) 157,401
--------------- -------------- --------------
Total liabilities and stockholders' equity $ 555,873 $ (99,130) $ 456,743
=============== ============== ==============
</TABLE>
<PAGE> 6
CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Coram Pro Forma
Healthcare Corp. Adjustments Pro Forma
------------------- ------------------ ------------------
<S> <C> <C> <C>
Net revenue $ 521,969 $ (47,599) (A) $ 474,370
Cost of service 361,688 (21,662) (A) 340,026
------------------- ------------------ ------------------
Gross profit 160,281 (25,937) 134,344
Operating expenses:
Selling, general and administrative expenses 104,261 (1,640) (A) 102,621
Provision for estimated uncollectable accounts 29,045 (355) (A) 28,690
Amortization of goodwill 15,259 (3,533) (B) 11,726
Provision for litigation settlement 27,875 - 27,875
------------------- ------------------ ------------------
Total operating expenses 176,440 (5,528) 170,912
------------------- ------------------ -------------------
Operating loss (16,159) (20,409) (36,568)
Other income (expense):
Interest expense (78,767) 9,500 (D) (69,267)
Other income, net 3,612 (580) (A) 3,032
------------------- ------------------ ------------------
Loss before income taxes and minority interest (91,314) (11,489) (102,803)
Income tax benefit (13,998) (34) (A) (14,032)
Minority interest in net income of consolidated J.V. 7,698 (6,589) (C) 1,109
=================== ================== ==================
Net loss $ (85,014) $ (4,866) $ (89,880)
=================== ================== ==================
Loss per share $ (2.05) $ (2.16)
=================== ==================
Weighted average common shares outstanding 41,546 41,546
=================== ==================
</TABLE>
<PAGE> 7
CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands)
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Coram Pro Forma
Healthcare Corp. Adjustments Pro Forma
------------------ ---------------- ----------------
<S> <C> <C> <C>
Net revenue $ 239,830 $ (23,062) (A) $ 216,768
Cost of service 164,765 (8,559) (A) 156,206
------------------ ---------------- ----------------
Gross profit 75,065 (14,503) 60,562
Operating expenses:
Selling, general and administrative expenses 46,478 (1,734) (A) 44,744
Provision for estimated uncollectible accounts 8,392 (77) (A) 8,315
Amortization of goodwill 7,209 (1,704) (B) 5,505
Income from litigation settlement (156,792) - (156,792)
------------------ ---------------- ----------------
Total operating income (94,713) (3,515) (98,228)
------------------ ---------------- -----------------
Operating income 169,778 (10,988) 158,790
Other income (expense) :
Interest expense (39,726) 4,800 (D) (34,926)
Termination fee 15,182 - 15,182
Other income, net 1,704 (399) (A) 1,305
------------------ ---------------- ----------------
Income before income taxes and minority interest 146,938 (6,587) 140,351
Income tax expense 250 (46) (A) 204
Minority interest in net income of consolidated J.V. 4,505 (3,990) (C) 515
================== ================ ================
Net income $ 142,183 $ (2,551) $ 139,632
================== ================ ================
Earnings per share $ 2.73 $ 2.68
================== ================
Weighted average shares outstanding 52,023 52,023
================== ================
</TABLE>
<PAGE> 8
CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Transaction
On September 30, 1997, Coram Healthcare Corporation (the "Company") completed
the sale to Integrated Health Services, Inc. ("IHS") of the Company's
lithotripsy business (the "Lithotripsy Business") for an aggregate cash purchase
price of approximately $126.6 million and the assumption of certain related
liabilities. Pursuant to a side agreement amending the August 20, 1997 Purchase
Agreement, Coram sold its interests in twelve of the thirteen lithotripsy
partnerships and the stock of Coram's equipment service company effective
September 30, 1997. The Company's interest in its remaining lithotripsy
partnership has been placed in escrow and will be delivered to IHS for an
additional purchase price of approximately $4.4 million if certain conditions
are satisfied on or prior to October 20, 1997. In the event that such conditions
are not met, the remaining partnership interest would not be conveyed to IHS
pursuant to the amended Purchase Agreement. No assurances can be given that such
conditions will be satisfied and that the sale of the remaining partnership
interest will be consummated. After consideration of accruals for estimated
legal, consulting and other costs that are directly attributable to the sale of
the Lithotripsy Business, net proceeds of approximately $118.0 million are
assumed to have been used to repay outstanding borrowings under the Company's
Senior Credit Facility. The purchase price for the Lithotripsy Business was
determined pursuant to arm's length negotiations between the parties.
Lithotripsy is a non-invasive medical procedure that uses shock waves to
dissolve kidney stones.
2. Pro Forma Adjustments
(A) To record disposition of the Company's Lithotripsy Business and to
eliminate the assets and liabilities and sales, cost of sales and
expenses of the Lithotripsy Business.
(B) To eliminate the Company's goodwill in the Lithotripsy Business and
related amortization expense.
(C) To eliminate the Company's minority interest obligation relating to
the Lithotripsy Business and the relating minority interest expense.
