SHARE PURCHASE AGREEMENT
Relating to the Acquisition of
All of the Outstanding Capital Stock of
ATLANTIC MEDICAL SUPPLY COMPANY, INC.
by
CONTOUR MEDICAL, INC.
As of July 1, 1996
TABLE OF CONTENTS
Page
INTRODUCTION............................................................. 1
BACKGROUND............................................................... 1
TERMS AND CONDITIONS..................................................... 1
SECTION 1. Definitions............................................. 1
SECTION 2. Sale and Purchase of the Shares......................... 6
SECTION 3. Closing................................................. 7
SECTION 4. Representations and Warranties of the Shareholders...... 7
4.1 Organization and Standing............................... 7
4.2 Capitalization and Share Ownership...................... 7
4.3 Authority and Binding Effect............................ 7
4.4 Validity of Contemplated Transactions................... 8
4.5 Restrictions............................................ 8
4.6 Third-Party Options..................................... 8
4.7 Subsidiaries............................................ 8
4.8 Financial Statements.................................... 9
4.9 Books of Account; Returns and Reports; Taxes............ 9
4.10 [Intentionally Deleted].................................10
4.11 Accounts Receivable.....................................10
4.12 Inventory...............................................10
4.13 Title to Assets.........................................11
4.14 All Tangible Assets.....................................11
4.15 Condition of Assets.....................................11
4.16 Real Property...........................................11
4.17 Environmental Matters...................................11
4.18 Contracts...............................................13
4.19 Employees...............................................14
4.20 Licenses................................................14
4.21 Intellectual Property...................................15
4.22 Billing and Collection Practices........................15
4.23 Compliance with Regulations and Court Orders............16
4.24 Claims..................................................17
4.25 Insurance...............................................17
4.26 Labor Matters...........................................17
4.27 Employee Benefit Plans..................................18
4.28 Transactions with Affiliates............................18
4.29 Delivery of Documents...................................18
4.30 No Material Adverse Developments........................19
4.31 Material Transactions...................................19
4.32 Additional Information..................................19
4.33 Corporate Records.......................................20
4.34 Full Disclosure.........................................20
4.35 Purchase Entirely for Own Account.......................20
4.36 Reliance Upon Representations...........................20
4.37 Receipt of Information..................................20
4.38 Investment Experience...................................21
4.39 Accredited Investor.....................................21
4.40 Restricted Securities...................................21
4.41 Legends.................................................22
SECTION 5 Representations and Warranties of the Buyer and RCA.....22
5.1 Organization and Standing...............................22
5.2 Authority and Binding Effect............................22
5.3 Validity of Contemplated Transactions...................22
5.4 Restrictions............................................22
5.5 Reports.................................................23
5.6 Full Disclosure.........................................23
5.7 Purchase Entirely for Own Account.......................23
5.8 Reliance Upon Representations...........................23
5.9 Receipt of Information..................................23
5.10 Investment Experience...................................24
5.11 Accredited Investor.....................................24
5.12 Restricted Securities...................................24
SECTION 6 Indemnification.........................................24
6.1 Definitions.............................................24
6.2 Agreement to Indemnify..................................25
6.3 Procedures for Indemnification..........................25
6.4 Third Party Claims......................................26
6.5 Rights and Remedies Exclusive...........................27
6.6 Survival................................................28
6.7 Time Limitations........................................28
6.8 Limitations as to Amount................................28
6.9 Maximum Liability.......................................28
6.10 Subrogation.............................................29
6.11 Payment.................................................29
SECTION 7 Other Matters...........................................29
7.1 Noncompetition..........................................29
7.2 No Interference.........................................30
7.3 Nonsolicitation.........................................30
7.4 Opinions of Counsel.....................................30
SECTION 8 Miscellaneous...........................................33
8.1 Payment of Expenses.....................................33
8.2 Brokers' and Finders' Fees..............................34
8.3 Notices.................................................34
8.4 Governing Law...........................................35
8.5 No Benefit to Others....................................35
8.6 Contents of Agreement...................................35
8.7 Section Headings and Gender.............................36
8.8 Disclosure Schedule and Exhibits........................36
8.9 Cooperation.............................................36
8.10 Severability............................................36
8.11 Counterparts............................................36
8.12 Knowledge...............................................36
8.13 Jurisdiction............................................36
EXHIBITS:
Exhibit A - Payment and Ownership Table
Exhibit B - Form of Negotiable Convertible Promissory Note
Exhibit C - Form of Put Agreement
Exhibit D - Form of Registration Rights Agreement
SHARE PURCHASE AGREEMENT
INTRODUCTION
This SHARE PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 1st day of July, 1996. The parties are those persons listed on
Exhibit A hereto (individually, each a "Shareholder" and collectively, the
"Shareholders"), RETIREMENT CARE ASSOCIATES, INC., a Colorado corporation
("RCA"), and CONTOUR MEDICAL, INC., a Nevada corporation (the "Buyer").
BACKGROUND
The Shareholders own all of the issued and outstanding shares (the
"Shares") of Common Stock, no par value per share, of Atlantic Medical Supply
Company, Inc., a Georgia corporation (the "Company"), with each Shareholder
owning the number and type of Shares set forth after such Shareholder's name
in column B of Exhibit A hereto. The Buyer desires to purchase from the
Shareholders, and the Shareholders desire to sell to the Buyer, all of the
Shares in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
TERMS AND CONDITIONS
SECTION 1. DEFINITIONS.
For convenience and brevity, certain terms used in various parts of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms to be equally applicable to both singular and plural forms of the
terms defined).
"Acquisition" means the acquisition of all of the Shares by the Buyer
and all related transactions provided for in or contemplated by this
Agreement.
"Affiliate" with respect to any Person shall mean (i) any Person
directly or indirectly owning, controlling or holding power to vote 10% or
more of the outstanding voting securities of such Person; (ii) any Person, 10%
or more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by such Person; (iii) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (iv) any officer, director or partner of such Person; and (v) if
a Person is an officer, director or partner, any corporation for which such
Person acts in such capacity. For purposes of this Agreement, any partnership
or which any Person is a general partner, or any joint venture in which any
Person is a joint venturer, is an Affiliate of such Person.
"Agreement" has the meaning set forth in the Preamble hereto.
"Assets" means all of the Company's and each Subsidiary's assets,
properties, business, goodwill and rights of every kind and description, real
and personal, tangible and intangible, accrued or contingent, wherever
situated and whether or not carried on the Balance Sheet.
"Balance Sheet" is defined in Section 4.8 hereof.
"Balance Sheet Date" means June 30, 1996.
"Business" means the existing business, operations, facilities and other
Assets, finances, products, supplies, customers and customer relations and
personnel of the Company and each Subsidiary.
"Business Day" means any calendar day which is not a Saturday, Sunday or
public holiday under the Laws of Georgia.
"Buyer" has the meaning set forth in the Preamble thereto.
"Claim" means any action, administrative or other proceeding,
arbitration, cause of action, claim, complaint, demand, criminal prosecution,
inquiry, hearing, investigation (governmental or otherwise), litigation,
notice (written or oral) by any Person alleging potential liability with
respect to the Company or any Subsidiary or the Business or the Assets
(including, without limitation, Contracts relating to the Company or any such
Subsidiary) or the transactions contemplated by this Agreement.
"Claim Notice" is defined in Section 8.2(A) hereof.
"Closing" and "Closing Date" are defined in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Statements" is defined in Section 4.8 hereof.
"Company" has the meaning set forth in the Preamble hereto.
"Consolidated Statements" is defined in Section 4.8 hereof.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument, purchase order or other document, commitment, arrangement,
undertaking, practice or authorization that is binding on any Person or its
property under applicable Law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state or local court or governmental or regulatory body or
authority that is binding on any Person or its property under applicable Law.
"Default" means (i) a breach of or default under any Contract, (ii) the
occurrence of an event that with the passage of time or the giving of notice
or both would constitute a breach of or default under any Contract, or (iii)
the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"Disclosure Schedule" means the Disclosure Schedule delivered by the
Shareholders to the Buyer prior to the date hereof pursuant to Section 4
hereof.
"Employee Benefit Plans" means "employee benefit plans" as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice or
arrangement providing compensation or other benefits to any current or former
officer or employee of the Company or any Subsidiary, or any dependent or
beneficiary thereof, which are now or have been maintained by the Company or
any Subsidiary or under which the Company or any Subsidiary has any obligation
or liability, whether actual or contingent, including, without limitation, all
incentive, bonus, deferred compensation, vacation, holiday, medical,
disability, share purchase or other similar plans, policies, programs,
practices or arrangements.
"Environmental Claim" means any Claim against the Company or any
Subsidiary, or the Assets (including, without limitation, notice or other
communication written or oral by any Person alleging potential liability on
the part of the Company or any Subsidiary for investigatory costs, cleanup
costs, private or governmental response or remedial costs, natural resources
damages, property damages, personal injuries, or penalties) arising out of,
based upon, or resulting from (i) any Environmental Matter or (ii) any
circumstances or state of facts forming the basis of any Liability or alleged
Liability under, or violation or alleged violation of, any Environmental Law.
"Environmental Laws" means all Laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata),
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 41 U.S.C. 9601 et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Hazardous Substances.
"Environmental Matter" means any matter or circumstances related in any
manner whatsoever to (i) the emission, discharge, disposal, release or
threatened release of any Hazardous Substance into the environment, or (ii)
the transportation, treatment, storage, recycling or other handling of any
Hazardous Substance or (iii) the placement of structures or materials into
waters of the United States, or (iv) the presence of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 4.27(A) hereof.
"Exchange Act" has the meaning set forth in Section 5.5 hereof.
"GAAP" means generally accepted accounting principles consistently
applied, on a consistent basis, set forth in the Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
their successors, which are applicable in the circumstances as of the date in
question. The requisite that such principles be applied on a consistent basis
shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period.
"Governmental Authority" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, board or body.
"Hazardous Substance" means (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil.
"Intellectual Property" means copyrights, Patents, Trademarks,
technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions and intellectual
property rights.
"IRS" means the Internal Revenue Service.
"Law" means the common law of any applicable jurisdiction and any code,
law, order, ordinance, regulation, rule or statute of any Governmental
Authority.
"Liability" means any direct or indirect liability, indebtedness,
obligation, Claim, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills and checks presented to banks for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute, contingent, matured, unmatured or other.
"Licenses" means licenses, franchises, permits, easements, rights and
other authorizations.
"Lien" means any mortgage, lien, security interest, pledge, encumbrance,
restriction on transferability, defect of title, charge or Claim of any nature
whatsoever on any property or property interest.
"Lienholder" means the holder of or other Person entitled to any
benefits arising under any Lien.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or
inquiry involving the Company or any Subsidiary, the Assets or any Contracts
to which the Company is a party or by which it or any of the Assets may be
bound.
"Noncompete Period" is defined in Section 7.1 hereof.
"Note" means a negotiable convertible promissory note executed by the
Buyer and acknowledged and agreed to by RCA substantially in the form of
Exhibit B hereto.
"Notice Period" is defined in Section 8.2(A) hereof.
"Patents" means all patents and patent applications.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" means "employee pension benefit plans" as defined in
Section 3(2) of ERISA.
"Permitted Liens" means Liens for taxes not yet due and payable and
other Liens described on Schedule 4.12 of the Disclosure Schedule.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any other syndicate or group that would be deemed to be a person under Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Put Agreement" means a put agreement executed by RCA and the
Shareholders substantially in the form of Exhibit "C" hereto.
"RCA" has the meaning set forth in the Preamble hereto.
"RCA Common Stock" means the $.0001 par value per share common stock of
RCA.
"Registration Rights Agreement" means a registration rights agreement
executed by RCA and the Shareholders substantially in the form of Exhibit D
hereto.
"Regulation" means any statute, Law, ordinance, regulation, order or
rule of any Governmental Authority, including, without limitation, those
covering environmental, energy, safety, health, transportation, bribery,
recordkeeping, zoning, antidiscrimination, antitrust, wage and hour, and price
and wage control matters.
"Report" has the meaning set forth in Section 5.5 hereto.
"SEC" has the meaning set forth in Section 5.5 hereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" or "Shareholders" has the meaning set forth in the
Preamble hereto.
"Shares" has the meaning set forth in the Preamble hereto.
"Subsidiary" means any Person of which fifty percent (50%) or more of
the shares of any class or classes having ordinary voting power for the
election of at least a majority of the members of the Board of Directors of
such Person are owned, directly or indirectly, by the Company, the Buyer or
RCA, as the case may be.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and
service marks.
"Unaudited Statements" is defined in Section 4.8 hereof.
SECTION 2. SALE AND PURCHASE OF THE SHARES.
Subject to the terms and conditions hereinafter set forth and on the
basis of and in reliance upon the representations, warranties, obligations and
agreements set forth herein, at the Closing each Shareholder shall deliver to
the Buyer, free and clear of all Liens, the certificates for the Shares to be
sold by such Shareholder in negotiable form, duly endorsed in blank, or with
separate notarized stock transfer powers attached thereto and signed in blank,
in exchange for the delivery to such Shareholder of (i) a check from the Buyer
in an amount as set forth on Exhibit A hereto, (ii) a Note in an amount as set
forth on Exhibit A hereto, (iii) a Put Agreement, and (iv) a Registration
Rights Agreement. At the Closing, (i) the Shareholders shall deliver to the
Buyer the written resignations of all the directors and officers of the
Company and each Subsidiary effective as of the Closing except for such
directors and officers as the Buyer shall designate in writing, and shall
cause to be made available to the successor directors and officers all minute
books, stock record books, books of account, corporate seals, Contracts and
other documents, instruments and papers belonging to the Company and each
Subsidiary and shall cause full possession and control of all of the Assets
and of all other things and matters pertaining to the operation of the
Business to be transferred and delivered to the directors and officers elected
to succeed the resigned directors and officers of the Company and each
Subsidiary, (ii) the parties shall also deliver the opinions of counsel
referred to in Section 7.4, and (iii) the Buyer shall deliver a check in the
amount of $150,000 to Terry E. Randolph in consideration for the complete
termination of that certain Employment Agreement between Mr. Randolph and the
Company dated July 1, 1994.