(D) Under the Senior Credit Facility the Company is required to apply
net sale proceeds, as defined in the debt agreement, to reduce its
debt obligations. Thus, interest expense is adjusted for estimated
interest savings that would have resulted had the cash proceeds
from the sale of the Lithotripsy Business been used to repay a
portion of the Company's Senior Credit Facility.
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C>
2.1 Side Agreement dated as of September 30, 1997 among
Coram Healthcare Corporation, T2 Medical, Inc., Coram Healthcare
Corporation of Greater New York and Integrated Health Services, Inc.
</TABLE>
<PAGE> 1
SIDE AGREEMENT
Side Agreement (this "AGREEMENT"), dated as of September 30, 1997, among
Integrated Health Services, Inc. ("IHS"), Coram Healthcare Corporation
("CORAM"), T2 Medical, Inc. ("T2"), and Coram Healthcare Corporation of Greater
New York ("CORAM NEW YORK").
BACKGROUND:
WHEREAS, the parties hereto are parties to the Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of August 20, 1997, pursuant to which IHS
and/or one or more of its wholly owned subsidiaries designated by it (each, a
"BUYING SUBSIDIARY") have agreed, subject to the terms and conditions of the
Purchase Agreement, to purchase all of the Assets (such term and all other
capitalized terms used and not otherwise defined herein are used herein with
the meanings ascribed thereto in the Purchase Agreement), and the Sellers have
agreed, subject to the terms and conditions of the Purchase Agreement, to sell
all of the Assets to IHS and the Buying Subsidiaries; and
WHEREAS, the parties hereto desire to close substantially all of the
transactions contemplated by the Purchase Agreement notwithstanding that certain
conditions to the Closing with respect to that portion of the Assets as to
which such transactions do not close on the date hereof have not been
satisfied as of the date hereof (the "UNSATISFIED CONDITIONS") and without
waiving such Unsatisfied Conditions; and
WHEREAS, in order to satisfy certain of the other conditions to the
Closing, IHS has agreed to purchase all of the TLI Stock in lieu of purchasing
the Gulf South Partnership interests and the Coastal Partnership interests; and
NOW THEREFORE, in consideration of the premises, the obligations of the
parties hereunder and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
1. Concurrently herewith the parties hereto are carrying out the Closing
as contemplated by the Purchase Agreement (the "INITIAL CLOSING") except as
hereinafter provided:
(a) Sellers are not selling, conveying, transferring, assigning or
delivering to IHS or any Buying Subsidiary the HMSGI Stock or the partnership
interests in, or management agreements relating to, the Gulf South Partnership
(the "EXCLUDED GS ASSET") or the Coastal Partnership (the "EXCLUDED COSTAL
ASSET") or the South Georgia Partnership (the "EXCLUDED SOUTH GEORGIA ASSET"
and together with the HMSGI Stock, Excluded GS Asset and the Excluded Coastal
Asset, the "EXCLUDED ASSETS"):
(b) IHS and the Buyer Subsidiaries are not assuming the Assumed
Liabilities to the extent such Assumed Liabilities relate to the Gulf South
Partnership (the "EXCLUDED GS ASSUMED LIABILITIES") or the Coastal Partnership
(the "EXCLUDED COASTAL ASSUMED LIABILITIES") or the South Georgia Partnership
(the "EXCLUDED SOUTH GEORGIA LIABILITIES") and together with the Excluded GS
Assumed Liabilities and the Excluded Costal Assumed Liabilities, the "EXCLUDED
ASSUMED LIABILITIES"); and
1
<PAGE> 2
(c) IHS and the Buyer are withholding $25,218,000 ($15,165,000 with
respect to the Gulf South Partnership, $5,658,000 with respect to the Coastal
Partnership, and $4,395,000 with respect to the South Georgia Partnership) (the
"EXCLUDED ASSET PURCHASE PRICE") from the Purchase Price payable at the
Closing, which is the amount of the Purchase Price that the parties agree is
allocable to the Excluded Assets, and is not assuming (and accordingly is not
paying to Sellers) $194,000 of the Intercompany Debt ($117,000 with respect to
the Gulf South Partnership, $44,000 with respect to the Coastal Partnership,
and $33,000 with respect to the South Georgia Partnership) otherwise to be
assumed and paid by IHS or the Buying Subsidiaries ("EXCLUDED INTERCOMPANY
DEBT") and in lieu thereof. IHS and the Buying Subsidiaries are depositing with
the CoreStates Bank, N.A., as escrow agent (the "ESCROW AGENT"), an amount (the
"ESCROW DEPOSIT") equal to the Excluded Asset Purchase Price plus the Excluded
Intercompany Debt to be held by the Escrow Agent in accordance with the terms
of the Escrow Agreement (the "ESCROW AGREEMENT") concurrently being executed
and delivered by the parties hereto and the Escrow Agent. The Escrow Deposit
shall be deposited in any interest bearing account with the Escrow Agent, and
Sellers shall pay all of the expenses of the Escrow Agent.
2. (a) Also concurrently herewith, the Sellers are delivering to the
Escrow Agent the following agreements, instruments and certificates (the
"SELLER ESCROW DOCUMENTS") that have been executed by the appropriate party
thereto, but that are undated:
(i) Assignment of the South Georgia Partnership Interest;
(ii) Assignment of the Gulf South Partnership Interest;
(iii) Stock Certificates representing all of the TLI Stock,
together with stock powers endorsed in blank;
(iv) Stock Certificates representing all of the TLII Stock,
together with stock powers endorsed in blank;
(v) Stock Certificates representing all of the HMSGI Stock,
together with stock powers endorsed in blank;
(vi) Assignment of Proprietary Rights for each of the South
Georgia Partnership and the Gulf South Partnership;
(vii) Assignment of Contract Rights for each of the South
Georgia Partnership and the Gulf South Partnership;
and
(viii) Bills of Sale for each of the South Georgia
Partnership Interest and the Gulf South Partnership
Interest.
(b) Also concurrently herewith, IHS and the Buyer Subsidiaries are
delivering to the Escrow Agent the following agreements, instruments and
certificates (the "IHS ESCROW DOCUMENTS") that have been executed by the
appropriate party thereto, but that are undated:
(i) Assumption of liabilities with respect to the South
Georgia Partnership Interest; and
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<PAGE> 3
(ii) Assumption of liabilities with respect to the
Gulf South Partnership Interest.
3. (a) (i) The parties agree that the Purchase Agreement
shall remain executory except to the extent that the transactions contemplated
thereby are being consummated at the Initial Closing, which transactions at the
Initial Closing shall be deemed to have closed pursuant to the Purchase
Agreement as of September 30, 1997;
(ii) The parties further agree that in lieu of
purchasing the Excluded GS Asset and the Excluded Coastal Asset, IHS or one of
the Buying Subsidiaries will purchase the TLI Stock (subject to the terms and
conditions of this Agreement) at a closing (the "TLI STOCK CLOSING") one
business day after all of the conditions to closing thereof shall have occurred
or been expressly waived in writing with reference to this Section 3(a), and
Sellers shall sell, convey,transfer, assign and deliver to IHS or such Buying
Subsidiary, the TLI Stock, free and clear of all Encumbrances other than
Permitted Encumbrances;
(iii) The parties further agree that IHS or one of the
Buying Subsidiaries shall (subject to the terms and conditions of this
Agreement) at a closing (the "SOUTH GEORGIA CLOSING") purchase the Excluded
South Georgia Asset and assume the Excluded South Georgia Assumed Liabilities
(including, without limitation), $33,000 of Intercompany Debt), and Sellers
shall sell, convey, transfer, assign and deliver to IHS or such Buying
Subsidiary, the Excluded South Georgia Asset, free and clear of all Encumbrances
other than Permitted Encumbrances.
(iv) The parties further agree that if the parties'
respective obligations to close the TLI Stock Closing are terminated, then IHS
or one of the Buying Subsidiaries shall (subject to the terms and conditions of
this Agreement) at a closing (the "GULF SOUTH CLOSING") purchase the Excluded GS
Asset and assume the Excluded GS Assumed Liabilities (including without
limitation $117,000 of Intercompany Debt) and Sellers shall sell, convey,
transfer, assign and deliver to IHS or such Buying Subsidiary, the Excluded GS
Asset, free and clear of all encumbrances other than Permitted Encumbrances.
(iv) To the extent permissible in accordance with
GAAP and applicable tax laws, the TLI Stock Closing shall be deemed to have
occurred on September 30, 1997.
(b) The obligations of IHS to consummate the transactions
contemplated to occur at the TLI Stock Closing, the South Georgia Closing and
the Gulf South Closing (collectively, the "ADDITIONAL CLOSINGS" and each, an
"ADDITIONAL CLOSING") are subject to the satisfaction, on or prior to the
Termination Date (as defined below), of each of the following conditions with
respect to such Additional Closing (the "IHS CONDITIONS"), any of which IHS
Conditions may be waived by IHS, provided, however, that the occurrence of any
Additional Closing will not be deemed a waiver of the breach of any
representation, warranty or covenant of any Seller made pursuant hereto:
(i) All of the representations and warranties made
by each Seller in the Purchase Agreement shall be remade by such Seller and
shall be true and correct as of the date of the applicable Additional Closing
(each, an "ADDITIONAL CLOSING DATE") (except to the extent that such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and
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<PAGE> 4
correct on and as of such earlier date) and except to the extent that the
failure of such representations and warranties to be true and correct do not in
the aggregate constitute a material adverse change from the Represented
Condition, disregarding any representations and warranty made by Sellers with
respect to any Excluded Assets and Excluded Liabilities), provided however,
that for said purposes and the other purposes of this Agreement, the term the
"Business" shall be deemed to exclude any portion of the Business purchased by
IHS and the Buyer Subsidiaries at the Initial Closing or at any prior
Additional Closing, the term "Assets" shall be deemed to mean only the Excluded
Assets not theretofore purchased by IHS and the Buyer Subsidiaries, and all of
the representations and warranties made pursuant to the Purchase Agreement
shall be deemed modified or deleted to the extent they do not relate to the
Gulf South Partnership, the Coastal Partnership, the South Georgia Partnership,
the Excluded Assets, the Excluded Assumed Liabilities, or the transactions
contemplated by this Agreement (which for the purposes hereof shall mean the
transactions to be consummated at each Additional Closing) and the portion of
the Purchase Agreement that remains executory following the Initial Closing.