SECTION 3. CLOSING.
The Closing (the "Closing") of the Acquisition shall take place
simultaneously with the execution hereof, at the offices of Rogers & Hardin in
Atlanta, Georgia at 10:00 A.M. local time, on August 6, 1996, or at such other
time or place or on such other date as the Buyer and the Shareholders may
agree to in writing. The Acquisition shall be effective as of 12:01 A.M.,
local time, July 1, 1996. The date of the Closing is hereinafter sometimes
referred to as the "Closing Date."
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each of the Shareholders, severally and not jointly with any other
Shareholder, represents and warrants to the Buyer that, except as set forth on
the Disclosure Schedule, each of which exceptions shall specifically identify
the relevant subsection hereof to which it relates and shall be deemed to be
representations and warranties as if made hereunder:
4.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation, having full power and authority to carry on the
Business as now conducted and to own, lease or operate the Assets. The
Company is duly qualified to do business and is in good standing in every
jurisdiction (all of which are disclosed in the Disclosure Schedule) in which
the Business or the character of the Assets requires such qualification,
unless failure to so qualify would not have a material adverse effect on the
Company. Except for the Subsidiaries, the Company does not have, nor has it
ever had, any predecessors or subsidiaries or any stock or other equity or
ownership interest (whether controlling or not) in any Person.
4.2 CAPITALIZATION AND SHARE OWNERSHIP. The Company's authorized
capital stock consists of 5,000,000 Shares, of which 2,000,000 Shares are
presently issued and outstanding. Such Shareholder is the record and
beneficial owner of the Shares set forth opposite such Shareholder's name in
column B of Exhibit A hereto, free and clear of any Liens. All of the Shares
have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of the terms of any Contract
binding upon the Company, and were issued in compliance with all applicable
charter documents of the Company and all applicable federal and state
securities or "blue sky" Laws and regulations. No equity securities of the
Company, other than the Shares, are issued or outstanding. There are, and
have been, no preemptive rights with respect to the issuance of the Shares.
There are (i) no existing Contracts, subscriptions, options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire any
capital shares or other securities of the Company or of any Subsidiary,
whether or not presently issued or outstanding, from such Shareholder, the
Company or any Subsidiary, at any time, or upon the happening of any stated
event, and (ii) no Contracts, subscriptions, options, warrants, calls,
commitments or rights to purchase or otherwise acquire from such Shareholder,
the Company or any Subsidiary any such convertible or exchangeable securities.
4.3 AUTHORITY AND BINDING EFFECT. Such Shareholder has the full power
and authority to execute, deliver and perform this Agreement and has taken all
actions necessary to secure all approvals required in connection therewith.
The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated will not contravene or violate the Articles
of Incorporation or By-Laws of the Company or any Subsidiary. This Agreement
constitutes the legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms.
4.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the execution and
delivery of this Agreement by such Shareholder nor the consummation of the
transactions contemplated hereby will contravene or violate any Regulation or
Court Order which is applicable to the Company, any Subsidiary or such
Shareholder, or will result in a Default under, or require the consent or
approval of any party to, any Contract relating to the Business or the Assets
or to or by which the Company, any Subsidiary or such Shareholder is a party
or otherwise bound or affected, or require the Company, any Subsidiary or such
Shareholder to notify or obtain any License from any federal, state, local or
other court or governmental agency or body or from any other regulatory
authority.
4.5 RESTRICTIONS. None of the Company, any Subsidiary nor such
Shareholder is a party to any Contract (except as to Contracts entered into in
the ordinary course of business) or subject to any restriction or any Court
Order or Regulation which adversely affects the Company, any Subsidiary, the
Assets or the Business or affects or restricts the ability of the Company or
any Shareholder to consummate the Acquisition.
4.6 THIRD-PARTY OPTIONS. Except as to Contracts entered into in the
ordinary course of business, there are no existing Contracts, options,
commitments or rights with, to or in any Person to acquire the Company, any
Subsidiary, or any interest in the Business.
4.7 SUBSIDIARIES. The Disclosure Schedule sets forth all Subsidiaries
as of the date of this Agreement. The Company owns eighty percent (80%) of
the issued and outstanding capital stock of Facility Supply, Inc. and owns all
of the issued and outstanding shares of capital stock of each other
Subsidiary. No equity securities of any Subsidiary are or may become required
to be issued by reason of any options, warrants, scrip, rights to subscribe
to, calls, or commitments or any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of any such Subsidiary, and there are no Contracts by which any
Subsidiary is bound to issue additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
its capital stock or by which the Company is or may be bound to transfer any
shares of the capital stock of any Subsidiary. There are no Contracts
relating to the rights of the Company to vote or to dispose of any shares of
the capital stock of any Subsidiary. All of the shares of capital stock of
each Subsidiary held by the Company are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Company free and clear of any
Lien. Each Subsidiary is a corporation and is duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its assets and to carry on its
business as now conducted. Each Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its assets
or the nature or conduct of its business requires it to be so qualified or
licensed, unless failure to so qualify would not have a material adverse
effect on such Subsidiary.
4.8 FINANCIAL STATEMENTS. Attached to the Disclosure Schedule are
true, correct and complete copies of (i) the consolidated balance sheet of the
Company and its Subsidiaries as of June 30, 1996 (the "Balance Sheet") and the
related consolidated statements of income, stockholders' equity and cash flow
for the six months then ended, including all related notes and schedules,
together with the report thereon of Laney, Boteler & Killinger (the
"Consolidated Statements"), (ii) the combined balance sheets of the Company,
Americare Health Services Corporation and Americare Group Purchasing
Corporation as of December 31, 1995, 1994 and 1993, and the related statements
of income, stockholders' equity and cash flow for the years then ended,
including all related notes and schedules, together with the report thereon of
Ernst & Young, LLP (the "Combined Statements"), and (iii) the unaudited
balance sheet of each of Facility Supply, Inc., Florida ACLF, Inc. and GeriMed
Inc. as of November 30, 1995 and the related statements of income for the
eleven months then ended and the unaudited balance sheet of Facility Supply,
Inc. as of December 31, 1995 and the related statement of income for the one
month then ended (collectively, the "Unaudited Statements"). All of the
foregoing financial statements were prepared in accordance with GAAP, include
all adjustments that are necessary for a fair presentation of the information
shown and, subject to any qualifications set forth in the applicable notes and
schedules, (i) the Consolidated Statements present fairly consolidated
financial position and consolidated results of operations of the Company and
its Subsidiaries at June 30, 1996 and for the six months then ended, and (ii)
the Combined Statements present fairly the combined financial position and
results of operations of the Company, Americare Health Services Corporation
and Americare Group Purchasing Corporation at December 31, 1995, 1994 and 1993
and for the years then ended. As of the Closing Date, neither the Company nor
any Subsidiary has any material liability or obligation of any nature
whatsoever, whether accrued, absolute, contingent or otherwise, other than (i)
current liabilities and obligations which are recurring in nature and not
overdue on their terms, (ii) liabilities and obligations reflected and
adequately provided for on the Balance Sheet, and (iii) liabilities and
obligations arising in the ordinary course of business of the Company or such
Subsidiary since the date of the Balance Sheet.
4.9 BOOKS OF ACCOUNT; RETURNS AND REPORTS; TAXES. Except as may be
disclosed in the Consolidated Statements or the Combined Statements, the books
of account of the Company fairly reflect (i) all material transactions
relating to the Company and each Subsidiary, and (ii) all material items of
income and expense, assets and liabilities and accruals relating to the
Company and each Subsidiary. Except as may be disclosed in the Consolidated
Statements or the Combined Statements, neither the Company nor any Subsidiary
has engaged in any material transaction, maintained any bank account or used
any corporate funds except for transactions, bank accounts and funds which
have been and are reflected in all material respects in the normally
maintained books and records of the Company. From inception through and
including December 31, 1996, the Company and each of its Subsidiaries was
continuously an "S" corporation within the meaning of Section 1361 of the Code
and the equivalent provisions of all applicable state income tax statutes.
Except as may be disclosed in the Consolidated Statements or the Combined
Statements, each of the Company and the Subsidiaries has duly filed all
federal, state and local tax reports and returns and all other reports and
returns required to be filed by it pursuant to any Regulation. Each of the
Company and the Subsidiaries has duly made all deposits required by Law to be
made with respect to employees' withholding taxes. Each of the Company and
the Subsidiaries has duly paid (or accrued on its books) all taxes, duties and
charges (including penalties and interest thereon) payable by it and the
amounts established as provisions for taxes on the Balance Sheet are
sufficient for the payment of all taxes (including penalties and interest
thereon, if any) due as a result of activities which occurred during the six
months ended June 30, 1996. Except as may be disclosed in the Consolidated
Statements or the Combined Statements, neither the Company nor any Subsidiary
has received any notice of assessment or deficiency or proposed assessment
from or by the IRS or any other taxing authority in connection with its tax
returns or reports and, to the best of such Shareholder's knowledge, there is
no pending tax examination of or tax Claim asserted against the Company, any
Subsidiary or any of the Assets. Except as may be disclosed in the
Consolidated Statements or the Combined Statements, there is no tax Lien on
any of the Assets. No agreement for the extension of time or waiver of the
statute of limitations for the assessment of any deficiency or adjustment for
any year is in effect. True and correct copies of all federal and state
income tax returns filed by the Company and each Subsidiary since 1993 have
been delivered to the Buyer.
4.10 [Intentionally Deleted]
4.11 ACCOUNTS RECEIVABLE. All accounts receivable as set forth on the
Balance Sheet or arising since the Balance Sheet Date (i) have arisen only in
the ordinary course of the Business consistent with past practice for goods
sold and delivered or services performed, and (ii) are collectible in full at
the recorded amounts thereof (free of any, and subject to no, defenses,
setoffs or counterclaims) in the ordinary course of business (without resort
to Litigation or assignment to a collection agency) but in no event later than
June 30, 1997 as to all Medicare Part B receivables and December 31, 1996 as
to all other receivables, net of any allowance for doubtful accounts reflected
on the Balance Sheet, and net of any allowance to be associated with accounts
arising since the Balance Sheet Date.
4.12 INVENTORY. The inventory as set forth on the Balance Sheet net of
any reserve reflected therein or arising since the Balance Sheet Date net of
any reserve to be associated therewith was acquired and has been maintained in
accordance with the regular business practices of the Company and each
Subsidiary, consists of new and unused items of a quality and quantity usable
or saleable in the ordinary course of the Business consistent with past
practice, and is valued at reasonable amounts based on the ordinary course of
the Business within the past six (6) months at prices equal to the lower of
cost or market value on a first-in-first-out basis. None of such inventory
(net of any applicable reserve) is obsolete, unusable, slow moving, damaged or
unsalable in the ordinary course of the Business consistent with past
practice.
4.13 TITLE TO ASSETS. Except as set forth in the Disclosure Schedule,
the Company or a Subsidiary owns outright and has good and marketable title to
all of the assets and properties set forth on the Balance Sheet (except for
such as may have been disposed of in the ordinary course of business since the
Balance Sheet Date), free and clear of all Liens, except Permitted Liens.
4.14 ALL TANGIBLE ASSETS. The Disclosure Schedule sets forth accurate
lists and summary descriptions of all tangible Assets where the value of an
individual item exceeds $10,000, or where an aggregate of similar items
exceeds $25,000, and of all material leases, Licenses and other Contracts to
which the Company or any Subsidiary is a party or is otherwise bound which
relate in whole or in part to the Assets. In the Disclosure Schedule, the
Assets listed have been grouped by type and assigned location. The Assets
listed on the Disclosure Schedule and those omitted therefrom because of the
foregoing minimum threshold constitute all of the material tangible assets
used in or necessary to the conduct of the Business.
4.15 CONDITION OF ASSETS. To the best knowledge of the Shareholders,
all tangible assets and properties which are part of the Assets are in good
operating condition and repair and are usable in the ordinary course of the
Business consistent with past practice and conform in all material respects to
all applicable Regulations relating to their construction, use and operation.
There are no developments materially affecting any such Asset which might
reasonably be expected to curtail the present or future use thereof for the
purpose for which it is currently used. Except pursuant to leases described
on the Disclosure Schedule, no Person other than the Company or the
Subsidiaries owns any vehicles, equipment or other tangible Assets situated on
the facilities used by the Company or any Subsidiary in the Business (other
than immaterial items of personal property owned by the Company's or any
Subsidiary's employees) or necessary to the operation of the Business.
4.16 REAL PROPERTY. Neither the Company nor any Subsidiary owns, nor
has at any time owned, any real property. All real and personal property
leased to the Company or any Subsidiary is described in the Disclosure
Schedule. To the best of such Shareholder's knowledge, all leases under which
the Company or any Subsidiary is the lessee of any real or personal property
are valid and binding on the lessors thereunder in accordance with their
respective terms.
4.17 ENVIRONMENTAL MATTERS.
(A) To the best of such Shareholder's knowledge, there are no
Environmental Claims (or any Claim against any Person whose Liability, or any
portion thereof, for Environmental Matters or under any Environmental Laws the
Company or any Subsidiary has or may have retained or assumed contractually or
by operation of Law) pending or threatened with respect to (i) the ownership,
use, condition or operation of the Assets or any asset formerly held for use
or sale by the Company or any Subsidiary, or (ii) any violation or alleged
violation of, or liability or alleged liability under, any Environmental Law
or any Order related to Environmental Matters by the Company or any
Subsidiary. There are no existing violations of (i) any Environmental Law, or
(ii) any Order related to Environmental Matters, with respect to the
ownership, use, condition or operation of the Business, the Assets or any
asset formerly held for use or sale by the Company or any Subsidiary. To the
best of such Shareholder's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, any Environmental Matter, that could reasonably be expected to
form the basis of (i) any material Environmental Claim against the Company or
any Subsidiary, or (ii) any material Claim against any Person whose Liability
(or any portion thereof) for Environmental Matters or under any Environmental
Laws the Company or any Subsidiary has or may have retained or assumed
contractually or by operation of Law.