(ii) All of the representations and warranties made
by any Seller pursuant to this Agreement shall be true and correct in all
material respects as of the applicable Additional Closing Date (except to the
extent that such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct on and as of such earlier date)).
(iii) Each Seller shall have performed in all
material respects all agreements and covenants required by this Agreement to be
performed by it prior to or on the applicable Additional Closing Date, and
shall have substantially performed in all material respects all agreements and
covenants required by the provisions of the Purchase Agreement that remains
executory following the Initial Closing to be performed by it prior to or on
the applicable Additional Closing Date.
(iv) All Permits, consents, approvals and waivers
from governmental authorities and other parties necessary to the consummation
of the transactions contemplated hereby and by the provisions of the Purchase
Agreement that remains executory following the Initial Closing and for the
operation of the Business (to be acquired at the Additional Closing) by IHS and
the Buyer Subsidiaries (including, without limitation, all required third party
consents to the assignment to IHS and the Buying Subsidiaries of the Excluded
Assets or the TLI Stock, as the case may be, to be acquired by IHS or the Buyer
Subsidiaries, at the applicable Additional Closing) shall have been obtained,
except for those the absence of which would not have a material adverse effect
on the Business (to be acquired at the Additional Closing) to be conducted by
IHS and the Buyer Subsidiaries or on their ability or the ability of the South
Georgia Partnership, Coastal Partnership or Gulf South Partnership, as the case
may be, to conduct its Business.
(v) (A) No Action by any governmental authority
(including the OIG and the DOJ), any representative of a governmental authority
(including the OIG and DOJ) or other person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or by the provisions of the Purchase Agreement that remains
executory following the Initial Closing, or the validity of legality of the
operation of the Business (to be acquired at the Additional Closing) or the
activities of the Gulf South Partnership, the South Georgia Partnership or the
Coastal Partnership, as the case may be, and which could reasonably be expected
to damage IHS, and Buyer Subsidiary, the Excluded Asset (to be acquired at the
Additional Closing) or
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<PAGE> 5
the Business (to be acquired at the Additional Closing) materially, including,
without limitation, materially and adversely affecting the right or ability of
IHS, any Buyer Subsidiary, the Gulf South Partnership, the South Georgia
Partnership or the Coastal Partnership, as the case may be, or any other owner
of the Gulf South Partnership, the South Georgia Partnership or the Coastal
Partnership, as the case may be, to own, operate, possess or transfer any
Excluded Asset or any TLI Stock or any other interest in the Gulf South
Partnership, the South Georgia Partnership or the Coastal Partnership, as the
case may be, or the right or ability of IHS, any Buyer Subsidiary, the Gulf
South Partnership, the South Georgia Partnership or the Coastal Partnership, as
the case may be, or any other owner of the Gulf South Partnership, the South
Georgia Partnership or the Coastal Partnership, as the case may be, or any TLI
Stock to own or operate the Gulf South Partnership, the South Georgia
Partnership or the Coastal Partnership, as the case may be, or the Business (to
be acquired at the Additional Closing).
(B) There shall not be any Regulation or
Court Order that makes the consummation of the transactions contemplated to
occur at such Additional Closing illegal or otherwise prohibited.
(vi) Sellers shall have delivered to IHS an opinion
(the "PHJ&W Legal Opinion") of Paul, Hastings, Janofsky & Walker LLP ("PHJ&W"),
counsel to Sellers, dated as of the applicable Additional Closing Date, in form
and substance reasonably satisfactory to IHS, with respect to the matters set
forth in Exhibit N to the Purchase Agreement; provided, however, that the
references therein to the Agreement shall be deemed to include this Agreement
and the executory provisions of the Purchase Agreement.
(vii) Sellers shall have furnished to IHS and the
Buyer Subsidiaries, such certificates of its officers and others to evidence
compliance with the IHS Conditions applicable to such applicable Additional
Closing as may be reasonably requested by IHS or any Buyer Subsidiary.
(viii) (A) To the extent required by the Gulf South
Partnership Agreement, the Coastal Partnership Agreement, or the South Georgia
Partnership Agreement, as the case may be (the "Applicable Partnership
Agreements"), the partners thereof shall have (I) consented to the transfer of
the interests of Sellers therein to IHS and the Buyer Subsidiaries, and (II)
shall have entered into such other agreements and amendments required to effect
such transfer and the consummation of the transactions contemplated hereby and
by the executory provisions of the Purchase Agreement.
(B) All Put Agreements under which IHS or
any Buyer Subsidiary shall have succeeded to the interests of any Seller under
this Agreement or the provisions of the Purchase Agreement that remain
executory following the Initial Closing, including, without limitation, those
agreements listed on Exhibit L to the Purchase Agreement that relate to the
Excluded Assumed Liabilities to be assumed by IHS or Buyer Subsidiaries at the
applicable Additional Closing, shall have been amended in a manner satisfactory
to IHS and Buyer to enable IHS and Buyer to satisfy the obligation of Sellers
thereunder except with respect to such obligations that are waived by Sellers.