(B) To the best knowledge of such Shareholder's knowledge,
neither the Company nor anyone known to such Shareholder has used any Assets
or any part thereof for the handling, treatment, storage, or disposal of any
Hazardous Substances.
(C) To the best of such Shareholder's knowledge, no release,
discharge, spillage or disposal of any Hazardous Substances has occurred or is
occurring at any site while or before such site was owned, leased, operated,
or managed, directly or indirectly, by the Company or any Subsidiary.
(D) To the best of such Shareholder's knowledge, no soil or
water in, under or adjacent to any Assets presently or formerly held for use
or sale by the Company or any Subsidiary has been contaminated by any
Hazardous Substance while or before such Assets were owned, leased, operated
or managed, directly or indirectly, by the Company or any Subsidiary.
(E) To the best of such Shareholder's knowledge, no waste
containing any Hazardous Substances has been generated, used, handled, stored,
treated or disposed of, directly or indirectly, by the Company or any
Subsidiary.
(F) There are no underground tanks or other underground storage
facilities presently or, to the best of such Shareholder's knowledge,
previously located at any site owned, leased, operated or managed, directly or
indirectly, by the Company or any Subsidiary.
(G) To the best of such Shareholder's knowledge, all waste,
hazardous or otherwise, have been removed from all sites owned, leased,
operated or managed, directly or indirectly, by the Company or any Subsidiary.
(H) To the best of such Shareholder's knowledge, the Company and
each Subsidiary has complied with all applicable reporting requirements under
all Environmental Laws concerning the disposal or release of Hazardous
Substances and has made any such reports concerning the Business.
(I) Without limiting the generality of any of the foregoing, to
the best of such Shareholder's knowledge, neither the Company nor any
Subsidiary has stored, disposed or arranged for the disposal of any Hazardous
Substances.
(J) Such Shareholder is not aware of any environmental site
assessment or other study relating to the investigation of the possibility of
the presence or existence of any Environmental Matter with respect to the
Business or the Assets.
(K) To the best of such Shareholder's knowledge, each of the
Company and the Subsidiaries has delivered to the Buyer copies of all Licenses
issued to the Company or such Subsidiary pursuant to any Environmental Law and
all communications between the Company and such Subsidiary or its
representatives and any Governmental Authority concerning any Environmental
Matter.
4.18 CONTRACTS.
(A) The Disclosure Schedule sets forth complete and accurate
lists or descriptions of all consents or approvals required under any material
Contracts that are necessary for the Shareholders to complete the Acquisition
or to avoid a Default under such Contracts.
(B) None of the Assets is leased by the Company or any
Subsidiary from any Person, whether affiliated or unaffiliated with the
Company or such Subsidiary.
(C) Neither the Company nor any Subsidiary is a party to any:
(1) material Contract with any present or former employee
or consultant;
(2) material Contract for the future purchase of, or
payment for, supplies or products or services;
(3) material Contract to sell or supply products or to
perform services;
(4) material representative or sales agency Contract;
(5) material Contract limiting or restraining it from
engaging or competing in any lines or business with any Person;
(6) material license, franchise, distributorship or other
agreement relating in whole or in part to any ideas, technical assistance or
other know-how of or used by the Company or any Subsidiary; or
(7) material Contract not otherwise disclosed herein.
(D) All of the Contracts to which the Company or any Subsidiary
is a party or by which it or any of its material Assets is bound or affected
are valid, binding and enforceable in accordance with their terms except as
such enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, and other Laws and legal and equitable principles of general
application affecting the rights or remedies of creditors, and (ii) the fact
that specific performance and other equitable remedies provided therein are
discretionary with the courts and may not be enforceable. Each of the Company
and the Subsidiaries has fulfilled in all material respects, or taken all
action necessary to enable it to fulfill when due, all of its obligations
under each of such Contracts. No party is in Default under any material
Contract, and no notice of any Claim of Default has been given to the Company
or any Subsidiary. To the best of such Shareholder's knowledge, there are no
provisions of, or developments materially affecting, any such Contract which
might reasonably be expected to prevent the Company or any Subsidiary from
realizing the benefits thereof whether before or after the completion of the
Acquisition, assuming compliance with the provisions thereof by the Company
and any such Subsidiary. With respect to any of such Contracts that are
leases, neither the Company nor any Subsidiary has received any notice of
cancellation or termination under any option or right reserved to the lessor,
or any notice of Default, thereunder.
(E) The Disclosure Schedule includes two Employment Agreements
between the Company, Americare Health Services Corp., Americare Group
Purchasing Care and Cliff Christianson, one of which is dated April 22, 1995
and bears a footer of ws94-2/atlmed.gm/EMPCLIFF ("Employment Agreement #1")
and the other of which is effective April 22, 1995 and bears a footer of
ws95-1/altmed.gm/EMPCLIFF ("Employment Agreement #2"). Employment Agreement
#1 is superseded in its entirety by Employment Agreement #2, and Employment
Agreement #1 is no longer of any force or effect whatsoever.
4.19 EMPLOYEES. The Disclosure Schedule sets forth the names and
current annual salary rates or current hourly wages of all present, full time
employees of the Company and each Subsidiary, together with the average number
of hours worked per week, the date of the last salary increase, the date of
commencement of employment of each employee with the Company or such
Subsidiary, as the case may be, and a summary of salary, bonuses and other
compensation, if any, paid or payable to each of such Persons for or in
respect of that portion of the 1996 calendar year ending on the Balance Sheet
Date. The Disclosure Schedule also sets forth the earnings for each of such
employees as reflected on Form W-2 for the 1995 calendar year.
4.20 LICENSES. The Disclosure Schedule sets forth a complete list of
all materialLicenses used in the operation of the Business or otherwise held
by the Company or any Subsidiary. The Company and each Subsidiary own,
possess or lawfully use in the operation of the Business all material Licenses
which are necessary to conduct the Business as now or previously conducted or
to the ownership of the Assets, free and clear of all Liens. Neither the
Company nor any Subsidiary is in Default, nor has it received any notice of
any Claim of Default, with respect to any such License. To the best of such
Shareholder's knowledge, except as otherwise governed by Law, all such
Licenses are renewable by their terms or in the ordinary course of business
without the need to comply with any special qualification procedures or to pay
any amounts other than routine filing fees and will not be adversely affected
by the completion of the Acquisition, assuming Buyer is not disqualified from
holding such License. Neither such Shareholder nor to the best of such
Shareholder's knowledge, any director, officer or employee of the Company or
any Subsidiary, or any other Person, owns or has any proprietary, financial or
other interest (direct or indirect) in any License which the Company or any
Subsidiary owns, possesses or uses.
4.21 INTELLECTUAL PROPERTY.
(A) No employee of the Company or any Subsidiary is, or, to the
best of suchShareholder's knowledge, is now expected to be, in Default under
any term of any employment contract, agreement or arrangement relating to any
Intellectual Property or noncompetition arrangement, or any other Contract or
any restrictive covenant relating to the right of any such officer or employee
to be employed by the Company or any Subsidiary, because of the nature of the
Business or relating to the use of any Intellectual Property of others, and
the continued employment of the Company's officers and employees does not
subject the Company or such Subsidiary to any liability resulting from such a
violation. The Intellectual Property of the Company and each Subsidiary was
developed entirely by its employees during the time they were employees only
of the Company or such Subsidiary, and such Intellectual Property does not
include any inventions of the employees made prior to the time such employees
became employees of the Company or such Subsidiary nor any Intellectual
Property of any previous employer of such employee.
(B) The Company and each Subsidiary owns or has a valid right to
use the Intellectual Property being used to conduct the Business; and the
conduct of the Business as now or previously operated does not and, to the
best of such Shareholder's knowledge, will not conflict with valid
Intellectual Property rights of others. Neither the Company nor any
Subsidiary has received any communication alleging that the Company has
violated or, by conducting the Business, would violate any of the Intellectual
Property rights of any other Person. Neither the Company nor any Subsidiary
has any obligation to compensate any Person for the use of any such
Intellectual Property rights nor has the Company or any Subsidiary granted to
any Person any license, option or other rights to use in any manner any of the
Intellectual Property of the Company or such Subsidiary, whether requiring the
payment of royalties or not.
(C) To the best of such Shareholder's knowledge, all Patents,
Copyrights and Trademarks used in the Business of, or owned by, the Company or
the Subsidiaries are listed in the Disclosure Schedule.
(D) The computer software of the Company and each Subsidiary
included in the Intellectual Property is fully licensed, and is the only
software used by the Company and such Subsidiary in the conduct of the
Business.
4.22 BILLING AND COLLECTION PRACTICES.
(A) The current practices and procedures of the Company and each
Subsidiary with respect to (i) billing on behalf of clients, (ii) receiving
and processing Medicare and Medicaid payments due to clients, (iii) holding
and transfer of such payments, and (iv) the method of determining and
collecting the fees received by the Company and such Subsidiaries for services
provided by providers and physicians participating in the Medicare or Medicaid
programs are not in violation of the restriction on assignment as set forth in
42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section
1396(a)(32), and the regulations promulgated thereunder or similar provisions
of any state Medicaid program, except for such violations which in the
aggregate would not have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or
prospects of the Company and its Subsidiaries taken as a whole.
(B) Neither the Company nor any Subsidiary is engaged in any
activity, whether alone or in concert with one of its clients, which would
constitute a violation of any Law (including, but not limited to, (i) federal
antifraud and abuse or similar laws pertaining to the Medicare, Medicaid, or
any other governmental health or insurance program, (ii) state law pertaining
to Medicare, Medicaid, or any other federal health or insurance program, (iii)
state or federal laws pertaining to billings to insurance companies, health
maintenance organizations, and other managed care plans or to insurance fraud,
and (iv) federal and state Laws relating to collection agencies and the
performance of collection services) prohibiting fraudulent or abusive or
unlawful practices connected in any way with the provision of health care
services, the billing for such services provided to a beneficiary of any
state, federal or private health or insurance program or credit collection
services, except for such violations which in the aggregate would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of the Company and its Subsidiaries
taken as a whole. Without limiting the generality of the foregoing, neither
the Company nor any Subsidiary has, directly or indirectly, paid, offered to
pay or agreed to pay, or solicited or received, any fee, commission, sum of
money, property or other remuneration to or from any Person which such
Shareholder knows or has reason to believe to have been illegal under 42
U.S.C. Section 1320a-7b(b) or any similar state law.
(C) Each of the Company and the Subsidiaries is in compliance in
all material respects with the applicable trust accounting statutes, rules and
regulations of the various states and has sufficient funds deposited in such
trust accounts to cover all currently existing trust liabilities to its
clients.
4.23 COMPLIANCE WITH REGULATIONS AND COURT ORDERS. Neither the Company
nor any Subsidiary is in violation of any Court Order or Regulation, and the
Assets have not been used or operated by the Company or any Subsidiary or any
other Person in violation of any Regulation or Court Order. All Court Orders
to which the Company or any Subsidiary is a party or subject are listed in the
Disclosure Schedule. Each of the Company and the Subsidiaries has made all
filings or notifications required to be made by them under any Regulations
applicable to the Company, any Subsidiary, the Business or the Assets. To the
best of such Shareholder's knowledge, neither the Company nor any Subsidiary
or any officer, employee or agent of, nor any consultant to, the Company or
any Subsidiary has unlawfully offered, paid, or agreed to pay, directly or
indirectly, any money or anything of value to, or for the benefit of, any
individual who is or was a candidate for public office, or an official or
employee of any Governmental Authority.
4.24 CLAIMS. There is no Litigation pending or, to the best of such
Shareholder's knowledge, threatened against the Company or any Subsidiary or
the Business or the Assets except for Claims which in the aggregate would not
have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of the Company and its
Subsidiaries taken as a whole. No Claim has been asserted and no event has
occurred of which such Shareholder has knowledge that might reasonably be
expected to result in Litigation against the Company or any Subsidiary or the
Business or the Assets and, to the best of such Shareholder's knowledge, there
is no reasonable basis for any such Claim, except for Claims which in the
aggregate would not have a material adverse effect on the assets, liabilities,
results of operations, financial condition, business or prospects of the
Company and its Subsidiaries taken as a whole.
4.25 INSURANCE. The Disclosure Schedule contains a true and complete
description of the current insurance coverage applicable to the Company, each
Subsidiary, the Business and the Assets for the past three (3) years,
including amounts and lines of coverage, loss experience history by line of
coverage for the past five (5) years, and a description of all Claims in
excess of $10,000 for the past five (5) years. All such insurance coverage is
in full force and effect, is valid, binding and enforceable in accordance with
its terms against the respective insurers, has been issued by insurers of
recognized responsibility and, to the best knowledge of such Shareholder,
insures the Company and each Subsidiary in reasonably sufficient amounts
against all risks usually insured against by Persons operating similar
businesses or properties in the localities where such businesses or properties
are located and has been issued by insurers of recognized responsibility. To
the best knowledge of such Shareholder, there is no Default under any such
coverage nor has there been any failure to give notice or present any Claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid premiums except in the ordinary course of business and no notice of
cancellation or nonrenewal of any such coverage has been received. There are
no provisions in such insurance policies for retroactive premium adjustments.