(ix) Each Seller and, with respect to the PHJ&W
Legal Opinion, PHJ&W, shall have executed and delivered to the Escrow Agent
instructions to date (as
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<PAGE> 6
of the applicable Additional Closing Date) and to deliver each of the Seller
Escrow Documents to IHS and the Buyer Subsidiaries, and to disburse all
interest and income earned on the Escrow Deposit to IHS, and each Seller shall
have filed (where necessary) and delivered to IHS and the Buyer Subsidiaries
all documents necessary to release the Excluded Assets (to be acquired at the
applicable Additional Closing) from all Encumbrances (except Permitted
Encumbrances), which documents shall be in a form reasonably satisfactory to
IHS's counsel.
(x) IHS, the Buyer Subsidiaries and each applicable
Partnership shall have obtained or been granted the right to use all Permits
necessary to the operation of the Business (to be acquired at the applicable
Additional Closing) except where the failure to do so would not have a material
adverse effect on the Business (to be acquired at the applicable Additional
Closing) or the ability of IHS, any Buyer Subsidiary or the applicable
Partnership to conduct the Business (to be acquired at the applicable Additional
Closing) and except for permits that will be transferable only after, and will
be transferred after, consummation of the transactions contemplated by this
Agreement and the provisions of the Purchase Agreement that remains executory
following the Initial Closing, and each Seller shall have executed and
delivered to IHS and the Buyer Subsidiaries, such other instruments as shall be
reasonably requested by IHS or any Buyer Subsidiary to vest in IHS or such
Buyer Subsidiary title in and to the Excluded Assets and/or the TLI Stock (to
be acquired at the applicable Additional Closing) in accordance with the
provisions of this Agreement and the portions of the Purchase Agreement.
(xi) No Seller shall have breached any
representation, warranty, agreement, obligation or covenant made or to be
performed or complied with at the Initial Closing or any prior Additional
Closing that would have entitled IHS, if it had known of such breach or
breaches at the time, to not close the transactions contemplated to occur at
the Initial Closing or at such prior Additional Closing or Closings as modified
by this Agreement.
(xii) All of the officers and directors of TLI and
its wholly owned corporate subsidiaries shall have resigned effective as of the
TLI Stock Closing Date.
(c) The obligations of Sellers to consummate the
transactions contemplated to occur at the applicable Additional Closing are
subject to the satisfaction, on or prior to the Termination Date, of each of
the following conditions with respect to such Additional Closing (the "Seller
Conditions"), any of which Seller Conditions may be waived by any Seller:
(i) All of the representations and warranties made
by IHS in the Purchase Agreement shall be remade by IHS and shall be true and
correct in all material respects as of the applicable Additional Closing Date
(except to the extent that such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date)).
(ii) All of the representations and warranties made
by IHS pursuant to this Agreement shall be true and correct in all material
respects as of the applicable Additional Closing Date (except to the extent that
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct on and
as of such earlier date)).
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(iii) IHS shall have performed in all material
respects all agreements and covenants required by this Agreement to be performed
by it prior to or on the applicable Additional Closing Date, and shall have
substantially performed in all material respects all agreements and covenants
required by the executory provisions of the Purchase Agreement to be performed
by it prior to or on the applicable Additional Closing Date.
(iv) The consents and approvals described in
Schedule 4.7 of the Purchase Agreement that relate to the Excluded Assets (to be
sold at the applicable Additional Closing Date) shall have been obtained.
(v) No Action by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby or by the executory
provisions of the Purchase Agreement and which could reasonably be expected to
damage Parent if the transactions contemplated to occur at the applicable
Additional Closing are consummated. There shall not be any Regulation or Court
Order that makes the purchase and sale of the Business (to be sold at the
applicable Additional Closing Date) or the Excluded Asset (to be sold at the
applicable Additional Closing Date) contemplated hereby illegal or otherwise
prohibited.
(vi) IHS shall have delivered to Sellers an opinion
(the "B&D LEGAL OPINION") of Blass & Driggs ("B&D"), counsel to IHS, dated as of
the applicable Additional Closing Date, in form and substance reasonably
satisfactory to Sellers, with respect to the matters set forth in Exhibit M to
the Purchase Agreement; provided, however, that the references therein to the
Agreement shall be deemed to include this Agreement and the executory provisions
of the Purchase Agreement.
(vii) IHS shall have furnished to Sellers, such
certificates of its officers and others to evidence compliance with the Seller
Conditions as may be reasonably requested by Sellers.
(viii) Sellers shall have been released from any
further obligations under all Put Agreements relating to the applicable
Partnership unless IHS shall have agreed to Sellers' reasonable satisfaction to
indemnify and hold harmless Sellers with respect thereto.