Such Shareholder does not know or have reason to know of the occurrence of any
event which reasonably might form the basis of any Claim against the Company,
any Subsidiary, the Business or the Assets or which might reasonably be
expected to materially increase the insurance premiums payable for any such
coverage other than events generally applicable to the industry in which the
Company operates. Except as set forth in the Disclosure Schedule, all
products liability and general liability insurance policies ever maintained by
the Company or any Subsidiary have been occurrence policies and not claims
made policies. There are no outstanding performance bonds covering or issued
for the benefit of the Company or any Subsidiary.
4.26 LABOR MATTERS. Neither the Company nor any Subsidiary has any
collective bargaining agreement with any labor union or other representative
of employees. No strike, slowdown, picketing or work stoppage by any union or
other group of employees against the Company, any Subsidiary or the Assets
wherever located, and no secondary boycott with respect to the products of the
Company or any Subsidiary, lockout by them of any of their employees or any
other labor trouble or other occurrence, event or condition of a similar
character, has occurred or, to the best of such Shareholder's knowledge, been
threatened.
4.27 EMPLOYEE BENEFIT PLANS.
(A) There is no Employee Benefit Plan maintained by the
Company or any Subsidiary or any corporate or other trade or business under
common control of the Company or any Subsidiary (hereinafter, an "ERISA
Affiliate"), within the meaning of Section 414 of the Code, or to which the
Company or any Subsidiary, or any ERISA Affiliate thereof, contributes or is
required to contribute for employees or for former employees of the Company or
any Subsidiary.
(B) Neither the Company nor any Subsidiary or any ERISA
Affiliate maintains any tax qualified plans within the meaning of Section 401
of the Code.
(C) Neither the Company nor any Subsidiary or any ERISA
Affiliate is a party to or obligated under any agreement, plan, contract or
other arrangement pursuant to which the Company, its Subsidiaries or any ERISA
Affiliate or the Buyer is or might be required to make payments that would not
be deductible or capitalizable for federal income tax purposes by reason of
the application of Section 280G of the Code. Further, the consummation of the
transactions contemplated by this Agreement will not by their occurrence
result in any employee becoming entitled to severance payments from any the
Company, its Subsidiaries or any ERISA Affiliate.
(D) The Company, its Subsidiaries and all ERISA Affiliates
have complied with the requirements of Section 162(k) of the Code regarding
continuation of health care coverage under any group health plans.
(E) There are no material liabilities (in excess of $5,000.00
individually or $50,000.00 in the aggregate), absolute or contingent, of the
Company or its Subsidiaries or of any employee, officer, director or any
Person which may have indemnity rights or contributions rights or other
recourse against the Company or its Subsidiaries with respect thereto, to any
employee benefit plan, program, practice, arrangement, agreement or
understanding, whether written or oral, except for liabilities which have been
fully accrued on the Balance Sheet.
4.28 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Disclosure Schedule, neither such Shareholder nor, to the best of such
Shareholder's knowledge, any director or officer of the Company, any
Subsidiary or any member of his or her immediate family or any other of its,
his or her Affiliates, owns or has an ownership interest in any Person that is
or was during the last three (3) years a party to, or in any property which is
or was during the last three (3) years the subject of, Contracts, business
arrangements or relationships of any kind with the Company or any Subsidiary.
4.29 DELIVERY OF DOCUMENTS. The Company and the Shareholders have
delivered to the Buyer true, correct and complete copies of the Company's and
each Subsidiary's charter documents and By-Laws and all material written
Contracts and other documents and summaries of any material oral Contracts
(including, without limitation, all amendments, supplements, modifications or
waivers currently in effect) described in this Agreement or in the Disclosure
Schedule.
4.30 NO MATERIAL ADVERSE DEVELOPMENTS. Since the Balance Sheet Date,
there has been no actual or, to the best of such Shareholder's knowledge,
threatened change in the Business or, to the best of such Shareholder's
knowledge, any event, condition or state of facts, in either case that is or
might reasonably be expected to be material and adverse to the Company, any
Subsidiary or the Assets other than any event, condition or state of facts
generally known or applicable to the industry in which the Company operates.
4.31 MATERIAL TRANSACTIONS. Since the Balance Sheet Date, the Business
has been operated in the ordinary course and in substantially the same manner
as it has been operated in the past six (6) months.
4.32 ADDITIONAL INFORMATION. The Disclosure Schedule contains, in all
material respects, accurate lists and summary descriptions of the following:
(A) all accounts receivable of the Company and each
Subsidiary reflected on the Balance Sheet, specifying the account debtor, the
face amount of each receivable, and reconciling the aggregate value of all
accounts receivable as of the Balance Sheet Date to the amount of such
category set forth on the Balance Sheet;
(B) all accounts payable and accrued expenses of the Company
and each Subsidiary reflected on the Balance Sheet, specifying the payee the
face amount of each payable, the age of each payable regardless of
classification on the balance sheet account, any defenses, setoffs or
counterclaims that may exist with respect thereto, and reconciling the
aggregate value of all accounts payable as of the Balance Sheet Date to the
amount of such category set forth on the Balance Sheet;
(C) the names of all present officers and directors of the
Company and each Subsidiary;
(D) the names and addresses of every bank and other financial
institution in which the Company or any Subsidiary maintains an account
(whether checking, savings or otherwise), lock box or safe deposit box, and
the account numbers and names of Persons having signing authority or other
access thereto;
(E) the names of all Persons authorized to borrow money or
incur or guarantee indebtedness on behalf of the Company or any Subsidiary;
(F) the names of all Persons holding powers of attorney from
the Company and any Subsidiary and a summary statement of the terms thereof;
and
(G) all names under which the Company or any Subsidiary has
ever conducted any Business or which it has otherwise ever used.
4.33 CORPORATE RECORDS. The minute books of the Company and each
Subsidiary are current and contain correct and complete copies of all charter
documents of the Company and each Subsidiary, including all amendments thereto
and restatements thereof, and of all minutes of meetings, resolutions and
other actions and proceedings of its shareholders and board of directors and
all committees thereof, duly signed by the Secretary or an Assistant
Secretary, and the stock record book of the Company and each Subsidiary is
also current, correct and complete and reflects the issuance of all of the
Shares to the Shareholders.
4.34 FULL DISCLOSURE. There are and will be no materially misleading
misstatements in any of the representations and warranties made by such
Shareholder in this Agreement or in any of the instruments delivered by the
Company, any Subsidiary or such Shareholder pursuant hereto, including
(without limitation) in the Disclosure Schedule, and such Shareholder has not
omitted to state any fact necessary to make such representations and
warranties not materially misleading.
4.35 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Note issued to such
Shareholder hereunder and the RCA Common Stock issuable upon conversion
thereof (collectively, the "Securities") will be acquired for investment for
such Shareholder's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof; such Shareholder has no
present intention of selling, granting any participation in, or otherwise
distributing the same; and such Shareholder does not have any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
grant participations to such Person with respect to any of the Securities.
4.36 RELIANCE UPON REPRESENTATIONS. Such Shareholder understands that
the Note is not, and any Common Stock acquired on conversion thereof at the
time of issuance will not be, registered under the Securities Act in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act, and that the Buyer's and RCA's reliance on such exemption is predicated
on such Shareholder's representations set forth herein.
4.37 RECEIPT OF INFORMATION. Such Shareholder believes such
Shareholder has received all the information such Shareholder considers
necessary or appropriate for deciding whether to engage in the Transaction.
Such Shareholder further represents that such Shareholder has had an
opportunity to ask questions of and receive answers from the Buyer and RCA
regarding the terms and conditions of the Acquisition and the business,
properties, prospects and financial condition of the Buyer and RCA and to
obtain additional information (to the extent the Buyer or RCA possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such
Shareholder or to which such Shareholder had access. The foregoing, however,
does not limit or modify any of the representations and warranties of the
Buyer or RCA in this Agreement or the Exhibits hereto or the right of such
Shareholder to rely thereon.
4.38 INVESTMENT EXPERIENCE. Such Shareholder represents that such
Shareholder is experienced in evaluating and investing in private placements
and acknowledges that such Shareholder is able to fend for himself, can bear
the economic risk of the Note, and has such knowledge and experience in
financial and business matters that such Shareholder is capable of evaluating
the merits and risks of the Acquisition.
4.39 ACCREDITED INVESTOR.
(a) The term "Accredited Investor" as used herein refers to:
(i) Any Shareholder whose individual net worth, or
joint net worth with such Shareholder's spouse, at the time of his purchase
exceeds $1,000,000; or
(ii) Any Shareholder who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
such Shareholder's spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level in the current
year.
As used in this Section 4.39., the term "net worth" mans the excess of total
assets over total liabilities. For the purpose of determining a person's net
worth, the principal residence owned by an individual should be valued at fair
market value, including the cost of improvements, net of current encumbrances.
As used in this Section 4.39, "income" means actual economic income, which may
differ from adjusted gross income for income tax purposes. Accordingly, such
Shareholder should consider whether such Shareholder should add any or all of
the following items to such Shareholder's adjusted gross income for income tax
purposes in order to reflect more accurately such Shareholder's actual
economic income: any amounts attributable to tax-exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to an IRA or Keogh retirement plan, and
alimony payments.
(b) Such Shareholder is an Accredited Investor.
4.40 RESTRICTED SECURITIES. Such Shareholder understands that the Note
(and any RCA Common Stock issued on conversion thereof) may not be sold,
transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Note (or any RCA Common Stock
issued on conversion thereof) or an available exemption from registration
under the Securities Act, the Note (and any RCA Common Stock issued on
conversion thereof) must be held indefinitely. In particular, such
Shareholder is aware that the Note (and any RCA Common Stock issued on
conversion thereof) may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of that Rule are met.
4.41 LEGENDS. To the extent applicable, the Note and each certificate
or other document evidencing any RCA Common Stock issued upon conversion
thereof shall be endorsed with a legend substantially as set forth below:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND RCA.
The Buyer as to itself only, and RCA as to itself only, hereby
represents and warrants to the Shareholders as follows:
5.1 ORGANIZATION AND STANDING. Each of the Buyer and RCA is a
corporation duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation, having all requisite corporate
power and authority to perform its obligations under this Agreement.
5.2 AUTHORITY AND BINDING EFFECT. Each of the Buyer and RCA has the
corporate power and authority to execute, deliver and perform this Agreement,
the Notes and, in the case of RCA, the Put Agreement, and has taken all
actions necessary to secure all approvals required in connection therewith.
The execution, delivery and performance of the Put Agreement by RCA and this
Agreement and the Notes by the Buyer and RCA and have been duly authorized by
all necessary corporate action. Each of this Agreement and the Notes
constitutes the legal, valid and binding obligation of the Buyer and RCA,
enforceable against them in accordance with its terms; and the Put Agreement
constitutes the legal, valid and binding obligation of RCA, enforceable
against it in accordance with its terms.
5.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the execution and
delivery of this Agreement or the Notes by the Buyer nor the consummation of
the transactions contemplated hereby by the Buyer will contravene or violate
any Regulation or Court Order which is applicable to the Buyer, or the
Articles of Incorporation or By-Laws of the Buyer, or will result in a Default
under any Contract to which the Buyer is a party or by which it is otherwise
bound or affected, or require the Buyer to notify or obtain any License from
any federal, state, local or other court or governmental agency or body or
from any other regulatory authority.
5.4 RESTRICTIONS. Neither the Buyer nor RCA is a party to any
Contract or subject to any restriction or any Court Order or Regulation which
adversely affects the Company, any Subsidiary, the Assets or the Business or
affects or restricts the ability of the Buyer or RCA to consummate the
Acquisition.
5.5 REPORTS. RCA has previously furnished to the Shareholders true
and complete copies of the following documents (the "Reports"): (i) RCA's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995, as filed
with the Securities and Exchange Commission ("SEC"), (ii) RCA's proxy
statement for its 1995 annual meeting of shareholders, and (iii) all other
reports and registration statements filed by RCA with the SEC since the end of
the fiscal year ended June 30, 1995. Each Report was prepared in compliance
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder. As of
its date, no Report contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements included in the Reports have been
prepared in accordance with GAAP applied on a consistent basis (except as may
be indicated therein or in the notes thereto) and fairly present the
consolidated financial position of RCA and its Subsidiaries as of the dates
thereof and the consolidated results of operations and changes in cash flow of
RCA and its Subsidiaries for each of the periods then ended, subject, in the
case of unaudited interim financial statements, to normal year-end
adjustments. Since the end of the quarter ended March 31, 1996, there has
been no material adverse change in the assets, liabilities, results of
operations, financial condition, business or prospects of RCA and its
Subsidiaries taken as a whole.
5.6 FULL DISCLOSURE. There are and will be no materially misleading
misstatements in any of the representations and warranties made by the Buyer
or RCA in this Agreement or in any of the instruments delivered by the Buyer
or RCA pursuant hereto, and neither the Buyer nor RCA has omitted to state any
fact necessary to make such representations and warranties not materially
misleading.
5.7 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares will be acquired
for investment for the Buyer's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof; the Buyer has
no present intention of selling, granting any participation in, or otherwise
distributing the same; and the Buyer does not have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participations to such Person with respect to any of the Shares.
5.8 RELIANCE UPON REPRESENTATIONS. The Buyer understands that the
Shares are not registered under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act,
and that the Shareholder's reliance on such exemption is predicated on the
Buyer's representations set forth herein.
5.9 RECEIPT OF INFORMATION. The Buyer believes it has received all
the information the Buyer considers necessary or appropriate for deciding
whether to engage in the Transaction. The Buyer further represents that it
has had an opportunity to ask questions of and receive answers from the
Shareholders regarding the terms and conditions of the Acquisition and the
business, properties, prospects and financial condition of the Company and to
obtain additional information (to the extent the Shareholders possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to the Buyer or
to which the Buyer had access. The foregoing, however, does not limit or
modify any of the representations and warranties of the Shareholders in this
Agreement or the Exhibits hereto or the right of the Buyer to rely thereon.