(ix) IHS and, with respect to the B&D Legal
Opinion, B&D, shall have executed and delivered to the Escrow Agent instructions
to date (as of the Applicable Closing Date) and to deliver each of the IHS
Escrow Documents to Sellers, and to disburse to Sellers the amount of Escrow
Deposit as required in subsection (d) below.
(x) IHS shall not have breached any
representation, warranty, agreement, obligation or covenant made or to be
performed or complied with at the Initial Closing or any prior Additional
Closing that would have entitled Sellers, if they had known of such breach or
breaches at the time, to not close the transactions contemplated to occur at the
Initial Closing or such prior Additional Closing as modified by this Agreement.
(d) With respect to each Additional Closing, the parties
shall instruct the Escrow Agent to disburse the applicable portion of Escrow
Deposit to Sellers (as set forth below) and the interest and income, if any,
accrued thereon, to IHS, and shall
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instruct the Escrow Agent to date all of the IHS Escrow Documents applicable to
such Additional Closing, the applicable Additional Closing Date and to deliver
all of such IHS Escrow Documents to Sellers, and shall instruct the Escrow
Agent to date all of the Seller Escrow Documents applicable to such Additional
Closing, the applicable Additional Closing Date and to deliver all of such
Seller Escrow Documents to IHS and Buyer Subsidiaries.
With respect to the TLI Stock Closing, the amount of
the Escrow Deposit to be delivered shall be $20,823,000 plus $161,000 (in full
payment of the Intercompany Debt to be assumed by IHS or its Buyer Subsidiary
on such date). With respect to the South Georgia Closing, the amount of the
Escrow Deposit to be delivered shall be $4,395,000 plus $33,000 (in full
payment of the Intercompany Debt to be assumed by IHS or its Buyer Subsidiary
on such date). With respect to the Gulf South Closing, the amount of the Escrow
Deposit to be delivered shall be $15,165,000 plus $117,000 (in full payment of
the Intercompany Debt to be assumed by IHS or its Buyer Subsidiary on such
date).
(e) Sellers, on the one hand, and IHS, on the other hand,
shall be entitled to terminate their respective obligations to close the
transactions contemplated by this Agreement and the executory provisions of
the Purchase Agreement that remain executory following the Initial Closing as
follows:
(i) IHS may do so, if any of the IHS Conditions has
not been satisfied by the Termination Date;
(ii) Sellers may do so, if any of the Sellers
Conditions has not been satisfied by the Termination Date; or
(iii) the parties may do so by the mutual consent of
IHS and Parent.
(f) The "TERMINATION DATE" shall mean October 20, 1997. If
a party terminates its obligations under this Agreement and the provisions of
the Purchase Agreement that remain executory following the Initial Closing
because one of its conditions precedent has not been satisfied, or if
terminated by mutual consent, each party that remain executory following the
Initial Closing its obligations hereunder and under the provisions of the
Purchase Agreement; provided, however, that if such termination is by reason of
the breach by any party of any of its representations, warranties or obligations
under this Agreement or the executory provisions of the Purchase Agreement, the
other party shall be entitled to be indemnified for any Damages incurred by it
by reason thereof in accordance with the provisions of Section 10.4 of the
Purchase Agreement.
(g) The parties agree that unless and until the
transactions contemplated to occur at the TLI Stock Closing shall have
occurred, the $1,300,000 and $14,062,500 limitations set forth in Section
10.4(f) of the Purchase Agreement shall be reduced by $208,232 and $2,252,511,
respectively. The parties agree that unless and until the South Georgia Closing
shall have occurred, the $1,300,000 and $14,062,500 limitations set forth in
Section 10.4(f) of the Purchase Agreement shall be reduced by $43,950 and
$475,428, respectively. The parties agree that if the Gulf South Closing shall
occur but the TLI Stock Closing shall not occur, the $1,300,000 and $14,062,500
limitations set forth in Section 10.4(f) of the Purchase Agreement shall be
increased by $56,581 and $612,055, respectively.
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4. (a) The Sellers agree that, notwithstanding the occurrence
of the Initial Closing or any Additional Closing, they will, at the request of
IHS, use their respective best efforts (with IHS to bear all reasonable
out-of-pocket third party expenses arising therefrom) to (i) obtain any
consents to the assignment to IHS and the Buyer Subsidiaries of any
non-competition agreements to which any Entity is a party requiring such
consent, and (ii) if such consent is not obtained, to enforce such Contract on
behalf of IHS and the Buyer Subsidiaries and to otherwise take such actions
(with IHS to bear all reasonable out-of-pocket third party expenses arising
therefrom), so as to provide IHS and the Buyer Subsidiaries with the benefits
of such Contract to the maximum extent possible. The Sellers shall indemnify and
hold IHS and the Buyer Subsidiaries harmless from and against all Damages
arising out of any claim with respect to a failure to obtain the consent of any
other parties to the non-competition agreements with respect to the business of
the Bay Area Partnership or the IPP Partnership (the "SPECIFIED NON-COMPETES")
necessary to the assignment to IHS and the Buyer of such Specified Non-Competes.