5.10 INVESTMENT EXPERIENCE. The Buyer represents that it is
experienced in evaluating and investing in transactions similar to the
Acquisition and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
Acquisition.
5.11 ACCREDITED INVESTOR. The Buyer is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D as promulgated under the Securities
Act.
5.12 RESTRICTED SECURITIES. The Buyer understands that the Shares may
not be sold, transferred, or otherwise disposed of without registration under
the Securities Act or an exemption therefrom and that in the absence of an
effective registration statement covering the Shares or an available exemption
from registration under the Securities Act the Shares must be held
indefinitely.
SECTION 6. INDEMNIFICATION.
6.1 DEFINITIONS. For the purposes of this Section 6:
(A) "Indemnification Claim" shall mean a claim for
indemnification hereunder.
(B) "Indemnitees" shall mean (i) with respect to
Indemnification Claims asserted under Section 6.2(A), the Buyer, the Company
and its Subsidiaries and their respective agents, representatives, employees,
officers, directors, shareholders, controlling persons and Affiliates, and
(ii) with respect to Indemnification Claims asserted under Section 6.2(B), the
Shareholders.
(C) "Indemnitor" shall mean each Shareholder in connection
with Indemnification Claims asserted under Section 6.2(A), and the Buyer in
connection with Indemnification Claims asserted under Section 6.2(B).
(D) "Losses" shall mean any and all demands, claims, actions
or causes of action, assessments, losses, diminution in value, damages
(including special and consequential damages), liabilities, costs, and
expenses, determined on a net after-tax basis, including, without limitation,
interest, penalties, cost of investigation and defense, and reasonable
attorneys' and other professional fees and expenses.
(E) "Third Party Claim" shall mean any claim, suit or
proceeding (including, without limitation, a binding arbitration or an audit
by any taxing authority) that is instituted against an Indemnitee by a person
or entity other than an Indemnitor and which, if prosecuted successfully,
would result in a Loss for which such Indemnitee is entitled to
indemnification hereunder.
6.2 AGREEMENT TO INDEMNIFY.
(A) Subject to the terms and conditions of this Section 6, each
Shareholder agrees to indemnify, defend, and hold harmless Indemnitees, and
each of them, from, against, for, and in respect of any and all Losses
asserted against, or paid, suffered or incurred by, an Indemnitee and
resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth or incompleteness of any
representation or warranty of such Shareholder contained in or made pursuant
to this Agreement or in any instrument furnished by such Shareholder in
connection herewith that was not known to the Buyer prior to the Closing Date;
or
(ii) a breach of or failure to perform any covenant,
undertaking or agreement of such Shareholder made in this Agreement that was
not known to the Buyer prior to the Closing Date.
(B) Subject to the terms and conditions of this Section 6, the
Buyer agrees to indemnify, defend and hold harmless Indemnitees, and each of
them, from, against, for, and in respect of any and all Losses asserted
against, or paid, suffered or incurred by, an Indemnitee and resulting from,
based upon, or arising out of:
(i) the inaccuracy, untruth or incompleteness of any
representation or warranty of the Buyer contained in or made pursuant to this
Agreement or in any instrument furnished by the Buyer in connection herewith
that was not known to the applicable Shareholder prior to the Closing Date; or
(ii) a breach or failure to perform any covenant,
undertaking, condition or agreement of the Buyer made in this Agreement that
was not known to the applicable Shareholder prior to the Closing Date.
6.3 PROCEDURES FOR INDEMNIFICATION.
(A) An Indemnification Claim shall be made by an Indemnitee
by delivery of a written notice to the Indemnitor requesting indemnification
and specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of a Third Party Claim, containing (by
attachment or otherwise) such other information as such Indemnitee shall have
concerning such Third Party Claim.
(B) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 6.4 hereof shall be observed by the
Indemnitee and the Indemnitor.
(C) If the Indemnification Claim involves a matter other
than a Third Party Claim, the Indemnitor shall have thirty (30) days to object
to such Indemnification Claim by delivery of a written notice of such objection
to such Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute a final and binding
acceptance of the Indemnification Claim by the Indemnitor, and the
Indemnification Claim shall be paid in accordance with subsection (D) of this
Section 6.3 hereof.
(D) Upon final determination by a court of competent
jurisdiction of the amount of an Indemnification Claim, or by agreement
between the Indemnitor and the Indemnitee, the Indemnitors shall pay the
amount of such Indemnification Claim within ninety (90) days of the date such
amount is determined or agreed.
6.4 THIRD PARTY CLAIMS. The obligations and liabilities of the
parties hereunder with respect to a Third Party Claim shall be subject to the
following terms and conditions:
(A) The Indemnitee shall give the Indemnitor written notice of
a Third Party Claim promptly after receipt by the Indemnitee of notice
thereof, and the Indemnitor may undertake the defense, compromise and
settlement thereof by representatives of its own choosing reasonably
acceptable to the Indemnitee. Subject to the provisions of Section 6.7
hereof, the failure of the Indemnitee to notify the Indemnitor of such claim
shall not relieve the Indemnitor of any liability that it may have with
respect to such claim except to the extent the Indemnitor demonstrates that
the defense of such claim is prejudiced by such failure. If the Indemnitee
desires to participate in, but not control, any such defense, compromise and
settlement, it may do so at its sole cost and expense. If, however, the
Indemnitor fails or refuses to undertake the defense of such Third Party Claim
within ten (10) days after written notice of such claim has been given to the
Indemnitor by the Indemnitee, the Indemnitee shall have the right to undertake
the defense, compromise and settlement of such claim with counsel of its own
choosing. In the circumstances described in the immediately preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense of
such claim, make an Indemnification Claim as specified in Section 6.3 hereof
which shall be deemed an Indemnification Claim that is not a Third Party Claim
for the purposes of the procedures set forth herein.
(B) If, in the reasonable opinion of the Indemnitee, any Third
Party Claim or the litigation or resolution thereof involves an issue or
matter which is likely to have a material adverse effect on the business,
operations, assets, properties or prospects of the Indemnitee (including,
without limitation, the administration of the tax returns and responsibilities
under the tax laws of the Indemnitee), the Indemnitee shall have the right to
control the defense, compromise and settlement of such Third Party Claim
undertaken by the Indemnitor. If the Indemnitee shall elect to exercise such
right, it shall be responsible for the payment of its legal fees and expenses
related thereto and, prior to settling or compromising such Third Party Claim,
shall give written notice to the Indemnitor of the proposed settlement or
compromise and shall request the consent of the Indemnitor thereto, which
consent shall not be withheld by the Indemnitor if the settlement or
compromise is reasonable. If the Indemnitor withholds its consent to the
settlement or compromise, the Indemnitee may enter into such settlement or
compromise notwithstanding the withholding of such consent. If it is
ultimately determined that the settlement or compromise entered into by the
Indemnitee was unreasonable, then the Indemnitee shall be entitled to
indemnification pursuant to this Section 6 for only one-half of the Loss.
Alternatively, if it shall be determined that the Indemnitor unreasonably
withheld its consent to the settlement or compromise, the Indemnitee shall be
entitled to indemnification for the entire Loss as provided in this Section 6.
If the Indemnitee shall elect to exercise its rights under this Section
6.4(B), the Indemnitor shall have the right to participate in, but not
control, the defense, compromise or settlement of such Third Party Claim at
its sole cost and expense.
(C) No settlement or compromise of a Third Party Claim
involving the asserted liability of an Indemnitor under this Section 6 shall
be made without the prior written consent by or on behalf of the Indemnitor,
which consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of $5,000 or less where the Indemnitor has
not responded within ten (10) business days of notice of a proposed
settlement. If the Indemnitor assumes the defense of such a Third Party
Claim, no compromise or settlement thereof may be effected by the Indemnitor
without the Indemnitee's prior written consent, which consent shall not be
unreasonably withheld or delayed.
(D) In connection with the defense, compromise or settlement
of any Third Party Claim, the parties to this Agreement shall execute such
powers of attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may reasonably
be related to any such claim or action, shall provide access to the counsel,
accountants and other representatives of each party during normal business
hours to all properties, personnel, books, tax records, contracts, commitments
and all other business records of such other party and will furnish to such
other party copies of all such documents as may reasonably be requested
(certified, if requested).
6.5 RIGHTS AND REMEDIES EXCLUSIVE. Except for any breach of Section
7.1, 7.2 or 7.3 hereof, as to which this Section 6 shall be inapplicable, the
rights of the Indemnitees under this Section 6 are the exclusive rights and
remedies of the Indemnitees for any breach of the representations and
warranties on the part of any Indemnitor or for the failure of any Indemnitor
to fulfill any agreement or covenant hereunder. The Parties covenant and
agree that they will assert no other rights or pursue other remedies, nor will
they seek recovery under any circumstances whatsoever of any amounts in excess
of the limits set forth in Section 6.9 hereof. The Party who breaches or
violates the provision of this Section 6.5 shall indemnify the other Parties
and hold them harmless from and against any costs, expansion damages they may
incur as a result of such breach or violation.
6.6 SURVIVAL. Subject to Section 6.7 hereof, all representations and
warranties contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Closing.
6.7 TIME LIMITATIONS. The Indemnitors shall have no liability under
Section 6.2 hereof, unless on or before the fifteen (15) month anniversary of
the Closing Date, the Indemnitors are given notice asserting an
Indemnification Claim with reasonable specificity with respect thereto;
provided, however, that an Indemnification Claim based upon a breach of the
representations and warranties of the Indemnitors contained (i) in Sections
4.2, 4.6, 4.18(E) and 4.35 through and including 4.41 hereof and in Section
5.2 hereof may be made at any time except as limited by law; (ii) in Section
4.9 as it relates to taxes hereof may be made at any time prior to the
expiration of the statute of limitations applicable to the liability relating
thereto; and (iii) in Section 4.17 hereof may be made at any time prior to the
third anniversary of the Closing Date.
6.8 LIMITATIONS AS TO AMOUNT. Indemnitors shall have no liability
with respect to the matters described in Section 6.2(a) hereof until the total
of all Losses with respect thereto exceeds $50,000, in which event such
Indemnitors shall be obligated to indemnify the Indemnitees as provided in
this Section 6 for all such Losses subject to Section 6.9 hereof.
6.9 MAXIMUM LIABILITY. In no event shall the aggregate liability of
the Buyer under this Section 6 exceed $2,500,000 or the aggregate liability of
any Shareholder under this Section 6 exceed $1,500,000 (in the case of
Frederick G. Perkins, III ("Perkins")), $695,750 (in the case of Terry E.
Randolph ("T. Randolph")) and $303,750 (in the case of Joseph M. Randolph ("M.
Randolph"); provided that (i) in the case of the Buyer, no more than
$1,000,000 of such liability may relate to Losses not resulting from common-law
fraud by or on behalf of the Buyer or from any intentional failure by the
Buyer to perform or comply with any covenant or agreement hereunder; (ii) in
the case of Perkins, no more than $600,000 of such liability may relate to
Losses not resulting from common-law fraud by or on behalf of Perkins or from
any intentional failure by Perkins to perform or comply with any covenant or
agreement hereunder; (iii) in the case of T. Randolph, no more than $278,300
of such liability may relate to Losses not resulting from common-law fraud by
or on behalf of T. Randolph or from any intentional failure by T. Randolph to
perform or comply with any covenant or agreement hereunder; and (iv) in the
case of M. Randolph, no more than $120,000 may relate to Losses not resulting
from common-law fraud by or on behalf of M. Randolph or from any intentional
failure by M. Randolph to perform or comply with any covenant or agreement
hereunder. In no event shall any Shareholder have any liability hereunder for
any Losses resulting from common-law fraud by another Shareholder that does
not constitute common-law fraud by such Shareholder. In no event shall any
Shareholder have any liability hereunder for any Losses resulting from a
failure to disclose a fact or circumstance required to be disclosed hereby, if
such Shareholder had no knowledge of such fact or circumstance and another
Shareholder did have knowledge of such fact or circumstance. The limitations
set forth in this Section 6.9 shall not apply to the Buyer's obligation to pay
the full purchase price as provided for in Section 2 hereof, which obligation
is absolute and unconditional, including the obligation to make payments when
due under the Note, or to RCA's obligation to perform its obligation under the
conversion provisions of the Note, the Put Agreement and the Registration
Rights Agreement, all of which shall be absolute and unconditional. The Note
shall not be subject to set off of any kind whatsoever.
6.10 SUBROGATION. Upon payment in full of any Indemnification Claim or
the payment of any judgment or settlement with respect to a Third Party Claim,
the Indemnitors shall be subrogated to the extent of such payment to the
rights of the Indemnitee against any person or entity with respect to the
subject matter of such Indemnification Claim or Third Party Claim.
6.11 PAYMENT. If there should be a dispute as to the amount of any
indemnity obligation owed under this Section 6, the Indemnitor shall
nevertheless pay when due such portion, if any, of the obligation as shall not
be subject to dispute. No payment under this Section 6 shall be due until the
final resolution of any dispute as to whether it is owed. If all or part of
any indemnification obligation under this Agreement is not paid when due, then
the Indemnitor shall pay the Indemnitee interest on the unpaid amount of the
obligation for each day from the date the amount became due until payment in
full, payable on demand, at the fluctuating rate per annum which at all times
shall be the lowest rate of interest generally charged from time to time by
Morgan Guaranty Trust Company of New York and publicly announced by such bank
as its so-called "prime rate."
SECTION 7. OTHER MATTERS.