Except as expressly set forth in this paragraph 4(a), no Seller shall have any
obligation or liability of any nature whatsoever with respect to any failure to
obtain any consent necessary to assign any non-compete agreement being assumed
by IHS or any Buyer Subsidiary under the Purchase Agreement or hereunder;
provided, however, that as to the Gulf South Partnership and the South Georgia
Partnership, in the event of a Gulf South Closing or a South Georgia Closing,
respectively, IHS and the Buying Subsidiaries shall not be deemed to have waived
any requirement to obtain any consent with respect to the assignment of any
non-competition agreements to the extent required under the Purchase Agreement.
(b) The Sellers, jointly and severally, shall indemnify and
hold harmless IHS and each Buyer Subsidiary harmless from and against all
Damages arising out of any liabilities existing as of the Closing Date that
arise out of IHS purchasing or owning the TLI Stock or the TLII Stock in lieu
of purchasing or owning the Partnership Interests of Gulf South Partnership or
the Coastal Partnership as contemplated by the Purchase Agreement, and from and
against all Damages arising out of any breach of a representation or warranty
made by any Seller in Section 5 below or of any obligation of any Seller under
this Agreement (as opposed to under the executory provisions of the Purchase
Agreement).
(c) The Sellers' indemnification obligations under
subsections (a) and (b) above shall not be subject to the limitations set
forth in Section 10.4(f) of the Purchase Agreement.
Sellers, IHS and the Buyer Subsidiaries shall cooperate
with respect to any consents or concurrences to assignments of Contracts with
respect to which Sellers are providing indemnity.
5. Each Seller hereby represents and warrants to IHS and each
Buyer Subsidiary as follows:
(a) Each Seller has the full legal power and capacity to
make, execute, deliver and perform this Agreement (including all Schedules and
Exhibits hereto), and all other agreements, instruments, certificates and
documents required or contemplated hereby or thereby (collectively "SELLER
TRANSACTION DOCUMENTS") to be executed or delivered by it, and to consummate
all of the transactions contemplated hereby and thereby. Such execution,
delivery, performance and consummation have been duly authorized by all
necessary action, corporate or otherwise, on the part of each Seller, and
except as set forth on Schedule 5(a), all necessary consents of governmental
authorities or third parties to the transactions contemplated by this Agreement
have been obtained.
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(b) This Agreement constitutes, and when delivered at or
prior to each Additional Closing, each Seller Transaction Document executed by
any Seller will constitute, the legal, valid and binding obligations of such
Seller, enforceable against it in accordance with its respective terms.
(c) Neither the execution or delivery of this Agreement or
any of the Seller Transaction Documents by any Seller nor the performance by
any Seller of the transactions contemplated hereby and thereby, conflicts with,
or constitutes a breach of or a default under or the termination of (a) its
Certificate of Incorporation or bylaws; or (b) any judgment, order, writ,
injunction, decree, statute, law, rule, regulation, directive, mandate,
ordinance or guideline ("Governmental Requirements") of any Federal, state,
local or other governmental or quasi-governmental agency, bureau, board,
council, administrator, court, arbitrator, commission, department,
instrumentality, body or other authority ("Governmental Authorities")
applicable to it or the operation of the Business or the ownership of any of
the Excluded Assets.
(d) Neither TLI nor TLII has been liquidated or dissolved
as contemplated by Section 4.1(e) and (f) of the Purchase Agreement. Neither
TLI nor TLII has any liabilities except as may be set forth in the Financial
Statements or on Schedule 5(d) hereto or in the partnership agreements of any of
the Partnerships in which it holds an interest as indicted on Exhibit A to the
Disclosure Schedule to the Purchase Agreement.
6. IHS hereby represents and warrants to the Sellers as follows:
(a) IHS has the full legal power and capacity to make,
execute, deliver and perform this Agreement (including all Schedules and
Exhibits hereto), and all other agreements, instruments, certificates and
documents required or contemplated hereby or thereby (collectively "IHS
Transaction Documents") to be executed or delivered by it, and to consummate all
of the transactions contemplated hereby and thereby. Such execution, delivery,
performance and consummation have been duly authorized by all necessary action,
corporate or otherwise, on the part of IHS, and except as set forth on Schedule
5(a), all necessary consents of governmental authorities or third parties to the
transactions contemplated by this Agreement have been obtained.
(b) This Agreement constitutes, and when delivered at or
prior to each Additional Closing, each IHS Transaction Document executed by IHS
will constitute, the legal, valid and binding obligations of IHS, enforceable
against it in accordance with its respective terms.
(c) Neither the execution or delivery of this Agreement or
any of the IHS Transaction Documents by IHS nor the performance by IHS of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default under or the termination of (a) its Certificate of
Incorporation or bylaws; or (b) any Governmental Requirements of any
Governmental Authorities applicable to it.
7. The parties agree to treat the transactions contemplated by the
TLI Stock Closing pursuant to Section 338(h)(10) of the Internal Revenue Code.