7.1 NONCOMPETITION. Each Shareholder agrees, individually and not on
behalf of any other Shareholder, that, from the Closing Date until the end of
three (3) years following the Closing Date (the "Noncompete Period"), such
Shareholder, unless acting in accordance with the Buyer's prior written
consent and except as an employee of, or consultant to or director of, the
Company or any of its Subsidiaries or the Buyer or any of its Subsidiaries,
will not (directly or indirectly) own, manage, operate, join, control, finance
or participate in the ownership, management, operation, control or financing
of, or be connected as an officer, director, employee, principal, agent,
representative, consultant, investor, owner, partner, manager, joint venturer
or otherwise with, or permit his name to be used by or in connection with, or
lease, sell or permit to use any real property or interest therein owned by
such Shareholder to, any Person engaged anywhere in the United States in the
business of (i) distributing, marketing or selling bulk medical supplies, (ii)
providing third party Medicare billing services, (iii) manufacturing,
distributing, marketing or selling orthopedic care products, rehabilitation
products, disposable surgical products or foam positioning devices, (iv)
distributing, marketing or selling durable medical equipment, or (v) operating
an institutional pharmacy or providing institutional pharmacy services;
provided, however, that the provisions of this Section 7.1 shall not be deemed
to (i) prohibit the ownership by any Shareholder of not more than five percent
(5%) of any corporation having a class of securities registered pursuant to
the Securities Exchange Act of 1934, as amended, or (ii) prohibit M. Randolph
from selling bulk medical supplies as a manufacturer's representative to (but
only to) wholesalers, distributors or resellers outside the states of Alabama,
Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, North
Carolina, South Carolina, Tennessee and Virginia. Each Shareholder
acknowledges that (i) the provisions of this Section 7.1 are reasonable and
necessary to protect the legitimate interest of the Buyer and the goodwill of
the Business and the other Assets acquired by the Buyer hereunder, (ii) any
violation of this Section 7.1 will result in irreparable injury to the Buyer
and the Company and that damages at law would not be reasonable or adequate
compensation to the Buyer and the Company and for a violation of this Section
7.1, and (iii) Buyer and the Company shall be entitled to have the provisions
of this Section 7.1 specifically enforced by preliminary and permanent
injunctive relief without the necessity of proving actual damages and without
posting bond or other security as well as to an equitable accounting of all
earnings, profits and other benefits arising out of any violation of this
Section 7.1. In the event that the provisions of this Section 7.1 should ever
be deemed to exceed the time, geographic, product or any other limitations
permitted by applicable law, then such provisions shall be deemed reformed to
the maximum permitted by applicable law.
7.2 NO INTERFERENCE. Each Shareholder agrees individually and not on
behalf of any other Shareholder, that, during the Noncompete Period, such
Shareholder will not (directly or indirectly) hire or offer employment to any
employee of the Company or any Subsidiary whose employment is continued by the
Company or such Subsidiary or the Buyer after the Closing Date unless the
Company, such Subsidiary or the Buyer, as the case may be, first terminates
the employment of such employee.
7.3 NONSOLICITATION. Each Shareholder agrees, individually and not on
behalf of any other Shareholder, that, during the Noncompete Period, such
Shareholder will not (directly or indirectly) call on or solicit for the
purpose of providing any goods or services competitive with those offered by
the Company or any of its Subsidiaries or the Buyer or any of its Subsidiaries
to, or direct or take away from the Company or any of its Subsidiaries or the
Buyer or any of its Subsidiaries the business of (including, without
limitation, by divulging to any competitor of the Company or any of its
Subsidiaries or the Buyer or any of its Subsidiaries the name of), any Person
who or which at the Closing Date was, or at any time during the three (3)
years preceding the Closing Date had been, a customer of the Company or any
its Subsidiaries or the Buyer or any of its Subsidiaries whose identity is
known to such Shareholder at the Closing Date as a Person whom the Company or
any of its Subsidiaries or the Buyer or any of its Subsidiaries intends to
solicit within the succeeding year.
7.4 OPINIONS OF COUNSEL.
(A) At the Closing, the Buyer shall receive the written opinion,
dated the Closing Date, of Aubrey C. Rhodes, P.C., counsel for the
Shareholders, in form and substance reasonably satisfactory to the Buyer, to
the effect that:
(i) Each of the Company and the Subsidiaries is validly
organized, existing, in good standing and authorized to do business in the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
currently conducted.
(ii) The Shareholders have full power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(iii) The Shareholders have taken all requisite action to
authorize, approve and carry out this Agreement and the transactions on the
part of the Shareholders contemplated hereby, and this Agreement constitutes a
legal, valid and binding agreement of the Shareholders, enforceable against
each of them in accordance with its terms, except that no opinion need be
given as to the enforceability of Sections 7.1, 7.2 or 7.3 hereof, and except
as such enforcement may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, and other Laws and legal and equitable principles
of general application affecting the rights or remedies of creditors, and (b)
the fact that specific performance and other equitable remedies provided
therein are discretionary with the courts and may not be enforceable.
(iv) The execution, delivery and performance of this
Agreement by the Shareholders and the consummation of the transactions on the
part of the Shareholders contemplated hereby will not result in any breach,
violation, default or acceleration of the obligations of the Shareholders, the
Company or any Subsidiary under any judgment, decree, order, lease, license,
contract or other agreement which is applicable to the Shareholders, the
Company or any Subsidiary and of which such counsel is aware.
(v) The consummation of the transactions on the part of
the Shareholders and the Company contemplated by this Agreement does not
require the consent, approval, authorization or order, giving of notice to, or
the registration with, any court or any Governmental Authority or any other
Person of which such counsel is aware.
(vi) To the best of such counsel's knowledge (a) no action
or proceeding against the Shareholders, the Company or any Subsidiary is
pending before any court, or before or by any Governmental Authority, to
restrain, prohibit, invalidate or obtain damages with respect to or otherwise
question or attack the transactions contemplated by this Agreement, and (b)
the Shareholders are not involved in any litigation which might have an
adverse effect on the Company.
(vii) The Shares have been validly issued by the Company and
are fully paid and non-assessable and represent all of the issued and
outstanding capital stock of the Company.
(B) At the Closing, the Shareholders shall receive the written
opinion, dated the Closing Date, of Rogers & Hardin, counsel for the Buyer, in
form and substance reasonably satisfactory to the Shareholders, to the effect
that:
(i) The Buyer is validly organized, existing, in good
standing and authorized to do business in the jurisdiction of its
incorporation and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as currently conducted.
(ii) The Buyer has the corporate power and authority to
execute and deliver this Agreement and the Notes, to consummate the
transactions contemplated hereby and to perform fully its obligations
hereunder and thereunder.
(iii) The Buyer has taken all requisite action to authorize,
approve and carry out this Agreement and the Notes and the transactions on the
part of the Buyer contemplated hereby, and each of this Agreement, the Escrow
Agreement and the Notes constitutes a legal, valid and binding agreement of
the Buyer, enforceable against the Buyer in accordance with its terms, except
as such enforcement may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, and other Laws and legal and equitable principles
of general application affecting the rights or remedies of creditors, and (b)
the fact that specific performance and other equitable remedies provided
therein are discretionary with the courts and may not be enforceable.
(iv) The execution, delivery and performance of this
Agreement, the Escrow Agreement and the Notes by the Buyer and the
consummation of the transactions on the part of the Buyer contemplated hereby
will not result in any breach, violation, default of acceleration of the
obligations of the Buyer under any judgment, decree, order, lease, license,
contract or other agreement which is applicable to the Buyer and of which such
counsel is aware.
(v) The consummation of the transactions on the part of
the Buyer contemplated by this Agreement does not require the consent,
approval, authorization or order, giving of notice to, or the registration
with, any court or any Governmental Authority or any other Person of which
such counsel is aware.
(vi) To the best of such counsel's knowledge, no action or
proceeding against the Buyer is pending before any court, or before or by any
Governmental Authority, to restrain, prohibit, invalidate or obtain damages
with respect to or otherwise question or attack the transactions contemplated
by this Agreement.
(C) At the Closing, the Shareholders shall receive the written
opinion, dated the Closing Date, of Rogers & Hardin, counsel for RCA, in form
and substance reasonably satisfactory to the Shareholders, to the effect that:
(i) RCA is validly organized, existing, in good standing
and authorized to do business in the jurisdiction of its incorporation and has
all requisite corporate power and authority to own and operate its properties
and to carry on its business as currently conducted.
(ii) RCA has the corporate power and authority to execute
and deliver the Put Agreement, the Notes and the Registration Rights Agreement
and to consummate the transactions contemplated thereby and to perform fully
its obligations thereunder.
(iii) RCA has taken all requisite action to authorize,
approve and carry out the Put Agreement, the Notes and the Registration Rights
Agreement and the transactions on the part of RCA contemplated thereby, and
each of the Put Agreement, the Notes and the Registration Rights Agreement
constitutes a legal, valid and binding agreement of RCA, enforceable against
the Buyer in accordance with its terms, except as such enforcement may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium, and other
Laws and legal and equitable principles of general application affecting the
rights or remedies of creditors, and (b) the fact that specific performance
and other equitable remedies provided therein are discretionary with the
courts and may not be enforceable, and except that rights to indemnity and
contribution under the Registration Rights Agreement may be limited by federal
or state securities laws or the public policy underlying such laws.
(iv) The execution, delivery and performance of the Put
Agreement, the Notes and the Registration Rights Agreement by RCA will not
result in any breach, violation, default of acceleration of the obligations of
RCA under any judgment, decree, order, lease, license, contract or other
agreement which is applicable to RCA and of which such counsel is aware.
(v) The consummation of the transactions on the part of
RCA contemplated by this Agreement does not require the consent, approval,
authorization or order, giving of notice to, or the registration with, any
court of any Governmental Authority or any other Person of which such counsel
is aware.
(vi) To the best of such counsel's knowledge, no action or
proceeding against RCA is pending before any court, or before or by and
Governmental Authority, to restrain, prohibit, invalidate or obtain damages
with respect to or otherwise question or attack the transactions contemplated
by this Agreement.
(vii) The RCA Common Stock issuable upon the conversion of
the Notes has been duly and validly reserved for issuance and, assuming that
RCA maintains an adequate number of authorized and unissued shares of RCA
Common Stock available for issuance upon conversion of the Notes pursuant to
their terms, then the RCA Common Stock to be issued upon conversion of the
Notes will be validly issued, fully paid and nonassessable.
SECTION 8. MISCELLANEOUS.
8.1 PAYMENT OF EXPENSES. Each of the Shareholders, the Company and
the Buyer shall pay all legal, accounting and other fees and expenses which
such party incurs in connection with this Agreement and the transactions
contemplated hereby, and none of the expenses of the Shareholders shall be
paid by the Company or out of any of the Assets. The Shareholders have
retained counsel to represent them with respect to this Agreement. To the
extent the work by any one or more of such counsel relates to the due
diligence efforts of the Company or the disclosure to be made by the Company
in response to the representations set out in Section 4, such work shall be
deemed to have been performed on behalf of the Company and shall be billed to
and paid by the Company, up to $5,000 in the aggregate.
8.2 BROKERS' AND FINDERS' FEES. The Shareholders as a group and the
Buyer each to the other represents and warrants that all negotiations relative
to this Agreement have been carried on by them directly without the
intervention of any Person who or which may be entitled to any brokerage fee
or other commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby, and each of them shall
indemnify and hold the other or any Affiliate of them harmless against any and
all Claims, losses, liabilities or expenses which may be asserted against any
of them as a result of any dealings, arrangements or agreements by the
indemnifying party with any such Person.
8.3 NOTICES. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally to the address
set forth below (to the attention of the Person identified below) or sent by
telegram or by registered or certified mail, postage prepaid, as follows:
If to the Buyer or the Company, to:
Contour Medical Company
3340 Scherer Drive
St. Petersburg, Florida 33716
Attention: President
With required copies to:
Steven E. Fox
Rogers & Hardin
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
If to RCA, to:
Retirement Care Associates, Inc.
6000 Lake Forrest Drive
Suite 200
Atlanta, Georgia 30328
Attention: President
With required copies to:
Philip M. Rees, Esq.
6000 Lake Forrest Drive
Suite 200
Atlanta, Georgia 30328
If to the Shareholders, to their addresses set forth on Exhibit A
hereto, with required copies to:
Aubrey C. Rhodes, Esq.
Aubrey C. Rhodes, P.C.
701 Greene Street
Suite 100
Augusta, Georgia 30901
Gary Epstein, Esq.
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to
have given as of the date so delivered or telegraphed or, if mailed, three
business days after the date so mailed.
8.4 GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the Laws of Georgia without
reference to the conflict of laws principles thereof.
8.5 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective heirs, executors, legal representatives,
successors and assigns and shall not be construed as conferring, and are not
intended to confer, any rights on any other Persons.
8.6 CONTENTS OF AGREEMENT. This Agreement, together with any
documents referred to herein, sets forth the entire agreement of the parties
hereto with respect to the transactions contemplated hereby. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto, and no claimed amendment, modification, termination or waiver shall be
binding unless in writing and signed by the party against whom or which such
claimed amendment, modification, termination or waiver is sought to be
enforced.
8.7 SECTION HEADINGS AND GENDER. All section headings and the use of
a particular gender are for convenience only and shall in no way modify or
restrict any of the terms or provisions hereof. Any reference in this
Agreement to a Section or Exhibit shall be deemed to be a reference to a
Section or Exhibit of this Agreement unless the context otherwise expressly
requires.
8.8 DISCLOSURE SCHEDULE AND EXHIBITS. All Exhibits hereto and the
Disclosure Schedule referred to herein are intended to be and hereby are
specifically made a part of this Agreement. An item disclosed in the
Disclosure Schedule in response to one Section of this Agreement shall not be
deemed disclosed in response to any other Section unless otherwise
specifically so provided.
8.9 COOPERATION. Subject to the provisions hereof, the parties hereto
shall use their best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Agreement and
under applicable Law to consummate and make effective the transactions
contemplated by this Agreement.