8. (a) Sellers agree that they will assume all Liabilities
(the "Seller Assumed Liabilities") that arise after the Initial Closing and on
or prior to October 2, 1997 that would have been Excluded Liabilities had the
Initial Closing occurred on October 2, 1997. The Sellers shall pay and perform
all Seller Assumed Liabilities in the
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ordinary course, and shall indemnify and hold harmless IHS, its Affiliates and
Subsidiaries, and its and their respective Representatives, from and against any
and all Damages arising out of any Seller Assumed Liability.
(b) All of the representations and warranties made by each
Seller in the Purchase Agreement shall be remade by such Seller and shall be
true and correct in all material respects as of October 2, 1997 (except to the
extent that such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct on and as of such earlier date)), as if the Initial Closing were held on
such date; and Sellers shall so certify to IHS on October 2, 1997 and for the
purposes of Section 10.4 of the Purchase Agreement (including without
limitation, Section 10.4(f)), IHS shall be deemed to have relied on such
certification in consummating the transactions contemplated by the Purchase
Agreement to occur at the Initial Closing.
(c) Sellers shall indemnify and hold harmless IHS, its
Affiliates and Subsidiaries, and its and their respective Representatives, from
and against any and all Damages arising out of any act or omission by any Seller
during the period commencing immediately after the Initial Closing Date and
ending on October 2, 1997 that would have constituted a breach by said Seller
if the Initial Closing had not yet occurred.
9. (a) In the event of a breach by any Seller of any of its
obligations hereunder, IHS shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the terms of
this Agreement, and each Seller hereby waives the defense that there may be an
adequate remedy at law.
(b) This Agreement binds and inures to the benefit of each
party hereto and its successors and proper assigns. Prior to the any Additional
Closing, Sellers, and IHS may not assign their respective interests under this
Agreement to any other person or entity without the prior written consent of the
other parties hereto; provided, however, that IHS may assign its rights, duties
and obligations hereunder to the Buyer Subsidiaries or any one or more of its
other subsidiaries or affiliates; provided that in the instance of such
assignment IHS shall remain responsible for consummating any Additional Closing
as provided in this Agreement. IHS shall be entitled to assign its rights under
this Agreement after any Additional Closing.
(c) This Agreement and the Exhibits and Schedules hereto,
and the Purchase Agreement and the Exhibits and Schedules thereto embody the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein; provided, however that
any confidentiality agreements among the parties shall survive to the extent
provided in the Purchase Agreement. The captions used herein are for convenience
only and shall not control or affect the meaning or construction of the
provisions of this Agreement. This Agreement may be executed in one or more
counterparts, and all such counterparts shall constitute one and the same
agreement.
(d) From time to time, as and when reasonably requested by
any party hereto after any Additional Closing, the other parties will (at the
expense of the requesting party) execute and deliver, or cause to be executed
and delivered, all such documents, instruments and consents and will use
reasonable efforts to take all such action as may be reasonably necessary to
carry out the intent and purposes of this Agreement.
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(e) All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when given in accordance with
the terms of the Purchase Agreement.
(f) This Agreement shall not be released, discharged,
abandoned, changed or modified in any manner, except by an instrument in writing
executed by or on behalf of each of the parties hereto by their duly authorized
officer or representative. The failure of any party to enforce at any time any
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the 40X of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
(g) Except as expressly provided with respect to
indemnification rights, nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto, other than the successors and
proper assigns of the parties hereto.
(h) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, disregarding any contrary
rules relating to the choice or conflict of laws.
(i) At any time before or after the execution and delivery
of this Agreement by the parties hereto, this Agreement may be amended or
supplemented by additional agreements, articles or certificates, as may be
mutually determined by the parties to be necessary, appropriate or desirable to
further the purposes of this Agreement, to clarify the intention of the parties,
or to add to or to modify the covenants, terms or conditions hereof or thereof.
The parties hereto shall make such technical changes to this Agreement, not
inconsistent with the purposes hereof, as may be required to effect or
facilitate any governmental approval or acceptance of this Agreement or to
effect or facilitate any filing or recording required for the consummation of
any portion of the transactions contemplated hereby. This Agreement may not be
amended except by an instrument in writing signed by each of the parties.
(j) Any provision, or distinguishable portion of any
provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction only, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the parties waive any provision of
law which renders a provision hereof prohibited or unenforceable in any respect.
(k) Sellers shall be jointly and severally liable for all
representations, warranties and covenants made by any of them pursuant to this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
INTEGRATED HEALTH SERVICES, INC.:
--------------------------------------
By: /s/
---------------------------------
Its:
---------------------------------
CORAM HEALTHCARE CORPORATION
By: /s/ Daniel Frank
---------------------------------
Its: President of Lithotripsy
---------------------------------
T MEDICAL, INC.
By: /s/ Daniel Frank
---------------------------------
Its: President of Lithotripsy
---------------------------------
CORAM HEALTHCARE CORPORATION
OF GREATER NEW YORK
By: /s/ Daniel Frank
---------------------------------
Its: President of Lithotripsy
---------------------------------
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SCHEDULE 5(A)
1. The transfer of the Certificate of Need for the State of
Alabama for the Coastal Partnership.
2. The transfer of the Certificate of Need for the State of
Mississippi for the Gulf South Partnership.