8.10 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
8.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together shall be
deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed and
delivered by all of the Parties. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.
8.12 KNOWLEDGE. As used in this Agreement, the terms "the best of such
Shareholder's knowledge", "the best knowledge of Shareholder," "known to such
Shareholder" or words of similar import used herein with respect to any
Shareholder shall mean the actual knowledge of such individual Shareholder,
together with the knowledge a reasonable business person in the position of
such Shareholder would have obtained after making reasonable inquiry and after
exercising reasonable diligence with respect to the matters at hand.
8.13 JURISDICTION. Any action, suit or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought against
any of the parties in the United States District Court for any District of
Georgia, or any state court sitting in the City of Atlanta or the City of
Augusta, Georgia, and each of the parties hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts) in any
such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of Georgia,
without limiting the foregoing, each of the parties hereto agrees that service
of process upon such party at the address referred to in Section 8.3, together
with written notice of such service to such party, shall be deemed effective
service of process upon such party.
IN WITNESS WHEREOF, each of the Shareholders has duly executed and
sealed this Agreement, and each of the Buyer and RCA has caused this Agreement
to be duly executed under seal on its behalf by an officer thereunto duly
authorized, all on the date first written above.
SHAREHOLDERS:
/s/ Frederick G. Perkins, III (SEAL)
FREDERICK G. PERKINS, III
/s/ Terry E. Randolph (SEAL)
TERRY E. RANDOLPH
/s/ Joseph M. Randolph (SEAL)
JOSEPH M. RANDOLPH
CONTOUR MEDICAL, INC.
[CORPORATE SEAL] By /s/ Donald F. Fox
Its: President
Attest: /s/ Phillip M. Ree
RETIREMENT CARE ASSOCIATES, INC.
[CORPORATE SEAL] By /s/ Chris Brogdon
Its: President
Attest: /s/ Edward E. Lane
EXHIBIT A
PAYMENT AND OWNERSHIP TABLE
PRINCIPAL
NUMBER OF CASH TO BE AMOUNT OF NOTES
NAME AND ADDRESS SHARES OWNED RECEIVED TO BE RECEIVED
Frederick G. Perkins, III
485 West Matheson Drive
Key Biscayne, FL 33149 1,200,000 $ -0- $ 9,500,000
Terry E. Randolph
3533 West Lake Drive
Martinez, Georgia 30907 557,000 1,044,375 500,000
J. Michael Randolph
4280 Gulf Stream Court
Fernandina Beach,
Florida 32034 243,000 355,625 500,000
Totals 2,000,000 $1,400,000 $10,500,000
EXHIBIT B
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
NEGOTIABLE CONVERTIBLE PROMISSORY NOTE
___________ _________, 1996
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, CONTOUR MEDICAL, INC., a Nevada
corporation ("Maker"), promises to pay to the order of ______________________,
an individual resident of __________________, (together with any assignee, the
"Holder"), at _______________________________, or at such other address as
Holder may from time to time designate, the principal sum of
_______________________ DOLLARS ($___________), together with interest thereon
from the date hereof at the rate of seven percent (7%) per annum; provided
that, during any period of default hereunder which is not cured within any
grace period provided for herein, interest shall accrue at thirteen percent
(13%) per annum; provided further that, notwithstanding any provision hereof,
it is not intended by this Note to impose upon Maker any obligation to pay
interest in excess of the maximum rate of interest permitted by law, and any
interest which so exceeds such maximum rate of interest shall automatically be
applied in reduction of the principal due hereunder to the extent of such
excess. The entire principal balance hereof, and all interest accrued
thereon, shall be due and payable in full on January 10, 1997 (the "Maturity
Date"). Payment of the entire balance of principal, and all interest accrued
thereon, shall be by wire transfer of immediately available funds to an
account designated by Holder prior to the Maturity Date.
This Note is issued pursuant to that certain Share Purchase Agreement
dated as of July 1, 1996 to which Maker and the shareholders of Atlantic
Medical Supply, Inc. (the "Shareholders") are each a party (the "Share
Purchase Agreement") and is secured by a Put Agreement dated as of July 1,
1996 between the Shareholders and Retirement Care Associates, Inc. ("RCA").
By causing this Note to be signed below by its duly authorized officer, RCA
acknowledges and agrees to all of the terms of this Note, including, without
limitation, the right of Holder to convert this Note into shares of the common
stock of RCA, $.0001 par value per share (the "RCA Common Stock") pursuant to
Section 3 hereof.
1. PREPAYMENT. Maker reserves the right to prepay this Note in whole
or in part, at any time and from time to time without premium or penalty, so
long as Maker has provided ten (10) days written notice thereof to the Holder.
2. EVENTS OF DEFAULT. The occurrence and continuation of any one of
the following events (each an "Event of Default") shall constitute a default
hereunder: (i) Maker shall fail to make due and punctual payment of principal
of or interest on this Note; (ii) Maker or RCA violates any representation,
warranty or covenant in this Note, the Share Purchase Agreement, or the Put
Agreement (other than payment when due of principal or interest on this Note),
and Maker fails to cure such violation within ten (10) days after written
notice thereof from Holder; or (iii) Maker or RCA makes a general assignment
for the benefit of creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions a court for the appointment of any receiver
or trustee for RCA or Maker or any substantial part of their property,
commences any proceeding relating to RCA or Maker under any arrangement or
debt readjustment law or statute of any jurisdiction whether now or hereafter
in effect or there is commenced against RCA or Maker any such proceeding which
remains undismissed for sixty (60) days, or RCA or Maker by any act indicates
consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver or trustee for him or any substantial part of its
property, or suffers any such receivership or trusteeship to continue
undischarged for sixty (60) days.
If an Event of Default occurs and is continuing, then, the entire
principal amount outstanding hereunder, together with interest thereon, shall
become immediately due and payable. The rights, remedies, powers and
privileges provided for herein are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
3. CONVERSION. If an Event of Default occurs and is continu-
ing, then Holder shall have the right, at Holder's option, to convert this
Note in whole (but not in part) into fully paid and nonassessable shares of
RCA Common Stock as provided herein. The number of shares of RCA Common
Stock into which this Note may be converted ("Conversion Shares") shall be
determined (i) by dividing the aggregate principal amount hereof, together
with all accrued interest to the date of conversion, (ii) by eighty five
percent (85%) of the arithmetic average daily closing sale price per share,
rounded to four decimal places, of the RCA Common Stock as reported on the
New York Stock Exchange ("NYSE") (or, if the RCA Common Stock is not listed
or admitted for trading on the NYSE, on the principal national securities
exchange on which the RCA Common Stock is listed or admitted for trading or,
if not listed or admitted for trading on any national securities exchange,
on the NASDAQ National Market System or, if the RCA Common Stock is not
quoted on such National Market System, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by
NASDAQ) for the five (5) consecutive trading days immediately preceding the
date of receipt by RCA of Holder's notice of conversion delivered pursuant
to Section 3.1 hereof (the "Conversion Price").
3.1 CONVERSION PROCEDURE
3.1.1 NOTICE OF CONVERSION. To effect the conversion of
this Note into shares of RCA Common Stock, Holder shall surrender this Note at
the principal office of RCA and shall give written notice by hand or by
overnight mail, or by mail, postage prepaid, to RCA at its principal corporate
office, of the election to convert the same pursuant to this Section 3.1, and
shall state therein the name or names in which the certificate or certificates
for shares of RCA Common Stock are to be issued. Such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of this Note, and the person or persons entitled to
receive the shares of RCA Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of RCA
Common Stock as of such date.
3.1.2 DELIVERY OF STOCK CERTIFICATE. As promptly as
practicable after the conversion of this Note, but in no event later than five
(5) business days after receipt thereof, RCA at its expense will issue and
deliver to Holder a certificate or certificates for the number of full shares
of RCA Common Stock issuable upon such conversion.
3.1.3 FRACTIONAL SHARES. No fractional shares of RCA
Common Stock shall be issued upon conversion of this Note. In lieu of RCA
issuing any fractional shares to Holder upon the conversion of this Note, RCA
shall issue a check payable to Holder for the amount not so converted.
3.1.4 TRANSFER TAXES. RCA shall pay any taxes which may be
payable in respect of the issue of transfer of any shares of RCA Common Stock
deliverable upon conversion of this Note, except that RCA shall not be
required to pay any tax imposed in connection with any transfer involving the
issuance of a certificate for shares of RCA Common Stock in any name other
than that of the original Holder of this Note; and in such case RCA shall not
be required to deliver any certificate representing the shares of RCA Common
Stock purchased upon conversion until such tax shall have been paid, or it has
been established to RCA's satisfaction that no tax is due.
4. ADJUSTMENTS.
4.1 MERGER, SALE OF ASSETS, ETC. If at any time prior to payment
in full or conversion of this Note, there shall be (i) a reorganization (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), (ii) a merger or consolidation of RCA with or
into another corporation in which RCA is not the surviving entity, or a
reverse triangular merger in which RCA is the surviving entity but the shares
of RCA's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash, or otherwise, or (iii) a sale or transfer of RCA's
properties and assets as, or substantially as, an entirety to any other
person, then, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the holder of this Note shall
thereafter be entitled to receive upon conversion of this Note, during the
period specified herein, the number of shares of stock or other securities or
property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares
deliverable upon conversion of this Note would have been entitled to receive
in such reorganization, consolidation, merger, sale or transfer if this Note
had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4.1. The foregoing provisions of this Section 4.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Note. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then
the value of such consideration shall be determined in good faith by RCA's
Board of Directors. In all events, appropriate adjustment (as determined in
good faith by RCA's Board of Directors) shall be made in the application of
the provisions of this Note with respect to the rights and interests of Holder
after the transaction, to the end that provisions of this Note shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon conversion of this
Note.
4.2 RECLASSIFICATION, ETC. If RCA, at any time while this Note,
or any portion thereof, remains outstanding by reclassification of securities
or otherwise, shall change any of the securities as to which conversion rights
under this Note exist into the same or a different number of securities of any
other class or classes, this Note shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
conversion rights under this Note immediately prior to such reclassification
or other change.
5. NOTICES OF RECORD DATE, ETC. In the event of (i) any taking by RCA
of a record of the holders of any class of securities of RCA for the purpose
of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend payable out of earned surplus at the same rate as
that of the last such cash dividend theretofore paid) or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive any
other right; or (ii) any capital reorganization of RCA, any reclassification
or recapitalization of the capital stock of RCA or any transfer of all or
substantially all of the assets of RCA to any other person or any
consolidation or merger involving RCA; or (iii) any voluntary or involuntary
dissolution, liquidation or winding-up of RCA, RCA will mail to the holder of
this Note at least ten (10) days prior to the earliest date specified therein,
a notice specifying: (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and (ii) the date on which
any such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding-up is expected to become effective and the
record date for determining stockholders entitled to vote thereon.
5.1 RCA shall at all times reserve and keep available out of its
authorized but unissued shares of RCA Common Stock solely for the purpose of
effecting the conversion of this Note such number of shares of RCA Common
Stock as shall from time to time be sufficient to effect the conversion of
this Note; and if at any time the number of authorized but unissued shares of
RCA Common Stock shall not be sufficient to effect the conversion of the
entire outstanding principal amount of this Note, in addition to such other
remedies as shall be available to the Holder of this Note, RCA will use its
best efforts to take such corporate actions as may be necessary to increase
its authorized but unissued shares of RCA Common Stock to such number of
shares as shall be sufficient for such purposes.
6. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 8 below, the rights and obligations of Maker and Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.
7. NO SET OFF. This Note is not subject to set off of any kind
whatsoever.
8. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of Maker and Holder.
9. TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION HEREOF.
With respect to any offer, sale or other disposition of this Note or
securities into which such Note may be converted, Holder will give written
notice to RCA prior thereto, describing briefly the manner thereof, together
with a written opinion of such Holder's counsel, to the effect that such
offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, RCA, as promptly as practicable, shall notify such Holder that such
Holder may sell or otherwise dispose of this Note or such securities, all in
accordance with the terms of the notice delivered to RCA. If a determination
has been made pursuant to this Section 8 that the opinion of counsel for the
Holder is not reasonably satisfactory to RCA, RCA shall so notify the Holder
promptly after such determination has been made. Each Note thus transferred
and each certificate representing the securities thus transferred shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Securities Act of 1933, as amended (the "Act"), unless in
the reasonable opinion of counsel for RCA such legend is not required in order
to ensure compliance with the Act. RCA may issue stop transfer instructions
to its transfer agent in connection with such restrictions.
10. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change his or its
address for future notice hereunder. Notice shall conclusively be deemed to
have been given when personally delivered or when deposited in the mail or
telegraphed in the manner set forth above and shall be deemed to have been
received when delivered.
11. NO STOCKHOLDER RIGHTS. Nothing contained in this Note shall be
construed as conferring upon Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of RCA or any other matters or any
rights whatsoever as a stockholder of RCA; and no dividends or interest shall
be payable or accrued in respect of this Note or the interest represented
hereby or the Conversion Shares obtainable hereunder until, and only to the
extent that, this Note shall have been converted.
12. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
13. WAIVER. No waiver by Holder of any default shall be effective
unless in writing, nor shall it operate as a waiver of any other default or of
the same default on a future occasion. No delay or omission by Holder in
exercising any of its rights, remedies, powers and privileges hereunder or at
law and no course of dealing between Holder and Maker and RCA or any other
person shall be deemed a waiver by Holder of any of such rights, remedies,
powers and privileges even if such delay or omission is continuous or
repeated, nor shall any single or partial exercise of any right, remedy, power
or privilege preclude any other or further exercise thereof by Holder or the
exercise of any other right, remedy, power or privilege by Holder. Maker and
RCA waives demand, presentment, protest, notice of protest and notice of
dishonor.
14. ATTORNEYS' FEES. If this Note is placed in the hands of any
attorney for collection, or if collected by suit or through any bankruptcy or
other legal proceedings, Maker hereby agrees to pay all expenses incurred
reasonably by the Holder of this Note, including attorneys' fees, all of which
shall become a part of the principal hereof.
15. SEVERABILITY. Each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.
16. SUCCESSORS AND ASSIGNS. This Note shall be binding upon Maker and
its successors and assigns and shall inure to the benefit of Holder and his
heirs, representatives, successors and assigns.
17. GOVERNING LAW. This Note in all respects shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia,
without giving effect to principles of conflicts of laws. This Note may not
be changed orally, but only by an instrument in writing executed by Maker and
Holder.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed,
sealed and delivered as of the day and year first above written.
CONTOUR MEDICAL, INC.
By:_______________________________________
[CORPORATE SEAL] Its: _____________________________________
Address:__________________________________
ATTEST:________________________ __________________________________
Name of Holder:___________________________
Address:__________________________________
__________________________________
Accepted, agreed to and
acknowledged by:
RETIREMENT CARE ASSOCIATES, INC.
By:_________________________________
Its:________________________________
[CORPORATE SEAL]
ATTEST:____________________________
Address:_____________________________
_____________________________
NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Note)
TO RETIREMENT CARE ASSOCIATES, INC.
The undersigned, the holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of the $.0001 par value per share common
stock of RETIREMENT CARE ASSOCIATES, INC., and requests that the certificates
for such shares be issued in the name of, and delivered to, ________________,
whose address is _________________________________________.
Dated:_________________________
_____________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the Note)
______________________________________________
______________________________________________
(Address)
EXHIBIT C
RETIREMENT CARE ASSOCIATES, INC.
PUT AGREEMENT
This PUT AGREEMENT ("Put Agreement") is made as of the 1st day of July,
1996 by and among RETIREMENT CARE ASSOCIATES, INC., a Colorado corporation
(the "Company"), and the undersigned holders (the "Stockholders") of the
Company's $.0001 par value per share common stock (the "Common Stock").
IN CONSIDERATION of the mutual representations, warranties and covenants
set forth herein, and intending to be legally bound, the parties hereto hereby
agree as follows:
1. PUT ARRANGEMENT.
(a) In the event that the Company shall fail to file and have declared
effective by July 10, 1997 a registration statement pursuant to Section 1.3 of
that certain Registration Rights Agreement of even date herewith between the
Stockholders and the Company, then for a period commencing on July 11, 1997
and ending on July 31, 1997, each Stockholder (and his transferees) shall have
the right to require the Company to repurchase (for cash) all (but not less
than all) of the Common Stock acquired by such Stockholder upon conversion of
that certain Negotiable Convertible Promissory Note (the "Note") of Contour
Medical, Inc. of even date herewith (the "Put Shares") at a price per share
(the "Put Price") equal to the Conversion Price (as defined in the Note), plus
interest thereon at the rate of twelve percent (12%) per annum from the date
of conversion until the date of the Put Closing (as hereinafter defined), by
delivering a written notice to the Company specifying the number of Put Shares
to be purchased (the "Put Notice"). The right to participate in the Put shall
inure to all transferees hereunder.
(b) Within ten (10) days after the date of the Put Notice, the Company
shall purchase and the holders of Put Shares shall sell the number of the
holder's Put Shares specified in the Put Notice at the time and place
specified in the Put Notice (the "Put Closing").
(c) At the Put Closing, the holders of Put Shares shall deliver to the
Company certificates representing the holders' Put Shares to be repurchased by
the Company free and clear of all liens and encumbrances and duly endorsed in
blank or accompanied by duly executed forms of assignment (with signatures
guaranteed), and the Company shall deliver to the holders of Put Shares an
amount equal to the product of (i) the Put Price per share multiplied by (ii)
the number of Put Shares to be repurchased, by wire transfer of immediately
available funds to an account designated by the holders of Put Shares.
2. LEGEND.
(a) Each certificate representing Put Shares shall be endorsed with
the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN PUT AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION AND
CERTAIN OTHER PERSONS. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
(b) The parties agree that the Company may instruct its transfer agent
to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 2(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall
be removed upon termination of this Agreement.
3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Georgia.
3.2 AMENDMENT. Any provisions may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, and (ii) as to the Stockholders, by persons
holding more than seventy-five percent (75%) in interest of the Put Shares
held by the Stockholders and their transferees pursuant to Section 3.3 hereof,
provided that any Stockholder may waive any of his rights hereunder without
obtaining the consent of any other Stockholder. Any amendment or waiver
effected in accordance with this Section 3.2 shall be binding upon each
Stockholder, his successors and assigns, and the Company.
3.3 ASSIGNMENT OF RIGHTS. This Agreement and the rights and
obligations of the parties hereunder shall inure to benefit of, and be binding
upon, their respective successors, assigns and legal representatives. The
rights of the Stockholders hereunder are only assignable by each of such
Stockholders (i) to any other Stockholder or (ii) to an assignee or transferee
who acquires all of the Put Shares acquired by such Stockholder upon
conversion of the Note.
3.4 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five (5) days after deposit in the United States mail,
by registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
3.5 SEVERABILITY. In the event one or more of the provisions of this
Put Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Put Agreement, and this Put
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
3.6 COUNTERPARTS. This Put Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.7 ENTIRE AGREEMENT. This Put Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject
matter hereof is superseded by this Put Agreement.
IN WITNESS WHEREOF, the Stockholders have executed, sealed and delivered
this Put Agreement, and the Company has caused this Put Agreement to be
executed, sealed and delivered, all as of the date first above-written.
RETIREMENT CARE ASSOCIATES, INC.
[CORPORATE SEAL] By:/s/ Chris Brogdon
Its: President
ATTEST:/s/ Edward E. Lane Address: 6000 Lake Forrest Drive
Suite 200
Atlanta, Georgia 30328
STOCKHOLDERS:
/s/ Frederick G. Perkins, III
FREDERICK G. PERKINS III
Address: 485 West Matheson Drive
Key Biscayne, Florida 33149
/s/ Terry E. Randolph
TERRY E. RANDOLPH
Address: 3533 West Lake Drive
Martinez, Georgia 30907
/s/ Joseph M. Randolph
JOSEPH M. RANDOLPH
Address: 4280 Gulf Stream Court
Fernandina Beach, Florida 32034
EXHIBIT D
RETIREMENT CARE ASSOCIATES, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of July 1, 1996, by and among RETIREMENT CARE ASSOCIATES, INC., a
Colorado corporation (the "Company"), and the undersigned individuals
(individually, each a "Seller" and collectively, the "Sellers").
IN CONSIDERATION of the mutual promises and covenants set forth herein,
and intending to be legally bound, the parties hereto hereby agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. Any capitalized terms used herein without
definition shall have the meaning ascribed to such terms in the Share Purchase
Agreement of even date herewith to which the Company and each of the Sellers
are parties (the "Share Purchase Agreement"). In addition, the following
terms shall have the meanings set forth below:
(a) "Common Stock" shall mean the $.0001 par value per share
common stock of the Company.
(b) "Holder" shall mean any Seller who holds Registrable
Securities and any holder of Registrable Securities to whom the rights
conferred by this Agreement have been transferred in compliance with Section
1.2 hereof.
(c) "Registrable Securities" shall mean shares of Common Stock
issued to the Sellers upon conversion of the Notes, provided that Registrable
Securities shall not include any shares of Common Stock which have previously
been registered and are available for resale by Holder without further
registration or restriction or which have been sold to the public by Holder.
(d) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration state-
ment in compliance with the Securities Act and applicable rules and
regulations thereunder and the declaration or ordering of the effectiveness of
such registration statement.
(e) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and expenses of any regular or special audits incident
to or required by any such registration, but shall not include (i) Selling
Expenses, (ii) fees and disbursements of counsel for the Holders, (iii) the
compensation of regular employees of the Company, which shall be paid in any
event by the Company, and (iv) blue sky fees and expenses incurred in
connection with the registration or qualification of any Registrable
Securities in any state, province or other jurisdiction in a registration
pursuant to Section 1.3 hereof to the extent that the Company shall otherwise
be making no offers or sales in such state, province or other jurisdiction in
connection with such registration.
(f) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(g) "Rule 144" shall mean Rule 144 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(h) "SEC" shall mean the Securities and Exchange Commission.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(j) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
1.2 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until there is then in
effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement, or the transferee has agreed in writing for the
benefit of the Company to be bound by this Section 1.2 (unless waived by the
Company) and (A) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition and (B) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act, it being understood that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the provisions of subparts (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by a Holder which is (A) a partnership to its partners in accordance with
partnership interests, or (B) to the Holder's family member or a trust for the
benefit of an individual Holder or one or more of his family members, provided
the transferee will be subject to the terms of this Section 1.2 to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement or permitted
by applicable laws) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required
under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
(c) The Company shall be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the Holder
shall have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of in
compliance with the Securities Act without registration, qualification or
legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal or if the Holder shall
request such removal and shall have obtained and delivered to the Company an
opinion of counsel reasonably acceptable to the Company to the effect that
such legend and/or stop-transfer instructions are no longer required pursuant
to applicable state securities laws.
1.3 COMPANY REGISTRATION. The Company (a) shall file with the SEC by
February 10, 1997 a registration statement on Form S-3, if available, or if
such form is unavailable, on any form which would permit the registration of
the Registrable Securities for sale under the Securities Act and shall use its
best efforts to cause such registration statement to be declared effective,
and (b) further agrees to reasonably assist Holders in connection with the
disposition of the Registrable Securities covered by such registration
statement.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses
relating to securities so registered shall be borne by the Holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.5 REGISTRATION PROCEDURES. In the case of each registration
statement filed by the Company pursuant to Section 1.3 hereof, the Company
will keep each Holder advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company
will use its best efforts to:
(a) keep such registration effective until the Holder or Holders
have completed the distribution described in the registration statement
relating thereto, or until freely tradeable without limitation as to volume,
whichever first occurs;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; provided, however, the Company shall not be
obligated to prepare and furnish any such prospectus supplements or amendments
relating to any material nonpublic information at any such time as the Board
of Directors of the Company has determined that, for good business reasons,
the disclosure of such material nonpublic information at that time is contrary
to the best interests of the Company in the circumstances and is not otherwise
required under applicable law (including applicable securities laws);
(e) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange and/or included in any
national quotation system on which similar securities issued by the Company
are then listed or included;
(f) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration;
(g) take such action as may be reasonably necessary to qualify
the Registrable Securities under Blue Sky or other state securities laws as
Holders may reasonably request, provided that the Company shall not be
obligated to take any such action in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process
in connection therewith, unless the Company is already subject to service in
such jurisdiction; and
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period
of at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
1.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its of-
ficers, directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities
Act, with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including
any related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company or relating to action or inaction
required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 1.6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if
any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other
Stockholder, and each of their officers, directors, and partners, and each
person controlling such Holder or Other Stockholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, Other Stockholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defend-
ing any such claim, loss, damage, liability, or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to the Company by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and (ii) that in no
event shall any indemnity under this Section 1.6 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section
1.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified of a release from all
liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred
to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the conduct, statements or omissions that resulted in
such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provi-
sions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Agreement.
1.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) so long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and
of the Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed as a Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration.
1.9 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights granted
to a Holder by the Company under this Agreement may be transferred or assigned
by a Holder, provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment, stating the
name and address of the transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned and, provided further, that the transferee or assignee of such rights
assumes the obligations of such Holder under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
2.1 Representations and Warranties of the Company. The Company
represents and warrants to the Sellers as follows:
(a) The execution, delivery and performance of this Agreement by
the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency
of government, the Articles of Incorporation or Bylaws of the Company, or any
provision of any material indenture, agreement or other instrument to which it
or any of its properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such material indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each Seller
represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement by
such Seller will not violate any provision of law, any order of any court or
any agency or government, or any provision of any material indenture or
agreement or other instrument to which he or any of his properties or assets
is bound, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such material indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, or encumbrance of any nature whatsoever upon any of the
properties or assets of such Seller.
(b) This Agreement has been duly executed and delivered by such
Seller and constitutes the legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
3. MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of Georgia, as if entered into by and between Georgia
residents exclusively for performance entirely within Georgia.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
the full and entire understanding and agreement between the parties with
regard to the subject hereof and thereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the Holders of at least fifty-one percent
(51%) of the Registrable Securities and any such amendment, waiver, discharge
or termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
3.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated in
Exhibit A to the Share Purchase Agreement or at such other address as such
Holder shall have furnished to the Company in writing, or (b) if to the
Company, at 6000 Lake Forrest Drive, Suite 200, Atlanta, Georgia 30328, or at
such other address as the Company shall have furnished to each Holder in
writing. All such notices and other written communications shall be effective
on the date of mailing or delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character
on the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
3.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein,
a Holder's rights hereunder are several rights, not rights jointly held with
any of the other Holders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
3.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of
the Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with
the exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
3.8 TITLES AND SUBTITLES. The titles of the paragraphs and sub-
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, each of the Sellers has duly executed and sealed
this Agreement, and the Company has caused this Agreement to be duly executed
under seal on its behalf by an officer or representative thereto duly
authorized, all as of the date first above written.
RETIREMENT CARE ASSOCIATES, INC.
[CORPORATE SEAL] By:/s/ Chris Brogdon
Its: President
SELLERS:
ATTEST: /s/ Edward E. Lane
/s/ Frederick G. Perkins III
FREDERICK G. PERKINS III
/s/ Terry E. Randolph
TERRY E. RANDOLPH
/s/ Joseph M. Randolph
JOSEPH M. RANDOLPH